-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DjwSrNOYUprGz+HRqX31sf2JJb+hU0xG57HKwuQxeRPNc3oxKj7AumX2vP01NWrP kevNdmbrnl+sEBLLutuS/Q== 0000950134-95-003133.txt : 19951130 0000950134-95-003133.hdr.sgml : 19951130 ACCESSION NUMBER: 0000950134-95-003133 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19951127 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMERCIAL METALS CO CENTRAL INDEX KEY: 0000022444 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-METALS SERVICE CENTERS & OFFICES [5051] IRS NUMBER: 750725338 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04304 FILM NUMBER: 95596442 BUSINESS ADDRESS: STREET 1: 7800 STEMMONS FRWY STREET 2: P O BOX 1046 CITY: DALLAS STATE: TX ZIP: 75221 BUSINESS PHONE: 2146894300 MAIL ADDRESS: STREET 1: 7800 STEMMONS FRWY STREET 2: PO BOX 1046 CITY: DALLAS STATE: TX ZIP: 75221 10-K 1 FORM 10-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED AUGUST 31, 1995 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM __________ TO __________ COMMISSION FILE NO. 1-4304 COMMERCIAL METALS COMPANY (Exact name of registrant as specified in its Charter) DELAWARE 75-0725338 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 7800 STEMMONS FREEWAY, DALLAS, TEXAS 75247 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (214) 689-4300
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - ----------------------------------------- -------------------------------------------------- Common Stock, $5 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE 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 IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [ ] THE AGGREGATE MARKET VALUE OF THE COMMON STOCK ON NOVEMBER 15, 1995, HELD BY NON-AFFILIATES OF THE REGISTRANT BASED ON THE CLOSING PRICE OF $25.00 PER SHARE ON NOVEMBER 15, 1995, ON THE NEW YORK STOCK EXCHANGE WAS $384,708,775. INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK, AS OF NOVEMBER 15, 1995: COMMON STOCK, $5.00 PAR -- 15,388,351. DOCUMENTS INCORPORATED BY REFERENCE PORTIONS OF THE FOLLOWING DOCUMENT ARE INCORPORATED BY REFERENCE INTO THE LISTED PART OF FORM 10-K: REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JANUARY 25, 1996 -- PART III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS Commercial Metals Company was incorporated in 1946 in Delaware as a successor to a secondary metals recycling business in existence since approximately 1915. The Company maintains executive offices at 7800 Stemmons Freeway, Dallas, Texas 75247 (telephone 214/689-4300). The terms "Company" or "registrant" as used herein include Commercial Metals Company and its consolidated subsidiaries. The Company's fiscal year ends August 31 and all references to years refer to the fiscal year ended August 31 of that year unless otherwise noted. The Company considers its businesses to be organized into three segments - (i) Manufacturing, (ii) Recycling and (iii) Marketing and Trading. For several years prior to 1995, the Company considered a much smaller Financial Services group to be a fourth business segment. During 1995 the activities of this segment were merged into the Marketing and Trading segment in view of the increased emphasis on supporting the Marketing and Trading segment's financial functions and cessation of financial services, including loans, to unrelated third parties. The Company's activities are primarily concerned with metals related activities. Financial information for the last three fiscal years concerning the segments is incorporated herein by reference from "Note 13 Business Segments," of the Notes to Consolidated Financial Statements at Part II, Item 8. On September 27, 1994, the Company announced that it had entered into an Agreement to acquire Owen Steel Company, Inc. and affiliated companies (collectively "Owen") headquartered in Columbia, South Carolina. This transaction was completed November 15, 1994. The Company paid approximately $50 million, one-half in cash and the balance by issuance of 932,301 shares of the Company's Common Stock to certain selling shareholders. The Company also provided funds for the retirement of approximately $32 million of Owen debt at the Closing. The purchase price was increased by approximately $3.2 million, paid one-half in cash and one-half with 59,410 shares of the Company's Common Stock in October, 1995, as a result of a post closing net worth adjustment and may be subject to further post-closing adjustments. Owen's successor company, SMI-Owen Steel Company, Inc. and the Owen affiliates, will operate as a part of the Manufacturing Segment's CMC Steel Group. THE MANUFACTURING SEGMENT The manufacturing segment is the registrant's dominant and most rapidly expanding segment in terms of assets employed, capital expenditures, operating profit and number of employees. It consists of two entities, the CMC Steel Group and the Howell Metal Company subsidiary, a manufacturer of copper tubing. The Steel Group is by far the more significant entity in this segment with subsidiaries operating four steel minimills, nineteen steel fabricating plants, three steel joist manufacturing facilities, three steel fence post manufacturing plants, six metals recycling plants, two railcar rebuilding facilities and eight warehouse stores which sell supplies and equipment to the concrete installation and construction trade. The Company endeavors to operate all four minimills at full capacity in order to minimize product costs. Increases in capacity and productivity are continuously emphasized through both operating and capital improvements. The steel minimill business is capital intensive with substantial capital expenditures required on a regular basis to remain competitive as a low cost producer. Over the past three fiscal years, approximately $72 million or 57% of the Company's total capital expenditures have been for minimill projects, not including the Owen acquisition cost. This emphasis on productivity improvements is reflected in increases in tons of steel melted, rolled and shipped from the minimills during each of the last three years as follows: 1 3
1993 1994 1995(1) ---------- --------- --------- Tons Melted 1,001,000 1,122,000 1,532,000 Tons Rolled 1,009,000 1,207,000 1,487,000 Tons Shipped 1,138,000 1,247,000 1,531,000
(1) 1995 includes 283,000 tons melted, 213,000 tons rolled and 225,000 tons shipped following the Owen minimill acquisition in November, 1994. The Company's largest steel minimill, operated by Structural Metals, Inc. ("SMI Texas") is located at Seguin, Texas, near San Antonio. SMI Texas manufactures steel reinforcing bars, angles, rounds, channels, flats, and special sections used primarily in highways, reinforced concrete structures and manufacturing. SMI Texas sells primarily to the construction, service center, energy, petrochemical, and original equipment manufacturing industries. Its primary markets are located in Texas, Louisiana, Arkansas and Oklahoma although products are shipped to approximately 30 states and Mexico. A record 778,000 tons were melted at SMI Texas during 1995. SMI Texas' rolling mill also set a new production record of 695,000 tons. SMI Steel, Inc. ("SMI Alabama"), a steel minimill in Birmingham, Alabama, was acquired in 1983. A substantial program to modernize and improve productivity at SMI Alabama has followed with approximately $107 million of capital expenditures from acquisition through 1995. Installation and start up of a new direct current electric furnace melt shop was substantially complete by the beginning of 1995 and resulted in record melt shop production of 470,000 tons. This project was the largest single capital expenditure in the registrant's history with a cost of approximately $30 million. SMI Alabama manufactures primarily larger size products than SMI Texas such as mid-size structural including angles, channels, up to eight inch wide flange beams and special bar quality rounds and flats. Customers include the construction, manufacturing, steel warehousing, original equipment manufacturing and fabricating industries in the primary market areas of Alabama, Georgia, Tennessee, North and South Carolina, and Mississippi. The steel minimill acquired in the Owen acquisition in November, 1994 is located at Cayce, near Columbia, South Carolina. This mill is now known as SMI Steel South Carolina (SMI South Carolina). Facilities at SMI South Carolina are similar but on a generally smaller capacity scale than the SMI Texas and SMI Alabama mills. Following the acquisition, several key employees from the Company's other mill operations assumed management responsibility for SMI South Carolina, with the bulk of the former Owen work force being retained. SMI South Carolina manufactures primarily steel reinforcing bars with limited but increasing production of angles, rounds and squares. Its primary market area includes the Southeast and mid-Atlantic area south through Florida and north into New England. With the Owen acquisition, the Company also acquired six rebar and five structural steel fabrication plants and two joist shops discussed below, which provide an outlet for a portion of SMI South Carolina's production. The SMI Texas, Alabama, and South Carolina mills consist of melt shops with electric arc furnaces that melt the steel scrap, continuous casting facilities to shape the molten metal into billets, reheating furnaces, rolling mills, mechanical cooling beds, finishing facilities and supporting facilities. The mills utilize both a Company-owned fleet of trucks and private haulers to transport finished products to customers and Company-owned fabricating shops. Mill capacity at SMI Texas is approximately 800,000 tons per year. SMI Alabama's annual capacity is approximately 500,000 tons and SMI South Carolina annual capacity is approximately 300,000 tons. The primary raw material for SMI Texas, Alabama and South Carolina is secondary (scrap) ferrous metal purchased primarily from suppliers generally within a 300 mile radius of each mill. A portion of the ferrous raw material, generally less than half, is supplied from Company owned recycling plants. The supply 2 4 of scrap is believed to be adequate to meet future needs but has historically been subject to significant price fluctuations. All three minimills also consume large amounts of electricity and natural gas, both of which are believed to be readily available at competitive prices. A fourth, much smaller mill has been in operation since 1987 and is located near Magnolia, Arkansas, ("SMI Arkansas"). No melting facilities are located at SMI Arkansas since this mill utilizes as its raw material rail salvaged from abandoned railroads for rerolling and, on occasion, billets from Company minimills or other suppliers. The rail or billets are heated in a reheat furnace and processed on a rolling mill and finished at facilities similar to, but on a smaller scale, the other mills. SMI Arkansas' finished product is primarily metal fence post stock, small diameter reinforcing bar and sign posts with some high quality round and flat products being rolled. Fence post stock is fabricated into metal fence posts at Company owned facilities at the Magnolia mill site, San Marcos, Texas, and Brigham City, Utah. Because of this mill's lack of melting capacity, it is dependent on an adequate supply of competitively priced billets or used rail, the availability of which fluctuates with the pace of railroad abandonments, rate of rail replacement by railroads and demand for used rail from domestic and foreign rail rerolling mills. Capacity at SMI Arkansas is approximately 150,000 tons per year. The Steel Group's processing facilities are engaged in the fabrication of reinforcing and structural steel, steel warehousing, joist manufacturing, fence post manufacturing and railcar repair and rebuilding. Steel fabrication capacity now exceeds 600,000 tons. Steel for fabrication may be obtained from unrelated vendors as well as Company owned mills. Historically, fabrication activities have been conducted at various locations in Texas in the cities of Beaumont, Buda (near Austin), Corpus Christi, Dallas, Houston, San Marcos, Seguin, Victoria, and Waco, as well as Baton Rouge and Slidell, Louisiana and Magnolia and Hope, Arkansas. The Owen acquisition included fabrication facilities in Cayce, Columbia, and Taylors, South Carolina; Whitehouse, Florida; Lawrenceville, Georgia; Gastonia, North Carolina and Fredericksburg, Virginia. Fabricated steel products are used primarily in the construction of commercial and non- commercial buildings, industrial plants, power plants, highways, arenas, stadiums, and dams. Sales of fabricated steel are generally made in response to bid solicitation from construction contractors or owners on a competitive bid basis and less frequently on a negotiated basis. The former Owen structural steel operations have historically been active in large projects such as high rise office towers, stadiums, convention centers, hospitals and other large jobs. Safety Railway Service, with locations in Victoria, Texas, and Tulsa, Oklahoma, repairs, rebuilds and provides custom maintenance with some manufacturing of railroad freight cars owned by railroad companies and private industry. That work is obtained primarily on a bid and contract basis and may include maintenance of the cars. Secondary metals recycling plants in Austin, Texas, and Cayce, South Carolina, each with two smaller feeder facilities nearby operate as part of the Steel Group due to the predominance of secondary ferrous metals sales to the nearby SMI minimills. These recycling plants have an aggregate capacity of approximately 350,000 tons. The joist manufacturing facility, SMI Joist Company, headquartered in Hope, Arkansas, manufactures steel joists and decking for roof supports using steel obtained primarily from the Steel Group's minimills. SMI Joist expanded operations with the Owen acquisition, obtaining smaller joist plants in Starke, Florida and Cayce, South Carolina. Joist consumers are construction contractors. Joists are generally made to order and sales, which may include custom design and fabrication, are primarily obtained on a competitive bid basis. In 1994 the Company consummated a purchase of assets from a seller of concrete related supplies in Texas. The purchase expanded the Company's position in the sale of supplies and sale or rental of equipment to the concrete installation trade in Texas. This business operates under the Shepler's name with warehouse locations in Austin, Beaumont, Conroe, Houston (2), Pharr, San Antonio and Waco, Texas. The Owen acquisition added a similar but smaller operation which emphasizes a broader industrial product supply in Columbia, South Carolina. The copper tube minimill operated by Howell Metal Company is located in New Market, Virginia. 3 5 It manufactures copper water, air conditioning and refrigeration tubing in straight lengths and coils for use in commercial, industrial and residential construction. Its customers, largely equipment manufacturers and wholesale plumbing supply firms, are located primarily east of the Mississippi river. High quality copper scrap supplemented occasionally by virgin copper ingot, is the raw material used in the melting and casting of billets. The scrap is readily available subject to rapid price fluctuations generally related to the price or supply of virgin copper. A small portion of the scrap is supplied by the Company's metal recycling yards. Howell's facilities include melting, casting, piercing, extruding, drawing, finishing and other departments. Capacity is approximately 50,000,000 pounds per year. Demand for copper tube is dependent mainly on the level of new residential construction and renovation. No single customer purchases ten percent or more of the manufacturing segment's production. The nature of certain stock products sold in the manufacturing segment are, with the exception of the steel fabrication and joist jobs, not characteristic of a long lead time order cycle. Orders for other stock products are generally filled promptly from inventory or near term production. As a result the Company does not believe backlog levels are a significant factor in evaluating most operations. Backlog at 1995 year-end was approximately $229,000,000. Backlog at 1994 is not comparable due to the significance of the Owen acquisition during 1995. THE RECYCLING SEGMENT The recycling segment is engaged in processing secondary (scrap) metals for further recycling into new metal products. This segment consists of the Company's 28 metal recycling plants (excluding six such facilities operated by the CMC Steel Group as a part of the manufacturing segment) and Commercial Metals Railroad Salvage Company which dismantles and recovers steel rail, track components and other materials from obsolete or abandoned railroads. The Company's metal recycling plants purchase ferrous and nonferrous secondary or scrap metals, processed and unprocessed, in a variety of forms. Sources of metals for recycling include manufacturing and industrial plants, metal fabrication plants, electric utilities, machine shops, factories, railroads, refineries, shipyards, ordinance depots, demolition businesses, automobile salvage and wrecking firms. Numerous small secondary metals collection firms are also, in the aggregate, major suppliers. These plants processed and shipped approximately 1,408,000 tons of scrap metal during 1995. Ferrous metals comprised the largest tonnage of metals recycled at approximately 1,200,000 tons, an increase from 1,000,000 the prior year, followed by approximately 208,000 tons of non-ferrous metals, primarily aluminum, copper and stainless steel, up from 158,000 the prior year. The Company also purchased and sold an additional 185,000 tons of metals processed by other metal recycling facilities. With the exception of precious metals, practically all metals capable of being recycled are processed by these plants. The metal recycling plants generally consist of an office and warehouse building equipped with specialized equipment for processing both ferrous and nonferrous metal. Most of the larger plants are equipped with scales, shears, baling presses, briquetting machines, conveyors and magnetic separators. Two locations have extensive equipment for mechanically processing large quantities of insulated wire to segregate metallic content. All ferrous processing centers are equipped with either presses, shredders or hydraulic shears, locomotive and crawler cranes and railway tracks to facilitate shipping and receiving. The segment operates four large shredding machines capable of pulverizing obsolete automobiles or other ferrous metal scrap. Two additional shredders are operated by the manufacturing segment. A typical recycling plant includes several acres of land used for receiving, sorting, processing and storage of metals. Several recycling plants devote a small portion of their site or a nearby location for display and sales of metal products considered reusable for their original purpose. 