CMC-11.30.2013-10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 10-Q
___________________________________
| |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended November 30, 2013
OR
| |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-4304
___________________________________
COMMERCIAL METALS COMPANY
(Exact Name of Registrant as Specified in its Charter)
___________________________________
|
| |
Delaware | 75-0725338 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) |
6565 N. MacArthur Blvd.
Irving, Texas 75039
(Address of Principal Executive Offices) (Zip Code)
(214) 689-4300
(Registrant's Telephone Number, Including Area Code)
___________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
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| | | |
Large accelerated filer x | Accelerated filer ¨ | Non-accelerated filer ¨ (Do not check if a smaller reporting company) | Smaller reporting company ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares outstanding of common stock as of January 3, 2014 was 117,310,716.
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS
| |
PART I. | FINANCIAL INFORMATION |
ITEM 1. FINANCIAL STATEMENTS
COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) |
| | | | | | | | |
| | Three Months Ended November 30, |
(in thousands, except share data) | | 2013 | | 2012 |
Net sales | | $ | 1,682,891 |
|
| $ | 1,749,515 |
|
Costs and expenses: | |
|
|
|
Cost of goods sold | | 1,501,798 |
|
| 1,562,850 |
|
Selling, general and administrative expenses | | 114,463 |
|
| 124,609 |
|
Interest expense | | 19,578 |
| | 17,024 |
|
Gain on sale of cost method investment | | — |
|
| (26,088 | ) |
| | 1,635,839 |
|
| 1,678,395 |
|
| | | | |
Earnings from continuing operations before income taxes | | 47,052 |
|
| 71,120 |
|
Income taxes | | 15,091 |
|
| 22,189 |
|
Earnings from continuing operations | | 31,961 |
|
| 48,931 |
|
| |
|
|
|
|
|
Earnings from discontinued operations before income taxes | | 22,845 |
|
| 1,250 |
|
Income taxes | | 8,887 |
|
| 462 |
|
Earnings from discontinued operations | | 13,958 |
|
| 788 |
|
| |
|
|
|
|
|
Net earnings | | 45,919 |
|
| 49,719 |
|
Less net earnings attributable to noncontrolling interests | | — |
|
| 2 |
|
Net earnings attributable to CMC | | $ | 45,919 |
|
| $ | 49,717 |
|
| |
|
|
|
Basic earnings per share attributable to CMC: | |
|
|
|
Earnings from continuing operations | | $ | 0.27 |
|
| $ | 0.42 |
|
Earnings from discontinued operations | | 0.12 |
|
| 0.01 |
|
Net earnings | | $ | 0.39 |
|
| $ | 0.43 |
|
| |
|
|
|
Diluted earnings per share attributable to CMC: | |
|
|
|
Earnings from continuing operations | | $ | 0.27 |
|
| $ | 0.42 |
|
Earnings from discontinued operations | | 0.12 |
|
| — |
|
Net earnings | | $ | 0.39 |
|
| $ | 0.42 |
|
| |
|
|
|
|
|
Cash dividends per share | | $ | 0.12 |
|
| $ | 0.12 |
|
Average basic shares outstanding | | 117,070,499 |
|
| 116,336,504 |
|
Average diluted shares outstanding | | 118,156,611 |
|
| 117,093,627 |
|
See notes to unaudited consolidated financial statements.
COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) |
| | | | | | | | |
|
| Three Months Ended November 30, |
(in thousands) |
| 2013 |
| 2012 |
Net earnings |
| $ | 45,919 |
|
| $ | 49,719 |
|
Other comprehensive income, net of income taxes: |
|
|
|
|
Foreign currency translation adjustment and other, net of income taxes of $2,077 and $11,792 |
| 19,442 |
|
| 21,900 |
|
Net unrealized gain (loss) on derivatives: |
|
|
|
|
|
|
Unrealized holding gain (loss), net of income taxes of $(449) and $88 |
| (1,617 | ) |
| 317 |
|
Reclassification for loss (gain) included in net earnings, net of income taxes of $181 and $(49) |
| 980 |
|
| (122 | ) |
Net unrealized gain (loss) on derivatives, net of income taxes of $(268) and $39 |
| (637 | ) |
| 195 |
|
Defined benefit obligation: |
|
|
|
|
|
|
Net gain, net of income taxes of $296 and $0 |
| 550 |
|
| — |
|
Amortization of prior service cost (credit), net of income taxes of $(1) and $0 |
| (2 | ) |
| 2 |
|
Adjustment from plan changes, net of income taxes of $0 and $308 |
| — |
|
| 1,315 |
|
Defined benefit obligation, net of income taxes of $295 and $308 |
| 548 |
|
| 1,317 |
|
Other comprehensive income |
| 19,353 |
|
| 23,412 |
|
Comprehensive income |
| $ | 65,272 |
|
| $ | 73,131 |
|
See notes to unaudited consolidated financial statements.
COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
| | | | | | | | |
(in thousands, except share data) | | November 30, 2013 | | August 31, 2013 |
Assets | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 515,473 |
| | $ | 378,770 |
|
Accounts receivable (less allowance for doubtful accounts of $9,773 and $10,042) | | 927,100 |
| | 989,694 |
|
Inventories, net | | 792,763 |
| | 757,417 |
|
Other | | 180,756 |
| | 240,314 |
|
Total current assets | | 2,416,092 |
| | 2,366,195 |
|
Property, plant and equipment: | | | | |
Land | | 80,810 |
| | 80,764 |
|
Buildings and improvements | | 494,256 |
| | 486,494 |
|
Equipment | | 1,685,480 |
| | 1,666,250 |
|
Construction in process | | 19,620 |
| | 18,476 |
|
| | 2,280,166 |
| | 2,251,984 |
|
Less accumulated depreciation and amortization | | (1,349,814 | ) | | (1,311,747 | ) |
| | 930,352 |
| | 940,237 |
|
Goodwill | | 69,733 |
| | 69,579 |
|
Other assets | | 121,532 |
| | 118,790 |
|
Total assets | | $ | 3,537,709 |
| | $ | 3,494,801 |
|
Liabilities and stockholders' equity | | | | |
Current liabilities: | | | | |
Accounts payable-trade | | $ | 347,354 |
| | $ | 342,678 |
|
Accounts payable-documentary letters of credit | | 131,412 |
| | 112,281 |
|
Accrued expenses and other payables | | 269,889 |
| | 314,949 |
|
Notes payable | | 7,993 |
| | 5,973 |
|
Current maturities of long-term debt | | 6,232 |
| | 5,228 |
|
Total current liabilities | | 762,880 |
| | 781,109 |
|
Deferred income taxes | | 53,838 |
| | 46,558 |
|
Other long-term liabilities | | 120,542 |
| | 118,165 |
|
Long-term debt | | 1,277,303 |
| | 1,278,814 |
|
Total liabilities | | 2,214,563 |
| | 2,224,646 |
|
Commitments and contingencies | |
| |
|
Stockholders' equity: | | | | |
Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 117,304,487 and 117,010,990 shares | | 1,290 |
| | 1,290 |
|
Additional paid-in capital | | 359,765 |
| | 363,772 |
|
Accumulated other comprehensive loss | | (7,823 | ) | | (27,176 | ) |
Retained earnings | | 1,198,584 |
| | 1,166,732 |
|
Less treasury stock, 11,756,177 and 12,049,674 shares at cost | | (228,744 | ) | | (234,619 | ) |
Stockholders' equity attributable to CMC | | 1,323,072 |
| | 1,269,999 |
|
Stockholders' equity attributable to noncontrolling interests | | 74 |
| | 156 |
|
Total stockholders' equity | | 1,323,146 |
| | 1,270,155 |
|
Total liabilities and stockholders' equity | | $ | 3,537,709 |
| | $ | 3,494,801 |
|
See notes to unaudited consolidated financial statements.
COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
| | | | | | | | |
| | Three Months Ended November 30, |
(in thousands) | | 2013 | | 2012 |
Cash flows from (used by) operating activities: | | | | |
Net earnings | | $ | 45,919 |
| | $ | 49,719 |
|
Adjustments to reconcile net earnings to cash flows from (used by) operating activities: | | | | |
Depreciation and amortization | | 33,860 |
| | 33,751 |
|
Provision for losses on receivables, net | | (240 | ) | | 1,153 |
|
Share-based compensation | | 5,544 |
| | 4,509 |
|
Amortization of interest rate swaps termination gain | | (1,900 | ) | | (2,908 | ) |
Deferred income taxes (benefit) | | 19,081 |
| | 23,876 |
|
Tax benefits from stock plans | | (109 | ) | | — |
|
Net gain on sale of a subsidiary, cost method investment and other | | (25,064 | ) | | (26,071 | ) |
Asset impairment | | 1,005 |
| | 3,028 |
|
Changes in operating assets and liabilities: | | | | |
Accounts receivable | | 73,052 |
| | 81,217 |
|
Accounts receivable sold, net | | 3,327 |
| | (46,614 | ) |
Inventories | | (29,789 | ) | | (99,076 | ) |
Other assets | | (20,185 | ) | | (740 | ) |
Accounts payable, accrued expenses and other payables | | (31,534 | ) | | (56,228 | ) |
Other long-term liabilities | | 505 |
| | 113 |
|
Net cash flows from (used by) operating activities | | 73,472 |
| | (34,271 | ) |
| | | | |
Cash flows from (used by) investing activities: | | | | |
Capital expenditures | | (14,085 | ) | | (24,757 | ) |
Proceeds from the sale of property, plant and equipment and other | | 2,126 |
| | 5,956 |
|
Proceeds from the sale of a subsidiary | | 54,265 |
| | — |
|
Proceeds from the sale of cost method investment | | — |
| | 28,995 |
|
Net cash flows from (used by) investing activities | | 42,306 |
| | 10,194 |
|
| | | | |
Cash flows from (used by) financing activities: | | | | |
Increase in documentary letters of credit | | 18,663 |
| | 60,217 |
|
Short-term borrowings, net change | | 2,020 |
| | (13,045 | ) |
Repayments on long-term debt | | (1,551 | ) | | (1,284 | ) |
Payments for debt issuance costs | | (430 | ) | | — |
|
Decrease in restricted cash | | 17,300 |
| | — |
|
Stock issued under incentive and purchase plans, net of forfeitures | | (2,089 | ) | | (414 | ) |
Cash dividends | | (14,067 | ) | | (13,963 | ) |
Tax benefits from stock plans | | 109 |
| | — |
|
Contribution from (purchase of) noncontrolling interests | | (52 | ) | | 15 |
|
Net cash flows from (used by) financing activities | | 19,903 |
| | 31,526 |
|
| | | | |
Effect of exchange rate changes on cash | | 1,022 |
| | 1,525 |
|
Increase in cash and cash equivalents | | 136,703 |
| | 8,974 |
|
Cash and cash equivalents at beginning of year | | 378,770 |
| | 262,422 |
|
Cash and cash equivalents at end of period | | $ | 515,473 |
| | $ | 271,396 |
|
See notes to unaudited consolidated financial statements.
COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | Additional | Accumulated Other | | Treasury Stock | Non- | |
(in thousands, except share data) | Number of Shares | Amount | Paid-In Capital | Comprehensive Income (Loss) | Retained Earnings | Number of Shares | Amount | controlling Interests | Total |
Balance, September 1, 2012 | 129,060,664 |
| $ | 1,290 |
| $ | 365,778 |
| $ | (18,136 | ) | $ | 1,145,445 |
| (12,709,240 | ) | $ | (248,009 | ) | $ | 139 |
| $ | 1,246,507 |
|
Net earnings | | | | | 49,717 |
| | | 2 |
| 49,719 |
|
Other comprehensive income | | | | 23,412 |
| | | | | 23,412 |
|
Cash dividends | | | | | (13,963 | ) | | | | (13,963 | ) |
Issuance of stock under incentive and purchase plans, net of forfeitures | | | (2,523 | ) | | | 97,474 |
| 2,109 |
| | (414 | ) |
Share-based compensation | | | 3,081 |
| | | | | |
| 3,081 |
|
Tax benefits from stock plans | | | | | | | | |
| — |
|
Contribution of noncontrolling interest | | | | | | | | 15 |
| 15 |
|
Balance, November 30, 2012 | 129,060,664 |
| $ | 1,290 |
| $ | 366,336 |
| $ | 5,276 |
| $ | 1,181,199 |
| (12,611,766 | ) | $ | (245,900 | ) | $ | 156 |
| $ | 1,308,357 |
|
| | | | | | | | | |
| Common Stock | Additional | Accumulated Other | | Treasury Stock | Non- | |
(in thousands, except share data) | Number of Shares | Amount | Paid-In Capital | Comprehensive Income (Loss) | Retained Earnings | Number of Shares | Amount | controlling Interests | Total |
Balance, September 1, 2013 | 129,060,664 |
| $ | 1,290 |
| $ | 363,772 |
| $ | (27,176 | ) | $ | 1,166,732 |
| (12,049,674 | ) | $ | (234,619 | ) | $ | 156 |
| $ | 1,270,155 |
|
Net earnings | | | | | 45,919 |
| | |
|
| 45,919 |
|
Other comprehensive income | | | | 19,353 |
| | | | | 19,353 |
|
Cash dividends | | | | | (14,067 | ) | | | | (14,067 | ) |
Issuance of stock under incentive and purchase plans, net of forfeitures | | | (7,964 | ) | | | 293,497 |
| 5,875 |
| | (2,089 | ) |
Share-based compensation | | | 3,818 |
| | | | | | 3,818 |
|
Tax benefits from stock plans | | | 109 |
| | | | | | 109 |
|
Purchase of noncontrolling interests | | | 30 |
| | | | | (82 | ) | (52 | ) |
Balance, November 30, 2013 | 129,060,664 |
| $ | 1,290 |
| $ | 359,765 |
| $ | (7,823 | ) | $ | 1,198,584 |
| (11,756,177 | ) | $ | (228,744 | ) | $ | 74 |
| $ | 1,323,146 |
|
See notes to unaudited consolidated financial statements.
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. ACCOUNTING POLICIES
Accounting Principles
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") on a basis consistent with that used in the Annual Report on Form 10-K filed by Commercial Metals Company ("CMC", and together with its consolidated subsidiaries, the "Company") with the Securities and Exchange Commission ("SEC") for the year ended August 31, 2013, and include all normal recurring adjustments necessary to present fairly the consolidated balance sheets and the consolidated statements of operations, comprehensive income, cash flows and stockholders' equity for the periods indicated. These notes should be read in conjunction with the audited consolidated financial statements and notes included in the Annual Report on Form 10-K for the year ended August 31, 2013. The results of operations for the three month period are not necessarily indicative of the results to be expected for the full year.
Recent Accounting Pronouncements
In the first quarter of fiscal 2014, the Company adopted guidance issued by the Financial Accounting Standards Board ("FASB") requiring an entity to provide quantitative and qualitative disclosures about the nature of its rights of setoff and related arrangements associated with its financial instruments and derivative instruments. The objective is to make financial statements that are prepared under GAAP more comparable to those prepared under International Financial Reporting Standards. The new disclosures will give financial statement users information about both gross and net exposures. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.
In July 2013, the FASB issued guidance requiring entities to net an unrecognized tax benefit with a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The new guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company does not expect this guidance to have a material impact on its consolidated financial statements.
In April 2013, the FASB issued guidance requiring an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. In addition, the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The new guidance is effective prospectively for entities that determine liquidation is imminent during fiscal years, and interim reporting periods within those years, beginning after December 15, 2013. The Company does not expect this guidance to have a material impact on its consolidated financial statements.
In March 2013, the FASB issued guidance requiring an entity to release any related cumulative translation adjustment into net income when it either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, the guidance resolves the diversity in practice for the treatment of business combinations achieved in stages involving a foreign entity. The new guidance is effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2013. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In February 2013, the FASB issued guidance requiring an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. The guidance also requires entities to disclose the nature and amount of the obligation as well as other information about the obligation. The new guidance is effective retrospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2013. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
NOTE 2. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss), net of income taxes, is comprised of the following:
|
| | | | | | | | | | | | | | | | |
(in thousands) | | Foreign Currency Translation | | Unrealized Gain (Loss) on Derivatives | | Defined Benefit Obligation | | Total Accumulated Other Comprehensive Income (Loss) |
Balance, August 31, 2013 | | $ | (27,477 | ) | | $ | 3,594 |
| | $ | (3,293 | ) | | $ | (27,176 | ) |
Other comprehensive income (loss) before reclassifications | | 19,442 |
| | (1,617 | ) | | 550 |
| | 18,375 |
|
Amounts reclassified from AOCI | | — |
| | 980 |
| | (2 | ) | | 978 |
|
Net other comprehensive income (loss) | | 19,442 |
| | (637 | ) | | 548 |
| | 19,353 |
|
Balance, November 30, 2013 | | $ | (8,035 | ) | | $ | 2,957 |
| | $ | (2,745 | ) | | $ | (7,823 | ) |
The significant items reclassified out of accumulated other comprehensive income (loss) and the corresponding line items in the consolidated statements of operations to which the items were reclassified were as follows:
|
| | | | | | |
Components of AOCI (in thousands) | | Location | | Three Months Ended November 30, 2013 |
Unrealized gain (loss) on derivatives: | |
| |
|
|
Commodity | | Cost of goods sold | | $ | (119 | ) |
Foreign exchange | | Net sales | | (250 | ) |
Foreign exchange | | Cost of goods sold | | (922 | ) |
Foreign exchange | | SG&A expenses | | 14 |
|
Interest rate | | Interest expense | | 116 |
|
| |
| | (1,161 | ) |
Income tax effect | | Income taxes (expense) benefit | | 181 |
|
Net of income taxes | |
| | $ | (980 | ) |
Defined benefit obligation: | |
| |
|
|
Amortization of net gain | | SG&A expenses | | $ | 3 |
|
Income tax effect | | Income taxes (expense) benefit | | (1 | ) |
Net of income taxes | |
| | $ | 2 |
|
Amounts in parentheses reduce earnings.
