Commercial Metals Co. (CMC) 2004年年度報告「NYSE」.pdf

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1、C O M M E R C IAL M ETAL S C O M PANY 2004 Annual Report2Financial Highlights 8Domestic Mills 12CMCZ 16Domestic Fabrication 20Recycling 24Marketing&Distribution 74Operations 76Divisions and Subsidiaries Since 1915,Commercial Metals Company has seized everyopportunity to forge itself into an ever str

2、onger enterprise.In 2004,CMCraised the bar for itself again,emphatically.We earned more in fiscal 2004than we ever have before.In both the third and fourth quarters alone,in fact,CMCearned morethan we ever had in any single previous year!Unquestionably,oursuccess was bolstered by favorable market fo

3、rces,including highprices,strong demand in Asia,an improving U.S.economy and aweak U.S.dollar.But equally unquestionably,our unprecedentedsuccess was built on the measures we have taken over the years including diversification by product,business segment andgeography to put CMCin a position of stren

4、gth to withstandchallenging economic times and reap the benefits of favorable ones.RAISINGTHE BARFinancial HighlightsYear ended August 31,(in thousands,except share data)20042003%IncreaseNet sales$4,768,327$2,875,88566Net earnings132,02118,904598Diluted earnings per share4.420.66570Net working capit

5、al640,755399,42560Cash dividends per share0.340.326Cash dividends paid9,7649,0398Average diluted shares outstanding29,844,33928,605,5954Stockholders equity660,627506,93330Stockholders equity per share22.5618.1125Total assets1,988,0461,283,25555Tonnages Shipped(short tons in thousands)200420032002200

6、12000Domestic steel mill rebar shipments 1,0141,007971833808Domestic steel mill structural and other shipments1,3871,2771,2001,0701,045CMCZ shipments1,082Total mill tons shipped3,4832,2842,1711,9031,853Fab plant rebar shipments890663559535472Fab plant structural,joist and post shipments4213654254514

7、83Total fabrication tons shipped1,3111,028984986955Domestic scrap metal tons processed and shipped3,4112,8112,5682,3082,380Commercial Metals Company and subsidiaries manufacture,recycle and market steel and metalproducts,related materials and services through a network including steel minimills,stee

8、l fabricationand processing plants,construction-related product warehouses,a copper tube mill,metal recyclingfacilities and marketing and distribution offices in the United States and in strategic overseas markets.3For the year ended August 31,2004,yourCompany reported record annual net earningsper

9、diluted share of$4.42and record net earningsof$132.0million on net sales of$4.8billion.This compares with net earnings per dilutedshare of$0.66and net earnings of$18.9millionon net sales of$2.9billion last year.The yearfar surpassed any previous one,and in the thirdand fourth quarters each,earnings

10、exceededthose for any entire year in the Companys previous90-year history.The current year included asubstantial pre-taxLIFOexpense of$74.8million($1.63per diluted share)compared with a pre-taxLIFOexpense of$9.3million($0.21per dilutedshare)in the prior year.The effective tax rate forfiscal 2004was

11、30.7%.The net income returnon beginning equity was 26.0%.In fiscal 2004,we enjoyed the winning com-bination of high prices,high margins,high operatinglevels,and high shipments in most of our businesssegments.Various prices and input costs climbed to record levels.But,we also benefitedfrom organic gr

12、owth and acquisitions,includingsignificant global expansion.In particular,theacquisition of 71%of CMCZawiercie S.A.(CMCZ)in Poland contributed meaningfully to our earningsgain in only nine months of ownership,and wesaw the accelerated payout from certain prioracquisitions.Moreover,we managed well th

13、roughtremendous price swings in our markets withinthe generally strong pricing environment.Ironically,perhaps,the robust markets maskedinternal improvements begun several years ago.Additionally,each of our business segments indeed,most branches generated good toexcellent FIFOoperating profits.To be

14、sure,we benefited from favorable marketconditions including strong demand in Asia,an improving U.S.economy,the relatively weakU.S.dollar,and inventory rebuilding resultingin sharply increased prices and metal spreads,particularly for steel scrap and steel mill prod-ucts.Demand for our products was r

15、obust andsupply was tight.But just as certainly,our long-enacted strategy of diversification by industrysegment,by products,and by geography thevery strategy which has helped us profitablyweather challenging market climates,hasplaced us in a position to reap major gains frompositive environments.And

16、 our vertical integrationbenefited us enormously.To our stockholdersFiscal 2004:The year far surpassed any previous one,and in the third and fourth quarters each,earnings exceeded those for any entire year in theCompanys previous 90-year history.Domestic Mills CMCsDomestic Mills segment is comprised

17、 ofthe four steel minimills with a capacity of 2.4million tons and the copper tube mill with acapacity of 80million pounds.Segment adjustedoperating profit was$84.2million in fiscal2004versus$19.7million in fiscal 2003.Theincrease in the segments LIFOreserve was$29.5million in fiscal 2004compared wi

18、th$6.2million in fiscal 2003.Fiscal 2004was a gangbuster year for thesteel mills with records achieved for combinedprofits,tons melted,tons rolled and tonsshipped.In most instances,individual mill recordswere set as well.The surges in steel pricesmore than overcame the spike in input costs.While not

19、 a record-setter,it also was a robustyear for our copper tube division.Within the segment,adjusted operating profitof$75.1million for our domestic steel minimillswas about four times greater than a year earlieron the strength of the much improved sellingprices and strong shipments,while productivity

20、remained at exceptionally high levels at all fourmills.The LIFOexpense for these mills was$24.1million.The extremely rapid rise in raw materialcosts was a significant offset to profitability.Production records were set in every mill.On ayear-to-year basis,tonnage melted was up 9%to 2.27million tons;

21、tonnage rolled was 2.20million tons,11%above last years result;andshipments increased 5%to 2.40million tons.Our average total mill selling price was$101per ton above last years extraordinarily low level,and the average selling price for finished goodswas up by$98per ton to$385per ton.Conversely,the

22、average scrap purchase costrose by$52per ton versus fiscal 2003.Additionally,utility costs increased by$7.3millionor 12%compared with the previous year due tohigher electrical/natural gas rates and usage;costs for ferroalloys were up a similar amount,and graphite electrodes and other suppliesincreas

23、ed in price considerably.On balance,though,our margins rose significantly.The metalspread at$230per ton was$49per ton greaterthan last year.The copper tube mill recorded an adjustedoperating profit of$9.0million compared withlast years$620,000,including$5.5millionin LIFOexpense this year.We benefite

24、d fromstronger demand from commercial as well asresidential users,resulting in higher selling pricesand margins.Against the prior year,copper tubeproduction increased 9%to 66.3million pounds,and shipments gained 11%to 68.4millionpounds.Metal spreads gained$0.16per poundto$0.61per pound despite the s

25、harp rise in theunderlying copper scrap price.CMCZThe steel mill and related operations in Polandcan produce quantities of 1.4million short tonsmelted and over 1.1million tons rolled on anannual basis.Results for the nine months thatwe owned this entity were nothing short ofremarkable and well in ex

26、cess of our highexpectations.Most of the post-acquisition surpriseswere positive and market conditions,of course,excellent.Moreover,synergies with our interna-tional operations were realized quickly,especiallyour marketing expertise.For the total period of new ownership,CMCZrecorded an adjusted oper

27、ating profit of$69.3million on a 100%owned basis.CMCZwasaffected by the same factors as reported abovefor our domestic steel mills except that it did notbenefit from the weak U.S.dollar.For the ninemonths,short tons melted equaled 1.16million,tons rolled equaled 863,000,and shipmentstotaled 1.08mill

28、ion tons including billets.Meanwhile,the average selling price was$380per short ton,while the average scrap purchasecost equaled$179per ton,resulting in a metalspread of$201per ton.200 4 N ET SAL E SDomestic Mills 21%CMCZ 8%Domestic Fabrication 20%Recycling 15%Marketing 36%200 4 EAR N I N G S B E F

29、O R E I N C O M E TA X E SDomestic Mills 32%CMCZ 25%Domestic Fabrication 3%Recycling 26%Marketing 14%4Domestic Fabrication CMCs Domestic Fabrication business segmentnow has a capacity of more than 1.4milliontons,as well as other capabilities which are notmeasured in tons.In fiscal 2004,the DomesticF