4 6 Recycled metals are sold to steel mills and foundries, aluminum sheet and ingot manufacturers, brass and bronze ingot makers, copper refineries and mills, secondary lead smelters, specialty steel mills, high temperature alloy manufacturers and other consumers. Sales of material processed through the Company's recycling plants are coordinated through the recycling segment's office in Dallas. Export sales are negotiated through the Company's network of foreign offices as well as the Dallas office. Railroad materials, primarily steel rail, are obtained by Commercial Metals Railroad Salvage Company from dismantling work it performs on abandoned rail lines acquired from railroads. Business is largely dependent on the pace of Interstate Commerce Commission approval of railroad abandonments. Used rail may be sold for relaying as usable track, rerolling, primarily by the Steel Group's SMI Arkansas operation, or melting by steel mills. No single source of material or customer of the recycling segment represents a material part of purchases or revenues. The recycling segment competes with other secondary processors and primary nonferrous metals producers, both domestic and foreign, for sales of nonferrous materials. Consumers of nonferrous scrap metals often have the capability to utilize primary or "virgin" ingot processed by mining companies interchangeably with secondary metals. The prices for nonferrous scrap metals are normally closely related to but generally less than, the prices of the primary or "virgin" metal producers. Ferrous scrap is the primary raw material for electric arc furnaces such as those operated by the Company's steel minimills. Relatively high prices and the need for low residual elements in the melting process have recently caused some minimills to supplement purchases of scrap metal with direct reduced iron and pig iron for certain product lines. THE MARKETING AND TRADING SEGMENT The marketing and trading segment buys and sells primary and secondary metals and other commodities and products through a network of trading offices located around the globe. Steel, nonferrous metals, specialty metals, chemicals, industrial minerals, ores, concentrates, ferroalloys, and other basic industrial materials are purchased primarily from producers in domestic and foreign markets. On occasion these materials are purchased from trading companies or industrial consumers with surplus supplies. Long-term contracts, spot market purchases and trading or barter transactions are all utilized to obtain materials. A large portion of these transactions involve fabricated semi-finished or finished product. Customers for these materials include industrial concerns such as the steel, nonferrous metals, metal fabrication, chemical, refractory and transportation sectors. Sales are generally made directly to consumers through and with coordination of offices in Dallas; New York; Englewood Cliffs, New Jersey; Los Angeles; Hurstville near Sydney, Australia; Singapore; Zug, Switzerland; Hong Kong and Tokyo. During the year the Company combined its Enterprise Metal Corporation operations in Great Neck, New York, with Commonwealth Metal Corporation and closed Enterprise. The Company also maintains representative offices in Bangkok, Sao Paulo, Seoul, and Beijing, as well as agents in other significant international markets. These offices form a network for the exchange of information on the materials marketed by the Company as well as servicing sources of supply and purchasers. In most transactions the Company acts as principal and often as a marketing representative. The Company utilizes agents when appropriate and occasionally acts as broker. The Company participates in transactions in practically all major markets of the world where trade by American-owned companies is permitted. This segment focuses on the marketing of physical products as contrasted to traders of commodity futures contracts who frequently do not take delivery of the commodity. Sophisticated global communications and the development of easily accessible, although not always accurate, quoted market prices for many 5 7 commodity related products has resulted in the Company emphasizing creative service functions for both sellers and buyers. Actual physical market pricing and trend information, as contrasted with sometimes more speculative metal exchange market information, technical information and assistance, financing, transportation and shipping (including chartering of vessels), storage, insurance, hedging and the ability to consolidate smaller purchases and sales into larger, more cost efficient transactions are examples of the services offered. The Company attempts to limit its exposure to price fluctuations by offsetting purchases with concurrent sales and entering into foreign exchange contracts as hedges of trade receivables and payables denominated in foreign currencies. The Company does not, as a matter of policy, speculate on changes in the commodity markets and hedges only firm commitments not anticipated transactions. During the past year over 1.1 million tons of steel products were sold by the marketing and trading segment. Continuing economic weakness and instability in eastern Europe and the Commonwealth of Independent States restricted sales activity in those markets but increased the availability of steel and other metal products. The 1995 year saw sales continue to increase in Australia, Japan, South Korea and parts of Southeast Asia. The Australian operations just-in-time steel warehousing business for steel imports continued to expand. During the year CMC Finanz AG ("Finanz"), a wholly owned foreign financial services subsidiary terminated offering loans and other financial services to third parties unrelated to the marketing and trading segment's activities. Finanz, located in Zug, Switzerland, was established subject to the Swiss banking law in 1984 and had previously been the core of the Company's financial services segment. With the termination of third party loans the Company has eliminated this activity as a business segment. In the future, Finanz will emphasize services related to financing international transactions for the Company's international operations. COMPETITION The Company's steel manufacturing, steel fabricating, and copper tube manufacturing businesses compete with regional, national and foreign manufacturers and fabricators of steel and copper. Price, quality and service are the primary methods of competition. The Company does not produce a significant percentage of the total national output of these products compared with its competitors but is considered a substantial supplier in the markets near its facilities. The large job structural steel capacity and expertise obtained in the Owen acquisition should enable the Company to compete throughout the United States for large structural steel projects. The Company believes the recycling segment is among the largest entities recycling nonferrous secondary metals and is also a major regional processor of ferrous scrap. The secondary metals business is subject to cyclical fluctuations depending upon the availability and price of unprocessed scrap metal and the demand in steel and nonferrous metals consuming industries. All phases of the Company's marketing and trading business are highly competitive. Many of the marketing and trading segment's products are standard commodity items. The principal elements of competition are price, quality, reliability, financial strength, and additional services. This segment competes with other domestic and foreign trading companies, some of which are larger and may have access to greater financial resources or be able to pursue business without regard for the laws and regulations governing the conduct of corporations subject to the jurisdiction of the United States. The Company also competes with industrial consumers who purchase directly from suppliers and importers and manufacturers of semi-finished ferrous and nonferrous products. 6 8 ENVIRONMENTAL MATTERS Compliance with environmental laws and regulations is a significant factor in the Company's business. The Company is subject to local, state, federal and supranational environmental laws and regulations concerning, among other matters, solid waste disposal, air emissions, waste and stormwater effluent and disposal and employee health. The Company's manufacturing and recycling operations produce significant amounts of by-products, some of which are handled as industrial waste or hazardous waste. For example, the electric arc furnace ("EAF") dust generated by the Company's minimills is classified as a hazardous waste by the Environmental Protection Agency (EPA) because of lead, cadmium and chromium content and requires special handling and recycling for recovery of zinc or disposal. Additionally the Company's scrap metal recycling facilities operate six shredders for which the primary feed materials are automobile hulks and obsolete household appliances. Approximately twenty percent (20%) of the weight of an automobile hulk consists of material (shredder fluff) which remains after the segregation of ferrous and saleable non-ferrous metals. Federal environmental regulations require shredder fluff to pass a toxic leaching test to avoid classification as a hazardous waste. The Company endeavors to have hazardous contaminants removed from the feed material prior to shredding and as a result the Company believes the shredder fluff generated is properly not considered a hazardous waste. Should the laws, regulations or testing methods change with regard to EAF dust processing or shredder fluff disposal, the Company may incur additional significant expenditures. To date, the Company has not experienced difficulty in contracting for recycling of EAF dust or disposing of shredder fluff in municipal or private landfills. The Company may also be required from time to time to clean up or take certain remediation action with regard to sites formerly used in connection with its operations. Furthermore, the Company may be required to pay for a portion of the costs of clean up or remediation at sites the Company never owned or on which it never operated if it is found to have arranged for treatment or disposal of hazardous substances on the sites. See Item 3. Legal Proceedings. The Company has been named a potentially responsible party (PRP) at several Superfund sites because the EPA contends that the Company and other PRP scrap dealers are liable for the cleanup of those sites solely as a result of having sold scrap metal to unrelated manufacturers for recycling as a raw material in the manufacture of new products. The Company's position is that an arms length sale of valuable scrap metal for use as a raw material in a manufacturing process over which the Company exercises no control cannot, contrary to EPA's assertion, constitute "an arrangement for disposal or treatment of hazardous substances" within the meaning of federal law. If the EPA's position is consistently upheld by the courts and no clarification or amendment of the law is provided by legislative bodies, the Company believes the possible liability arising from the sale of secondary metals would reduce recycling rates for metals and other recyclable materials in general. In particular, the Company believes that sellers of secondary or recycled metals could be at material disadvantage compared to sellers of "virgin" ingot from mining operations because the EPA's position apparently excludes suppliers of virgin metals from liability for sales of those materials to the same manufacturers for use, often interchangeably, in the same manufacturing process. The Company believes this result is contrary to public policy objectives and federal and state legislation encouraging recycling and promoting the use of recycled materials. New federal, state and local laws, regulations and changing interpretations, together with uncertainty regarding adequate control levels, testing and sampling procedures, new pollution control technology and cost benefit analysis based on market conditions are all factors which impact the Company's future expenditures to comply with environmental requirements. It is not possible to predict the total amount of capital expenditures or increases in operating costs or other expenses or whether such costs can be passed on to customers through product price increases. During 1995, the Company incurred environmental costs including disposal, permit, license fees, tests, studies, remediation, consultant fees and environmental personnel expense of approximately $9.3 million. The Company believes that it is in material compliance with currently applicable environmental laws and regulations and does not anticipate material capital expenditures for new environmental control facilities during 1996. 