NOTE 3. SALES OF ACCOUNTS RECEIVABLE
The Company has a domestic sale of accounts receivable program which expires on December 26, 2014. Under the program, Commercial Metals Company contributes, and several of its subsidiaries sell without recourse, certain eligible trade accounts receivable to CMC Receivables, Inc. ("CMCRV"), a wholly owned subsidiary of CMC. CMCRV is structured to be a bankruptcy-remote entity and was formed for the sole purpose of buying and selling receivables generated by the Company. CMCRV sells the trade accounts receivable in their entirety to two financial institutions. The financial institutions advance up to a maximum of $200 million for all receivables sold, and the remaining portion of the purchase price of the receivables will be paid to the Company from the ultimate collection of the receivables after payment of certain fees and other costs. The Company accounts for sales of the receivables as true sales and the trade accounts receivable balances that are sold are removed from the consolidated balance sheets. The cash advances received are reflected as cash provided by operating activities on the Company's consolidated statements of cash flows. Additionally, the receivables program contains certain cross-default provisions whereby a termination event could occur if the Company defaulted under certain of its credit arrangements. The covenants contained in the receivables purchase agreement are consistent with the credit facility described in Note 7, Credit Arrangements.
At November 30, 2013 and August 31, 2013, under its domestic sale of accounts receivable program, the Company had sold $356.9 million and $358.8 million of receivables, respectively, to the financial institutions and received no advance payments.
In addition to the domestic sale of accounts receivable program described above, the Company's international subsidiaries in Europe and Australia sell accounts receivable to financial institutions without recourse. These arrangements constitute true sales, and once the accounts are sold, they are no longer available to the Company's creditors in the event of bankruptcy. The European program allows the Company’s European subsidiaries to advance up to 90% of eligible receivables sold under the terms of the arrangement. During the first quarter of fiscal 2014, the Company phased out its existing Australian accounts receivable sales program and entered into a new accounts receivable sales program with a different financial institution. Under the new Australian program, accounts receivable balances will be sold to a special purpose vehicle, which in turn will sell 100% of the eligible receivables of Commercial Metals Pty. Ltd., CMC Steel Distribution Pty. Ltd. and G.A.M. Steel Pty. Ltd. to the financial institution. Under the Australian program, the financial institution will fund up to A$75.0 million for all receivables sold, and the remaining portion of the purchase price of the receivables will be paid to the Company from the ultimate collection of the receivables after payment of certain fees and other costs. During the three months ended November 30, 2013, no accounts receivable were sold under the new Australian program. The Company accounts for sales of the receivables as true sales and the trade accounts receivable balances that are sold are removed from the consolidated balance sheets. The cash advances received are reflected as cash provided by operating activities on the Company's consolidated statements of cash flows.
At November 30, 2013 and August 31, 2013, under its international sale of accounts receivable programs, the Company had sold $55.4 million and $121.2 million of accounts receivable, respectively, to third-party financial institutions and had received advance payments of $31.7 million and $24.5 million, respectively.
During the three months ended November 30, 2013 and 2012, cash proceeds from the domestic and international sale of accounts receivable programs were $162.8 million and $287.0 million, respectively, and cash payments to the owners of accounts receivable were $159.4 million and $333.6 million, respectively. For a nominal servicing fee, the Company is responsible for servicing the accounts receivable for the domestic and Australian programs. Discounts on domestic and international sales of accounts receivable were $0.6 million and $1.2 million for the three months ended November 30, 2013 and 2012, respectively, and are included in selling, general and administrative expenses in the Company's consolidated statements of operations.
The deferred purchase price on the Company's domestic and international sale of accounts receivable programs are included in accounts receivable on the Company's consolidated balance sheets. The following tables summarize the activity of the deferred purchase price receivables for the domestic and international sale of accounts receivable programs:
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended November 30, 2013 |
(in thousands) | | Total | | Domestic | | Australia | | Europe |
Beginning balance | | $ | 453,252 |
| | $ | 358,822 |
| | $ | 64,996 |
| | $ | 29,434 |
|
Transfers of accounts receivable | | 1,037,205 |
| | 840,571 |
| | 73,120 |
| | 123,514 |
|
Collections | | (1,042,922 | ) | | (847,878 | ) | | (65,804 | ) | | (129,240 | ) |
Program termination | | (72,312 | ) | | — |
| | (72,312 | ) | | — |
|
Ending balance | | $ | 375,223 |
| | $ | 351,515 |
| | $ | — |
| | $ | 23,708 |
|
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended November 30, 2012 |
(in thousands) | | Total | | Domestic | | Australia | | Europe |
Beginning balance | | $ | 515,481 |
| | $ | 396,919 |
| | $ | 70,073 |
| | $ | 48,489 |
|
Transfers of accounts receivable | | 1,206,746 |
| | 936,630 |
| | 126,908 |
| | 143,208 |
|
Collections | | (1,186,356 | ) | | (928,556 | ) | | (119,820 | ) | | (137,980 | ) |
Ending balance | | $ | 535,871 |
| | $ | 404,993 |
| | $ | 77,161 |
| | $ | 53,717 |
|
NOTE 4. INVENTORIES
Inventories are stated at the lower of cost or market. Inventory cost for most domestic inventories is determined by the last-in, first-out ("LIFO") method. At November 30, 2013 and August 31, 2013, 39% and 43%, respectively, of the Company's total net inventories were valued at LIFO. LIFO inventory reserves were $189.6 million and $185.5 million at November 30, 2013 and August 31, 2013, respectively. Inventory cost for international inventories and the remaining domestic inventories are determined by the first-in, first-out ("FIFO") method and consisted mainly of material dedicated to CMC Poland Sp. z.o.o. ("CMCP") and certain marketing and distribution businesses.
The majority of the Company's inventories are in the form of finished goods with minimal work in process. At November 30, 2013 and August 31, 2013, $74.6 million and $66.7 million, respectively, of the Company's inventories were in the form of raw materials.
NOTE 5. GOODWILL AND OTHER INTANGIBLE ASSETS
The following table details the changes in the carrying amount of goodwill by reportable segment: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Americas | | International | | |
(in thousands) | | Recycling | | Mills | | Fabrication | | Mill | | Marketing and Distribution | | Consolidated |
Balance, August 31, 2013 | | $ | 7,267 |
| | $ | 295 |
| | $ | 57,144 |
| | $ | 2,755 |
| | $ | 2,118 |
| | $ | 69,579 |
|
Foreign currency translation | | — |
| | — |
| | — |
| | 121 |
| | 33 |
| | 154 |
|
Balance, November 30, 2013 | | $ | 7,267 |
| | $ | 295 |
| | $ | 57,144 |
| | $ | 2,876 |
| | $ | 2,151 |
| | $ | 69,733 |
|
The total gross carrying amounts of the Company's intangible assets that are subject to amortization were $43.3 million and $42.9 million at November 30, 2013 and August 31, 2013, respectively, and are included in other noncurrent assets on the Company's consolidated balance sheets. Excluding goodwill, there are no other significant intangible assets with indefinite lives. Amortization expense for intangible assets was $1.2 million for each of the three months ended November 30, 2013 and 2012.