30、abrication segment rebounded and the adjustedoperating profit was$7.3million compared with$701,000in fiscal 2003.This was the only segment which suffered from margin compres-sion during much of fiscal 2004;however,thevery positive development was that overall volume and selling prices accelerated as

31、 theyear progressed.The segment also was impactednegatively by corrective action to eliminateunderperformers and anticipated contract lossesas we worked through older jobs.Moreover,theLIFOreserve increased by$26.3million.Construction activity was mixed and varied bygeographic region.Public and insti

32、tutional con-struction continued at a solid level,and somesectors of commercial construction showedimprovement.By product area,rebar fabrication,construction-related products,steel post plants,steel joist manufacturing,and structural steelfabrication all were affected by higher steelinput costs,but

33、aided by significant increases inselling prices.All showed improvements in prof-itability.Shipments from our fab plants totaled1.3million tons,28%above the prior year,whilethe composite average fab selling price(includingstock and buyouts)increased by$96per ton to$676per ton.One of the ways we stren

34、gthenedthe downstream capability last year was throughthe acquisition of The Lofland Company,signif-icantly bolstering CMCs rebar fabrication andconstruction-related products operations.Weshould evidence much improved performancefrom these entities in fiscal 2005.Recycling Fiscal 2004was a fantastic

35、 year in virtuallyevery respect,shattering all previous records.Adjusted operating profit increased four-fold to$67.9million on a net sales increase of 75%.The LIFOexpense was$5.2million.The seg-ments unprecedented results were primarily aresult of the vibrant ferrous scrap market,butnonferrous also

36、 contributed.Gross margins weresignificantly above last year,while operatingcosts as a percent of sales declined from 13%to 9.5%.Our markets were characterized bysome of the strongest prices ever for our majorcommodities,albeit with significant price volatility,against a backdrop of continued overal

37、l strongdemand for our products.Versus last year,theaverage ferrous scrap sales price increased by72%to$172per ton,and shipments climbed21%to 1.98million tons.The average nonferrousscrap sales price for the year was approximately35%above a year ago,while nonferrous ship-ments were 12%higher at 258,0

38、00tons.Thetotal domestic volume of scrap processed,including all our processing plants,equaled 3.4million tons against 2.8million tons last year.Marketing&Distribution We had a superb,record-setting fiscal 2004inthis segment as well,with excellent performancethroughout most of the segment.Adjusted o

39、perating profit for the Marketing&Distributionsegment of$39.4million was nearly double lastyears,reflecting favorable markets in severalgeographic regions around the world andbroad-based growth across practically all productlines.This segment also recorded an increaseof$13.8million in its LIFOreserv

40、e.Our businesswas good in Australia,China,elsewhere in Asia,and in Europe,and improved in the United States.Margins and shipments in steel,aluminum,copper,and stainless steel increased significantly.Salesand profits for industrial materials and products including ores,minerals,ferrous alloys,andchem

41、icals hit record levels because of strongdemand.Our value-added downstream andprocessing businesses continued to generategood profits.Our ability to administer theincreased business was abetted by furtherprogress in integrated systems.200 4 D E P R E C IATI O N AN D AM O RTI Z ATI O NDomestic Mills

42、51%CMCZ 14%Domestic Fabrication 19%Recycling 11%Marketing 5%200 4 C AP ITAL E X P E N D ITU R E S*Domestic Mills 50%CMCZ 15%Domestic Fabrication 15%Recycling 17%Marketing 3%*Excludes CMCZ and Lofland acquisitions56Financial ConditionWe finished fiscal 2004with a strong balancesheet,most notably long

43、-term debt to capitalizationat 36%and a current ratio of 1.8.Managingworking capital proved to be a formidable chal-lenge because of the huge increases in pricesas well as the increased volumes across ourbusiness lines,resulting in historically highinventories and accounts receivable.A major achieve

44、ment during fiscal 2004wasthe restructuring of our long-term debt.We nowhave$405million in long-term debt at aweighted average interest rate of 6.14%;only$93million matures before 2009.Our blend oflong-and short-term borrowing includes ourenlarged$275million commercial paper programand the$130millio

45、n domestic A/RAssetSecuritization Agreement,as well as unsecuredbank credit lines.Additionally,we furtherincreased our trade finance capabilities,includingsubstantially larger bank letters of credit linesand concluded an AUD 50million A/Rsalesagreement in Australia.Fiscal 2005Capital Plan The capita

46、l plan shows projected expendituresof approximately$130million geared towardimprovements in raw material procurement,operating efficiencies,product mix management,market development,quality enhancements,and transportation capabilities.A further focusis to elevate our earnings power through geo-graph

47、ic and product line expansion.About$61million,or 47%,represents carryover projects,the largest being the new continuous caster atSMI-Texas.OrganizationThe crucial process of succession planning andimplementation continued as the next generationassumes more upper management responsibilitiesat CMC.Tra

48、nsition also continued at middlemanagement levels.Simultaneously,we havebeen re-evaluating the organization structure ineach of our business segments,especially inview of our growth in recent years.One generaltrend to enhance marketing and internal controlhas been more regional groupings.On January

49、30,2004,Russ Rinn wasappointed Chief Operating Officer of the CMCSteel Group.On September 20,2004,theCompany appointed Murray McClean as itsExecutive Vice President and Chief OperatingOfficer.Hanns Zllner was named to replaceMcClean as President of our Marketing&Distribution segment.On September 23,

50、2004,Alan Postel was named President of the SecondaryMetals Processing Division,succeeding HarryHeinkele who retired on September 30,2004.We thank Mr.Heinkele for his more than 24years of outstanding service and his major con-tribution to CMC.He will remain a consultant tothe Company.Most of all,we

51、need to thank the women andmen of Commercial Metals Company for theirextraordinary performance.Sarbanes-OxleyWe have invested a significant amount of monetaryand human resources to meet the challenge ofthe new regulatory environment.Though we believewe have identified our areas of concern and arecom

52、pleting remediation,internal control is adynamic and evolving process which will continueto hold our attention.Business EthicsI am proud and pleased to report thatCommercial Metals Company was a recipientof the 2004Greater Dallas Business EthicsAward from the Society of Financial ServiceProfessional

53、s.OutlookAs we look forward to fiscal 2005,we anticipatethat the positive factors which have been drivingour markets will remain in place and allow acontinuation of healthy pricing and volume forN ET EAR N I N G S($millions)030609012015013219412445040300 01 02N ET SAL E S($billions)0123454.82.92.52.

54、52.7040300 01 027our goods and services.Our outlook for theyear remains very positive,although we must beconcerned about the impact of the very highpetroleum prices.We expect some shift in profits,with a higher proportion coming from theDomestic Fabrication segment.Business inter-ruption insurance c

55、laims for transformer failuresin South Carolina and Texas will be filed.Theprimary transformer was reinstalled at the Texasmill on September 23,2004,and that for theSouth Carolina mill is scheduled to be rein-stalled during the first half of November 2004.Our expectation remains that mill margins an

56、dfabrication margins will expand further as wehave booked new business at higher levels,andour other business segments will perform well,buoyed by strong demand and growth in marketsand product lines.A major catalyst for the strong steel and non-ferrous markets around the world has been therapid exp

57、ansion of a number of emergingeconomies,most notably China.The magnitudeof this growth is a new dynamic.There is,accordingly,the enhanced prospect of significantlong-term growth in demand for the globalmaterials sector.Cautionary StatementThis letter to stockholders contains forward-looking statemen

58、ts regarding the outlook for theCompanys financial results including net earnings,product pricing and demand,production rates,energy expense,inventory levels,tax rates,acquisitions and general market conditions.These forward-looking statements generally canbe identified by phrases such as the Compan

59、yor its management“expects,”“anticipates,”“believe,”“ought,”“should,”“could,”“likely,”“appears,”“projected,”“forecast,”“presumes,”or other words or phrases of similar impact.Thereis inherent risk and uncertainty in any forward-looking statements.Variances will occur andsome could be materially diffe

60、rent from man-agements current opinion.Developments thatcould impact the Companys expectationsinclude construction activity,metals pricing over which the Company exerts little influence,increased capacity and product availability fromcompeting steel minimills and other steel suppliers including impo