7 9 EMPLOYEES As of October, 1995, the Company had approximately 6,400 employees. Approximately 5,000 were employed by the manufacturing segment, 1,100 by the recycling segment, 230 by the marketing and trading segment, 36 in general corporate management and administration with 25 employees providing service functions for divisions and subsidiaries. Production employees at one metals recycling plant are represented by a union for collective bargaining. The Company believes that its labor relations are generally good. ITEM 2. PROPERTIES The SMI Texas steel minimill is located on approximately 554 acres of land owned by the Company. Facilities including buildings occupying approximately 663,000 square feet, are used for manufacturing, storage, office and related uses. SMI Alabama's steel mill in Birmingham is located on approximately 35 acres with buildings occupying approximately 435,000 square feet used for manufacturing, storage, office and related use. The SMI South Carolina mill in Cayce, South Carolina is located on approximately 112 acres, all owned, with building occupying approximately 350,000 square feet. The SMI Arkansas facility at Magnolia is located on approximately 104 acres with buildings occupying approximately 136,000 square feet. Approximately 30 acres of the Alabama mill property and all Arkansas mill property is leased in conjunction with revenue bond financing and may be purchased by the Company at the termination of the leases for a nominal sum. The steel fabricating operations including the fabrication plants, fence post and joist operations own approximately 740 acres of land and lease approximately 50 acres of land at various locations in Texas, Louisiana, Arkansas, Utah, South Carolina, Florida, Virginia, Georgia and North Carolina. Howell Metal owns approximately 21 acres of land with buildings occupying about 228,000 square feet in New Market, Virginia. The Company's recycling plants occupy in the aggregate approximately 355 acres owned by the Company located at Austin, Beaumont, Dallas, Galveston, Houston, Lubbock, Odessa, Victoria and Vinton, all in Texas; as well as the Jacksonville, Lake City, Orlando, and Tampa, Florida; Chattanooga, Tennessee; Springfield, Missouri; and Burlington, North Carolina plants. It leases the real estate at Clute, Corpus Christi, Laredo and Midland, Texas; Ocala, Port Sutton (Tampa) and Casselberry, Florida; Shreveport, Louisiana, and East Ridge, Tennessee. The smaller of two locations at Beaumont and Victoria, Texas, are leased. The Fort Worth recycling plant is partially owned and partially leased. The corporate headquarters, all domestic marketing and trading offices and all foreign offices occupy leased premises. The leases on the leased properties described above will expire on various dates within the next ten years. Several of the leases have renewal options and the Company has had little difficulty in renewing such leases as they expire. The minimum annual rental obligation of the Company for real estate operating leases in effect at August 31, 1995, to be paid during fiscal 1996 is approximately $2,883,000. The Company also leases a portion of the equipment used in its plants. The minimum annual rental obligation of the Company for equipment operating leases in effect at August 31, 1995, to be paid during fiscal 1996, is approximately $1,514,000. ITEM 3. LEGAL PROCEEDINGS As of August 31, 1995, the Company or its affiliates has received notices from the United States Environmental Protection Agency (EPA) or state agency with similar responsibility that the Company and numerous other parties are considered potentially responsible parties (a PRP) and may be obligated under 8 10 the Comprehensive Environmental Response Compensation and Liability Act of 1980 (CERCLA) or similar state statute to pay for the cost of remedial investigation, feasibility studies and ultimately remediation to correct alleged releases of hazardous substances at eleven locations. The Company is contesting or intends to contest its designation as a PRP with regard to several of the sites. The locations, none of which involve real estate ever owned or on which operations were conducted by the Company, are commonly referred to by the EPA or state agency as the Peak Oil Site (Tampa, FL), the Metcoa Site (Pulaski, PA), the NL Industries/Taracorp Site (Granite City, IL), the Sapp Battery Site (Cottondale, Florida), the Interstate Lead Company ("ILCO") Site (Leeds, Alabama), the Poly-Cycle Industries Site (Techula, Texas) and the Taylor Road Site (Tampa, Florida), the Jensen Drive Site (Houston, TX), the Houston Lead Site (Houston, TX), the SoGreen/Parramore Site (Tifton, GA) and the Stoller Site (Jericho, SC). The Company has periodically received information requests with regard to other sites which are apparently under consideration by the EPA as existing or potential CERCLA clean-up sites. It is not known if any demand will ultimately be made against the Company as a result of those inquiries. The EPA has notified the Company and other alleged PRPs that under Sec. 106 of CERCLA it could be subject to a maximum penalty fine of $25,000 per day and the imposition of treble damages if they refused to clean up the Peak Oil, Metcoa, Sapp Battery, NL/Taracorp, Parramore and Stoller sites as ordered by the EPA. The Company is presently participating in a PRP organization at the Peak Oil, Sapp Battery, SoGreen/Parramore and Stoller sites, although reserving the right to contest its PRP status, and does not believe that the EPA will pursue any fine against it so long as it continues to participate in the PRP groups. The Company is contesting its designation as a PRP at the Metcoa and NL/Taracorp sites and believes it has adequate defenses to any attempt by the EPA to impose fines in those matters. In addition, the Company and 25 other defendants were sued in April, 1990, (United States of America v. Marvin Pesses, et al., U.S. District Court, W. Dist. Penn.) by the EPA under Sec. 107 of CERCLA to recover past and future response costs incurred by the EPA at the Metcoa Site. The EPA contends that the Company and other PRP scrap dealers are liable for the cleanup because they sold scrap metal for raw material in the manufacture of new products. The manufacturing process employed by the buyer of the scrap metals resulted in the release of contaminants at the site of the buyer's operation. The Company's position is that arms-length sales of valuable scrap metal for use as a raw material in a manufacturing process over which the Company exercises no control cannot, contrary to the EPA's assertion, constitute "an arrangement for disposal or treatment of hazardous substances" within the meaning of CERCLA. The District Court has granted EPA's Motion for Partial Summary Judgment on the issue and ruled that Defendants are deemed to be "responsible parties" within the meaning of 42 U.S.C. Sec. 9607(a). The Company and defendants are considering options to appeal the ruling. On July 20, 1993, EPA issued a second order under Sec. 106 of CERCLA for the excavation, removal and treatment, or disposal of dust, soil and debris containing hazardous substances at the Metcoa Site. The Company, along with other recipients of the letter, agreed to do some but not all of the work requested by the order. In particular, the Company along with other recipients of the letter, declined to handle any cleanup of radioactive materials at the Site. The Company's position is that it has no obligation to clean up any of the radioactive material under the Third Circuit law set forth in United States v. Alcan Aluminum Corp., 964 F.2d 252 (3d Cir. 1992) because it did not send any radioactive materials to the Site. The district court has scheduled the case for trial on the issues of joint and several liability and allocation of damages in calendar year 1996. An adverse ruling in the Metcoa Site litigation and similar cases, if ultimately upheld, could have a significant adverse effect on companies, such as the Company, that have historically recycled metals by purchasing and preparing scrap metals for resale to manufactures for use as a supplement to or in lieu of virgin metals in manufacturing processes. The impact of an adverse ruling would, in the opinion of the Company, result in a reduction of recycling rates for metals and other recyclable materials and be contrary to public policy objectives in federal and state legislation encouraging recycling and the use of recycled materials. In November, 1993, the Federal Energy Regulatory Commission ("FERC") entered an Order (the 9 11 "FERC Order") affirming in part and reversing in part a 1989 decision and proposed order of a administrative law judge affirming in part, reversing in part and remanding for further consideration a Remedial order issued in 1986 by the Office of Hearings and Appeals of the Department of Energy to RFB Petroleum, Inc. (RFB) and CMC Oil Company (CMC Oil), a wholly-owned subsidiary of the Company. The FERC Order finds CMC Oil liable for alleged overcharges constituting violations of crude oil reseller regulations arising from the purchase and sale of crude oil in alleged joint ventures between CMC Oil and RFB totaling approximately $1,330,000 plus interest from their occurrence (December, 1977, to January, 1979) to present as calculated under the Department of Energy's interest rate policy. Utilizing that interest calculation, interest accrued through August, 1995, is estimated to be approximately $5,700,000. In January, 1994, CMC Oil filed a complaint in United States District for the Southern District of Texas seeking judicial review to have enforcement of the FERC Order enjoined. The government filed a counterclaim seeking enforcement of the FERC Order. Motions for Summary Judgment were filed by both parties. On November 21, 1994, the District Court denied CMC Oil's Motion and granted government's cross motion. On November 22, 1994, the Court entered a Final Order for restitution by CMC Oil of $1,330,399.17 plus interest to date of judgment as provided in the Order and post judgment interest thereafter at 6.48% per annum. CMC Oil appealed the judgment to the United States Court of Appeals for the Federal Circuit. On November 3, 1995, the Court of Appeals entered Judgment affirming the District Court's decision. CMC Oil is evaluating its options, including the possibility of a petition for rehearing or certiorari. CMC Oil, which has been inactive since 1985, accrued the liability for the judgment on its books during 1995. CMC Oil does not have sufficient assets to satisfy the judgment. No claim has been asserted against the Company in connection with the CMC Oil litigation. The Company will vigorously contest liability should any such claim be asserted. While the Company is unable to estimate the ultimate dollar amount of exposure to loss in connection with the above-described environmental litigation, government proceedings, and disputes that could result in additional litigation, some of which may have a material impact on earnings and cash flows for a particular quarter, it is the opinion of the Company's management that the outcome of the suits and proceedings mentioned, and other miscellaneous litigation and proceedings now pending, will not have a material adverse effect on the business or the consolidated financial position of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS. Not Applicable. 10 12 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The table below summarizes the high and low sales prices reported on the New York Stock Exchange for the Company's common stock and cash dividends paid for the past two fiscal years.
Price Range 1995 of Common Stock Fiscal ---------------------- Cash Quarter High Low Dividends - --------------------------------------------------------------------------------------------- 1st 29 1/8 24 3/8 12c. 2nd 27 23 3/8 12c. 3rd 27 3/4 24 1/2 12c. 4th 29 26 1/4 12c.
Price Range 1994 of Common Stock Fiscal ---------------------- Cash Quarter High Low Dividends - ---------------------------------------------------------------------------------------------- 1st $ 30 $ 25 7/8 10c. 2nd 28 3/4 26 12c. 3rd 29 21 12c. 4th 27 21 12c.
On November 22, 1993, the Company declared a four-for-three stock split in the form of a 33 1/3% stock dividend on the Company's common stock payable December 27, 1993 to shareholders of record December 6, 1993. All share and per share data have been adjusted for the stock split. Since August 3, 1982 the Company's common stock has been listed and traded on the New York Stock Exchange. Prior to that date and since 1959 the Company's common stock was traded on the American Stock Exchange. The number of shareholders of record of the registrant's common stock at November 15, 1995, was approximately 2,217. 11 13 ITEM 6. SELECTED FINANCIAL DATA The table below sets forth a summary of selected consolidated financial information of the Company for the periods indicated:
FOR THE YEARS ENDED AUGUST 31, 1995 1994 1993 1992 1991 -------- ------ ------- ------- -------- (Dollars in thousands except per share amounts) Net Sales 2,107,426 1,657,810 1,558,349 1,156,203 1,150,075 Net Earnings 38,208 26,170 21,661 12,510 12,015 Net Income Per Share 2.52 1.75 1.46 .87 .84 Total Assets 748,103 604,877 541,961 515,738 460,757 Long-term Debt 158,004 72,061 76,737 87,221 45,547 Cash Dividend Per Share .48 .46 .39 .39 .39
12 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED RESULTS (in millions except share data)
Year ended August 31, - ----------------------------------------------------------------------------------- 1995 1994 1993 ------------------------------------------ Revenues $ 2,117 $ 1,666 $ 1,569 Net earnings 38.2 26.2 21.7 Cash flow 76.6 61.7 53.6 International sales 508 587 694 As % of total 24% 35% 45% LIFO effect on net earnings (8.4) (6.2) .1 Per share (.56) (.42) .01 LIFO reserve 34.3 21.3 11.7 % of inventory on LIFO 86% 78% 65%
Significant events affecting the Company this year: - - All time record annual revenues, earnings, earnings per share and cash flow. - - Steel Group reported record tons melted, rolled and shipped and Recycling had its second best earnings year ever. - - LIFO effect decreased net earnings $8.4 million. - - Acquisition of Owen Steel Company in November 1994 expanded our presence in the Southeast. - - Sold $100 million of investment grade notes in the initial entry into the long-term public debt market. - - Judgment against CMC Oil Company rendered, accrued and appealed. SEGMENTS Revenues and operating profit by business segment are shown in the following table:
(in millions) Year ended August 31, - ------------------------------------------------------------------------------- 1995 1994 1993 ------------------------------------------ Revenues: Manufacturing $ 913 $ 598 $ 487 Recycling 511 342 290 Marketing and Trading 749 758 818 Financial Services - 3 4 Operating profit (loss): Manufacturing 54.4 37.7 32.5 Recycling 11.3 5.0 .6 Marketing and Trading 17.8 13.5 14.3 Financial Services - 1.7 1.8
Manufacturing The Manufacturing segment includes the CMC Steel Group and Howell Metal Company. On November 15, 1994, the Company completed its acquisition of Owen Steel Company, Inc. and related entities (SMI-Owen) headquartered in Columbia, South Carolina. The purchase price was approximately $50 million (payable one-half each in cash and common stock), subject to adjustments based upon the net worth of SMI-Owen and other factors. The Company also retired $32 million of Owen Steel Company, Inc. debt at closing. The acquisition was accounted for under the purchase method of accounting. SMI-Owen operates a minimill and associated steel fabrication, joist and recycling plants in the southeastern United States. The SMI-Owen minimill (SMI South Carolina) has 350,000 tons per year melting capacity and 300,000 tons of rolling capacity. The SMI-Owen fabrication operations include six rebar fabrication shops, five structural fabrication shops, two joist plants and one construction supply company. SMI-Owen also processes approximately 155,000 tons per year of scrap metals at three locations. Propelled by nonresidential private construction and public construction, particularly highway work, the Manufacturing segment achieved record revenues and record operating profit. Steel Group revenues were $840 million, an increase of 54% over last year. Operating profits increased 47% to $49.9 million with a 29% increase in tonnage shipped and a 19% increase in average prices. These record results were realized in spite of startup costs and initial losses at SMI-Owen and a pre-tax LIFO charge of $4.8 million. The four mills produced record shipments of 1.5 million tons and operating profits increased 43%. SMI Texas had a record year and SMI Birmingham achieved excellent performance from its new melt shop. SMI Arkansas also had a good year. SMI South Carolina incurred a slight loss before allocation of intercompany interest. The steel fabrication companies shipped 564,000 tons representing a 62% increase. Operating profits rose notwithstanding a combined first year loss at the SMI-Owen fabricating plants. Copper Tube Division operating profit increased 18% even though business was impacted by weaker single family housing construction and some industry overproduction of copper water tube. Shipments were up 9% approaching 50 million pounds. Recycling The Recycling segment (excludes six recycling plants in the CMC Steel Group), buoyed by a resounding second quarter, reported a 127% increase in operating profit compared to last year. At mid-year many product prices were at their highest levels since the robust period of the late 1980's. The second half of the year saw price declines but demand for steel scrap, copper, brass and aluminum remained strong with the usual volatility. The overall rise in prices resulted in a pre-tax LIFO charge of $3.8 million. Ferrous shipments were about 1.2 million tons, an increase of 10% over the previous year. Nonferrous tonnage processed and shipped was 208,000 tons, up 32%. Good export demand augmented the domestic markets. In August 1995, the Company acquired the operating assets of a small secondary metals operation in South Texas with two locations in Corpus Christi and one in Laredo. The Corpus Christi equipment will be combined with the Company's present location in Corpus Christi and the Company will continue operations at the Laredo location. The acquisition was not significant to the consolidated Company. 