NOTE 6. BUSINESSES HELD FOR SALE, DISCONTINUED OPERATIONS AND DISPOSITIONS
Businesses Held for Sale
The assets and liabilities of businesses classified as held for sale are included in other current assets and accrued expenses on the Company's consolidated balance sheets. The components of assets and liabilities of businesses held for sale are as follows.
|
| | | | | | | | |
(in thousands) | | November 30, 2013 | | August 31, 2013 |
Assets: | | | | |
Accounts receivable | | $ | — |
| | $ | 20,313 |
|
Inventories, net | | — |
| | 8,713 |
|
Other current assets | | — |
| | 3,683 |
|
Property, plant and equipment, net of accumulated depreciation and amortization | | 1,085 |
| | 10,459 |
|
Assets of businesses held for sale | | $ | 1,085 |
| | $ | 43,168 |
|
Liabilities: | |
|
| |
|
|
Accounts payable-trade | | $ | — |
| | $ | 7,615 |
|
Accrued expenses and other payables | | — |
| | 3,251 |
|
Liabilities of businesses held for sale | | $ | — |
| | $ | 10,866 |
|
Discontinued Operations
During the fourth quarter of fiscal 2013, the Company decided to sell all of the stock of its wholly owned copper tube manufacturing operation, Howell Metal Company ("Howell"). The Company determined that the decision to sell this business met the definition of a discontinued operation. As a result, the Company included Howell in discontinued operations for all periods presented.
During fiscal 2012, the Company announced its decision to exit the steel pipe manufacturing operations in Croatia ("CMCS") by closure of the facility and sale of the assets. The Company determined that the decision to exit this business met the definition of a discontinued operation. As a result, the Company included CMCS in discontinued operations for all periods presented. The Company sold a majority of CMCS' assets during fiscal 2012. The remaining assets were sold during the first quarter of fiscal 2013 for $3.9 million with no impact to the consolidated statements of operations.
Financial information for discontinued operations was as follows:
|
| | | | | | | | |
| | Three Months Ended November 30, |
(in thousands) | | 2013 | | 2012 |
Net Sales | | $ | 17,298 |
| | $ | 39,711 |
|
Earnings from discontinued operations before income taxes | | 22,845 |
| | 1,250 |
|
Dispositions
On October 17, 2013, the Company sold all of the stock of Howell for $58.5 million, of which $4.2 million is held in escrow, subject to customary purchase price adjustments, resulting in a pre-tax gain of $23.8 million. Howell was previously an operating segment included in the Americas Mills reporting segment.
During the first quarter of fiscal 2013, the Company completed the sale of its 11% ownership interest in Trinecke Zelezarny, a.s. ("Trinecke"), a Czech Republic joint-stock company, for $29.0 million resulting in a pre-tax gain of $26.1 million. The Trinecke investment was included in the International Marketing and Distribution reporting segment.
NOTE 7. CREDIT ARRANGEMENTS
In May 2013, the Company issued $330.0 million of 4.875% Senior Notes due May 15, 2023 (the "2023 Notes") and received proceeds of $325.0 million, net of underwriting discounts and debt issuance costs. The Company used $205.3 million of the proceeds from the 2023 Notes to purchase all of its outstanding $200.0 million of 5.625% Notes due 2013 (the "2013 Notes"). The Company uses the remaining proceeds for general corporate purposes. Interest on the 2023 Notes is payable semi-annually on May 15 and November 15 of each year, beginning on November 15, 2013. The Company may, at any time, redeem the 2023 Notes at a redemption price equal to 100 percent of the principal amount, plus a "make-whole" premium described in the indenture. Additionally, if a change of control triggering event occurs, as defined by the terms of the indenture, holders of the 2023 Notes may require the Company to repurchase the 2023 Notes at a purchase price equal to 101 percent of the principal amount, plus accrued and unpaid interest, if any, to the date of purchase. The Company is generally not limited under the indenture governing the 2023 Notes in its ability to incur additional indebtedness provided the Company is in compliance with certain restrictive covenants, including restrictions on liens, sale and leaseback transactions, mergers, consolidations and transfers of substantially all of the Company's assets.
In December 2011, the Company entered into a third amended and restated $300 million revolving credit facility that matures on December 27, 2016. The maximum availability under this facility can be increased to $400 million with the consent of both parties. The program's capacity, with a sublimit of $50 million for letters of credit, is reduced by outstanding stand-by letters of credit which totaled $35.2 million at November 30, 2013. Under the credit facility, the Company was required to maintain a minimum interest coverage ratio (adjusted EBITDA to interest expense, as each is defined in the facility) of not less than 3.00 to 1.00 for the twelve month cumulative period ended November 30, 2012 and for each fiscal quarter on a rolling twelve month cumulative period thereafter. At November 30, 2013, the Company's interest coverage ratio was 4.96 to 1.00. The credit facility also requires the Company to maintain a debt to capitalization ratio that does not exceed 0.60 to 1.00. At November 30, 2013, the Company's debt to capitalization ratio was 0.50 to 1.00. The credit facility provides for interest based on the LIBOR, the Eurodollar rate or Bank of America's prime rate.
At November 30, 2013, the Company was in compliance with all covenants related to its debt agreements.
During fiscal 2012, the Company terminated its existing interest rate swap transactions and received cash proceeds of approximately $52.7 million, net of customary finance charges. The resulting gain was deferred and is being amortized as a reduction to interest expense over the remaining term of the respective debt tranches. At November 30, 2013 and August 31, 2013, the unamortized portion was $32.5 million and $34.4 million, respectively, and for the three months ended November 30, 2013 and 2012, the amortization of the deferred gain was $1.9 million and $2.9 million, respectively.
The Company has uncommitted credit facilities available from domestic and international banks. In general, these credit facilities are used to support trade letters of credit (including accounts payable settled under bankers' acceptances), foreign exchange transactions and short-term advances which are priced at market rates.
Long-term debt, including the deferred gain from the termination of the interest rate swaps, was as follows:
|
| | | | | | | | | | |
(in thousands) | | Weighted Average Interest Rate as of November 30, 2013 | | November 30, 2013 | | August 31, 2013 |
$400 million notes at 6.50% due July 2017 | | 5.7% | | $ | 410,775 |
| | $ | 411,518 |
|
$500 million notes at 7.35% due August 2018 | | 6.4% | | 521,773 |
| | 522,930 |
|
$330 million notes at 4.875% due May 2023 | | 4.9% | | 330,000 |
| | 330,000 |
|
Other, including equipment notes | | | | 20,987 |
| | 19,594 |
|
| | | | 1,283,535 |
| | 1,284,042 |
|
Less current maturities | | | | 6,232 |
| | 5,228 |
|
| | | | $ | 1,277,303 |
| | $ | 1,278,814 |
|
Interest on these notes is payable semiannually.
CMCP has uncommitted credit facilities of $66.3 million with several banks with expiration dates ranging from December 2013 to October 2014. During the three months ended November 30, 2013, CMCP had no borrowings and no repayments under these facilities. At November 30, 2013, no material amounts were outstanding under these facilities.
The Company had no material amounts of interest capitalized in the cost of property, plant and equipment during the three months ended November 30, 2013 and 2012, respectively. Cash paid for interest during the three months ended November 30, 2013 and 2012 was $9.5 million and $4.6 million, respectively.
NOTE 8. DERIVATIVES AND RISK MANAGEMENT
The Company's global operations and product lines expose it to risks from fluctuations in metal commodity prices, foreign currency exchange rates, natural gas prices and interest rates. One objective of the Company's risk management program is to mitigate these risks using derivative instruments. The Company enters into metal commodity futures and forward contracts to mitigate the risk of unanticipated changes in gross margin due to the volatility of the commodities' prices, enters into foreign currency forward contracts that match the expected settlements for purchases and sales denominated in foreign currencies and enters into natural gas forward contracts to mitigate the risk of unanticipated changes in operating cost due to the volatility of natural gas prices. When sales commitments to customers include a fixed price freight component, the Company occasionally enters into freight forward contracts to reduce the effects of the volatility of ocean freight rates.
At November 30, 2013, the notional value of the Company's foreign currency contract commitments and its commodity contract commitments was $433.3 million and $54.9 million, respectively.
The following table provides information regarding the Company's commodity contract commitments as of November 30, 2013:
|
| | | | | | |
Commodity | | Long/Short | | Total |
Aluminum | | Long | | 4,945 |
| MT |
Aluminum | | Short | | 1,800 |
| MT |
Copper | | Long | | 476 |
| MT |
Copper | | Short | | 5,443 |
| MT |
Zinc | | Long | | 7 |
| MT |
MT = Metric Ton
The Company designates only those contracts which closely match the terms of the underlying transaction as hedges for accounting purposes. These hedges resulted in substantially no ineffectiveness in the Company's consolidated statements of operations, and there were no components excluded from the assessment of hedge effectiveness for the three months ended November 30, 2013 and 2012. Certain foreign currency and commodity contracts were not designated as hedges for accounting purposes, although management believes they are essential economic hedges.
