EX-99.1 2 cmc-11302018xex991.htm EXHIBIT 99.1 Exhibit

Exhibit No. 99.1


News Release    image0a37.jpg


COMMERCIAL METALS COMPANY REPORTS FIRST QUARTER EARNINGS FROM CONTINUING OPERATIONS OF $0.16 PER SHARE AND ADJUSTED EARNINGS FROM CONTINUING OPERATIONS OF $0.35 PER SHARE

Irving, TX - January 7, 2019 - Commercial Metals Company (NYSE: CMC) today announced financial results for its fiscal first quarter ended November 30, 2018. For the three months ended November 30, 2018, earnings from continuing operations were $19.4 million, or $0.16 per diluted share, on net sales of $1.3 billion, compared to earnings from continuing operations of $31.9 million, or $0.27 per diluted share, on net sales of $1.1 billion for the three months ended November 30, 2017.

First quarter results include net after tax expenses of $22.1 million related to certain non-operational costs. Excluding these expenses, adjusted earnings from continuing operations were $41.5 million, or $0.35 per diluted share, as detailed in the non-GAAP reconciliation on page 12, compared to adjusted earnings from continuing operations of $36.2 million, or $0.31 per diluted share, for the three months ended November 30, 2017.

Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, commented, "Results for the first quarter were strong even though we experienced historically wet weather in the U.S. which reduced shipments. In Poland, we completed a major rolling mill overhaul while also delivering record levels of seasonally adjusted profits from this operation. The highlight of the quarter, however, was the closing of the acquisition of certain rebar assets from Gerdau which occurred on November 5th. Excluding $4.1 million of intercompany elimination charges, these assets contributed approximately $12.5 million of operating income in the first partial month of ownership. The integration of these assets purchased from Gerdau has gone very well thus far, allowing us to gain confidence in the accretive nature and operating synergy potential of these assets."

The Company's liquidity position at November 30, 2018 remained strong with cash and cash equivalents of $52.4 million and availability under the Company's credit and accounts receivable sales facilities of $626.8 million.

On January 2, 2019, the board of directors of CMC declared a quarterly dividend of $0.12 per share of CMC common stock payable to stockholders of record on January 15, 2019. The dividend will be paid on January 30, 2019.





(CMC First Quarter Fiscal 2019 - Page 2)


Business Segments - Fiscal First Quarter 2019 Review
Our Americas Recycling segment recorded adjusted EBITDA of $15.4 million for the first quarter of fiscal 2019, compared to adjusted EBITDA of $15.0 million for the first quarter of fiscal 2018. Adjusted EBITDA was relatively flat compared to the same period of the prior year as volumes remained strong and margins remained relatively consistent.

Our Americas Mills segment recorded adjusted EBITDA of $113.9 million for the first quarter of fiscal 2019, an increase of 106% compared to adjusted EBITDA of $55.2 million for the first quarter of fiscal 2018. The first quarter results of fiscal 2019 include adjusted EBITDA of $11.6 million for the partial one month results of the acquired mills on shipments of 114 thousand tons. In addition to the impact of the acquired mills, the increase in shipment volume in comparison to the first quarter of fiscal 2018 was due to incremental shipments from our new micro mill in Durant, OK. Demand from U.S. construction remains strong, however, it was impacted by weather in the current quarter as some of our markets had the most rainfall ever recorded during our first quarter, which delayed construction projects. As a result of the strong global demand for rebar, metal margins have increased by $80 per ton from the same period of the prior year and are currently the highest that we have experienced since the Great Financial Crisis. Inflationary pressures on the cost of alloys and electrodes and some extended maintenance outages resulted in an increase in manufacturing costs of approximately 13% per ton as compared to the first quarter of fiscal 2018.