15 Marketing and Trading Operating profit (excluding financial services income) increased 8% on constant revenue with the prior year. Demand for nonferrous semis, primary metals, secondary metals and industrial raw materials remained strong, offsetting lower steel sales volume mainly due to the continued weak Chinese import market. Inter-Asia trading was active including exports from China. The weak U.S. dollar and strengthening local demand made sourcing in parts of Europe difficult and caused an increase in local general and administrative expenses. The segment had a pre-tax LIFO charge of $3.0 million. The operations of Enterprise Metal Corporation were consolidated into Commonwealth Metal Corporation. Financial Services During 1995 the Financial Services segment was merged with the Marketing and Trading segment in recognition of its greater emphasis on supporting internal Treasury activities instead of third party lending. Corporate Interest expense increased from $9.3 million in 1994 to $15.2 million in 1995. The principal cause was increased borrowing related to the financing of the Owen Steel Company acquisition. As more fully discussed under Contingencies, CMC Oil Company, a subsidiary of the Company, incurred a litigation accrual in connection with alleged overcharges for crude oil sales dating back to the 1970's. OUTLOOK The favorable operating outlook for fiscal 1996 is based on a continuation of internal operating improvements, particularly at the SMI-Owen companies. The market outlook is predicated on moderate growth in the U.S., a deep recession in Mexico, a sluggish European economy, a slight improvement in Japan, some pickup in China and fair demand in the rest of the Pacific Rim. The global decline in interest rates since May should be beneficial. The U.S. manufacturing sector appears to be rebounding again while business investment is healthy. Residential construction may be weaker over the next year although apartment building will probably take up some of the slack. Commercial and industrial construction should continue to improve and public construction will be steady. Regionally the Southwest and Southeast should achieve a good business level. The steel market will be relatively firm. Nonferrous metals always are volatile but are expected to trend toward the lower end of recent trading ranges. A key will be steel and nonferrous metal consumption in Japan. Ferrous scrap prices should gyrate at high levels. The second half of fiscal 1996 should be stronger than the first. 1994 COMPARED TO 1993 SEGMENTS Manufacturing Steel Group revenues for 1994 were a record $545 million, 27% higher than last year. Tons shipped were up 15%. The record revenues were fueled by strong demand and a 10% increase in selling prices. Operating profits for 1994 were $34 million, up 33% over a year ago despite the Birmingham melt shop startup, higher raw material inventory costs and a pre-tax LIFO charge of $6.1 million. Steel mill shipments were 1.25 million tons, an increase of nearly 10% over last year. Operating profits were up 28% over last year due to the strong performance of SMI-Texas and SMI-Arkansas. SMI-Birmingham operating profits were lower because of the startup of the new melt shop. Steel fabrication revenues and shipments were up over last year by 48% and 23%, respectively. Operating profits increased 70% compared to a year ago. In September 1993 we acquired the assets of Shepler's, gaining additional locations to complement our concrete related product warehouse business. In June 1994, the division purchased substantially all the assets of CS&W of Utah, Inc. in Brigham City, Utah, a small steel fence post manufacturing and marketing operation. Copper Tube Division shipments were 4% higher than a year ago, however, selling prices declined 9% from last year due to slower residential housing starts and some overproduction in the copper water tube industry. Operating profit was lower than a year ago. Recycling Operations in the Recycling segment improved significantly over last year's modest results. Revenues for fiscal 1994 were up 18% over last year and tonnage processed and shipped was up 15%. Operating profits for fiscal 1994 were $5 million despite a LIFO charge of $2.4 million (pre-tax). Last year operating profits were $600 thousand. Demand for steel scrap was strong during most of the fiscal year. Prices were strong during the first half of the year, but fell dramatically during the third quarter before rebounding in the fourth quarter to near the year's high. Tonnage processed and shipped was up 17% over last year. Nonferrous prices were weak during the first half of the year, but moved steadily higher during the last half due to brisk demand and generally tight supplies. Tonnage processed and shipped was 9% higher than a year ago. In April 1994, the Secondary Metals Processing Division purchased substantially all the operating assets of Proler International Corp.'s scrap processing facility at Vinton, Texas near El Paso. The Vinton facility shredder is the fifth shredder CMC operates in its thirty recycling facilities. In August 1994, the Secondary Metals Processing Division purchased the working assets of Tri-State Recycling Corp.'s scrap metal processing facility in Jacksonville, Florida. These transactions, either individually or in the aggregate were not significant to the consolidated company. 16 1994 COMPARED TO 1993 (CONTINUED): Marketing and Trading Operating profit for the Marketing and Trading segment was 6% lower than last year, primarily attributable to a 24% decline in our global steel shipments. Revenues from steel products were 19% lower. The International Division's record steel shipments in fiscal 1993, the major portion of which went to China, was not sustained in fiscal 1994 due to weaker steel markets overseas. Shipments and revenues from nonferrous semis improved significantly, however, including imports into North America. Industrial raw materials shipments and revenues were relatively unchanged. Financial Services Revenues were 25% lower than last year, but operating profit was only 3% lower. There was a further shifting in emphasis toward bolstering intercompany transaction financing and away from third party financings. Profits were aided by increasing U.S. dollar interest rates. Letter of credit commission income declined, reflecting lower business volume in the Marketing and Trading segment, as well as a decrease in fee income from the closure of our portfolio management department. Operating expenses were lower due to a reduction in personnel. Corporate The increase in corporate administrative expenses during fiscal 1994 was due primarily to increased legal expenses and to lower inter-division allocations. In addition, there was a $1.3 million credit for interest income last year which did not recur in fiscal 1994. LIQUIDITY AND CAPITAL RESOURCES Cash flow from operations (before changes in operating assets and liabilities) for fiscal 1995 was an all time high for the Company. Record Company earnings and increased depreciation expense in the Manufacturing and Recycling segments generated record cash flow with some offset due to higher interest expense at the Corporate level. Cash flow from operating activities was used to fund increases in inventory levels primarily in the Steel Group and at Cometals, Inc. With the phasing out of third party loans from CMC Finanz, the decrease in financial services loans and advances also provided cash flow. Accruals for litigation and general increases in business activity caused increases in accounts payable, accrued expenses and income taxes. The acquisition of Owen Steel Company, Inc. consumed approximately $25 million of cash. Investments in property, plant and equipment (net of Owen) were approximately $39.3 million. The proceeds from the sale of $100 million of unsecured long-term notes in conjunction with a decrease in temporary investments funded the Owen acquisition and allowed the Company to retire its commercial paper and short-term notes payable. The long-term notes also refinanced $60 million of interim acquisition financing. With the winding down of activities of CMC Finanz, most financial services notes payable were paid. Net working capital was $266 million as of August 31, 1995 compared to $175 million last year. The current ratio was 2.0 compared to 1.6 last year. The Company's sources of short-term funds include a commercial paper program of $30 million. The Company's commercial paper is rated in the second highest category by both Standard & Poor's Corporation (A-2) and Fitch Investors Service, Inc. (F-2). Formal bank credit lines are maintained equal to 100% of the amount of all commercial paper outstanding. The Company has a shelf registration on file with the Securities and Exchange Commission for an additional $50 million of medium term notes. The notes can be issued over the next two years. The Company's $100 million long-term notes issued in July 1995 are rated investment grade by Standard & Poor's Corporation and Fitch Investors Service, Inc. (BBB+) and by Moody's Investors Service (Baa2). The Company has a two year, $30 million unsecured revolving credit and term loan facility with a group of five banks. The final maturity date of this credit facility can be extended annually for successive additional one-year periods by mutual agreement. The Company has numerous informal credit facilities available from domestic and international banks. These credit facilities are priced at banker's acceptance rates or on a cost of funds basis. Management believes it has adequate capital resources available from internally generated funds, treasury shares and from the short-term and long-term capital markets to meet anticipated working capital needs, planned capital expenditures, dividend payments to shareholders and to take advantage of new opportunities requiring capital. 17 Capital investments in property, plant and equipment were $39 million in 1995 compared to $48 million the prior year. This excludes the property, plant and equipment valued at $52 million acquired from Owen Steel Company,Inc. Capital spending for fiscal 1996 is projected at $61 million of which $44 million will be invested in steel manufacturing, $2 million in copper tube, $13 million in recycling and $2 million in other operations. These expenditures are expected to be funded from internally generated funds. Total capitalization was $480 million at the end of fiscal 1995. The ratio of long-term debt to capitalization was 33%, up from 22% last year as a result of the $100 million long-term notes. Stockholders' equity was $303 million or $19.72 per share. The Board of Directors has authorized the repurchase of the Company's common stock although none was purchased during 1995. On August 31, 1995, 763,000 treasury shares were held by the Company. There were 15.4 million shares outstanding at year end. CONTINGENCIES In the ordinary course of conducting its business, the Company becomes involved in litigation, administrative proceedings and governmental investigations, including environmental matters. The Company's origin and one of its core businesses for over three quarters of a century has been metals recycling. In the present era of conservation of natural resources and ecological concerns, the Company has a continuing commitment to sound ecological and business conduct. Certain laws and governmental regulations regarding environmental concerns, however well intentioned, are presently at odds with goals of greater recycling and expose the Company and the secondary metals recycling industry to potentially significant risks. Such exposures are causing the industry to shrink, leaving fewer but more well financed operators as survivors to face the challenge. The Company believes that secondary metals that are recycled are commodities that are neither discarded nor disposed. They are diverted from the solid waste streams because of their inherent value. These materials are purchased and sold in public and private markets and commodities exchanges every day around the world. They have been identified, purchased, sorted, processed and sold in accordance with carefully established industry specifications. Environmental agencies at various federal and state levels would classify certain secondary metals as hazardous substances and confuse the sale of valuable secondary metals with arrangements to treat or dispose of hazardous substances, thereby subjecting recyclers to material remediation costs for sites contaminated by unrelated and now defunct manufacturers. Taken to extreme, such liability schemes could cripple the recycling industry and undermine any national goal of material conservation. Enforcement, interpretation and litigation involving these laws and regulations are not well developed. The Company has received notices from the U.S. Environmental Protection Agency (EPA) or equivalent state agency that it is considered a potentially responsible party (PRP) at eleven sites, none owned by the Company, and may be obligated under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) or similar state statute to conduct remedial investigation, feasibility studies, remediation and/or removal of alleged releases of hazardous substances or to reimburse the EPA for such activities. The Company is involved in litigation or administrative proceedings with regard to several of these sites in which the Company is contesting, or at the appropriate time may contest its PRP designation. In addition, the Company has received information requests with regard to other sites which may be under consideration by the EPA as potential CERCLA sites. Some of these environmental matters or other proceedings may result in fines, penalties or judgments being assessed against the Company which, from time to time, may have a material impact on earnings and cash flows for a particular quarter. While the Company is unable to estimate precisely the ultimate dollar amount of exposure to loss in connection with the above-referenced matters, it makes accruals as warranted. It is the opinion of the Company's management that the outcome of these proceedings, individually or in the aggregate, will not have a material adverse effect on the business or consolidated financial position of the Company. In fiscal 1995, the Company incurred environmental expenses of approximately $9.3 million. This included costs of offsite disposal, staff environmental personnel at various divisions, permit and license fees, accruals and payments for studies, tests, assessment and remediation, consultant fees and various other expenses. The Company estimates that more than $1.4 million of its capital expenditures for fiscal 1995 are related to costs associated with environmental compliance. The nature and timing of these environmental costs is such that it is not practical for the Company to estimate their magnitude in future periods. On November 22, 1994, the United States District Court for the Southern District of Texas granted the federal government's motion for summary judgment and entered a Final Order in the principal amount of $1.3 million against CMC Oil Company, a subsidiary of the Company. The claim involves liability for overcharges by an alleged partner of CMC Oil Company for crude oil sales during the late 1970's. With interest, the judgment is approximately $7.0 million and this has been fully accrued in the financial statements of CMC Oil Company. CMC Oil Company has appealed the Order. DIVIDENDS Quarterly cash dividends have been paid in each of the past 31 consecutive years. The annual dividend in 1995 was 48 cents a share paid at the rate of 12 cents each quarter. 18 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (in thousands, except share data)
Year ended August 31, - ------------------------------------------------------------------------------------------------ 1995 1994 1993 ----------------------------------------------------------- Revenues: Net sales $ 2,107,426 $ 1,657,810 $ 1,558,349 Other revenues 9,353 8,424 10,157 - ------------------------------------------------------------------------------------------------ 2,116,779 1,666,234 1,568,506 Costs and expenses: Cost of goods sold 1,892,540 1,504,566 1,424,707 Selling, general and administrative expenses 133,058 103,547 92,679 Interest expense 15,246 9,271 9,397 Employees' pension and profit sharing plans 11,277 7,943 6,662 Litigation accrual 6,650 - - - ------------------------------------------------------------------------------------------------ 2,058,771 1,625,327 1,533,445 Earnings before income taxes 58,008 40,907 35,061 Income taxes 19,800 14,737 13,400 - ------------------------------------------------------------------------------------------------ Net earnings $ 38,208 $ 26,170 $ 21,661 ================================================================================================ Net earnings per share $2.52 $1.75 $1.46 ================================================================================================
See notes to consolidated financial statements. 19 COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
August 31, - ---------------------------------------------------------------------------------------- 1995 1994 --------------------------------- ASSETS Current assets: Cash and temporary investments $ 21,018 $ 38,269 Accounts receivable (less allowance for collection losses of $4,743 and $3,528) 268,657 228,035 Financial services loans and advances - 19,560 Inventories 208,114 133,748 Other 36,316 26,473 - ---------------------------------------------------------------------------------------- Total current assets 534,105 446,085 Other assets 4,259 1,984 Property, plant and equipment: Land 16,629 10,747 Buildings 40,178 32,367 Equipment 372,644 304,977 Leasehold improvements 16,972 15,585 Construction in process 10,282 6,880 - ---------------------------------------------------------------------------------------- 456,705 370,556 Less accumulated depreciation and amortization (246,966) (213,748) - ---------------------------------------------------------------------------------------- 209,739 156,808 --------------------------------- $ 748,103 $ 604,877 ========================================================================================