The following tables summarize activities related to the Company's derivative instruments and hedged items recognized in the consolidated statements of operations:
|
| | | | | | | | | | |
| | | | Three Months Ended November 30, |
Derivatives Not Designated as Hedging Instruments (in thousands) | | Location | | 2013 | | 2012 |
Commodity | | Cost of goods sold | | $ | 510 |
| | $ | (411 | ) |
Commodity | | SG&A expenses | | — |
| | (588 | ) |
Foreign exchange | | Net sales | | (159 | ) | | (11 | ) |
Foreign exchange | | Cost of goods sold | | (121 | ) | | — |
|
Foreign exchange | | SG&A expenses | | (4,693 | ) | | (36 | ) |
Other | | Cost of goods sold | | — |
| | 15 |
|
Loss before income taxes | | | | $ | (4,463 | ) | | $ | (1,031 | ) |
The Company's fair value hedges are designated for accounting purposes with gains and losses on the hedged items offsetting the gain or loss on the related derivative transaction. Hedged items relate to firm commitments on commercial sales and purchases and capital expenditures.
|
| | | | | | | | | | |
Derivatives Designated as Fair Value Hedging Instruments (in thousands) | | | | Three Months Ended November 30, |
| Location | | 2013 | | 2012 |
Foreign exchange | | Net sales | | $ | (113 | ) | | $ | — |
|
Foreign exchange | | Cost of goods sold | | (127 | ) | | (229 | ) |
Loss before income taxes | | | | $ | (240 | ) | | $ | (229 | ) |
|
| | | | | | | | | | |
Hedged Items Designated as Fair Value Hedging Instruments (in thousands) | | | | Three Months Ended November 30, |
| Location | | 2013 | | 2012 |
Foreign exchange | | Net sales | | $ | 93 |
| | $ | (23 | ) |
Foreign exchange | | Cost of goods sold | | 125 |
| | 157 |
|
Gain before income taxes | | | | $ | 218 |
| | $ | 134 |
|
|
| | | | | | | | |
Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments Recognized in Accumulated Other Comprehensive Income (Loss) (in thousands) | | Three Months Ended November 30, |
| 2013 | | 2012 |
Commodity | | $ | (89 | ) | | $ | 14 |
|
Foreign exchange | | (1,528 | ) | | 303 |
|
Gain (loss), net of income taxes | | $ | (1,617 | ) | | $ | 317 |
|
|
| | | | | | | | | | |
Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments Reclassified from Accumulated Other Comprehensive Income (Loss) (in thousands) | | | | Three Months Ended November 30, |
| Location | | 2013 | | 2012 |
Commodity | | Cost of goods sold | | $ | (89 | ) | | $ | — |
|
Foreign exchange | | Net sales | | (231 | ) | | 51 |
|
Foreign exchange | | Cost of goods sold | | (758 | ) | | (41 | ) |
Foreign exchange | | SG&A expenses | | 12 |
| | 10 |
|
Interest rate | | Interest expense | | 86 |
| | 102 |
|
Gain (loss), net of income taxes | | | | $ | (980 | ) | | $ | 122 |
|
The Company enters into derivative agreements that include provisions to allow the set-off of certain amounts. Derivative instruments are presented on a gross basis on the Company's consolidated balance sheets. The asset and liability balances in the tables below reflect the gross amounts of derivative instruments at November 30, 2013 and August 31, 2013. The fair value of the Company's derivative instruments on the consolidated balance sheets was as follows:
|
| | | | | | | | |
Derivative Assets (in thousands) | | November 30, 2013 | | August 31, 2013 |
Commodity — not designated for hedge accounting | | $ | 1,357 |
| | $ | 1,066 |
|
Foreign exchange — designated for hedge accounting | | 1,414 |
| | 1,626 |
|
Foreign exchange — not designated for hedge accounting | | 1,971 |
| | 1,238 |
|
Derivative assets (other current assets and other assets)* | | $ | 4,742 |
| | $ | 3,930 |
|
|
| | | | | | | | |
Derivative Liabilities (in thousands) | | November 30, 2013 | | August 31, 2013 |
Commodity — designated for hedge accounting | | $ | 39 |
| | $ | 129 |
|
Commodity — not designated for hedge accounting | | 1,302 |
| | 1,268 |
|
Foreign exchange — designated for hedge accounting | | 889 |
| | 432 |
|
Foreign exchange — not designated for hedge accounting | | 1,633 |
| | 1,738 |
|
Derivative liabilities (accrued expenses, other payables and long-term liabilities)* | | $ | 3,863 |
| | $ | 3,567 |
|
_________________
* Derivative assets and liabilities do not include the hedged items designated as fair value hedges.
As of November 30, 2013, all of the Company's derivative instruments designated to hedge exposure to the variability in future cash flows of the forecasted transactions will mature within twelve months.
All of the instruments are highly liquid and not entered into for trading purposes.
NOTE 9. FAIR VALUE
The Company has established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest level input that is significant to the fair value measurement. Levels within the hierarchy are defined as follows:
Level 1 - Unadjusted quoted prices in active markets for identical assets and liabilities;
Level 2 - Quoted prices for similar assets and liabilities in active markets (other than those included in Level 1) which are observable, either directly or indirectly; and
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
The following tables summarize information regarding the Company's financial assets and financial liabilities that were measured at fair value on a recurring basis:
|
| | | | | | | | | | | | | | | | |
| | | | Fair Value Measurements at Reporting Date Using |
(in thousands) | | November 30, 2013 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | | | | | | | | |
Money market investments (1) | | $ | 371,574 |
| | $ | 371,574 |
| | $ | — |
| | $ | — |
|
Commodity derivative assets (2) | | 1,357 |
| | 1,357 |
| | — |
| | — |
|
Foreign exchange derivative assets (2) | | 3,385 |
| | — |
| | 3,385 |
| | — |
|
Liabilities: | | | | | | | | |
Commodity derivative liabilities (2) | | 1,341 |
| | 1,302 |
| | 39 |
| | — |
|
Foreign exchange derivative liabilities (2) | | 2,522 |
| | — |
| | 2,522 |
| | — |
|
|
| | | | | | | | | | | | | | | | |
| | | | Fair Value Measurements at Reporting Date Using |
(in thousands) | | August 31, 2013 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | | | | | | | | |
Money market investments (1) | | $ | 236,727 |
| | $ | 236,727 |
| | $ | — |
| | $ | — |
|
Commodity derivative assets (2) | | 1,066 |
| | 1,066 |
| | — |
| | — |
|
Foreign exchange derivative assets (2) | | 2,864 |
| | — |
| | 2,864 |
| | — |
|
Liabilities: | | | | | | | | |
Commodity derivative liabilities (2) | | 1,397 |
| | 1,268 |
| | 129 |
| | — |
|
Foreign exchange derivative liabilities (2) | | 2,170 |
| | — |
| | 2,170 |
| | — |
|
_________________
(1) Money market investments are short-term in nature, and the value is determined by broker quoted prices in active markets. The investment portfolio mix can change each period based on the Company's assessment of investment options.
(2) Derivative assets and liabilities classified as Level 1 are commodity futures contracts valued based on quoted market prices in the London Metal Exchange or the New York Mercantile Exchange. Amounts in Level 2 are based on broker quotes in the over-the-counter market. Further discussion regarding the Company's use of derivatives and the classification of the assets and liabilities is included in Note 8, Derivatives and Risk Management.
Fair value of property, plant and equipment held for sale (Level 3) was $3.8 million based on appraised values less costs to sell at November 30, 2013. CMC does not have other assets or intangible assets measured at fair value on a non-recurring basis at November 30, 2013.
The carrying values of the Company's short-term items, including the deferred purchase prices of accounts receivable, documentary letters of credit and notes payable, approximate fair value due to their short term nature.
The carrying values and estimated fair values of the Company's financial assets and liabilities that are not required to be measured at fair value on the consolidated balance sheets are as follows:
|
| | | | | | | | | | | | | | | | | | |
| | | | November 30, 2013 | | August 31, 2013 |
(in thousands) | | Fair Value Hierarchy | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
$400 million notes at 6.50% due July 2017 (1) | | Level 2 | | $ | 410,775 |
| | $ | 447,760 |
| | $ | 411,518 |
| | $ | 443,646 |
|
$500 million notes at 7.35% due August 2018 (1) | | Level 2 | | 521,773 |
| | 574,840 |
| | 522,930 |
| | 570,429 |
|
$330 million notes at 4.875% due May 2023 (1) | | Level 2 | | 330,000 |
| | 311,025 |
| | 330,000 |
| | 298,650 |
|
(1) The fair value of the notes is calculated based on indicated market values.
NOTE 10. INCOME TAX
The Company's effective income tax rate from continuing operations for the three months ended November 30, 2013 and 2012 was 32.1% and 31.2%, respectively. The Company's effective income tax rate from discontinued operations for the three months ended November 30, 2013 and 2012 was 38.9% and 37.0%, respectively.