Our Americas Fabrication segment recorded an adjusted EBITDA loss of $37.0 million for the first quarter of fiscal 2019, compared to adjusted EBITDA of $2.0 million for the first quarter of fiscal 2018. The first quarter results of fiscal 2019 include an adjusted EBITDA loss of $8.0 million for the partial one month results related to the acquired fabrication operations on shipments of 52 thousand tons. The adjusted EBITDA loss does not include the benefit of a purchase accounting adjustment of $11.3 million related to the unfavorable contract backlog that we assumed in the acquisition. Including this adjustment, the operating income of the acquired fabrication assets was $3.0 million for the partial period of ownership. Average selling prices rose 12% compared to the first quarter of fiscal 2018, significantly outpaced by steel input costs, which increased by 28%, causing continued margin pressure in this segment. In addition, labor costs have also increased, which contributed to the margin compression. Rebar fabrication bidding activity remains strong and selling prices for contracted work during the quarter increased approximately 40% compared to the first quarter of fiscal 2018.

Our International Mill segment in Poland recorded adjusted EBITDA of $32.8 million for the first quarter of fiscal 2019, compared to adjusted EBITDA of $30.9 million for the first quarter of fiscal 2018. Margins continue to be very good, supported by strong demand for construction steel. The strong results were achieved despite one of the rolling mills having a significant planned overhaul, which was completed during the first quarter of fiscal 2019.
    
Our Corporate and Other segment recorded an adjusted EBITDA loss of $59.6 million for the first quarter of fiscal 2019 compared to an adjusted EBITDA loss of $23.9 million for the first quarter of fiscal 2018. Included in the




(CMC First Quarter Fiscal 2019 - Page 3)


current quarter loss was $28.0 million related to acquisition costs and other legal expenses and $9.7 million related to an elimination of profit in inventory on shipments between the segments. This $9.7 million includes $4.1 million related to rebar shipments from the mill segment to the newly acquired fabrication locations and $5.6 million related to our legacy fabrication operations, as extraordinarily wet weather during the first quarter of fiscal 2019 has led to a temporary increase in inventory levels.

Outlook
"We remain optimistic about the demand outlook in our key markets. Our second quarter of fiscal 2019 will include normal seasonality, which will reduce shipment rates at our facilities; however we expect the quarter to be strong in comparison to historical second quarter results, due to the contribution from our strategic growth initiatives," said Ms. Smith. "We expect to see continued growth from our investment in the new Durant, OK micro mill, as well as growth from the ongoing integration of the newly acquired rebar assets. We are confident that these will position us well to serve our customers in this period of strong demand and deliver enhanced returns to our shareholders." 

Conference Call
CMC invites you to listen to a live broadcast of its first quarter fiscal 2019 conference call today, Monday, January 7, 2019, at 11:00 a.m. ET. Barbara Smith, Chairman of the Board of Directors, President, and Chief Executive Officer, and Mary Lindsey, Senior Vice President and Chief Financial Officer, will host the call. The call is accessible via our website at www.cmc.com. In the event you are unable to listen to the live broadcast, the call will be archived and available for replay on our website on the next business day. Financial and statistical information presented in the broadcast are located on CMC's website under “Investors”.

About Commercial Metals Company
Commercial Metals Company and its subsidiaries manufacture, recycle and market steel and metal products, related materials and services through a network of facilities that includes eight electric arc furnace ("EAF") mini mills, two EAF micro mills, a rerolling mill, steel fabrication and processing plants, construction-related product warehouses, and metal recycling facilities in the U.S. and Poland.

Forward-Looking Statements
This news release contains forward-looking statements within the meaning of the federal securities laws with respect to general economic conditions, key macro-economic drivers that impact our business, the effects of ongoing trade actions, the effects of continued pressure on the liquidity of our customers, potential synergies provided by our recent acquisitions, demand for our products, steel margins, the ability to operate our mills at full capacity, future supplies of raw materials and energy for our operations, share repurchases, legal proceedings, renewing the credit facilities of our Polish subsidiary, the reinvestment of undistributed earnings of our non-U.S. subsidiaries, U.S. non-residential construction activity, international trade, capital expenditures, our liquidity and our ability to satisfy future liquidity requirements, our new Oklahoma micro mill, estimated contractual obligations, the effects of the acquisition of




(CMC First Quarter Fiscal 2019 - Page 4)


substantially all of the U.S. rebar fabrication facilities and the steel mini-mills located in or around Rancho Cucamonga, California, Jacksonville, Florida, Sayreville, New Jersey and Knoxville, Tennessee previously owned by Gerdau S.A. and certain of its subsidiaries (collectively, the “Acquired Businesses”), and our expectations or beliefs concerning future events. These forward-looking statements can generally be identified by phrases such as we or our management "expects," "anticipates," "believes," "estimates," "intends," "plans to," "ought," "could," "will," "should," "likely," "appears," "projects," "forecasts," "outlook" or other similar words or phrases. There are inherent risks and uncertainties in any forward-looking statements. We caution readers not to place undue reliance on any forward-looking statements.