20
August 31, - ----------------------------------------------------------------------------------------- 1995 1994 ----------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Commercial paper $ - $ 20,000 Notes payable - 21,000 Financial services notes payable 5,189 50,912 Accounts payable 107,906 84,644 Other payables and accrued expenses 137,933 85,220 Income taxes payable 3,246 4,338 Current maturities of long-term debt 14,108 4,852 - ----------------------------------------------------------------------------------------- Total current liabilities 268,382 270,966 Deferred income taxes 18,553 19,077 Long-term debt 158,004 72,061 Commitments and contingencies Stockholders' equity: Capital stock: Preferred stock Common stock, par value $5.00 per share: authorized 40,000,000 shares; issued 16,132,583 shares; outstanding 15,369,592 and 14,275,007 shares 80,663 80,663 Additional paid-in capital 11,946 1,019 Retained earnings 223,994 192,997 - ----------------------------------------------------------------------------------------- 316,603 274,679 Less treasury stock 762,991 and 1,857,576 shares at cost (13,439) (31,906) - ----------------------------------------------------------------------------------------- 303,164 242,773 ----------------------------------- $ 748,103 $ 604,877 =========================================================================================
See notes to consolidated financial statements. 21 COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
August 31, - ----------------------------------------------------------------------------------------------------------- 1995 1994 1993 ---------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 38,208 $ 26,170 $ 21,661 Adjustments to earnings not requiring cash: Depreciation and amortization 38,134 30,143 27,361 Provision for losses on receivables 1,084 1,258 1,998 Deferred income taxes (524) 4,304 2,281 Other (268) (209) 331 - ----------------------------------------------------------------------------------------------------------- Cash flows from operations before changes in operating assets and liabilities 76,634 61,666 53,632 Changes in operating assets and liabilities net of effect of Owen acquisition: Decrease (increase) in accounts receivable 6,652 (65,906) (1,259) Decrease (increase) in financial services loans and advances 19,560 16,208 9,400 Decrease (increase) in inventories (39,804) 2,853 (30,388) Decrease (increase) in other assets (5,635) (9,014) 2,672 Increase (decrease) in accounts payable, accrued expenses, and income taxes 15,472 4,998 24,431 - ----------------------------------------------------------------------------------------------------------- Net Cash Flows From Operating Activities 72,879 10,805 58,488 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Owen net of cash acquired (24,769) - - Temporary investments 19,174 9,485 7,307 Purchases of property, plant and equipment (39,311) (48,152) (37,613) Sales of property, plant and equipment 993 733 1,288 - ----------------------------------------------------------------------------------------------------------- Net Cash Used by Investing Activities (43,913) (37,934) (29,018) CASH FLOWS FROM FINANCING ACTIVITIES: Commercial paper - net change (20,000) 20,000 - Notes payable - net change (21,000) 21,000 - Financial services notes payable (45,723) 9,909 (10,895) New long-term debt 160,000 - - Refinance long-term debt of acquisition (32,000) - - Payments on long-term debt (64,801) (4,648) (12,911) Stock issued under stock option, purchase, and bonus plans 2,337 4,347 5,630 Tax benefits related to stock option plan 1,355 661 1,661 Treasury stock acquired - (17,120) - Dividends paid (7,211) (6,705) (5,635) - ----------------------------------------------------------------------------------------------------------- Net Cash Provided (Used) by Financing Activities (27,043) 27,444 (22,150) Increase in Cash and Cash Equivalents 1,923 315 7,320 Cash and Cash Equivalents at Beginning of Year 19,095 18,780 11,460 - ----------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 21,018 $ 19,095 $ 18,780 ===========================================================================================================
See notes to consolidated financial statements. 22 COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands, except share data)
Common stock Treasury stock ---------------------- Additional --------------------------- Number of paid-in Retained Number of shares Amount capital earnings shares Amount - -------------------------------------------------------------------------------------------------------------------------- Balance, September 1, 1992 12,100,064 $ 60,500 $ 2,560 $ 173,839 (1,434,058) $ (24,795) Net earnings 21,661 Cash dividends - $.39 per share (5,635) Treasury stock acquired - - Stock issued under stock option, purchase and bonus plans (302) 394,607 5,932 Tax benefits related to stock option plan 1,661 - -------------------------------------------------------------------------------------------------------------------------- Balance, August 31, 1993 12,100,064 60,500 3,919 189,865 (1,039,451) (18,863) Net earnings 26,170 Cash dividends - $.46 per share (6,705) Stock split, four-for-three 4,032,519 20,163 (3,830) (16,333) (346,318) - Treasury stock acquired (748,100) (17,120) Stock issued under stock option, purchase and bonus plans 269 276,293 4,077 Tax benefits related to stock option plan 661 - -------------------------------------------------------------------------------------------------------------------------- Balance, August 31, 1994 16,132,583 80,663 1,019 192,997 (1,857,576) (31,906) Net earnings 38,208 Cash dividends - $.48 per share (7,211) Treasury stock acquired - - Treasury stock issued for acquisition of Owen 8,710 932,301 16,345 Stock issued under stock option, purchase and bonus plans 862 162,284 2,122 Tax benefits related to stock option plan 1,355 - -------------------------------------------------------------------------------------------------------------------------- Balance, August 31, 1995 16,132,583 $ 80,663 $ 11,946 $223,994 (762,991) $ (13,439) ==========================================================================================================================
See notes to consolidated financial statements. 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, AUGUST 31, 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany transactions and balances are eliminated in consolidation. Revenue Recognition Sales are recognized when title to inventory passes to the customer based on customary industry practice. Inventories Inventories are stated at the lower of cost or market. Inventory cost for almost all domestic inventories is determined by the last-in, first-out (LIFO) method; cost of international and other domestic inventories is determined by the first-in, first-out (FIFO) method. Property, Plant and Equipment Property, plant and equipment is recorded at cost and is depreciated at annual rates based upon the estimated useful lives of the assets using substantially the straight-line method. Provision for amortization of leasehold improvements is made at annual rates based upon the estimated useful lives of the assets or terms of the leases, whichever is shorter. Startup Costs Startup costs associated with the acquisition and expansion of manufacturing and recycling facilities are expensed as incurred. Income Taxes Deferred income taxes are provided for temporary differences between financial and tax reporting. The principal differences are described in Note 6. Benefits from tax credits are reflected currently in earnings. Foreign Currency The functional and the reporting currency of a majority of the Company's international subsidiaries is the United States dollar. There are no significant translation adjustments to be reported as a separate component of stockholders' equity. Gain or loss on foreign currency exchange contracts designated as hedges is deferred and recognized upon settlement of the related trade receivable or payable. Cash Flows For purposes of the statements of cash flows, the Company considers investments that are short-term (generally with original maturities of three months or less) and highly liquid to be cash equivalents. Temporary investments include highly liquid instruments with longer original maturity dates. Cash and cash equivalents and temporary investments at August 31 were as follows (in thousands):
1995 1994 1993 - -------------------------------------------------------------------------------- Cash and cash equivalents $ 21,018 $ 19,095 $ 18,780 Temporary investments (at lower of cost or market) - 19,174 28,659 - -------------------------------------------------------------------------------- $ 21,018 $ 38,269 $ 47,439 ================================================================================
Reclassifications Certain reclassifications have been made in the 1994 and 1993 financial statements to conform to the classifications used in the current year. 2. ACQUISITION On November 15, 1994, the Company acquired all the outstanding common stock of three privately owned companies Owen Steel Company, Inc. and two affiliated corporations, Owen Miscellaneous Metals,Inc. and South Carolina Steel Corporation (all three combined referred to as "Owen"). Owen operated a steel minimill in Columbia, South Carolina and related fabrication plants in Florida, Georgia, North Carolina, South Carolina and Virginia. The Company paid approximately $50 million consisting of $25 million in cash and the issuance of 932,301 shares of treasury stock, valued at $26.875 per share. The Company also provided funds for the retirement of approximately $32 million of Owen debt at the closing. The transaction is accounted for by the purchase method of accounting and resulted in no goodwill. Results of operations of Owen are included in the statement of earnings since acquisition date. At August 31, 1995, approximately $9 million of the acquisition price was maintained in an escrow account, subject to final determination of the net worth of Owen at the closing date and certain other post-closing adjustments. These adjustments may affect the ultimate purchase price and the allocation of fair value to assets and liabilities. The following unaudited pro forma statements of earnings have been derived from historical financial statements of the Company and Owen. The information is adjusted to give effect to the acquisition of Owen by the Company as if it had occurred at the beginning of the period presented. These supplemental statements of earnings are presented for informational purposes only and do not purport to be indicative of the results of operations that actually would have occurred if the acquisition had been consummated as of those dates. 24 Proforma information (unaudited): (in thousands except share data)
1995 1994 - ---------------------------------------------------------------------- Revenues $ 2,194,055 $ 1,924,635 Net income 38,594 10,565 - ---------------------------------------------------------------------- Earnings per share $ 2.55 $ 0.67 ======================================================================
3. INVENTORIES Before reduction of LIFO reserves of $34,255,000 and $21,298,000 at August 31, 1995 and 1994, respectively, inventories valued under the first-in, first-out method approximated replacement cost. At August 31, 1995 and 1994, 86% and 78%, respectively, of total inventories were valued at LIFO. The remainder of inventories, valued at FIFO, consist mainly of international back-to-back sales, in-transit to customers. 4. CREDIT ARRANGEMENTS Periodically, the Company is active in the commercial paper market with a program which permits borrowings up to $30,000,000. It is the Company's policy to maintain formal bank credit lines equal to 100% of the amount of all commercial paper outstanding. The Company has numerous informal credit facilities available from domestic and international banks. These credit facilities are priced at banker's acceptance rates or on a cost of funds basis. No compensating balances or commitment fees are required under these credit facilities. On July 26, 1995 the Company sold $100 million of investment grade, unsecured notes with a coupon rate of 7.20% in its initial entry into the long-term public debt market. After netting the proceeds of an interest rate hedge closed simultaneously with the pricing of the bonds, the effective interest rate is 7.04%. The shelf registration also included $50 million of securities in the form of medium term notes that can be issued over the next two years. On November 23, 1993, the Company arranged a 2 year, $30 million unsecured revolving credit loan facility with a group of five banks. The final maturity date of this credit facility can be extended annually for successive additional one year periods by mutual agreement. The agreement provides for borrowing in United States dollars indexed to the prime rate, to the United States certificate of deposit rate, or to the offshore dollar interbank market rate. A commitment fee of .225% per annum is payable on the unused credit line. No compensating balances are required. Long-term debt and amounts due within one year as of August 31, 1995, are as follows (in thousands):
Amount Current Long-term outstanding maturities debt - --------------------------------------------------------------------------- 7.20% notes due 2005 $100,000 $ - $100,000 8.49% notes due 2001 42,857 7,143 50,000 8.75% note due 1999 14,999 4,286 19,285 Other 148 2,679 2,827 - --------------------------------------------------------------------------- $158,004 $ 14,108 $172,112 ===========================================================================
All interest is payable semiannually. The 7.20% notes are due in July 2005. The 8.49% notes provide for annual principal repayments beginning on December 1, 1995; all other notes are payable semiannually. Certain of the note agreements include various covenants. The most restrictive of these requires maintenance of consolidated net current assets of $75,000,000 and net worth (as defined) of $150,000,000. At August 31, 1995, approximately $144,000,000 of retained earnings was available for cash dividends under these covenants. The aggregate amounts of all long-term debt maturities for the five years following August 31, 1995, are (in thousands): 1996 - $14,108; 1997 - $11,498; 1998 - $11,480; 1999 - $11,457; 2000 - $9,284. Interest expense is comprised of the following (in thousands):
Year ended August 31, - ------------------------------------------------------------------------- 1995 1994 1993 - ------------------------------------------------------------------------- Long-term debt $ 9,105 $ 5,521 $ 7,259 Financial services debt 1,364 1,953 1,799 Commercial paper 516 321 178 Notes payable 4,261 1,476 161 - ------------------------------------------------------------------------- $ 15,246 $ 9,271 $ 9,397 =========================================================================
Interest of $149,000, $1,176,000, and $411,000 was capitalized in the cost of property, plant and equipment constructed in 1995, 1994 and 1993, respectively. Interest of $12,641,000, $10,453,000, and $10,524,000 was paid in 1995, 1994 and 1993 respectively. 5. FINANCIAL INSTRUMENTS, MARKET AND CREDIT RISK Management believes that the historical financial statement presentation is the most useful for displaying the Company's financial position. However, generally accepted accounting principles require disclosure of an estimate of the fair value of the Company's financial instruments as of year end. These estimated fair values disregard management intentions concerning these instruments and do not represent liquidation proceeds or settlement amounts currently available to the Company. Differences between historical presentation and estimated fair values can occur for many reasons including taxes, commissions, prepayment penalties, make-whole provisions and other restrictions as well as the inherent limitations in any estimation technique. Because of this management believes that this information may be of limited usefulness in understanding the Company and minimal value in comparability between companies. Due to near-term maturities, allowances for collection losses, investment grade ratings and security provided, the following financial instruments' carrying amounts are considered equivalent to fair value: - Cash and temporary investments - Financial services loans and advances - Commercial paper - Notes payable - Financial services notes payable 25 The Company's long-term debt is both publicly and privately held. Fair value was determined for private debt by discounting future cash flows at current market yields and for public debt at indicated market values.