61、rt quantities and pricing,industry consolidation or changes in productioncapacity or utilization,global factors includingpolitical and military uncertainties,currency fluc-tuations,energy prices,disputes as to insurancecoverage or the extent of lost income subject toreimbursement which could result

62、in a lengthydelay or failure to obtain recovery under business interruption insurance,and decisionsby governments impacting the level of steelimports and pace of overall economic activity,particularly China.Stanley A.RabinChairman,Presidentand Chief Executive OfficerNovember 12,2004R A I S I N G T H

63、 E B A R I ND O M E S T I C M I L L SCMCs Domestic Mills business segment strengthened itself in2004through the coordinated management of our Alabama andSouth Carolina mills sales teams,utilizing combined efficienciesand improved product offerings to the collective customer base.DOMESTIC MILLS ADJUS

64、TED OPERATING PROFIT(in thousands)2003$19,6642004$84,15603049Steel Minimills Fiscal 2004was an excellent year for our domestic steel minimills.The challenge of strongdemand and rapid escalating costs for scrap,energy,alloys,and other input materials was met by the mills with an outstanding performan

65、ce in cost management,productivityimprovements,and enhanced quality to serve the needs of our customers.Record production,shipments,net sales,and net earnings were recorded by our domestic steelminimills.These records were set while the mills achieved an outstanding safety record.SMI-Texas surpassed

66、 rolling and shipping records even with the failure of the primaryand backup furnace transformers during the fourth quarter.The installation of a smallerbackup transformer enabled the melt shop to continue producing,albeit at a reduced rate.Purchased billets supplemented internal production and enab

67、led the mill to partiallyrecover some lost production and respond to customer needs.SMI Steel South Carolina enjoyed an all-out record year in many areas,including meltand mill production,shipments,net sales,and net earnings.A“Passion for Excellence”program focusing on safety,quality,and production

68、resulted in higher productivity,yieldincreases,and cost reductions.In fiscal 2005,planned improvements in the melt shop including a larger transformer,a new higher capacity ladle crane,and a baghouseexpansion will increase melting capacity to match the capability of the rolling mill.SMISteel-Alabama

69、 also set all-time records in melt and mill production.Strong demandled to excellent shipments and an impressive improvement in net income for the year.With the addition of electromagnetic mold stirring,the Birmingham mill realized a significantDomestic MillsCMCs Domestic Mills segment is comprised

70、of four steel minimills witha capacity of 2.4million tons and a copper tube minimill with a capacity of 80million pounds.C M C C O P P E R TU B I N G(pounds in millions)MeltedRolledShipped015304560759070.459.356.275.061.960.773.168.466.3040302040080012001600200024002.22.12.02.32.12.02.42.32.2040302C

71、 M C STE E L M I L L S(tons in millions)MeltedRolledShipped10improvement in billet quality that will open new markets in the near-term future.A positivedownward trend in injury rates was the result of a strong emphasis on personal accountability on safety issues.SMISteel-Arkansas developed new produ

72、cts to supplement its basic product line resultingin its best shipping year in six years and a major improvement in net earnings.Fiscal 2004accomplishments included successfully facing record high material costs with a reduction inconversion cost,setting production records on higher margin product s

73、egments,receivingISO 9001:2000certification,and achieving record low accident rates in fiscal 2004.The domestic steel minimills look for continued strong demand in fiscal 2005and arefocused on managing the mix of products for margin improvement while maintaining strongcustomer relationships.Recyclin

74、g Yards The scrap metal recycling facilities in the Domestic Mills segment had an extraordinary yearin terms of financial performance.The branches managed volatile market prices in settingrecords in net sales,net earnings and shipments.At CMC-Lexington,a new landfill projectwas completed in June and

75、 an ISSsorting system will be in place in fiscal 2005to free up landfill capacity by reclaiming residue metal units.At CMC-Austin,capital improvementsare underway to significantly upgrade its AMPRecycling feeder yard in response toincreased market opportunities.The rail stock needs of SMI-Arkansas h

76、ave continued to be met by SMIRail Company,which produced record shipments of over 100,000tons.The rail salvage companysstrong relationship with rail operators resulted in exclusive agreements to remove and marketall surplus,change-out materials.Copper Tube Mill Howell Metal Company manufactures cop

77、per tubing for the plumbing,air conditioning,andrefrigeration industries.This fully integrated copper minimill utilizes both secondary and virgin copper in the manufacturing process.The copper is melted,cast,extruded,and drawninto water and refrigeration tubing.Howell is currently marketing its tubi

78、ng east of the Rockies.We have been able to sell thecapacity of the mill in this territory without moving further west.Our fleet of trucks provides the highest level of service in the industry.Since we sell a commodity-based product,service is the one thing,other than price,that keeps us competitive

79、 in the marketplace.Key factors affecting our business are on three fronts.First,foreign imports have increasedsignificantly since 2000.Secondly,alternative products such as PEXand CPVCplastics have been introduced for water distribution on our most popular sizes,1/2through 1inch.Thirdly,buying grou

80、ps have limited the number of customers available in the market.Howell has been able to sell the capacity of the mill while dealing with these factors in the market.Foreign competition comes and goes with margins and currency valuations.PEXand CPVCare here to stay,but oil prices are going to have a

81、negative effect on their pricing in the future.200 4 N ET SAL E SDomestic Mills 21%Rest of CMC 79%200 4 EAR N I N G S B E F O R E I N C O M E TA X E SDomestic Mills 32%Rest of CMC 68%200 4 C AP ITAL E X P E N D ITU R E SDomestic Mills 50%Rest of CMC 50%Steel ManufacturingProcessingCopper Tube Manufa

82、cturingD O M E STI C M I L L SR A I S I N G T H E B A R I NC M C ZCMCacquired a 71%interest in our Polish minimill,CMCZawiercie S.A.,in December 2003,and in fiscal 2004it pro-duced record quantities and shipments.CMCZ STATISTICS(short tons)Melted1,159,000Rolled863,000Shipped1,082,00013On December 3,

83、2003,we acquired 71.1%of the shares of the Polish long products steel mill,Huta Zawiercie,which has since been renamed CMCZawiercieS.A.(CMCZ).With this acquisition we have added a new dimension to our international business and are now a leading producer of bars and wire rod in Poland,thereby underl

84、ining our commitment to the growing markets in Central Europe.CMCZhas exceeded our expectations.The market in Poland was particularlyfavorable in the spring,especially for construction-related materials in anticipation of the accession of Poland into the EU.Since becoming a part of Commercial Metals

85、 Company nine months ago,wehave produced over one million metric tons of steel,thereby surpassing the productionlevel of the prior full fiscal year.Due to several technical and operational improvements and innovations,we were also able to increase production of rolledproducts to record levels.We hav

86、e strengthened our management team by adding experienced managers in various fields from our Domestic Mills segment and our Marketing&Distribution segment.Our focus is on safety,human resources development,and good employee relations.A sound financial base allowed us to maintain a comfortable level

87、of inventory of scrap and take advantage of price fluctuations and,at the same time,alwaysmaintain a sufficient stock of finished goods to be able to meet our customersCMCZCMCs Polish business segment,CMCZawiercie,utilizes a steel minimill whichproduces more than one million tons of rebar and wire r

88、od,as well as merchant bar.14requirements quickly.Our new marketing strategy emphasizes more end-user business and selling on a delivered basis,thereby increasing the functions we provide to our customers.Technological innovation is key to our future success and is underlined with an ambitious capit

89、al expenditure program.In fiscal 2004,we successfully startedproduction of 8mm straight reinforcing bar and 8mm and 10mm bars in coiland increased the size range of flat bars.In fiscal 2005,we expect better growth of the economy in Poland than in theneighboring EUcountries.We will further improve ou

90、r ability to source more scrapmore efficiently,and we plan to install a new shredder.A modernization of our#1caster will allow us to have the same production capacity at both casters and,thereby,make them interchangeable.In line with our overall corporate strategy,we will also explore possibilities