Although we believe that our expectations are reasonable, we can give no assurance that these expectations will prove to have been correct, and actual results may vary materially. Except as required by law, we undertake no obligation to update, amend or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or any other changes. Important factors that could cause actual results to differ materially from our expectations include those described in Part I, Item 1A, Risk Factors, of the 2018 Form 10-K as well as the following: changes in economic conditions which affect demand for our products or construction activity generally, and the impact of such changes on the highly cyclical steel industry; rapid and significant changes in the price of metals, potentially impairing our inventory values due to declines in commodity prices or reducing the profitability of our fabrication contracts due to rising commodity pricing; excess capacity in our industry, particularly in China, and product availability from competing steel mills and other steel suppliers including import quantities and pricing; compliance with and changes in environmental laws and regulations, including increased regulation associated with climate change and greenhouse gas emissions; involvement in various environmental matters that may result in fines, penalties or judgments; potential limitations in our or our customers' abilities to access credit and non-compliance by our customers with our contracts; activity in repurchasing shares of our common stock under our repurchase program; financial covenants and restrictions on the operation of our business contained in agreements governing our debt; our ability to successfully identify, consummate, and integrate acquisitions and the effects that acquisitions may have on our financial leverage; risks associated with acquisitions generally, such as the inability to obtain, or delays in obtaining, required approvals under applicable antitrust legislation and other regulatory and third party consents and approvals; failure to retain key management and employees of the Acquired Businesses; issues or delays in the successful integration of the Acquired Businesses’ operations with those of the Company, including the inability to substantially increase utilization of the Acquired Businesses’ steel mini mills, and incurring or experiencing unanticipated costs and/or delays or difficulties; difficulties or delays in the successful transition of the Acquired Businesses to the information technology systems of the Company as well as risks associated with other integration or transition of the operations, systems and personnel of the Acquired Businesses; unfavorable reaction to the acquisition of the Acquired Businesses by customers, competitors, suppliers and employees; lower than expected future levels of revenues and higher than expected future costs; failure or inability to implement growth strategies in a timely manner; impact of goodwill impairment charges; impact of long-lived asset impairment charges; currency fluctuations; global factors, including political uncertainties and military conflicts; availability and pricing of electricity, electrodes and natural gas for mill operations; ability to hire and retain key executives and other employees; competition from other materials or from competitors that have a




(CMC First Quarter Fiscal 2019 - Page 5)


lower cost structure or access to greater financial resources; information technology interruptions and breaches in security; ability to make necessary capital expenditures; availability and pricing of raw materials and other items over which we exert little influence, including scrap metal, energy and insurance; unexpected equipment failures; ability to realize the anticipated benefits of our investment in our new micro mill in Durant, Oklahoma; losses or limited potential gains due to hedging transactions; litigation claims and settlements, court decisions, regulatory rulings and legal compliance risks; risk of injury or death to employees, customers or other visitors to our operations; impacts of the Tax Cuts and Jobs Act ("TCJA"); and increased costs related to health care reform legislation.




(CMC First Quarter Fiscal 2019 - Page 6)



COMMERCIAL METALS COMPANY
FINANCIAL & OPERATING STATISTICS (UNAUDITED)
 
 
Three Months Ended
(in thousands, except per ton amounts)
 
11/30/2018
 
8/31/2018
 
5/31/2018
 
2/28/2018
 
11/30/2017
 Americas Recycling
 
 
 
 
 
 
 
 
 
 
 Net Sales
 
$
302,009

 
361,363

 
364,098

 
320,627

 
319,341

 Adjusted EBITDA
 
$
15,434

 
16,996

 
19,477

 
17,216

 
15,005

Short tons shipped
 
 
 
 
 
 
 
 
 