The Company made net payments of $1.4 million and $0.3 million for income taxes during the three months ended November 30, 2013 and 2012, respectively.
The reserve for unrecognized income tax benefits related to the accounting for uncertainty in income taxes was $28.6 million and $27.4 million, exclusive of interest and penalties, as of November 30, 2013 and 2012, respectively.
The Company's policy classifies interest recognized on an underpayment of income taxes and any statutory penalties recognized on a tax position as income tax expense and the balances at the end of a reporting period are recorded as part of the current or
noncurrent reserve for uncertain income tax positions. For the three months ended November 30, 2013, before any income tax benefits, the Company recorded immaterial amounts of accrued interest and penalties on unrecognized income tax benefits.
During the twelve months ending November 30, 2014, it is reasonably possible that the statute of limitations may lapse pertaining to positions taken by the Company in prior year income tax returns or that income tax audits in various taxing jurisdictions could be finalized. As a result, the total amount of unrecognized income tax benefits may decrease by approximately $17.9 million, which would reduce the provision for income taxes on earnings by an immaterial amount.
The Company files income tax returns in the United States and multiple foreign jurisdictions with varying statutes of limitations. In the normal course of business, the Company and its subsidiaries are subject to examination by various taxing authorities. The following is a summary of tax years subject to examination:
US Federal — 2009 and forward
US States — 2009 and forward
Foreign — 2006 and forward
The Company is currently under examination by the Internal Revenue Service and state revenue authorities from 2009 to 2011. Management believes the Company's recorded tax liabilities as of November 30, 2013 sufficiently reflect the anticipated outcome of these examinations.
NOTE 11. SHARE-BASED COMPENSATION PLANS
The Company's share-based compensation plans are described, and informational disclosures provided, in Note 15, Share-Based Compensation Plans, to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended August 31, 2013. During the three months ended November 30, 2013 and 2012, restricted stock units ("RSUs") and performance stock units ("PSUs") totaling 1.1 million and 1.3 million, respectively, were granted at a weighted-average fair value of $16.75 and $12.99, respectively. Stock appreciation rights ("SARs") were not granted during the three months ended November 30, 2013. The Company granted 0.2 million SARs at a weighted average exercise price of $14.12 during the three months ended November 30, 2012.
During the three months ended November 30, 2013 and 2012, the Company granted 59,565 equivalent shares of cash-settled RSUs and PSUs and 204,069 equivalent shares of cash-settled RSUs, PSUs and SARs, respectively. The fair value of these cash-settled awards is remeasured each reporting period and is recognized ratably over the service period. As of November 30, 2013, the Company had 2,016,522 equivalent shares in awards outstanding. The Company expects 1,717,684 equivalent shares to vest.
In general, the RSUs and PSUs granted during fiscal 2014 will vest over a period of three years; however, certain RSUs granted during fiscal 2014 will vest over a period of four years. The RSUs granted during fiscal 2013 will vest over a period of three years. Subject to the achievement of performance targets established by the Compensation Committee of the Board of Directors, the PSUs granted during fiscal 2014 and fiscal 2013 will vest after a period of three years. The SARs granted during fiscal 2013 vest ratably over a period of three years. The SARs have a contractual term of seven years.
Share-based compensation expense for the three months ended November 30, 2013 and 2012 of $5.5 million and $4.5 million, respectively, is included in selling, general and administrative expenses on the Company's consolidated statements of operations.
NOTE 12. EARNINGS PER SHARE ATTRIBUTABLE TO CMC
The calculations of the basic and diluted earnings per share for the three months ended November 30, 2013 and 2012 are as follows:
|
| | | | | | | | |
| | Three Months Ended November 30, |
(in thousands, except share data) | | 2013 | | 2012 |
Net earnings attributable to CMC | | $ | 45,919 |
| | $ | 49,717 |
|
| | | | |
Basic earnings per share: | | | | |
Shares outstanding for basic earnings per share | | 117,070,499 |
| | 116,336,504 |
|
| | | | |
Basic earnings per share attributable to CMC: | | $ | 0.39 |
| | $ | 0.43 |
|
| | | | |
Diluted earnings per share: | | | | |
Shares outstanding for basic earnings per share | | 117,070,499 |
| | 116,336,504 |
|
| | | | |
Effect of dilutive securities: | | | | |
Share-based incentive/purchase plans | | 1,086,112 |
| | 757,123 |
|
Shares outstanding for diluted earnings per share | | 118,156,611 |
| | 117,093,627 |
|
| | | | |
Diluted earnings per share attributable to CMC: | | $ | 0.39 |
| | $ | 0.42 |
|
| | | | |
Anti-dilutive shares not included above | | 1,364,036 |
| | 2,945,188 |
|
All stock options and SARs expire by 2020.
CMC's restricted stock is included in the number of shares of common stock issued and outstanding, but is omitted from the basic earnings per share calculation until the shares vest.
The Company did not purchase any shares during the first three months of fiscal 2014 and had remaining authorization to purchase 8,259,647 shares of its common stock at November 30, 2013.
NOTE 13. COMMITMENTS AND CONTINGENCIES
In the ordinary course of conducting its business, the Company becomes involved in litigation, administrative proceedings and government investigations, including environmental matters. See Note 18, Commitments and Contingencies, to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended August 31, 2013.
On September 18, 2008, the Company was served with a class action antitrust lawsuit alleging violations of Section 1 of the Sherman Act, brought by Standard Iron Works of Scranton, Pennsylvania, against nine steel manufacturing companies, including CMC. The lawsuit, filed in the United States District Court for the Northern District of Illinois, alleges that the defendants conspired to fix, raise, maintain and stabilize the price at which steel products were sold in the United States by artificially restricting the supply of such steel products. The lawsuit, which purports to be brought on behalf of a class consisting of all purchasers of steel products directly from the defendants between January 1, 2005 and September 2008, seeks treble damages and costs, including reasonable attorney fees and pre- and post-judgment interest. Motions for and against class certification have been filed. Oral arguments related to class certification are pending. Discovery on the case merits remains pending. The Company believes the case is without merit and intends to defend it vigorously.
Since the filing of the direct purchaser lawsuit, a case has been filed in federal court in the Northern District of Illinois on behalf of a class of indirect purchasers in approximately 28 states naming the same defendants and containing allegations substantially identical to those of the Standard Iron Works complaint. That case has in effect been stayed. Another indirect purchaser action was filed in Tennessee state court, again naming the same defendants but contending that the conspiracy continued through 2010. The case has been removed to federal court, and plaintiffs have moved to remand. The motion to remand has not yet been decided, and no motion practice or discovery has taken place. The Company believes that the lawsuits are without merit and plans to defend them vigorously. Due to the uncertainty and the information available at this time, the Company cannot reasonably estimate a range of loss relating to these cases.
Guarantees
During fiscal 2012, the Company entered into a guarantee agreement with a bank in connection with a credit facility granted by the bank to a supplier of the Company. The fair value of the guarantee is negligible. The maximum credit facility with the bank was $4.0 million, and the Company's maximum exposure was $2.8 million as of November 30, 2013.
NOTE 14. BUSINESS SEGMENTS
The Company's reporting segments are based on strategic business areas, which offer different products and services. These segments have different lines of management responsibility as each business requires different marketing strategies and management expertise.
The Company structures its business into the following five segments: Americas Recycling, Americas Mills, Americas Fabrication, International Mill and International Marketing and Distribution. The Americas Recycling segment processes scrap metals for use as a raw material by manufacturers of new metal products. The Americas Mills segment manufactures finished long steel products including rebar, merchant bar, light structural, some special bar quality (SBQ) and other special sections as well as semi-finished billets for re-rolling and forging applications. The Americas Fabrication segment consists of the Company's rebar and structural fabrication operations, fence post manufacturing plants, construction-related product facilities and plants that heat-treat steel to strengthen and provide flexibility. The International Mill segment includes the Company's minimill and the Company's recycling and fabrication operations in Poland. The International Marketing and Distribution segment includes international operations for the sale, distribution and processing of steel products, ferrous and nonferrous metals and other industrial products. Additionally, this segment includes the Company's U.S.-based marketing and distribution divisions and also operates a recycling facility in Singapore. Corporate contains expenses of the Company's corporate headquarters and interest expense related to its long-term public debt.
The financial information presented for the International Mill segment excludes CMCS operations. Additionally, the financial information presented for the Americas Mills segment excludes Howell. These operations have been classified as discontinued operations in the consolidated statements of operations. See Note 6, Businesses Held for Sale, Discontinued Operations and Dispositions, for more information.
The Company uses adjusted operating profit (loss) to measure the financial performance of its segments. Intersegment sales are generally priced at prevailing market prices. Certain corporate administrative expenses are allocated to segments based upon the nature of the expense. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.