91、to become more vertically integrated.200 4 N ET SAL E SCMCZ 8%Rest of CMC 92%200 4 EAR N I N G S B E F O R E I N C O M E TA X E SCMCZ 25%Rest of CMC 75%200 4 C AP ITAL E X P E N D ITU R E SCMCZ 15%Rest of CMC 85%ProcessingSteel ManufacturingC M C ZIn fiscal 2004,CMCstrengthened its Domestic Fabricat

92、ionbusiness segment through the acquisition of The LoflandCompany,significantly bolstering CMCs rebar fabricationand construction-related products operations.R A I S I N G T H E B A R I ND O M E S T I C F A B R I C AT I O NDOMESTIC FABRICATION ADJUSTED OPERATING PROFIT(in thousands)2003$7012004$7,28

93、8030417Rebar FabricationCMCs rebar fabricating businesses capitalized on their strong market positionto register a significant increase in net earnings.A sizable increase in shipments was partially the result of the acquisition of The Lofland Company,a nine-location,five-state rebar fabricator based

94、 in Dallas,Texas,and Dunn Del Re Steel located in metro Phoenix,Arizona.The segments strategy to selecthigher margin jobs proved especially wise during the rapidly increasing steelprices of the second quarter.Overall,the acquisitions,along with higher sellingprices,contributed to over a 40%rise in n

95、et sales.The rebar fabricating businesses are poised to improve their performance in fiscal 2005.Joist and Structural Steel Fiscal 2004was a turnaround year for the joist and structural divisions asthey returned to profitability.Boosted by an improving market and challengedby the rapid increase in m

96、aterial costs,our joist and structural operationswere successful in staying ahead of the material escalation curve while reducingnon-material related costs.Joist production,shipments,bookings,and ending backlog were up significantly from the previous year.The Joist Divisionachieved its highest level

97、 of profitability since fiscal 2000.SMISteel Products,which manufactures castellated and cellular beams,achieved record sales,shipments,and profits during fiscal 2004as architectsbecame more aware of the benefits of this product.Domestic FabricationCMCs Domestic Fabrication business segment has a re

98、bar andstructural steel fabrication capacity of more than 1.4million tons and includes facilities in California,Texas,and Florida.18The Structural Divisions net sales and shipments were up significantly forthe year,with a marked improvement in profitability.Construction-Related Products The Construc

99、tion-Related Products(CRP)group continued to grow its distribution network as the prime supplier of concrete accessories,highwayproducts,and concrete forming systems in the South Central and SouthAtlantic regions.The CRPbusinesses recorded an impressive improvementin net sales and net earnings for t

100、he year.Expectations for fiscal 2005are high with the addition of five new locations;the restructuring of branchesin South Texas,Louisiana and Mississippi;and a continued emphasis onquick,coordinated reactions to market needs.Other Value-Added Businesses The markets for heat-treated steel products c

101、ontinued to exhibit strong growthfor CMC.Allegheny Heat Treating(AHT)recorded record net sales andadjusted operating profits for the year.With a recently installed furnace linefor heat treating large rounds,AHTis poised for a significant sales and production increase in fiscal 2005.Begun in 2001as a

102、 sales and marketingorganization to complement AHTs market presence,Impact Metal Productsenjoyed a banner year in fiscal 2004.This unique unit successfully leveragedthe strengths of the Companys steel minimills,CMCs international contacts,and strong domestic third party mill relationships to deliver

103、 record sales andprofits for the year.The steel fence post manufacturing arm,the four-location Southern PostCompany,had record shipments and production resulting in improved grossmargins leading to record adjusted operating profits.The Utah facilityinstalled a new paint dip system for increased prod

104、uctivity and quality.200 4 N ET SAL E SDomestic Fabrication 20%Rest of CMC 80%200 4 EAR N I N G S B E F O R E I N C O M E TA X E SDomestic Fabrication 3%Rest of CMC 97%200 4 C AP ITAL E X P E N D ITU R E SDomestic Fabrication 15%Rest of CMC 85%Steel Fabrication Fence Post ManufacturingHeat TreatingC

105、astellated and Cellular Beam FabricationRailcar RebuildingConstruction-Related Products WarehousingRail SalvageSteel Joist PlantsD O M E STI C FAB R I C ATI O NR A I S I N G T H E B A R I NR E C Y C L I N GCMCs Recycling business segment strengthened itself in 2004by increasing gross margins and dec

106、reasing operating costs asa percentage of net sales.RECYCLING ADJUSTED OPERATING PROFIT(in thousands)2003$15,2062004$67,887030421Secondary Metals Processing DivisionThis has truly been an outstanding,record-setting year.Not only did each quarter of fiscal 2004outperform the similar quarter of fiscal

107、 2003,but each of the lastthree quarters outperformed any previous years history for the Division.Ferrous scrap continued to lead the way in this record-setting year.New highswere also hit in total scrap shipments of 2.24million short tons and net sales of$774.2million.Ferrous scrap processed and sh

108、ipped from our plants increased by21%to a record 1.98million tons.Nonferrous scrap shipments increased byalmost 12%to 516million pounds,with an additional 36 million pounds beingshipped by us from other sources.On an F.O.B.basis,ferrous prices rose from last years$100 per short ton to$172per short t

109、on or 72%.Total nonferrous pricesjumped by 35%or about$18.05cwt.We acquired the assets of a customer in Lufkin,Texas,that provided feed materialfor our shredder in Beaumont,Texas.This occurred in the latter part of the fiscal year.Therefore,most of the growth this year was generated by the existingp

110、lants in our system.In an attempt to prevent inflation and protect its banking system,the governmentin China is reining in the economy.Despite those attempts,the steel sectorsgrowth remains phenomenal.Its market produces and consumes about 25%ofthe worlds steel.While our Division ships very little f

111、errous scrap into Asia,principally China,Korea,and other Far Eastern scrap consumers continue to contributeRecyclingCMCis one of the largest processors of nonferrous scrap metals in the UnitedStates and one of the nations largest regional processors of ferrous scrap metals.22to the strong ferrous sc

112、rap market that exists in the U.S.China also remains ourprincipal buyer for low-grade,nonferrous scrap metal.The weakening dollar hasfurther assisted us in exporting nonferrous scrap to both Asia and Europe.All four Regions contributed to the record-setting year.With the robust ferrousscrap market,o

113、ur shredder plants were generally the key contributors in helping us achieve new highs in shipments and profits.We also continue to grow our businesswith our National Accounts group.We expanded our coverage with UnitedTechnologies entities operated by Carrier Corporation and Hamilton SundstrandsSull

114、air unit.Leggett&Platt has allowed us to service several of its locations.In addressing our multi-year renewal,we thank Robert A.Welch,Director of Materialsfor Insteel Wire Products Company,for the following testimonial,“Our decision to renew our contract with CMCreflects Insteels satisfaction with

115、pricing transparencyand the excellent execution capabilities of CMC.We are never surprised by pricing,and we have a solid audit trail for every ton of material that leaves one of our plants.CMChas demonstrated its value to Insteel,and we are pleased to move forwardwith the renewal of our agreement.”

116、While it is difficult to predict that a record-breaking year can be repeated,weremain confident that fiscal 2005will be an excellent year.World steel demandcontinues to be very good.Most world economies are improving,and Chinasappetite for raw materials remains insatiable.Domestically,the dollar is

117、weakagainst the Euro,and while short-term interest rates are climbing,long-term rates remain stable.The housing market remains strong and,although automotiveproduction has slowed,it is still at a respectable level.We believe only an unforeseen international event will prevent us from having another

118、exceptional year.200 4 N ET SAL E SRecycling 15%Rest of CMC 85%200 4 EAR N I N G S B E F O R E I N C O M E TA X E SRecycling 26%Rest of CMC 74%200 4 C AP ITAL E X P E N D ITU R E SRecycling 17%Rest of CMC 83%Feeder YardsSecondary Metals ProcessingSecondary Metals ProcessingR E C YC L I N GR A I S I

119、N G T H E B A R I NM A R K E T I N G&D I S T R I B U T I O NCMCs Marketing&Distribution business segment strengtheneditself in fiscal 2004through initiatives such as the opening of anew office in Guangzhou,China,increasing CMCs presence in thiscrucial market.MARKETING&DISTRIBUTION ADJUSTED OPERATING