 
 Ferrous
 
579

 
644

 
642

 
560

 
589

 Nonferrous
 
63

 
69

 
65

 
63

 
66

 Total short tons shipped
 
642

 
713

 
707

 
623

 
655

 Average selling price (per short ton)
 
 
 
 
 
 
 
 
 
 
 Ferrous
 
$
273

 
298

 
314

 
285

 
257

 Nonferrous
 
$
1,982

 
2,155

 
2,252

 
2,345

 
2,208

 
 
 
 
 
 
 
 
 
 
 
 Americas Mills
 
 
 
 
 
 
 
 
 
 
 Net Sales
 
$
601,853

 
604,435

 
553,063

 
425,887

 
413,518

 Adjusted EBITDA
 
$
113,873

 
106,830

 
89,590

 
50,219

 
55,166

 Short tons shipped
 
 
 
 
 
 
 
 
 
 
     Rebar
 
530

 
482

 
503

 
405

 
405

     Merchant & Other
 
317

 
359

 
308

 
279

 
272

Total Short Tons Shipped
 
847

 
841

 
811

 
684

 
677

 Average price (per short ton)
 
 
 
 
 
 
 
 
 
 
 Total selling price
 
$
682

 
674

 
632

 
571

 
550

 Cost of ferrous scrap utilized
 
$
307

 
326

 
329

 
288

 
256

 Metal margin
 
$
375

 
348

 
303

 
283

 
294

 
 
 
 
 
 
 
 
 
 
 
 Americas Fabrication
 
 
 
 
 
 
 
 
 
 
 Net Sales
 
$
437,111

 
403,889

 
378,241

 
312,973

 
332,779

 Adjusted EBITDA
 
$
(36,996
)
 
(24,607
)
 
(8,208
)
 
(8,611
)
 
2,032

Total short tons shipped
 
319

 
307

 
302

 
241

 
264

Total selling price (per short ton)
 
$
868

 
843

 
777

 
799

 
778

 
 
 
 
 
 
 
 
 
 
 
 International Mill
 
 
 
 
 
 
 
 
 
 
 Net Sales
 
$
227,024

 
253,058

 
201,737

 
211,765

 
220,478

 Adjusted EBITDA
 
$
32,779

 
36,654

 
31,987

 
32,135

 
30,944

 Short tons shipped
 
 
 
 
 
 
 
 
 
 
     Rebar
 
80

 
145

 
79

 
95

 
140

     Merchant & Other
 
312

 
289

 
241

 
251

 
260

Total short tons shipped
 
392

 
434

 
320

 
346

 
400

 Average price (per short ton)
 
 
 
 
 
 
 
 
 
 
 Total selling price
 
$
547

 
555

 
599

 
578

 
517

 Cost of ferrous scrap utilized
 
$
295

 
305

 
329

 
324

 
296

 Metal margin
 
$
252

 
250

 
270

 
254

 
221







(CMC First Quarter Fiscal 2019 - Page 7)


COMMERCIAL METALS COMPANY
BUSINESS SEGMENTS (UNAUDITED)
(in thousands)
 
Three Months Ended
Net sales
 
11/30/2018
 
8/31/2018
 
5/31/2018
 
2/28/2018
 
11/30/2017
 Americas Recycling
 
$
302,009

 
$
361,363

 
$
364,098

 
$
320,627

 
$
319,341

 Americas Mills
 
601,853

 
604,435

 
553,063

 
425,887

 
413,518

 Americas Fabrication
 
437,111

 
403,889

 
378,241

 
312,973

 
332,779

 International Mill
 
227,024

 
253,058

 
201,737

 
211,765

 
220,478

 Corporate and Other
 
(290,655
)
 
(314,307
)
 
(292,655
)
 
(216,984
)
 
(209,583
)
Total Net Sales
 
$
1,277,342

 
$
1,308,438

 
$
1,204,484

 
$
1,054,268

 
$
1,076,533

 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA from continuing operations
 
 
 
 
 
 
 
 
 
 
 Americas Recycling
 
$
15,434

 
$
16,996

 
$
19,477

 
$
17,216

 
$
15,005

 Americas Mills
 
113,873

 
106,830

 
89,590

 
50,219

 
55,166

 Americas Fabrication
 
(36,996
)
 