The following is a summary of certain financial information from continuing operations by reportable segment:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended November 30, 2013 |
| | Americas | | International | | | | | | |
(in thousands) | | Recycling | | Mills | | Fabrication | | Mill | | Marketing and Distribution | | Corporate | | Eliminations | | Continuing Operations |
Net sales-unaffiliated customers | | $ | 293,475 |
| | $ | 291,573 |
| | $ | 353,992 |
| | $ | 228,492 |
| | $ | 509,174 |
| | $ | 6,185 |
| | $ | — |
| | $ | 1,682,891 |
|
Intersegment sales | | 44,727 |
| | 189,578 |
| | 4,226 |
| | 658 |
| | 1,984 |
| | — |
| | (241,173 | ) | | — |
|
Net sales | | 338,202 |
| | 481,151 |
| | 358,218 |
| | 229,150 |
| | 511,158 |
| | 6,185 |
| | (241,173 | ) | | 1,682,891 |
|
Adjusted operating profit (loss) | | 839 |
| | 65,814 |
| | 2,217 |
| | 15,268 |
| | 503 |
| | (18,049 | ) | | 597 |
| | 67,189 |
|
Total assets* | | 281,102 |
| | 594,224 |
| | 608,313 |
| | 499,366 |
| | 858,567 |
| | 1,182,688 |
| | (493,199 | ) | | 3,531,061 |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended November 30, 2012 |
| | Americas | | International | | | | | | |
(in thousands) | | Recycling | | Mills | | Fabrication | | Mill | | Marketing and Distribution | | Corporate | | Eliminations | | Continuing Operations |
Net sales-unaffiliated customers | | $ | 307,471 |
| | $ | 267,105 |
| | $ | 352,747 |
| | $ | 215,858 |
| | $ | 603,535 |
| | $ | 2,799 |
| | $ | — |
| | $ | 1,749,515 |
|
Intersegment sales | | 44,490 |
| | 189,633 |
| | 3,845 |
| | 6,209 |
| | 5,053 |
| | — |
| | (249,230 | ) | | — |
|
Net sales | | 351,961 |
| | 456,738 |
| | 356,592 |
| | 222,067 |
| | 608,588 |
| | 2,799 |
| | (249,230 | ) | | 1,749,515 |
|
Adjusted operating profit (loss) | | 4,494 |
| | 51,660 |
| | 10,192 |
| | 876 |
| | 40,161 |
| | (17,370 | ) | | (660 | ) | | 89,353 |
|
Total assets at August 31, 2013* | | 309,599 |
| | 598,478 |
| | 631,510 |
| | 487,613 |
| | 838,413 |
| | 1,075,594 |
| | (496,946 | ) | | 3,444,261 |
|
* Excludes total assets from discontinued operations of $6.6 million at November 30, 2013 and $50.5 million at August 31, 2013.
Reconciliations of earnings from continuing operations to adjusted operating profit are provided below: |
| | | | | | | | |
| | Three Months Ended November 30, |
(in thousands) | | 2013 | | 2012 |
Earnings from continuing operations | | $ | 31,961 |
|
| $ | 48,931 |
|
Income taxes | | 15,091 |
|
| 22,189 |
|
Interest expense | | 19,578 |
|
| 17,024 |
|
Discounts on sales of accounts receivable | | 559 |
|
| 1,209 |
|
Adjusted operating profit | | $ | 67,189 |
|
| $ | 89,353 |
|
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In the following discussion, references to "we," "us" or the "Company" mean Commercial Metals Company and its consolidated subsidiaries, unless the context otherwise requires. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the notes thereto, which are included in this report, and our audited consolidated financial statements and the notes thereto, which are included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2013. This discussion contains or incorporates by reference "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts, but rather are based on expectations, estimates, assumptions and projections about our industry, business and future financial results, based on information available at the time this report is filed with the Securities and Exchange Commission ("SEC") or, with respect to any document incorporated by reference, available at the time that such document was prepared. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those identified in the section entitled "Forward-Looking Statements" in this Item 2 of this Quarterly Report on Form 10-Q and in the section entitled "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the fiscal year ended August 31, 2013. We do not assume any obligation to update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or otherwise, except as required by law.
CRITICAL ACCOUNTING POLICIES
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 our Annual Report on Form 10-K filed with the SEC for the fiscal year ended August 31, 2013.
CONSOLIDATED RESULTS OF OPERATIONS
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, | | Increase (Decrease) |
(in thousands) | | 2013 | | 2012 | | % |
Net sales* | | $ | 1,682,891 |
| | $ | 1,749,515 |
| | (4 | )% |
Earnings from continuing operations | | 31,961 |
| | 48,931 |
| | (35 | )% |
Adjusted EBITDA* | | 101,170 |
| | 124,202 |
| | (19 | )% |
_______________________________________
* Excludes divisions classified as discontinued operations.
In the table above, we have included a financial statement measure that was not derived in accordance with United States generally accepted accounting principles ("GAAP"). We use adjusted EBITDA (earnings before interest expense, income taxes, depreciation, amortization, impairment charges and net earnings attributable to noncontrolling interests) as a non-GAAP financial measure. In calculating adjusted EBITDA, we exclude our largest recurring non-cash charge, depreciation and amortization, as well as impairment charges. Adjusted EBITDA provides a core operational performance measurement that compares results without the need to adjust for federal, state and local taxes which have considerable variation between domestic jurisdictions. Tax regulations in international operations add additional complexity. We also exclude interest cost in our calculation of adjusted EBITDA. The results are, therefore, without consideration of financing alternatives of capital employed. We use adjusted EBITDA as one guideline to assess our unleveraged performance return on our investments, our ability to pay our current debt obligations as they mature and as a tool to calculate possible future levels of leverage capacity. Adjusted EBITDA is also the target benchmark for our annual and long-term cash incentive performance plans for management and part of a debt compliance test in certain of our debt agreements. Adjusted EBITDA may be inconsistent with similar measures presented by other companies. Reconciliations of earnings from continuing operations to adjusted EBITDA are provided below:
|
| | | | | | | | | | | |
| | Three Months Ended November 30, | | Increase (Decrease) |
(in thousands) | | 2013 | | 2012 | | % |
Earnings from continuing operations | | $ | 31,961 |
|
| $ | 48,931 |
| | (35 | )% |
Less net earnings attributable to noncontrolling interests | | — |
|
| 2 |
| | (100 | )% |
Interest expense | | 19,578 |
|
| 17,024 |
| | 15 | % |
Income taxes | | 15,091 |
|
| 22,189 |
| | (32 | )% |
Depreciation, amortization and impairment charges | | 34,540 |
|
| 36,060 |
| | (4 | )% |
Adjusted EBITDA | | $ | 101,170 |
|
| $ | 124,202 |
| | (19 | )% |
Our adjusted EBITDA does not include net earnings attributable to noncontrolling interests, interest expense, income taxes, depreciation or amortization and impairment charges. Because we have borrowed money in order to finance our operations, interest expense is a necessary element of our costs and our ability to generate revenues. Because we use capital assets, depreciation and amortization are also necessary elements of our costs. Impairment charges, when necessary, accelerate the write-off of fixed assets that otherwise would have been accomplished by periodic depreciation charges. Additionally, the payment of income taxes is a necessary element of our operations. Therefore, any measures that exclude these elements have material limitations. To compensate for these limitations, we believe that it is appropriate to consider both net earnings (loss) determined in accordance with GAAP, as well as adjusted EBITDA, to evaluate our performance. Further, we separately analyze any significant fluctuations in interest expense, depreciation, amortization, impairment charges and income taxes.
The following are the significant factors that impacted our financial performance during the first quarter of fiscal 2014 compared with the same period during fiscal 2013:
- Overall, our sales for the first quarter of fiscal 2014 were down when compared to the first quarter of fiscal 2013, with the International Marketing and Distribution segment having the most significant sales decline. The decline in sales for this segment is primarily due to the performance of our domestic raw materials business.
- Our Americas Mills segment's adjusted operating profit improved $14.2 million during the first quarter of fiscal 2014 as compared the prior year's first quarter. Additionally, our International Mill segment's adjusted operating profit improved $14.4 million during the first quarter of fiscal 2014 as compared the prior year's first quarter. The improvements in both segments were the result of a favorable change in product mix toward higher margin products.
- We reported LIFO income of $23.2 million in the first quarter of fiscal 2013 as compared to LIFO expense of $4.4 million in the first quarter of fiscal 2014, which is a significant unfavorable change of $27.6 million.