120、 PROFIT(in thousands)2003$21,7842004$39,427030425Marketing&DistributionThe Marketing&Distribution segment consists of four divisions:CometalsDivision Commonwealth Metal Division Dallas Trading Division,and International Division.As a group,we established new records in net sales andnet earnings.The

121、bar has certainly been lifted to an unprecedented height.Our global strategy and regional focus took advantage of exceptional market conditions in China and Central Eastern Europe,as well as buoyantconditions in Asia,Australia,Europe,and the U.S.The highlight of fiscal 2004was our successful acquisi

122、tion of CMCZawiercie S.A.(CMCZ)in Poland.The performance of CMCZhas been outstanding.CMCZoperates as its own segment within Commercial Metals Company,butreports through our International Division and is managed within the Marketing&Distribution segment.Our emphasis on core values,a clear focus and s

123、trategy,selecting the rightpeople,and striving for improved performance has lifted all of our businesssegments to new levels.We will carefully evaluate opportunities to grow our business segments evenfurther in the future.The unity within the Marketing&Distribution segment is exceptionally strong,an

124、d we will build on the strength of our people.We are excited about thefuture,and the momentum from fiscal 2004will carry through into fiscal 2005.Marketing&DistributionCMCs Marketing&Distribution segment markets steel,non-ferrous semis,primary and secondary metals,and industrial raw materials throug

125、h a network ofmarketing offices,processing facilities,and other investments and joint ventures around the world.26Cometals DivisionThirty-five years ago we started our business with China,and we are pleased to report that fiscal 2004was our most successful year ever for businessthere.The strong and

126、highly motivated team that we developed over the yearswas ready at the right time and place to service the soaring demand for raw materials in China.During fiscal 2004,we reached record-level sales forimports into China with steel making,raw materials,and related products leading us to record margin

127、s.Our exports of Chinese raw materials also reached record levels.We enjoyedstrong demand and healthy industrial activities in our traditional markets ofNorth America,Europe,and the CIS.Our business in Russia,both imports andexports,reached a record level due to an improved business environment and

128、political stability.We continued our diversification program,which proved very successful during fiscal 2004.This entailed new products,markets,and services that weprovided to our ever-growing supplier and customer base.Our forward order book is stronger than usual,underscoring the belief thatfavora

129、ble market conditions will prevail during fiscal 2005.Cometals introduced a fully integrated and efficient information and orderentry system during fiscal 2004.All of our employees around the world are now able to conduct and record business in real-time mode on a single platform.We continue to oper

130、ate out of four locations:Fort Lee;Beijing;Moscow;andTemse,Belgium.We also benefit from the valuable assistance of agents andbusiness partners around the globe.Commonwealth Metal DivisionCommonwealth Metal Division markets a broad range of specialty metals to service centers and major manufacturers

131、throughout North America andChina.From a global base of supply partners,we import and distribute theworlds best semi-fabricated aluminum,copper,and stainless steel products ina multitude of alloys,forms,and sizes.We offer a one-stop-shop service for a large spectrum of general purpose and specialize

132、d metal applications used in a variety of industries.Our product scope now represents the widestavailable from a single import marketing firm in the U.S.200 4 N ET SAL E SMarketing 36%Rest of CMC 64%200 4 EAR N I N G S B E F O R E I N C O M E TA X E SMarketing 14%Rest of CMC 86%200 4 C AP ITAL E X P

133、 E N D ITU R E SMarketing 3%Rest of CMC 97%27Our business continues to benefit from the expansion of global trade andgrowing demand for the import services our organization provides.Over thepast three years,we strengthened and enhanced our core competency bycontinuous investments in systems,technolo

134、gy,and people.In addition,throughthe development of innovative delivery programs as well as other uniqueservices,we successfully reduced import lead times for our customers and,thereby,captured significant market shares in our target product and business segments.During the course of fiscal 2004,we

135、accomplished major milestones,including the following:posted a new net sales record for our Division recertified our quality system as a service organization by Lloyds Registraraccording to the new ISO 2000Standard expanded China,both as a majorsource and sales territory established stainless steel

136、as a significant newproduct line.Furthermore,the latter two objectives represent important poten-tial future sources of growth and development for our Division.As we enter our 40th year,Commonwealth forges ahead with its provenstrategy to achieve substantial,sustainable growth by focusing on further

137、product line and market development.At the same time,we continue to offera wide array of reliable and responsive services supported by solid systems.Based on a very strong second half of fiscal 2004,we expect our expansionto continue,especially given robust demand,higher base metal prices and atight

138、ening domestic supply outlook.Our strategy to remain highly diversifiedin all aspects of our business sources,products,and markets serves not only to fuel our growth,but also to underpin our progress as we take ourbusiness to the next level of performance.Dallas Trading DivisionThe Dallas Trading Di

139、vision markets and distributes steel semi-finished long and flat products,primary aluminum and aluminum semi-finished flat-rolled and extruded products,nonferrous scrap,steel scrap,and steel re-rolling stock into the Americas and other global markets from a diverse baseof international and domestic

140、sources.We provide our customers and suppliers with professional marketing,trading,financial,and logistical services.We are pleased to report a record year for fiscal 2004.Internal processimprovements over the past few years provided the proper foundation forDallas Trading to excel in the unpreceden

141、ted markets of fiscal 2004.28Comprehensive system enhancements were implemented to increase operatorefficiency and reduce errors.Key staff additions and improved trainingbrought about significant progress in our long-term organizational goals.Our conservative business practices allowed us to navigat

142、e the challengesthat arose during the past year,including:rising freight rates,volatile steeland steel scrap price movements,threats of contract renegotiations,growingsupplier and customer base,credit and collections.The depth of our tradingstaff,as well as our product and geographic diversity,allow

143、ed us to meetgrowing customer demand for steel and aluminum products throughout the fiscal year.Lower consumer confidence in the U.S.economy,higher interest rates,andthe presidential elections have recently created a wait and see attitudeamong some of our customers.We have a strong order book for th

144、e firsthalf of fiscal 2005,and with a clearer market direction in early calendar2005,our goal is to improve upon the results of fiscal 2004.International DivisionThe International Division of Commercial Metals Company has been activefor 40years as a global marketing and distribution operation for st

145、eel and in certain regions for industrial products,raw materials,and special metals.In the last few years we have made strategic,value-added investments inprocessing,heat treatment,warehousing,and marketing joint ventures withsuppliers.Our scope is global,and our focus is regional.During fiscal 2004

146、,our international steel trading business reflected theever shorter cycles in the global trading arena and the growing significance of the Asian Region.Market swings can present good opportunities for a skilledmarketer,and our policy of prudent risk and exposure management and carefulchoice of suppl

147、iers and customers,as well as our professional contract execution,allowed us to profit from these developments.The European,United Kingdom,and German import businesses all profitedfrom improved markets and managed to expand their sourcing from nearby countries and increase their customer base.We hav

148、e placed moreemphasis on marketing special niche products and added a specialized unit for tubular products.29The marketing of products from Trinecke Zelezarny continues to perform toour full satisfaction.The lack of volume business in certain products hasbeen more than compensated with an increase

149、in higher value-added products.Our investment in Europickling continues to develop profitably.We are continuously expanding our customer base for pickled sheet resulting inincreased repeat business.We are cautiously optimistic for fiscal 2005as the economies in our majormarkets show signs of stronge

150、r growth.Australia,including the Pacific Rim,is an important geographic region forCommercial Metals Company.Our business includes steel import,steel distribution,steel processing,and raw material supply,predominantly to thesteel,foundry,and smelting industries.We have a solid and sustainable busines

151、s in Australia,with annual net sales over$330million.Our strategy is tobroaden our product base,expand our processing capabilities,and grow distribution.We continue to look for acquisitions to support our existing businesses and to grow our presence in Australia.Australia is a stable and mature mark

152、et,and Commercial Metals Companyis well positioned.We are the largest steel importer,we rank third in steelsheet and coil distribution,we own three low-cost coil processing facilitiesand a heat treatment plant for alloy bars,and we operate our own warehousesat the major ports.Our steel distribution

153、business,Coil Steels,is supported by a domesticsupply agreement with BlueScope Steel which gives us a supply of steelsheet and coil from one of the worlds leading producers.Our Australian businesses are also well placed to profit from expansion andgrowth in China and S.E.Asia.We work closely with ou