(in thousands) - ------------------------------------------------------- Long-Term Debt 1995 1994 - ------------------------------------------------------- Carrying Amount $ 172,112 $ 76,913 Estimated Fair Value $ 174,950 $ 80,606 =======================================================
The notional amount of foreign currency exchange contracts outstanding at year end was $42,600,000. The fair value of these contracts effective as hedges is not significant. The fair value of all outstanding letters of credit is not meaningful. The Company does not have significant off-balance-sheet risk from financial instruments. It enters into foreign exchange contracts as hedges of trade receivables and payables denominated in currencies other than the functional currency. Effects of changes in currency rates are therefore minimized. As a matter of Company policy, foreign exchange contracts are used only to hedge firm commitments, not anticipated transactions. The Company maintains both corporate and divisional credit departments. Limits are set for customers and countries. Letters of credit issued or confirmed through sound financial institutions are obtained to further ensure prompt payment in accordance with terms of sale; generally, collateral is not required. At August 31, 1995, $30,049,000 of accounts receivable were backed by these bankers acceptances. In the normal course of its marketing activities, the Company transacts business with substantially all sectors of the metals industry. Customers are internationally dispersed, cover the spectrum of manufacturing and distribution, deal with various types and grades of metal, and have a variety of end markets in which they sell. The Company's historical experience in collection of accounts receivable falls within the recorded allowances. Due to these factors, no additional credit risk beyond amounts provided for collection losses is believed inherent in the Company's accounts receivable. 6. INCOME TAXES The provisions for income taxes include the following (in thousands):
Year ended August 31, - ------------------------------------------------------------------------------ 1995 1994 1993 -------------------------------------------------- Current: United States $ 17,816 $ 8,165 $ 8,827 Foreign 615 402 1,028 State and local 1,893 1,866 1,264 - ------------------------------------------------------------------------------ 20,324 10,433 11,119 Deferred (524) 4,304 2,281 - ------------------------------------------------------------------------------ $ 19,800 $ 14,737 $ 13,400 ==============================================================================
Taxes of $21,000,000, $14,736,000, and $7,511,000 were paid in 1995, 1994 and 1993, respectively. Deferred taxes arise from temporary differences between the tax basis of an asset or liability and its reported amount in the financial statements. The sources and tax effects of these differences are (in thousands):
August 31, - --------------------------------------------------------------- 1995 1994 -------------------------- U.S. taxes provided on foreign income and foreign taxes $ 11,532 $ 10,589 Tax on difference between tax and book depreciation 17,260 9,228 Net operating losses (6,692) -- Alternative minimum tax credit (1,713) -- Other accruals (1,606) -- Other (228) (740) - --------------------------------------------------------------- Total $ 18,553 $ 19,077 ===============================================================
As noted above the Company provides United States taxes on unremitted foreign earnings. Such earnings have been reinvested in the foreign operations except for dividends of $6,062,000. The Company's effective tax rates were 34.1% in 1995, 36% in 1994, and 38.2% in 1993. Reconciliations of the United States statutory rates to the effective rates are as follows:
Year ended August 31, - ----------------------------------------------------------- 1995 1994 1993 ------------------------------ Statutory rate 35.0% 35.0% 35.0% Tax credits (.5) (.5) (.5) State and local taxes 2.1 2.9 2.1 Other (2.5) (1.4) 1.6 - ----------------------------------------------------------- Effective tax rate 34.1% 36.0% 38.2% ===========================================================
During 1995, the Company resolved all issues for its returns through 1992. The settlement amount was negligible and as a result the Company credited income tax expense $1,350,000 during 1995. This is reflected in Other in the table above. The Company acquired Owen Steel Company,Inc. and subsidiaries in a tax free merger transaction during 1995. As a result of this transaction, there are $19 million of net operating losses and $1.7 million of alternative minimum tax credits that were recorded as deferred tax assets under purchase accounting. These assets will be reduced as tax expense is 26 recognized in future periods. The net operating losses consist of $4 million and $15 million that are due to expire in 2008 and 2009, respectively. The $1.7 million alternative minimum tax credit is available indefinitely. 7. CAPITAL STOCK Stock Purchase Plan Substantially all employees may participate in the Company's employee stock purchase plan. The Directors have authorized the annual purchase of up to 200 shares at a discount of 25% from the stock's price. Annual activity of the stock purchase plan was as follows:
1995 1994 1993 - ------------------------------------------------------------------- Shares available 426,021 Shares outstanding 146,710 Price per share $18.41 Shares purchased 107,110 122,607 133,053 Price per share $ 19.94 $ 14.06 $ 13.42
Stock Option Plans In 1979, the Board of Directors of the Company approved the Key Employees Restricted Stock Bonus Plan (the Plan), under which shares of common stock were awarded to certain key employees of the Company. Under the terms of the Plan, the shares are issued in the name of the employee and placed in escrow for a five-year vesting period, with the employee receiving all cash dividends and having the right to vote such shares held in escrow. In October 1989, the Company awarded 260,337 shares and recorded deferred noncash compensation of $4,029,000, representing the fair market value of the common stock at the date of the stock award. The deferred compensation is being amortized over the five-year vesting period, with $96,848, $654,000, and $488,000 in 1995, 1994 and 1993, respectively, charged to operations. Employees with 1,232 and 7,265 nonvested shares forfeited their shares during 1994 and 1993, respectively. These shares were returned to the Company. In October, 1994 230,505 shares were issued under the Plan. The Plan terminated on January 30, 1990, except as to awards outstanding . The 1986 Stock Incentive Plan (Incentive Plan) was approved in November 1986 by the Board of Directors. Under the Incentive Plan, stock options and stock appreciation rights may be awarded to full-time salaried employees, including directors, of the Company. The option price for both the stock options and the stock rights will not be less than the fair market value of the Company's stock at the date of grant and are exercisable two years from date of grant. The Incentive Plan also provides for issuance of common stock to eligible employees as performance awards for achievement of specified objectives. Annual activity of the stock incentive plan is as follows:
1995 1994 1993 ---------------------------------------- Shares available 667,697 Shares outstanding 1,430,293 Price per share $8.72 - 27.61 Shares exercisable 860,253 Shares granted 293,000 287,369 372,595 Price per share $24.50 $27.61 $20.21 Shares exercised 126,843 160,497 494,365 Average price per share $16.61 $13.72 $12.47 Shares forfeited 8,646 12,319 24,812
Preferred Stock Preferred stock has a par value of $1.00 a share, with 2,000,000 shares authorized. It may be issued in series, and the shares of each series shall have such rights and preferences as fixed by the Board of Directors when authorizing the issuance of that particular series. There are no shares of preferred stock outstanding. 8. EMPLOYEES' PENSION AND PROFIT SHARING PLANS Substantially all employees of the Company and its subsidiaries are covered by profit sharing or savings plans. Effective May 1, 1994, the Company's two profit sharing plans were amended to add 401(k) deferred compensation options. Contributions, which are discretionary, to all plans were $10,801,000, $6,999,000, and $6,097,000 for 1995, 1994 and 1993, respectively. One subsidiary maintains a defined benefit pension plan that covers substantially all its employees. Benefits are based on an employee's average monthly earnings and years of service. The contribution required for 1995 is not significant. Financial statement pension expense (income) and related balance sheet and funded status are not significant. 9. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS/POSTEMPLOYMENT BENEFITS The Company has no significant postretirement obligations other than pensions (see note 8). The Company's historical costs for postemployment benefits have not been significant and are not expected to be in the future. 10. COMMITMENTS AND CONTINGENCIES Minimum rental commitments payable by the Company and its consolidated subsidiaries for noncancelable operating leases in effect at August 31, 1995, are as follows for the fiscal periods specified (in thousands):
Real Equipment Estate - ------------------------------------------------------------ 1996 $ 1,514 $ 2,883 1997 917 2,237 1998 686 1,904 1999 257 1,773 2000 and thereafter 96 3,532 - ------------------------------------------------------------ $ 3,470 $ 12,329 ============================================================
Total rental expense was $7,953,000, $6,086,000, and $5,994,000 in 1995, 1994 and 1993, respectively. 27 In the ordinary course of conducting its business, the Company becomes involved in litigation, administrative proceedings and governmental investigations, including environmental matters. The Company has received notices from the U.S. Environmental Protection Agency (EPA) or equivalent state agency that it is considered a potentially responsible party (PRP) at eleven sites, none owned by the Company, and may be obligated under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) or similar state statute to conduct remedial investigations, feasibility studies, remediation and/or removal of alleged releases of hazardous substances or to reimburse the EPA for such activities. The Company is involved in litigation or administrative proceedings with regard to several of these sites in which the Company is contesting, or at the appropriate time may contest, its PRP designation. In addition, the Company has received information requests with regard to other sites which may be under consideration by the EPA as potential CERCLA sites. Some of these environmental matters or other proceedings may result in fines, penalties or judgments being assessed against the Company which, from time to time, may have a material impact on earnings for a particular quarter. While the Company is unable to estimate precisely the ultimate dollar amount of exposure to loss in connection with the above-referenced matters, it makes accruals as warranted. It is the opinion of the Company's management that the outcome of these proceedings, individually or in the aggregate, will not have a material adverse effect on the business or consolidated financial position of the Company. On November 22, 1994, the United States District Court for the Southern District of Texas granted the federal government's motion for summary judgment and entered a Final Order in the principal amount of $1.3 million against CMC Oil Company, a subsidiary of the Company. The claim involves liability for overcharges by an alleged partner of CMC Oil Company for crude oil sales during the late 1970's. With interest, the judgment is approximately $7.0 million and this has been fully accrued in the financial statements of CMC Oil Company. CMC Oil Company has appealed the Order. 11. EARNINGS PER SHARE Earnings per share are computed on the basis of the weighted average number of shares of common stock and common stock equivalents outstanding during the year. Common stock equivalents resulting from the stock option and purchase plans do not cause a significant dilutive effect. The shares used in the calculation of earnings per share were 15,151,072, 14,956,479, and 14,820,832 in 1995, 1994 and 1993 respectively. 12. OTHER PAYABLES AND ACCRUED EXPENSES
(in thousands) August 31, - ----------------------------------------------------------------------------- 1995 1994 ---------------------------------- Salaries, wages and commissions $ 30,213 $ 18,882 Advance billings on contracts 13,590 - Pension and profit sharing 9,758 7,988 Insurance 9,193 6,843 Accrual for contract losses 8,066 - Environmental 7,634 3,955 Litigation accrual 6,650 - Freight 5,625 4,849 Taxes other than income taxes 5,335 3,430 Interest 3,592 2,733 Other accrued expenses 38,277 36,540 - ----------------------------------------------------------------------------- $137,933 $ 85,220 =============================================================================
13. BUSINESS SEGMENTS Summarized data for the Company's international operations (principally in Europe and the Far East) are as follows (in thousands):
Year ended August 31, - ------------------------------------------------------------------------------------ 1995 1994 1993 ------------------------------------------- Revenues-unaffiliated customers $ 376,332 $ 478,012 $ 591,681 ==================================================================================== Operating profit $ 10,051 $ 8,683 $ 11,003 ==================================================================================== Identifiable assets $ 88,711 $ 139,668 $ 132,417 ====================================================================================
Export sales from the Company's United States operations are as follows (in thousands):
Year ended August 31, - ---------------------------------------------------------------------- 1995 1994 1993 --------------------------------------------------- Far East $ 42,439 $ 36,686 $ 21,805 Canada and Mexico 42,698 34,621 42,086 Other 6,074 6,660 4,208 - ---------------------------------------------------------------------- Total $ 91,211 $ 77,967 $ 68,099 ======================================================================
The Company operates in three business segments, as indicated below. During 1995 the Financial Services segment was merged with the Marketing and Trading segment in recognition of its greater emphasis on supporting internal treasury activities instead of third party lending. Intersegment sales generally are priced at prevailing market prices. Certain corporate administrative expenses are allocated to segments based upon the nature of the expense. 28 13. BUSINESS SEGMENTS (CONTINUED):
Adjustments Marketing Financial and 1995 (in thousands) Manufacturing Recycling and Trading Services Corporate eliminations - --------------------------------------------------------------------------------------------------------------------------- Revenues - unaffiliated customers $ 900,922 $ 483,428 $ 732,419 $ 10 $ - Intersegment revenues 11,817 27,707 16,806 (56,330) - --------------------------------------------------------------------------------------------------------------------------- Total revenues 912,739 511,135 749,225 10 (56,330) =========================================================================================================================== Operating profit (loss) 54,417 11,337 17,751 (10,251) Interest expense Earnings before income taxes =========================================================================================================================== Depreciation and amortization 28,847 8,524 635 128 =========================================================================================================================== Capital expenditures 24,689 14,103 431 88 =========================================================================================================================== Identifiable assets $ 452,145 $ 111,119 $ 165,692 $ 19,147 $ - =========================================================================================================================== 1994 (in thousands) - --------------------------------------------------------------------------------------------------------------------------- Revenues - unaffiliated customers $ 592,958 $ 319,468 $ 751,027 $ 2,747 $ 34 $ - Intersegment revenues 5,317 22,782 6,895 (34,994) - --------------------------------------------------------------------------------------------------------------------------- Total revenues 598,275 342,250 757,922 2,747 34 (34,994) =========================================================================================================================== Operating profit (loss) 37,670 4,998 13,507 1,731* (9,681) Interest expense Earnings before income taxes =========================================================================================================================== Depreciation and amortization 22,382 7,003 655 103 =========================================================================================================================== Capital expenditures 37,203 10,181 519 249 =========================================================================================================================== Identifiable assets $ 281,471 $ 97,924 $ 154,102 $ 62,003 $ 9,377 $ - =========================================================================================================================== 1993 (in