- Results for the first quarter of fiscal 2014 included an after-tax gain of $15.5 million associated with the sale of the Company’s wholly owned copper tube manufacturing operation, Howell Metal Company ("Howell"). Results for the first quarter of fiscal 2013 included an after-tax gain of $17.0 million associated with the sale of the Company’s 11% ownership investment in Trinecke Zelezarny, a.s., a Czech Republic joint-stock company ("Trinecke").
SEGMENT OPERATING DATA
Unless otherwise indicated, all dollar amounts below are calculated before income taxes. Financial results for our reportable segments are consistent with the basis and manner in which we internally disaggregate financial information for the purpose of making operating decisions. See Note 14, Business Segments, to the unaudited consolidated financial statements included in this report.
We use adjusted operating profit (loss) to compare and to evaluate the financial performance of our segments. Adjusted operating profit (loss) is the sum of our earnings (loss) before income taxes and financing costs.
The following table shows net sales and adjusted operating profit (loss) by business segment:
|
| | | | | | | | |
| | Three Months Ended November 30, |
(in thousands) | | 2013 | | 2012 |
Net sales: | | | | |
Americas Recycling | | $ | 338,202 |
| | $ | 351,961 |
|
Americas Mills | | 481,151 |
| | 456,738 |
|
Americas Fabrication | | 358,218 |
| | 356,592 |
|
International Mill | | 229,150 |
| | 222,067 |
|
International Marketing and Distribution | | 511,158 |
| | 608,588 |
|
Corporate | | 6,185 |
| | 2,799 |
|
Eliminations | | (241,173 | ) | | (249,230 | ) |
| | $ | 1,682,891 |
|
| $ | 1,749,515 |
|
Adjusted operating profit (loss): | | | | |
Americas Recycling | | $ | 839 |
| | $ | 4,494 |
|
Americas Mills | | 65,814 |
| | 51,660 |
|
Americas Fabrication | | 2,217 |
| | 10,192 |
|
International Mill | | 15,268 |
| | 876 |
|
International Marketing and Distribution | | 503 |
| | 40,161 |
|
Corporate | | (18,049 | ) | | (17,370 | ) |
Eliminations | | 597 |
| | (660 | ) |
Adjusted operating profit | | $ | 67,189 |
|
| $ | 89,353 |
|
LIFO Impact on Adjusted Operating Profit (Loss)
LIFO is an inventory costing method that assumes the most recent inventory purchases or goods manufactured are sold first. Therefore, current sales prices are offset against current inventory costs. In periods of rising prices, the LIFO inventory costing method has the effect of eliminating inflationary profits from operations. In periods of declining prices, this method has the effect of eliminating deflationary losses from operations. In either case the goal is to reflect economic profit of current market conditions. The table below reflects LIFO income or (expense) which represents decreases or (increases) in the LIFO inventory reserve.
The International Mill segment exclusively uses the FIFO inventory valuation method and thus is not included in this table:
|
| | | | | | | | |
| | Three Months Ended November 30, |
(in thousands) | | 2013 | | 2012 |
Americas Recycling | | $ | (2,525 | ) | | $ | 2,350 |
|
Americas Mills | | 1,869 |
| | 4,901 |
|
Americas Fabrication | | (1,835 | ) | | 7,232 |
|
International Marketing and Distribution | | (1,876 | ) | | 8,753 |
|
Consolidated pre-tax LIFO income (expense) | | $ | (4,367 | ) | | $ | 23,236 |
|
BUSINESS SEGMENT RESULTS
Americas Recycling
Adjusted operating profit decreased during the first quarter of fiscal 2014 when compared to the prior year's first quarter. This segment’s results were impacted by a $4.9 million unfavorable change in pre-tax LIFO, from LIFO income of $2.4 million in the first quarter of fiscal 2013 to LIFO expense of $2.5 million in the first quarter of fiscal 2014. Although ferrous selling prices increased 1% to $326 per ton during the first quarter of fiscal 2014, metal margins declined 7% and nonferrous selling prices and metal margins declined in the current quarter compared to the same quarter in fiscal 2013. Lower shipments and metal margins in the first quarter of fiscal 2014 were offset by a gain on sale of real estate and facility relocation reimbursements. Furthermore, on a sequential quarter basis, for both ferrous and nonferrous shipments, selling prices and metal margins improved. We exported 7% and 5% of our ferrous scrap tonnage during the first quarter of fiscal 2014 and fiscal 2013, respectively, and 26% and 32% of our nonferrous scrap tonnage during the first quarter of fiscal 2014 and fiscal 2013, respectively.
The following table reflects our Americas Recycling segment's average selling prices per ton and tons shipped (in thousands): |
| | | | | | | | | | | | | | | |
| | Three Months Ended November 30, | | Increase (Decrease) |
| | 2013 | | 2012 | | Amount | | % |
Average ferrous selling price | | $ | 326 |
| | $ | 322 |
| | $ | 4 |
| | 1 | % |
Average nonferrous selling price | | 2,679 |
| | 2,798 |
| | (119 | ) | | (4 | )% |
| | | | | | | | |
Ferrous tons shipped | | 503 |
| | 503 |
| | — |
| | — | % |
Nonferrous tons shipped | | 56 |
| | 59 |
| | (3 | ) | | (5 | )% |
Total tons shipped | | 559 |
| | 562 |
| | (3 | ) | | (1 | )% |
Americas Mills
We include our five domestic steel minimills and the scrap locations which directly support the steel minimills in our Americas Mills segment.
This segment recorded adjusted operating profit of $65.8 million for the first quarter of fiscal 2014, compared to adjusted operating profit of $51.6 million for the first quarter of fiscal 2013. Shipments of this segment’s higher margin products, such as merchant and rebar, increased, while shipments of lower margin billets declined when compared to the first quarter of fiscal 2013. Furthermore, in the first quarter of fiscal 2013 we incurred approximately $5.5 million of expenses associated with an outage at our South Carolina melt shop for the successful installation of a new electric arc furnace and related equipment. Conversion costs during the first quarter of fiscal 2014 improved 7% compared to the first quarter of fiscal 2013.
The table below reflects our domestic steel minimills' operating statistics (in thousands) and average prices per short ton:
|
| | | | | | | | | | | | | | | |
| | Three Months Ended November 30, | | Increase (Decrease) |
| | 2013 | | 2012 | | Amount | | % |
Tons melted | | 652 |
| | 572 |
| | 80 |
| | 14 | % |
Tons rolled | | 618 |
| | 594 |
| | 24 |
| | 4 | % |
Tons shipped | | 676 |
| | 666 |
| | 10 |
| | 2 | % |
| | | | | | | | |
Average mill selling price (finished goods) | | $ | 668 |
| | $ | 687 |
| | $ | (19 | ) | | (3 | )% |
Average mill selling price (total sales) | | 657 |
| | 669 |
| | (12 | ) | | (2 | )% |
Average cost of ferrous scrap consumed | | 334 |
| | 339 |
| | (5 | ) | | (1 | )% |
Average metal margin | | 323 |
| | 330 |
| | (7 | ) | | (2 | )% |
Average ferrous scrap purchase price | | 297 |
| | 294 |
| | 3 |
| | 1 | % |
Americas Fabrication
This segment recorded adjusted operating profit of $2.2 million for this year's first quarter, compared with adjusted operating profit of $10.2 million for the first quarter of fiscal 2013. The decline in profitability is due to a $9.0 million unfavorable change in pre-tax LIFO, from LIFO income of $7.2 million in the first quarter of fiscal 2013 to LIFO expense in the first quarter of fiscal
2014 of $1.8 million. Compared to the same quarter in the prior year, this segment noted improvements in its key commercial and operating metrics, including tons bid, tons booked and tons shipped as well as a slight increase in the backlog.
The tables below show our average fabrication selling prices per short ton and total fabrication plant shipments:
|
| | | | | | | | | | | | | | | |
| | Three Months Ended November 30, | | Increase (Decrease) |
Average selling price (excluding stock and buyout sales) | | 2013 | | 2012 | | Amount | | % |
Rebar | | $ | 877 |
| | $ | 899 |
| | $ | (22 | ) | | (2 | )% |
Structural | | 2,433 |
| | 2,134 |
| | 299 |
| | 14 | % |
Post | | 888 |
| | 899 |
| | (11 | ) | | (1 | )% |
|
| | | | | | | | | | | | |
| | Three Months Ended November 30, | | Increase (Decrease) |
Tons shipped (in thousands) | | 2013 | | 2012 | | Amount | | % |
Rebar | | 234 |
| | 225 |
| | 9 |
| | 4 | % |
Structural | | 12 |
| | 15 |
| | (3 | ) | | (20 | )% |
Post | | 21 |
| | 20 |
| | 1 |
| | 5 | % |
International Mill
During the first quarter of fiscal 2014, this segment had adjusted operating profit of $15.3 million