154、r Asian operations,and it is this CMCnetwork that sets us apart from our competitors.We continueto raise the bar in Australia by increasing our functions in the marketplace.CMCs Asian steel businesses reached record levels this financial year.Our steel marketing business has operated in Asia for man

155、y years coveringAsia geographically from Japan,Korea,and China to S.E.Asia.In recentyears,we have grown our product range and expanded into new markets,andwe are selectively moving downstream into more value-added businessesand distribution.30China is the biggest and fastest growing steel market in

156、the world.Our steelmarketing and sourcing offices are located in Shanghai,Guangzhou,andHong Kong.We sell into China,buying from Europe and Asia.China is alsogrowing in importance as a source of steel for export to our marketing anddistribution businesses in Australia,Europe,and the U.S.,as well as a

157、 sourcefor sales within Asia.Our strategy is to increase our presence in China in the product lines and businesses where we have a competitive advantageand proven track record.Our S.E.Asia operations have also grown in recent years,and this businessis managed through our office in Singapore.We sourc

158、e from Malaysia,Indonesia,and Thailand and sell to Australia,the U.S.,and within Asia.Vietnamhas emerged as a growing market for steel imports and is now second toChina for CMC.Asia is an important and strategic region for CMCs international businesses,and we will grow and expand our presence in Asi

159、a through investment andtrade-related activities,always with our usual focus on risk management andconservative business practices.Marketing&DistributionProcessingRepresentative OfficesAgentsInvestments and Joint VenturesMAR K ETI N G&D I STR I B UTI O N32CMCZMANAGEMENT(left to right)Peter Weyermann

160、Marek RozgaDorota PieszczochJan CzarneckiNed LeyendeckerHanns Z ollnerKazimierz JeziorskiLudovit GajdosDOMESTICFABRICATIONMANAGEMENT(left to right)Rick JenkinsBinh K.HuynhEd HallKarl SchoenleberTracy PorterJeff H.SeligJohn RicheyRECYCLING MANAGEMENT(left to right)Carl J.NastoupilLarry OlschwangerHar

161、ry J.HeinkeleJoseph R.ReichardAlan PostelRocky AdamsChuck Grossman Jim VermillionRichard L.GouldeRobert J.MelendiMARKETING&DISTRIBUTIONMANAGEMENT(left to right)Eugene L.VastolaKevin S.AitkenJ.Matthew KramerEliezer SkornickiMurray R.McCleanHanns Z ollnerDOMESTIC MILLSMANAGEMENT(left to right)CMC Stee

162、l GroupRussell RinnClyde P.SeligBob UnfriedSteve HendersonPhil SeidenbergerDale SchmelzleAvery HiltonDennis MalatekHowell MetalA.Leo Howell34Selected Financial Data 36Managements Discussion and Analysis of Financial Conditionand the Results of Operations52Financial Ratios and Statistics53Consolidate

163、d Statements of Earnings54Consolidated Balance Sheets56Consolidated Statements of Cash Flows57Consolidated Statements of Stockholders Equity58Notes to Consolidated Financial Statements72Report of Independent RegisteredPublic Accounting Firm2 0 0 4F I N A N C I A L R E V I E W34(dollars in thousands,

164、except share data)2004200320022001OperationsNet sales$4,768,327$2,875,885$2,479,941$2,470,133Net earnings132,02118,90440,52523,772Income taxes65,05511,49022,61314,643Earnings before income taxes211,94730,39463,13838,415Interest expense28,10415,33818,70827,608Depreciation and amortization71,04461,203

165、61,57967,272EBITDA*296,224106,935143,425133,295EBITDA/interest expense10.57.07.74.8Effective tax rate30.7%37.8%35.8%38.1%Balance Sheet InformationCash and cash equivalents123,55975,058124,39756,021Accounts receivable607,005397,490350,885297,611Inventories645,484310,816268,040223,859Total current ass

166、ets1,424,232852,266806,649632,991Property,plant and equipmentOriginal cost1,090,530962,470921,779896,896Net of depreciation and amortization451,490373,628378,155395,851Capital expenditures51,88949,79247,22353,022Total assets1,988,0461,283,2551,247,3731,095,604Commercial paperNotes payable5303,793Tot

167、al current liabilities783,477452,841427,544359,178Net working capital640,755399,425379,105273,813Current ratio1.81.91.91.8Acid test ratio0.91.11.11.0Long-term debt*393,368254,997255,969251,638Long-term debt as a percent of total capitalization*36.4%31.6%32.8%35.5%Total debt/total capitalizationplus

168、short-term debt*37.6%33.6%33.9%37.6%Deferred income taxes50,43344,41832,81330,405Total stockholders equity660,627506,933501,306433,094Total capitalization*1,118,661806,348794,988718,817Return on beginning stockholders equity26.0%3.8%9.4%5.7%Stockholders equity per share*22.5618.1117.5816.56Share Inf

169、ormationDiluted earnings per share*4.420.661.430.90Stock dividends/splits per share100%Cash dividends per share of common stock*0.340.320.2750.26Total cash dividends paid9,7649,0397,5216,780Average diluted common shares*29,844,33928,605,59528,275,29126,320,988Other DataNumber of employees at year-en

170、d10,6687,7787,6597,956Stockholders of record at year-end2,6862,6402,2712,526*EBITDA=earnings before interest expense,income taxes,depreciation and amortization*Excluding current portion*Total capitalization=total long-term debt+deferred income taxes+total stockholders equity*Restated for stock split

171、sCommercial Metals Company and SubsidiariesSELECTED FINANCIAL DATA352000199919981997199619951994$2,661,420$2,251,442$2,367,569$2,258,388$2,322,363$2,116,779$1,666,23444,59046,97442,71438,60546,02438,20826,17026,07027,82925,35522,35026,89719,80014,73770,66074,80368,06960,95572,92158,00840,90727,31919

172、,65018,05514,63715,82215,2469,27166,58352,05447,46043,72041,59938,13430,143164,562146,507133,584119,312130,342111,38880,3216.07.57.48.28.27.38.736.9%37.2%37.2%36.7%36.9%34.1%36.0%20,05744,66530,98532,99824,26021,01838,269352,203297,664318,655289,735294,611268,657228,035270,368247,154257,231220,64418

173、6,201208,114133,748702,405643,376673,500585,276539,483534,105446,085856,128804,247680,401570,604506,969456,705370,556407,512402,272318,462247,261222,710209,739156,80869,627141,752119,91570,95547,98239,31148,1521,170,0921,079,0741,002,617839,061766,756748,103604,87779,00010,00040,00020,00013,4664,382

174、60,80921,000438,231357,648426,063278,144264,073268,382270,966264,174285,728247,437307,132275,410265,723175,1191.61.81.62.12.02.01.60.81.0.81.21.21.11.1261,884265,590173,789185,211146,506158,00472,06136.8%37.6%30.1%33.0%29.1%32.9%21.6%44.7%39.6%41.5%34.4%30.7%35.5%39.2%31,13123,26321,37620,83421,0441

175、8,55319,077418,805418,312381,389354,872335,133303,164242,773711,821707,165576,554560,917502,683479,721333,91110.7%12.3%12.0%11.5%15.2%15.7%11.1%15.9014.5213.0912.0211.109.868.511.561.611.411.271.511.260.8833%0.260.260.260.260.240.240.237,3047,5407,7177,7777,2467,2116,70528,500,17029,253,08030,241,57

176、230,439,45430,552,31630,414,17229,886,2468,3797,6307,3767,1036,6816,2724,3142,6912,5502,6722,6742,5932,2562,19036We manufacture,recycle,market and distribute steel andmetal products through a network of over 150 locationsin the United States and internationally.Subsequent to our acquisitions of CMC

177、Zawiercie(CMCZ)and The Lofland Company(Lofland)inDecember 2003,we have revised our segment reportingto include five reportable segments.We have maintainedour recycling and marketing and distribution segments,but presented our new Polish minimill,CMCZ,separatelybecause its economic characteristics ar

178、e different fromour domestic minimills.Our former manufacturing seg-ment has been split into two segments:(1)domesticmills,including our four steel minimills and copper tubeminimill,and(2)domestic fabrication,including our newrebar acquisition(Lofland).Following our acquisition ofLofland,we made int