thousands) - --------------------------------------------------------------------------------------------------------------------------- Revenues - unaffiliated customers $ 482,076 $ 264,580 $ 816,901 $ 3,661 $ 1,288 $ - Intersegment revenues 5,334 25,592 1,018 (31,944) - --------------------------------------------------------------------------------------------------------------------------- Total revenues 487,410 290,172 817,919 3,661 1,288 (31,944) =========================================================================================================================== Operating profit (loss) 32,536 603 14,271 1,790* (6,541) Interest expense Earnings before income taxes =========================================================================================================================== Depreciation and amortization 19,193 7,392 688 88 =========================================================================================================================== Capital expenditures 31,945 4,798 577 293 =========================================================================================================================== Identifiable assets $ 234,005 $ 77,723 $ 140,760 $ 64,174 $ 25,299 $ - ============================================================================================================================ Consolidated - ------------------------------------------------------------------------- Revenues - unaffiliated customers $ 2,116,779 Intersegment revenues - ------------------------------------------------------------------------- Total revenues 2,116,779 ========================================================================= Operating profit (loss) 73,254 Interest expense (15,246) Earnings before income taxes 58,008 ========================================================================= Depreciation and amortization 38,134 ========================================================================= Capital expenditures 39,311 ========================================================================= Identifiable assets $ 748,103 ========================================================================= 1994 (in thousands) - ------------------------------------------------------------------------- Revenues - unaffiliated customers $ 1,666,234 Intersegment revenues - ------------------------------------------------------------------------- Total revenues 1,666,234 ========================================================================= Operating profit (loss) 48,225 Interest expense (7,318)* Earnings before income taxes 40,907 ========================================================================= Depreciation and amortization 30,143 ========================================================================= Capital expenditures 48,152 ========================================================================= Identifiable assets $ 604,877 ========================================================================= 1993 (in thousands) - ------------------------------------------------------------------------- Revenues - unaffiliated customers $ 1,568,506 Intersegment revenues - ------------------------------------------------------------------------- Total revenues 1,568,506 ========================================================================= Operating profit (loss) 42,659 Interest expense (7,598)* Earnings before income taxes 35,061 ========================================================================= Depreciation and amortization 27,361 ========================================================================= Capital expenditures 37,613 ========================================================================= Identifiable assets $ 541,961 =========================================================================
* Interest expense of the financial services segment has been included in operating profit in the amounts of $1,953 in 1994, and $1,799 in 1993. 29 14. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for 1995, 1994 and 1993 are as follows (in thousands except per share data):
Three Months Ended 1995 ------------------------------------------------------- Nov. 30 Feb. 28 May 31 Aug. 31 ------------------------------------------------------- Net sales $ 411,434 $ 530,907 $ 572,520 $ 592,565 Gross profit 45,751 58,204 60,370 50,561 Net earnings 6,372 10,277 11,371 10,188 Net earnings per share .44 .67 .73 .66
Three Months Ended 1994 ------------------------------------------------------- Nov. 30 Feb. 28 May 31 Aug. 31 ------------------------------------------------------- Net sales $ 380,016 $ 389,913 $ 440,649 $ 447,232 Gross profit 36,606 32,830 40,916 42,892 Net earnings 5,723 4,272 7,145 9,030 Net earnings per share .38 .28 .48 .63
Three Months Ended 1993 ------------------------------------------------------- Nov. 30 Feb. 28 May 31 Aug. 31 ------------------------------------------------------- Net sales $ 324,380 $ 411,712 $ 435,041 $ 387,216 Gross profit 30,471 33,628 35,619 33,924 Net earnings 2,854 4,846 6,452 7,509 Net earnings per share .20 .33 .43 .50
The quantities and costs used in calculating cost of goods sold on a quarterly basis include estimates of the annual LIFO effect. The actual effect cannot be known until the year-end physical inventory is completed and quantity and price indices are developed. The quarterly cost of goods sold above includes such estimates. Fourth quarter 1995 and 1994 net earnings decreased $5,195,000 and $3,084,000, respectively, after the final determination of quantities and prices was made. As discussed in footnote 6, there are credits to income tax expense of $1,350,000 ($1,000,000 in the first quarter and $350,000 in the fourth quarter) resulting from the favorable resolution of tax issues with the Internal Revenue Service for years audited. As discussed in footnote 10, CMC Oil Company recorded a nonrecurring net charge of $4.1 million in the first quarter as a litigation accrual. INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders Commercial Metals Company Dallas, Texas We have audited the consolidated balance sheets of Commercial Metals Company and subsidiaries at August 31, 1995 and 1994 and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the three years in the period ended August 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Commercial Metals Company and subsidiaries at August 31,1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 1995, in conformity with generally accepted accounting principles. /s/ DELOITTE & TOUCHE LLP Dallas, Texas October 18, 1995 30 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE No event reportable herein took place. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Certain of the information required in response to this Item with regard to directors is incorporated herein by reference from the registrant's Definitive Proxy Statement for the annual meeting of shareholders to be held January 25, 1996, which will be filed no later than 120 days after the close of the Registrant's fiscal year. The following is a listing of employees believed to be considered "Executive Officers" of the registrant as defined under Rule 3b-7 as of August 31, 1995:
NAME CURRENT TITLE & POSITION AGE OFFICER SINCE - ---- ------------------------ --- ------------- Lawrence A. Engels Vice President, Treasurer and 62 1977 Chief Financial Officer Hugh M. Ghormley Executive Vice President 66 1981 CMC Steel Group Harry J. Heinkele President, Secondary Metals 63 1981 Processing Division A. Leo Howell Vice President; President and 74 1977 Treasurer - Howell Metal Company; Director and Chairman of the Executive Committee William B. Larson Controller 42 1995 Murray R. McClean Vice President and 47 1995 President, International Division Stanley A. Rabin President and Chief Executive 57 1974 Officer; Director
29 31 Bert Romberg Senior Vice President 65 1968 Marvin Selig President, CMC Steel Group; 72 1968 Director Clyde P. Selig Executive Vice President, 63 1981 CMC Steel Group David M. Sudbury Vice President, Secretary and 50 1976 General Counsel
The Executive Officers are employed by the Board of Directors of the registrant or the respective subsidiary usually at its first meeting after the registrant's Annual Shareholders Meeting and continue to serve for terms set from time to time by the registrant's Board of Directors in its discretion. All of the Executive Officers of the Company have served in the positions indicated above or in positions of similar responsibility for more than five years except for Messrs. Larson and McClean. Mr. Larson was employed by the Company in June, 1991 as Assistant Controller. For five years prior to June, 1991, he had been employed by and was a partner when he left Deloitte & Touche LLP. Mr. McClean has been employed by the Company's subsidiary CMC (Australia) Pty. Limited since 1984. In September, 1993, he assumed the function of President of the International Division of the Company. Director and Executive Officer Marvin Selig is the brother of Executive Officer Clyde P. Selig. There are no other family relationships among the officers of the registrant or among the Executive Officers and Directors. ITEM 11. EXECUTIVE COMPENSATION Information required in response to this Item is incorporated herein by reference from the Registrant's Definitive Proxy Statement for the annual meeting of shareholders to be held January 25, 1996, which will be filed no later than 120 days after the close of the Registrant's fiscal year. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required in response to this Item is incorporated herein by reference from the Registrant's Definitive Proxy Statement for the annual meeting of shareholders to be held January 25, 1996, which will be filed no later than 120 days after the close of the Registrant's fiscal year. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS To the extent applicable, information required in response to this Item is incorporated herein by reference from the Registrant's Definitive Proxy Statement for the annual meeting of shareholders to be held January 25, 1996, which will be filed no later than 120 days after the close of the Registrant's fiscal year. 30 32 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report: 2. Commercial Metals Company and Subsidiaries Consolidated Financial Statement Schedules Independent Auditors' Report as to Schedules Valuation and qualifying accounts (Schedule VIII) All other schedules have been omitted because they are not applicable, are not required, or the required information is shown in the financial statements or notes thereto. 3. The following is a list of the Exhibits and Index required to be filed by Item 601 of Regulation S-K: (3)(i) Restated Certificate of Incorporation (Filed as Exhibit (3)(i) to the Company's Form 10-K for the fiscal year ended August 31, 1993 and incorporated herein by reference). (3)(i)a - Certificate of Amendment of Restated Certificate of Incorporation dated February 1, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E1 (3)(i)b - Certificate of Amendment of Restated Certificate of Incorporation dated February 17, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E2 (3)(ii) By-Laws (Filed as Exhibit (3)(ii) to the Company's Form 10-K for the fiscal year ended August 31, 1993 and incorporated hereby by reference). (4) Indenture between the Company and Chase Manhattan Bank dated as of July 31, 1995 (Filed as Exhibit 4.1 to the Company's Registration Statement No. 33-60809 on July 18, 1995 and incorporated herein by reference). (11) Calculation of primary and fully diluted earnings per share . . . . . . . . . . . . . . . . E3 (21) Subsidiaries of Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E4 (23) Independent Auditors' consent to incorporation by reference into previously filed Registration Statements No. 033-61073 and No. 033-61075 on Form S-8 of report dated October 18, 1995 accompanying the consolidated financial statements of Commercial Metals Company and Subsidiaries for the year ended August 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . E5 (27) Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E6
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the last quarter covered by this report. 31 33 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COMMERCIAL METALS COMPANY /s/ Stanley A. Rabin ----------------------------------- By: Stanley A. Rabin President and Chief Executive Officer Date: November 20, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: /s/ Albert A. Eisenstat /s/ Dorothy G. Owen - -------------------------------------- -------------------------------------- Albert A. Eisenstat, November 20, 1995 Dorothy G. Owen, Novemer 20, 1995 Director Director /s/ Moses Feldman /s/ Charles B. Peterson - -------------------------------------- -------------------------------------- Moses Feldman, November 20, 1995 Charles B. Peterson, November 20, 1995 Director Director /s/ Laurence E. Hirsch /s/ Stanley A. Rabin - -------------------------------------- -------------------------------------- Laurence E. Hirsch, November 20, 1995 Stanley A. Rabin, November 20, 1995 Director President, Chief Executive Officer and Director /s/ A. Leo Howell - -------------------------------------- /s/ Marvin Selig A. Leo Howell, November 20, 1995 -------------------------------------- Vice President and Director Marvin Selig, November 20, 1995 President - Steel Group /s/ Walter F. Kammann and Director - -------------------------------------- Walter F. Kammann, November 20, 1995 /s/ Lawrence A. Engels Director -------------------------------------- Lawrence A. Engels, November 20, 1995 /s/ Ralph E. Loewenberg Vice President and - -------------------------------------- Chief Financial Officer Ralph E. Loewenberg, November 20, 1995 Director /s/ William B. Larson -------------------------------------- William B. Larson November 20, 1995 Controller
32 34 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Commercial Metals Company Dallas, Texas We have audited the consolidated financial statements of Commercial Metals Company as of August 31, 1995 and 1994, and for each of the three years in the period ended August 31, 1995, and have issued our report thereon dated October 18, 1995 which is included herein. Our audits also included the consolidated financial statement schedule of Commercial Metals Company listed in Item 14. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. /s/ DELOITTE & TOUCHE LLP Deloitte & Touche LLP Dallas, Texas October 18, 1995 35 SCHEDULE VIII COMMERCIAL METALS COMPANY AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED AUGUST 31, 1995, 1994 AND 1993 ( In thousands )
Allowance for collection losses deducted from notes and accounts receivable: Charged to Charged Deductions Balance, profit and to other from Balance beginning loss or accounts reserves end Year of year income ( A ) ( B ) of year -------- ---------- ---------- ---------- ---------- ---------- 1993 $2,500 $1,998 $192 $1,473 $3,217 1994 3,217 1,258 275 1,222 3,528 1995* $3,724 $1,084 $611 $676 $4,743
* Includes opening balance of $196 from the acquisition of the Owen Companies in November 1994. ( A ) Recoveries of accounts written off. ( B ) Write-off of uncollectible accounts. 36 INDEX TO EXHIBITS
Exhibit No. Description - ----------- ------------- (3)(i) Restated Certificate of Incorporation (Filed as Exhibit (3)(i) to the Company's Form 10-K for the fiscal year ended August 31, 1993 and incorporated herein by reference). (3)(i)a - Certificate of Amendment of Restated Certificate of Incorporation dated February 1, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E1 (3)(i)b - Certificate of Amendment of Restated Certificate of Incorporation dated February 17, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E2 (3)(ii) By-Laws (Filed as Exhibit (3)(ii) to the Company's Form 10-K for the fiscal year ended August 31, 1993 and incorporated hereby by reference). (4) Indenture between the Company and Chase Manhattan Bank dated as of July 31, 1995 (Filed as Exhibit 4.1 to the Company's Registration Statement No. 33-60809 on July 18, 1995 and incorporated herein by reference). (11) Calculation of primary and fully diluted earnings per share . . . . . . . . . . . . . . . . E3 (21) Subsidiaries of Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E4 (23) Independent Auditors' consent to incorporation by reference into previously filed Registration Statements No. 033-61073 and No. 033-61075 on Form S-8 of report dated October 18, 1995 accompanying the consolidated financial statements of Commercial Metals Company and Subsidiaries for the year ended August 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . E5 (27) Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E6