(24,607
)
 
(8,208
)
 
(8,611
)
 
2,032

 International Mill
 
32,779

 
36,654

 
31,987

 
32,135

 
30,944

 Corporate and Other
 
(59,554
)
 
(28,827
)
 
(31,814
)
 
(26,083
)
 
(23,880
)





(CMC First Quarter Fiscal 2019 - Page 8)


COMMERCIAL METALS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
 
 
Three Months Ended November 30,
(in thousands, except share data)
 
2018
 
2017
Net sales
 
$
1,277,342

 
$
1,076,533

Costs and expenses:
 
 
 
 
Cost of goods sold
 
1,118,433

 
933,515

Selling, general and administrative expenses
 
117,217

 
96,111

Interest expense
 
16,663

 
6,611

 
 
1,252,313

 
1,036,237

 
 
 
 
 
Earnings from continuing operations before income taxes
 
25,029

 
40,296

Income taxes
 
5,609

 
8,425

Earnings from continuing operations
 
19,420

 
31,871

 
 
 
 
 
Earnings from discontinued operations before income taxes
 
457

 
8,120

Income taxes
 
135

 
3,181

Earnings from discontinued operations
 
322

 
4,939

 
 
 
 
 
Net earnings
 
$
19,742

 
$
36,810

 
 
 
 
 
Basic earnings per share*
 
 
 
 
Earnings from continuing operations
 
$
0.17

 
$
0.27

Earnings from discontinued operations
 

 
0.04

Net earnings
 
$
0.17

 
$
0.32

 
 
 
 
 
Diluted earnings per share*
 
 
 
 
Earnings from continuing operations
 
$
0.16

 
$
0.27

Earnings from discontinued operations
 

 
0.04

Net earnings
 
$
0.17

 
$
0.31

 
 
 
 
 
Cash dividends per share
 
$
0.12

 
$
0.12

Average basic shares outstanding
 
117,387,038

 
116,243,545

Average diluted shares outstanding
 
118,682,473

 
117,857,911


* EPS is calculated independently for each component and may not sum to net earnings EPS due to rounding





(CMC First Quarter Fiscal 2019 - Page 9)



COMMERCIAL METALS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data)
 
November 30, 2018
 
August 31, 2018
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
52,352

 
$
622,473

Accounts receivable (less allowance for doubtful accounts of $7,301 and $4,489)
 
1,018,000

 
749,484

Inventories, net
 
828,559

 
589,005

Other current assets
 
130,013

 
116,243

Total current assets
 
2,028,924

 
2,077,205

Property, plant and equipment, net
 
1,492,228

 
1,075,038

Goodwill
 
64,252

 
64,310

Other noncurrent assets
 
123,246

 
111,751

Total assets
 
$
3,708,650

 
$
3,328,304

Liabilities and stockholders' equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable-trade
 
$
319,637

 
$
261,258

Accrued expenses and other payables
 
287,467

 
260,939

Acquired unfavorable contract backlog
 
122,268

 

Current maturities of long-term debt
 
29,083

 
19,746

Total current liabilities
 
758,455

 
541,943

Deferred income taxes
 
27,182

 
37,834

Other long-term liabilities
 
126,162

 
116,325

Long-term debt
 
1,307,824

 
1,138,619

Total liabilities
 
2,219,623

 
1,834,721

Stockholders' equity
 
1,488,841

 
1,493,397

Stockholders' equity attributable to noncontrolling interests
 
186

 
186

Total stockholders' equity
 
1,489,027

 
1,493,583

Total liabilities and stockholders' equity
 
$
3,708,650

 
$
3,328,304






(CMC First Quarter Fiscal 2019 - Page 10)



COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 
 
Three Months Ended November 30,
(in thousands)
 
2018
 
2017
Cash flows from (used by) operating activities:
 
 
 
 
Net earnings
 
$
19,742

 
$
36,810

Adjustments to reconcile net earnings to cash flows from (used by) operating activities:
 
 
 
 
Depreciation and amortization
 
35,182

 
32,193

Amortization of acquired unfavorable contract backlog
 
(11,332
)
 

Stock-based compensation
 
4,217

 
4,780

Net gain on disposals of subsidiaries, assets and other
 
(1,271
)
 