179、ernal management reportingchanges which necessitated this change in segmentreporting.We have revised prior period results to be con-sistent with our current segment presentation.Domestic Mills OperationsWe conduct our domestic mills operations through a net-work of:steel mills,commonly referred to a

180、s“minimills,”thatproduce reinforcing bar,angles,flats,small beams,rounds,fence post sections and other shapes;scrap processing facilities that directly support theseminimills;and a copper tube minimill.CMCZ OperationsWe conduct our CMCZ minimill operation through:a rolling mill that produces primari

181、ly reinforcing bar;a rolling mill that produces primarily wire rod;and our majority-owned scrap processing facilities thatdirectly support CMCZ.Domestic Fabrication OperationsWe conduct our domestic fabrication operations througha network of:steel fabrication and processing plants that bend,weld,cut

182、 and fabricate steel,primarily reinforcing barand angles;warehouses that sell or rent products for the installa-tion of concrete;plants that produce special sections for floors andceiling support;plants that produce steel fence posts;plants that treat steel with heat to strengthen and provide flexib

183、ility;a plant that rebuilds railcars;and a railroad salvage company.Recycling OperationsWe conduct our recycling operations through metal pro-cessing plants located in the states of Florida,Georgia,Kansas,Louisiana,Missouri,North Carolina,Oklahoma,South Carolina,Tennessee,and Texas.Marketing and Dis

184、tribution OperationsWe market and distribute steel,copper and aluminumcoil,sheet and tubing,ores,metal concentrates,industrialminerals,ferroalloys and chemicals through our networkof marketing and distribution offices,processing facilitiesand joint ventures around the world.Our customers usethese pr

185、oducts in a variety of industries.You should read this managements discussion andanalysis in connection with your review of our consolidat-ed audited financial statements and the accompanyingfootnotes.Critical Accounting Policies and EstimatesThe following are important accounting policies,esti-mate

186、s and assumptions that you should understand asyou review our financial statements.We apply theseaccounting policies and make these estimates andassumptions to prepare financial statements underaccounting principles generally accepted in the UnitedStates(GAAP).Our use of these accounting policies,es

187、timates and assumptions affects our results of opera-tions and our reported amounts of assets and liabilities.Where we have used estimates or assumptions,actualresults could differ significantly from our estimates.Revenue Recognition We recognize sales when titlepasses to the customer either when go

188、ods are shipped orwhen they are received based on the terms of the sale.For a few of our steel fabrication operations,we recog-nize net sales and profits from certain long-term fixedprice contracts by the percentage-of-completion method.For the years ended August 31,2004,2003 and 2002,respectively,w

189、e recognized approximately 3%,3%and6%of our total net sales on a percentage-of-completionbasis.In determining the amount of net sales to recog-nize,we estimate the total costs and profits expected tobe recorded for the contract term and the recoverabilityof costs related to change orders.When we est

190、imate thatCommercial Metals Company and SubsidiariesMANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS37a contract will result in a loss,the entire loss is accruedas soon as it is probable and estimable.Through the pas-sage of time,due to the variances between actua

191、l costsand those that we previously anticipated,our estimatescould change,resulting in changes in our earnings.Contingencies We make accruals as needed for litigation,administrative proceedings,government investigations(including environmental matters),and contract disputes.We base our environmental

192、 liabilities on estimatesregarding the number of sites for which we will beresponsible,the scope and cost of work to be performedat each site,the portion of costs that we expect we willshare with other parties and the timing of the remediation.Where timing of expenditures can be reliably estimated,w

193、e discount amounts to reflect our cost of capital overtime.We record these and other contingent liabilitieswhen they are probable and when we can reasonablyestimate the amount of loss.Where timing and amountscannot be precisely estimated,we estimate a range,andwe recognize the low end of the range w

194、ithout discount-ing.Also,see Note 11,Commitments and Contingencies,to the consolidated financial statements.Inventory Cost We determine inventory cost for mostdomestic inventories by the last-in,first-out method,orLIFO.At the end of each quarter,we estimate both inven-tory quantities and costs that

195、we expect at the end of thefiscal year for these LIFO calculations,and we record anamount on a pro-rata basis.These estimates could varysubstantially from the actual year-end results,causing anadjustment to cost of goods sold in our fourth quarter.See Note 15,Quarterly Financial Data,to the consoli-

196、dated financial statements.We record all inventories atthe lower of their cost or market value.Property,Plant and Equipment Our domestic mills,CMCZ and recycling businesses are capital intensive.We evaluate the value of these assets and other long-lived assets whenever a change in circumstances indi

197、-cates that their carrying value may not be recoverable.Some of the estimated values for assets that we currentlyuse in our operations utilize judgments and assumptionsof future undiscounted cash flows that the assets will pro-duce.If these assets were for sale,our estimates of theirvalues could be

198、significantly different because of marketconditions,specific transaction terms and a buyers dif-ferent viewpoint of future cash flows.Also,we depreciateproperty,plant and equipment on a straight-line basisover the estimated useful lives of the assets.Depreciablelives are based on our estimate of the

199、 assets economi-cally useful lives.To the extent that an assets actual lifediffers from our estimate,there could be an impact ondepreciation expense or a gain/loss on the disposal of theasset in a later period.We expense major maintenancecosts as incurred.Other Accounting Policies and New Accounting

200、Pronouncements See Note 1,Summary of SignificantAccounting Policies,to our consolidated financial statements.Consolidated Results of OperationsYear ended August 31,(in millions except share data)200420032002Net sales$4,768$2,876$2,480Net earnings132.018.940.5Per diluted share4.420.661.43EBITDA296.21

201、06.9143.4International net sales1,778830503As%of total37%29%20%LIFO*effect on net earnings expense(income)48.66.11.0Per diluted share1.630.210.04*Last in,first out inventory valuation method.In the table above,we have included a financial statementmeasure that was not derived in accordance with GAAP

202、.We use EBITDA(earnings before interest expense,income taxes,depreciation and amortization)as a non-GAAP performance measure.In calculating EBITDA,weexclude our largest recurring non-cash charge,depreciationand amortization.EBITDA provides a core operationalperformance measurement that compares resu

203、lts withoutthe need to adjust for federal,state and local taxes whichhave considerable variation between domestic jurisdictions.Tax regulations in international operations add additionalcomplexity.Also,we exclude interest cost in our calculationof EBITDA.The results are,therefore,without consider-at

204、ion of financing alternatives of capital employed.Weuse EBITDA as one guideline to assess our unleveragedperformance return on our investments.EBITDA is alsothe target benchmark for our long-term cash incentiveperformance plan for management.Reconciliations to netearnings are provided below for the

205、year ended August 31:(in millions)200420032002Net earnings$132.0$18.9$40.5Interest expense28.115.318.7Income taxes65.111.522.6Depreciation and amortization71.061.261.6EBITDA$296.2$106.9$143.4EBITDA does not include interest expense,income taxesand depreciation and amortization.Because we have bor-ro

206、wed money in order to finance our operations,interestexpense is a necessary element of our costs and our abil-ity to generate revenues.Because we use capital assets,38depreciation and amortization are also necessary ele-ments of our costs.Also,the payment of income taxes isa necessary element of our

207、 operations.Therefore,anymeasures that exclude these elements have material lim-itations.To compensate for these limitations,we believethat it is appropriate to consider both net earnings deter-mined under GAAP,as well as EBITDA,to evaluate ourperformance.Also,we separately analyze any significantfl

208、uctuations in interest expense,depreciation and amorti-zation and income taxes.Our EBITDA increased 177%to$296.2 million forour fiscal year ended August 31,2004 as compared to$106.9 million in 2003.The following events had a sig-nificant financial impact during our fiscal year endedAugust 31,2004 as

209、 compared to our 2003 fiscal year:1.We reported our highest net sales and net earnings ever.2.Increased selling prices,margins,production,andshipments resulted in significantly higher adjusted operat-ing profits in our domestic mills and recycling segments.3.In December 2003,we acquired a minimill i

210、n Poland anda rebar fabricator with operations in Texas and surround-ing states which significantly expanded our internationalmanufacturing capabilities and enhanced our domesticmarket share in rebar fabrication.4.Margins in our domestic fabrication segment werecompressed because of the rapid increa