EX-3.(I)A 2 RESTATED CERTIFICATE OF INCORPORATION 1 Exhibit (3)(i)a CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF COMMERCIAL METALS COMPANY COMMERCIAL METALS COMPANY, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: FIRST: That the Board of Directors of the Corporation, at a meeting duly held, adopted resolutions setting forth the following amendment to the Corporation's Restated Certificate of Incorporation, declaring this amendment to be advisable and designating the next annual meeting of the stockholders of the Corporation for consideration thereof: The present Article Seventeenth of the Corporation's Restated Certificate of Incorporation shall be replaced in its entirety by the following: SEVENTEENTH: The stockholder vote required to approve any Business Combination (as hereinafter defined) shall be as set forth in this Article Seventeenth. (a)(1) Except as otherwise expressly provided in paragraph (b) of this Article Seventeenth: (A) Any merger or consolidation of the corporation or any Subsidiary (as hereinafter defined) with (i) any Interested Stockholder (as hereinafter defined) or (ii) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Stockholder; or 2 (B) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $25,000,000 or more; or (C) the issuance or transfer by the corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $25,000,000 or more; or (D) the adoption of any plan or proposal for the liquidation or dissolution of the corporation proposed by or on behalf of any Interested Stockholder or any Affiliate of any Interested Stockholder; or (E) any reclassification of securities (including any reverse stock split) or recapitalization of the corporation, or any merger or consolidation of the corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving any Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the corporation or any subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder; shall require the affirmative vote of the holders of at least 70% of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class (it being understood that for purposes of this Article Seventeenth, each share of the Voting Stock shall have the number of votes granted to it pursuant to Article Fourth of this Restated Certificate of Incorporation). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise, and shall be required in addition to any affirmative vote of the holders of any particular class or series of Voting Stock required by law or this Restated Certificate of Incorporation. -2- 3 (2) The term "Business Combination" as used in this Article Seventeenth shall mean any transaction which is referred to in any one or more of subsections (A) through (E) of subparagraph (1) of this section (a). (b) The provisions of section (a) of this Article Seventeenth shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law, by any other provision of this Restated Certificate of Incorporation or by any agreement with any national securities exchange, if, in the case of a Business Combination that does not involve any cash or other consideration being received by the stockholders of the corporation, solely in their respective capacities as stockholders of the corporation, the condition specified in the following subparagraph (1) is met, or, in the case of any other Business Combination, the conditions specified in either of the following subparagraphs (1) or (2) are met: (1) The Business Combination shall have been approved by a majority of the Disinterested Directors (as hereinafter defined), it being understood that this condition shall not be capable of satisfaction unless there is at least one Disinterested Director. (2) All of the following conditions shall have been met: (A) The consideration to be received by holders of shares of a particular class of outstanding Voting Stock shall be in cash or in the same form as the Interested Stockholder has paid for shares of such class of Voting Stock within the two-year period ending on and including the date on which the Interested Stockholder became an Interested Stockholder (the "Determination Date"). If, within such two-year period, the Interested Stockholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration to be received per share by holders of shares of such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock acquired by the Interested Stockholder within such two-year period. (B) The aggregate amount of (x) the cash and (y) the Fair Market Value, as of the date (the "Consummation Date") of the consummation of the Business Combination, of the consideration other than -3- 4 cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the higher of the following (it being intended that the requirements of this subparagraph (2)(B) shall be required to be met with respect to all shares of Common Stock outstanding whether or not the Interested Stockholder has previously acquired any shares of Common Stock): (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of Common Stock acquired by it within the two-year period immediately prior to the date of the first public announcement of the proposal of the Business Combination (the "Announcement Date") or in the transaction in which it became an Interested Stockholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Citibank, N.A. (or such other bank as may be selected by the Disinterested Directors), in effect from time to time, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid in other than cash, on each share of Common Stock from the Determination Date through the Consummation Date, in an amount up to but not exceeding the amount of interest so payable per share of Common Stock; or (ii) The Fair Market Value per share of Common Stock on the Announcement Date. (C) The aggregate amount of (x) the cash and (y) the Fair Market Value, as of the Consummation Date, of the consideration other than cash to be received per share by holders of shares of any class, other than Common Stock, of outstanding Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this subparagraph (2)(C) shall be required to be met with respect to every such class of outstanding Voting Stock, whether or not the Interested Stockholder has previously acquired any shares of a particular class of Voting Stock): -4- 5 (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of such class of Voting Stock acquired by it within the two-year period immediately prior to the Announcement Date or in the transaction in which it became an Interested Stockholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Citibank, N.A. (or such other bank as may be selected by the Disinterested Directors), in effect from time to time, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid in other than cash, on each share of such class of Voting Stock from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of interest so payable per share of such class of Voting Stock; or (ii) the Fair Market Value per share of such class of Voting Stock on the Announcement Date; or (iii) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation. (D) After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (x) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding Preferred Stock; (y) there shall have been (i) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Disinterested Directors, and (ii) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, -5- 6 unless the failure so to increase such annual rate is approved by a majority of the Disinterested Directors; and (z) such Interested Stockholder shall have not become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Stockholder's becoming an Interested Stockholder. (E) After such Interested Stockholder has become an Interested Stockholder, such interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder of the corporation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the corporation, whether in anticipation of or in connection with such Business Combination or otherwise. (F) A proxy or information statement describing the proposed Business combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all stockholders of the corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). (c) For the purposes of this Article Seventeenth: (1) A "person" shall mean any individual, firm, corporation or other entity. (2) "Interested Stockholder" shall mean any person (other than the corporation or any Subsidiary) who or which: (A) is the beneficial owner, directly or indirectly, of more than 10% of the voting power of the outstanding Voting Stock; or (B) is an Affiliate of the corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then-outstanding Voting Stock; or -6- 7 (C) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by an Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933; provided that the Trust shall not be an Interested Stockholder until such time as the Trust shall become the beneficial owner of any shares of Voting Stock in addition to the shares of Voting Stock of which it was the beneficial owner on January 27, 1994; provided further that the Trust shall not become an Interested Stockholder solely as a result of action taken solely by the corporation that benefits all holders of Voting Stock pro rata based on their ownership of Voting Stock. (3) A person shall be a "beneficial owner" of any Voting Stock: (A) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (B) which such person or any of its Affiliates or Associates has (x) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (y) the right to vote pursuant to any agreement, arrangement or understanding; or (C) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. (4) For the purposes of determining whether a person is an Interested Stockholder pursuant to subparagraph (2) of this paragraph (c), the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of subparagraph (3) of this paragraph (c), but shall not include any other shares of Voting Stock which may be issuable pursuant to any -7- 8 agreement, arrangement, or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (5) "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on January 1, 1994. (6) "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in subparagraph (2) of this paragraph (c), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the corporation. (7) "Disinterested Director" means any member of the board of directors of the corporation (the "Board") who is unaffiliated with the Interested Stockholder and was a member of the Board prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Disinterested Director who is unaffiliated with the Interested Stockholder and is recommended to succeed a Disinterested Director by a majority of Disinterested Directors then on the Board. (8) "Fair Market Value" means: (x) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, on the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System, or if such stock is not quoted on the National Market System, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or, if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board in good faith; and (y) in the case -8- 9 of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board in good faith. (9) In the event of any Business Combination in which the corporation survives, the phrase "consideration other than cash to be received" as used in subparagraphs (2)(A) and (2)(C) of paragraph (b) of this Article Seventeenth shall include the shares of Common Stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares. (d) A majority of the total number of Disinterested Directors (whether or not there exist any vacancies in previously authorized directorships at the time any such determination as is hereinafter in this paragraph (d) specified is to be made by the Board) shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article Seventeenth, including, without limitation, (1) whether a person is an Interested Stockholder, (2) the number of shares of Voting Stock beneficially owned by any person, (3) whether a person is an Affiliate or Associate of another, (4) whether the applicable conditions set forth in subparagraph (2) of paragraph (b) have been met with respect to any Business Combination, and (5) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the corporation or any subsidiary in any Business Combination has, an aggregate Fair Market Value of $25,000,000 or more. (e) Nothing contained in this Article Seventeenth shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. (f) Unless extended pursuant to Article Twelfth of this Restated Certificate of Incorporation, the provisions of this Article Seventeenth shall expire and no longer be of any effect after 12 noon, Central time, on January 28, 1999. SECOND: That thereafter, pursuant to a resolution of the Board of Directors of the Corporation, an annual meeting of stockholders of the Corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the -9- 10 necessary number of shares as required by statute were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the applicable provisions of section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by Stanley A. Rabin, its President, and attested by David M. Sudbury, its Secretary this 1st day of February, 1994. COMMERCIAL METALS COMPANY By: /s/ STANLEY A. RABIN ----------------------------------- Stanley A.Rabin President ATTEST: By: /s/ DAVID M. SUDBURY --------------------------- David M. Sudbury Secretary -10- EX-3.(I)B 3 RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT (3)(i)b CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF COMMERCIAL METALS COMPANY COMMERCIAL METALS COMPANY, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "corporation"), DOES HEREBY CERTIFY: FIRST: That the Board of Directors of the Corporation, at a meeting duly held, adopted resolutions setting forth the following amendment to the Corporation's Restated Certificate of Incorporation, declaring this amendment to be advisable and designating the next annual meeting of the stockholders of the Corporation for consideration thereof: The first paragraph of the present Article Fourth of the Corporation's Restated Certificate of Incorporation shall be replaced in its entirety by the following paragraph with the remainder of the present Article Fourth remaining unchanged: FOURTH. The aggregate number of shares of capital stock which the corporation shall have authority to issue is Forty Two Million (42,000,000) of which Forty Million (40,000,000) shares shall be Common Stock at the Par Value of Five Dollars ($5.00) per share and Two Million (2,000,000) shares shall be Preferred Stock of the Par Value of One Dollar ($1.00) per share. SECOND: That thereafter, pursuant to a resolution of the Board of Directors of the Corporation, an annual meeting of stockholders of the Corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting necessary number of shares as required by statute were 2 voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by Stanley A. Rabin, its President, and attested by David M. Sudbury, its Secretary this 17th day of February, 1995. COMMERCIAL METALS COMPANY By: /s/ Stanley A. Rabin ----------------------------------- Stanley A. Rabin President ATTEST: By: /s/ David M. Sudbury -------------------------- David M. Sudbury Secretary EX-11 4 CALCULATION OF EARNINGS PER SHARE 1 EXHIBIT 11 COMMERCIAL METALS COMPANY AND SUBSIDIARIES CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE* (In thousands except share data)
YEAR ENDED AUGUST 31, ------------------------------------ 1995 1994 1993 ---------- ---------- ---------- Net earnings $38,208 $26,170 $21,661 Weighted average number of shares outstanding 14,895,475 14,649,810 10,835,246 Dilutive effect of stock option and purchase plans, after application of treasury stock method 255,597 306,669 280,378 Adjustment for December 1993 four-for-three stock split 3,705,208 Shares used in calculating primary net earnings per share 15,151,072 14,956,479 14,820,832 ---------- ---------- ---------- Net earnings per share $2.52 $1.75 $1.46 ========== ========== ==========
*Fully diluted earnings per share are identical to primary earnings per share. EX-21 5 SUBSIDIARIES OF THE COMPANY 1 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY AS OF AUGUST 31, 1995
JURISDICTION OF PERCENTAGE NAME OF SUBSIDIARY INCORPORATION OWNED ------------------ --------------- ---------- CMC (Australia) Pty., Limited Australia 100 CMC Comercio de Metias, Ltda. Brazil 100 CMC Concrete Accessories, Inc. Texas 90 CMC Fareast Limited Hong Kong 100 CMC Finanz A.G. Switzerland 100 CMC Information Systems, Inc. Texas 100 CMC International (S.E. Asia) Pte., Limited Singapore 100 CMC Oil Company Texas 100 CMC Process Products, Inc. Texas 100 CMC Steel Holding Company Delaware 100 CMC Steel Fabricators, Inc. Texas 100 CMC Trading A.G. Switzerland 100 CMC (UK) Limited England 100 CSC Engineering, Inc. Texas 100 Cometals China, Inc. Texas 100 Cometals Far East, Inc. Texas 100 Cometals, Inc. New York 100 Cometals International, S.A. Belgium 100 Commercial Metals - Austin Inc. Texas 100 Commercial Metals Company, Holding A.G. Switzerland 100 Commercial Metals Overseas Export (FSC) Corp. US Virgin Islands 100 Commercial Metals Railroad Salvage Company Texas 100 Commercial Metals SF/JV Company Tennessee 100 Commonwealth Metal Corporation New Jersey 100 Daltrading Limited Switzerland 100 Enterprise Metal Corporation New York 100 Howell Metal Company Virginia 100 Mini-Mill Consultants, Inc. Texas 100 Owen Electric Steel Company of South Carolina South Carolina 100 Owen Industrial Products, Inc. South Carolina 100 Owen Joist Corporation South Carolina 100 Owen Joist of Florida, Inc. Florida 100 Owen of Georgia, Inc. Georgia 100 Owen Steel Company of Florida Florida 100 Owen Steel Company of N.C., Inc. North Carolina 100 Owen Supply Company, Inc. South Carolina 100 Regency Advertising Agency, Inc. Texas 100 SMI-Owen Steel Company, Inc. South Carolina 100 SMI Steel Inc. Alabama 100 Structural Metals, Inc. Texas 100 Zenith Finance and Construction Company Texas 100
EX-23 6 INDEPENDENT AUDITOR'S CONSENT 1 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 033-61073 and 033-61075 of Commercial Metals Company on Form S-8 of our report dated October 18, 1995, appearing in the Annual Report on Form 10-K of Commercial Metals Company for the year ended August 31, 1995. /s/ DELOITTE & TOUCHE LLP Dallas, Texas November 27, 1995 EX-27 7 FINANCIAL DATA SCHEDULE
5 1,000 YEAR AUG-31-1995 SEP-01-1994 AUG-31-1995 21,018 0 273,400 4,743 208,114 534,105 456,705 246,966 748,103 268,382 158,004 80,663 0 0 222,501 748,103 2,107,426 2,116,779 1,892,540 1,892,540 149,901 1,084 15,246 58,008 19,800 38,208 0 0 0 38,208 2.52 0
-----END PRIVACY-ENHANCED MESSAGE-----