(228
)
Deferred income taxes and other long-term taxes
 
(352
)
 
9,312

Write-down of inventories
 
45

 
87

Provision for losses on receivables, net
 

 
1,901

Asset impairment
 

 
1,480

Changes in operating assets and liabilities
 
(36,333
)
 
(30,537
)
Beneficial interest in securitized accounts receivable
 
(367,521
)
 
(175,957
)
Net cash flows used by operating activities
 
(357,623
)
 
(120,159
)
 
 
 
 
 
Cash flows from (used by) investing activities:
 
 
 
 
Acquisitions, net of cash acquired
 
(694,802
)
 
(6,980
)
Capital expenditures
 
(37,914
)
 
(59,681
)
Proceeds from settlement of life insurance policies
 
1,905

 

Insurance proceeds
 
2,000

 

Proceeds from the sale of property, plant and equipment and other
 
1,953

 
560

Proceeds from the sale of subsidiaries
 
1,893

 
2,260

Repayments under accounts receivable programs
 

 
(90,000
)
Beneficial interest in securitized accounts receivable
 
367,521

 
175,957

Net cash flows from (used by) investing activities
 
(357,444
)
 
22,116

 
 
 
 
 
Cash flows from (used by) financing activities:
 
 
 
 
Proceeds from issuance of long-term debt
 
180,000

 

Repayments of long-term debt
 
(7,175
)
 
(2,979
)
Proceeds from the accounts receivable programs
 
33,439

 

Repayments under accounts receivable programs
 
(45,586
)
 

Dividends
 
(14,116
)
 
(13,993
)
Stock issued under incentive and purchase plans, net of forfeitures
 
(6,220
)
 
(9,520
)
Increase in documentary letters of credit, net
 

 
2,141

Net cash flows from (used by) financing activities
 
140,342

 
(24,351
)
Effect of exchange rate changes on cash
 
(353
)
 
(235
)
Decrease in cash, restricted cash and cash equivalents
 
(575,078
)
 
(122,629
)
Cash, restricted cash and cash equivalents at beginning of period
 
632,615

 
285,881

Cash, restricted cash and cash equivalents at end of period
 
$
57,537

 
$
163,252

Supplemental information:
 
Three Months Ended November 30,
(in thousands)
 
2018
 
2017
Cash and cash equivalents
 
$
52,352

 
$
130,209

Restricted cash
 
5,185

 
33,043

Total cash, restricted cash and cash equivalents
 
$
57,537

 
$
163,252







(CMC First Quarter Fiscal 2019 - Page 11)


COMMERCIAL METALS COMPANY
NON-GAAP FINANCIAL MEASURES (UNAUDITED)

This press release contains financial measures not derived in accordance with generally accepted accounting principles ("GAAP"). Reconciliations to the most comparable GAAP measures are provided below.
Core EBITDA from Continuing Operations is a non-GAAP financial measure. Core EBITDA from continuing operations is the sum of earnings (loss) from continuing operations before interest expense and income taxes (benefit). It also excludes recurring non-cash charges for depreciation and amortization, asset impairments, and equity compensation. Core EBITDA from continuing operations also excludes certain material acquisition and integration related costs and other legal fees, mill operational start-up costs, CMC Steel Oklahoma incentives, net debt restructuring and extinguishment gains and losses and severance expenses. Core EBITDA from continuing operations should not be considered an alternative to earnings (loss) from continuing operations or net earnings (loss), or as a better measure of liquidity than net cash flows from operating activities, as determined by GAAP. However, we believe that Core EBITDA from continuing operations provides relevant and useful information, which is often used by analysts, creditors and other interested parties in our industry as it allows: (i) comparison of our earnings to those of our competitors; (ii) a supplemental measure of our ongoing core performance; and (iii) the assessment of period-to-period performance trends. Additionally, Core EBITDA from continuing operations is the target benchmark for our annual and long-term cash incentive performance plans for management. Core EBITDA from continuing operations may be inconsistent with similar measures presented by other companies.

A reconciliation of earnings from continuing operations to Core EBITDA from continuing operations is provided below:

 
Three Months Ended
(in thousands)
11/30/2018
 
8/31/2018
 
5/31/2018
 
2/28/2018
 
11/30/2017
Earnings from continuing operations
$
19,420

 
$
51,260

 
$
42,325

 
$
9,781

 
$
31,871

Interest expense
16,663

 
15,654

 
11,511

 
7,181

 
6,611

Income taxes
5,609

 
6,682

 
13,312

 
1,728

 
8,425

Depreciation and amortization
35,176

 
32,610

 
32,949

 
34,050

 
31,899

Asset impairments

 
840

 
935

 
12,136

 
461

Non-cash equity compensation
4,215

 
5,679

 
5,376

 
8,550

 
4,433

Acquisition and integration related costs and other
27,970

 
10,907

 
4,975

 
5,905

 
3,720

Amortization of acquired unfavorable contract backlog
(11,332
)
 

 

 

 

Mill operational start-up costs*

 

 
1,473

 
6,565

 
5,433

CMC Steel Oklahoma incentives

 

 
(3,000
)
 

 

Loss on debt extinguishment, net

 

 

 

 

Severance

 

 

 

 

Core EBITDA from continuing operations
$
97,721

 
$
123,632

 
$
109,856

 
$
85,896

 
$
92,853

*Net of interest, taxes, depreciation and amortization, impairments, and non-cash equity compensation.




(CMC First Quarter Fiscal 2019 - Page 12)


Adjusted earnings from continuing operations is a non-GAAP financial measure that is equal to earnings (loss) from continuing operations before certain acquisition and integration related and costs and other legal expenses, mill operational start-up costs, CMC Steel Oklahoma incentives, asset impairments, debt restructuring and extinguishment gains and losses and severance expenses, including the estimated income tax effects thereof. Additionally, we adjust adjusted earnings from continuing operations for the effects of the TCJA as well as the tax benefit associated with an international reorganization. Adjusted earnings from continuing operations should not be considered as an alternative to earnings from continuing operations or any other performance measure derived in accordance with GAAP. However, we believe that adjusted earnings from continuing operations provides relevant and useful information to investors as it allows: (i) a supplemental measure of our ongoing core performance and (ii) the assessment of period-to-period performance trends. Management uses adjusted earnings from continuing operations to evaluate our financial performance. Adjusted earnings from continuing operations may be inconsistent with similar measures presented by other companies. Adjusted earnings from continuing operations per diluted share is defined as adjusted earnings from continuing operations on a diluted per share basis.

A reconciliation of earnings from continuing operations to adjusted earnings from continuing operations is provided below:

 
Three Months Ended
(in thousands)
11/30/2018
 
8/31/2018
 
5/31/2018
 
2/28/2018
 
11/30/2017
Earnings from continuing operations
$
19,420

 
$
51,260

 
$
42,325

 
$
9,781

 
$
31,871

Impairment of structural steel assets

 

 

 
12,136

 

Acquisition and integration related costs and other
27,970

 
10,907

 
4,975

 
5,905

 
3,720

Mill operational start-up costs

 

 
6,456

 
8,651

 
2,909

CMC Steel Oklahoma incentives

 

 
(3,000
)
 

 

Loss on debt extinguishment, net

 

 

 

 

Severance

 

 

 

 

Total adjustments (pre-tax)
$
27,970

 
$
10,907

 
$
8,431

 
$
26,692

 
$
6,629

 
 
 
 
 
 
 
 
 
 
Tax impact
 
 
 
 
 
 
 
 
 
TCJA impact
$

 
$

 
$

 
$
10,600

 
$

International reorganization

 

 

 
(9,200
)
 

Related tax effects on adjustments
(5,874
)
 
(2,290
)
 
(1,771
)
 
(6,855
)
 
(2,320
)
Total tax impact
(5,874
)
 
(2,290
)
 
(1,771
)
 
(5,455
)
 
(2,320
)
Adjusted earnings from continuing operations
$
41,516

 
$
59,877

 
$
48,985

 
$
31,018

 
$
36,180

 
 
 
 
 
 
 
 
 
 
Adjusted earnings from continuing operations per diluted share
$
0.35

 
$
0.51

 
$
0.41

 
$
0.26

 
$
0.31













Media Contact:
Susan Gerber
214.689.4300