211、se in input costs,but adjusted operating profits were better than last year.5.We attained record adjusted operating profits in ourmarketing and distribution segment due to robust demandin Asia(especially China),the improved U.S.economy,the weak U.S.dollar,and lower end-user inventories.6.We recorded

212、 a$48.6 million after-tax LIFO expense($1.63 per diluted share)compared to$6.1 millionLIFO expense($0.21 per diluted share)in 2003.7.In 2004,we issued$200 million aggregate principalamount of 5.625%notes due 2013 following the pur-chase of$90 million of our notes otherwise due in 2005.8.Our overall

213、effective tax rate was lower due primarilyto a 20%effective tax rate in Poland.In 2004,our net earnings reached all-time record levelsas a result of the combination of historically high sellingprices,margins,production and shipments in most of oursegments.These positive factors more than offsetincre

214、ased purchase prices,LIFO expenses and otherinput costs.We also benefited from growth and acquisi-tions,especially our acquisition of 71%of CMCZ inPoland.Global market conditions were favorable whichresulted in significantly increased selling prices and metalspreads,especially for our steel scrap an

215、d steel mill prod-ucts.These market conditions included strong demand inAsia,an improving U.S.economy,the relatively weakU.S.dollar and low end-user inventories.Demand for ourproducts was robust,and supply was tight.Our strategyof diversifying our business by segment,products andgeography allowed us

216、 to take advantage of the positiveenvironment.Conditions improved significantly through-out fiscal 2004,and our net earnings in the third andfourth quarters of fiscal 2004 exceeded those for anyprevious complete fiscal year.SegmentsUnless otherwise indicated,all dollars below are beforeminority inte

217、rests and income taxes.Financial results forour reportable segments are consistent with the basis andmanner in which we internally disaggregate financialinformation for making operating decisions.Following ouracquisitions in December 2003,we have revised oursegment reporting to include five reportab

218、le segments.We have revised prior period results to be consistent withour current segment presentation.See Note 14,BusinessSegments,to the consolidated financial statements.We use adjusted operating profit(loss)to compare andevaluate the financial performance of our segments.Adjusted operating profi

219、t is the sum of our earningsbefore income taxes,minority interests and financingcosts.Adjusted operating profit is equal to earnings beforeincome taxes for our domestic mills and domestic fabri-cation segments because these segments require minimaloutside financing.The following table shows net sale

220、s andadjusted operating profit(loss)by business segment:Year ended August 31,(in millions)200420032002Net sales:Domestic mills$1,109$770$721CMCZ*427Domestic fabrication1,047743805Recycling774441378Marketing and distribution1,8821,150777Corporate and eliminations(471)(228)(202)Adjusted operating prof

221、it(loss):Domestic mills84.219.741.0CMCZ*69.3Domestic fabrication7.30.730.4Recycling67.915.25.1Marketing and distribution39.421.814.2Corporate and eliminations(26.4)(11.0)(8.1)*Acquired December 2003.Dollars are before minority interests.392004 Compared to 2003Domestic Mills We include our four domes

222、tic steel andour copper tube minimills in our domestic mills segment.In 2004,our domestic mills segment set all-time annualrecords for production,shipments and adjusted operatingprofits.Our domestic mills segments adjusted operatingprofit for the year ended August 31,2004 increased by$64.5 million a

223、s compared to 2003 on$339.2 million(44%)more net sales.Net sales and adjusted operatingprofit were higher in 2004 due primarily to higher sellingprices and shipments as compared to 2003.Metal mar-gins(the difference between the average selling priceand scrap purchase cost)for the segment increased s

224、ig-nificantly in 2004 as compared to 2003 becauseincreases in selling prices more than offset the increasesin scrap purchase and other input costs and much higherexpenses related to valuing our inventories under theLIFO method.Our LIFO expenses increased due to ourhigher scrap purchase and other inp

225、ut costs,as well asincreased inventory quantities.Adjusted operating profit for our four domestic steelminimills was$75.1 million for the year ended August 31,2004 as compared to$19.1 million for 2003.Sellingprices and shipments increased in 2004 as compared to2003 due to stronger demand,which was p

226、artially due tothe recovering U.S.economy.Also,the competition fromforeign steel imports was less as a result of the weakerU.S.dollar and stronger global markets,especially inChina.Average scrap purchase costs were higher than lastyear due primarily to increased world demand for ferrousscrap.Our ove

227、rall metal margins increased,resulting insignificantly higher total adjusted operating profits for thefour steel minimills in 2004 as compared to 2003.Thetable below reflects domestic steel and ferrous scrapprices per ton for the year ended August 31:Increase20042003$%Average mill selling price(fini

228、shed goods)$385$287$9834%Average mill selling price(total sales)37927810136%Average ferrous scrappurchase price149975254%Average metal margin2301814927%The domestic steel minimills production and shipmentlevels(tons melted,rolled and shipped)for the yearended August 31,2004 were at all-time record l

229、evels,inspite of the transformer failure at SMI-Texas on May 31,2004.The table below reflects our domestic steel min-imills operating statistics for the year ended August 31:(in thousands)20042003IncreaseTons melted2,2652,0819%Tons rolled2,1951,97211%Tons shipped2,4012,2845%Due to the factors discus

230、sed above,all of our domesticsteel minimills,except for SMI-Texas,were more prof-itable for the year ended August 31,2004 as comparedto 2003.SMI-Alabama reported an adjusted operatingprofit of$29.8 million,an increase of$25.7 million forthe year ended August 31,2004 as compared to 2003.SMI-South Car

231、olina reported$13.3 million in adjustedoperating profit for the year ended August 31,2004 ascompared to a$7.1 million adjusted operating loss in2003.Adjusted operating profit at SMI-Arkansasincreased by$3.8 million to an adjusted operating profitof$3.9 million for the year ended August 31,2004.Howev

232、er,adjusted operating profit at SMI-Texasdecreased by$1.5 million(8%)to$17.8 million for theyear ended August 31,2004 as compared to 2003.This decrease was due largely to the failure of SMI-Texasprimary transformer on May 31,2004,with the subse-quent failure of the principal back up transformer in J

233、une2004 and accruals related to a sales tax audit andunclaimed property.Although another replacement trans-former was installed,it had a lower capacity,resulting inlower production than we had planned.In order to meetour sales commitments to our SMI-Texas customers inthe fourth quarter of 2004,we pu

234、rchased and rolled billetsfrom other affiliated and unrelated minimills at highercosts.We intend to file a claim with our business inter-ruption insurance carrier.See Note 11,Commitmentsand Contingencies,to the consolidated financial state-ments.Overall,the steel minimills recorded$24.1 millionLIFO

235、expense in 2004 as compared to$5.7 million in2003.Utility expenses increased by$7.3 million(12%)in 2004 as compared to 2003.Electricity increased by$4.5 million(10%)due to both higher usage fromincreased overall production and rate increases.Naturalgas costs increased by$2.8 million(15%)due to highe

236、rrates and usage.Costs for ferroalloys and graphite elec-trodes increased by$8.4 million and$2.3 million,respectively,in 2004 as compared to 2003 largely tomore demand from U.S.mills,the impact of the weakerU.S.dollar and higher ocean freight costs on theseimported items.Our copper tube minimills ad

237、justed operating profitwas$9.0 million during the year ended August 31,2004 as compared to an adjusted operating profit of$620 thousand for 2003.Copper tube selling pricesand shipments increased due to stronger demand fromresidential and commercial customers.The strong U.S.40market in 2004 more than

238、 compensated for increasedforeign imports,alternative competing products such asplastic water tubing,and consolidation among our cus-tomers.Our average selling price increased more thanour average copper scrap purchase cost resulting inincreased metal margins in 2004 as compared to 2003.The table be

239、low reflects our copper tube minimills pricesand costs per pound and operating statistics for the yearended August 31:(pounds in millions)20042003IncreasePounds shipped68.461.911%Pounds produced66.360.79%Average selling price$1.69$1.1744%Average scrap purchase cost$1.08$0.7250%Average metal margin$0

240、.61$0.4536%Our copper tube minimill recorded$5.5 million LIFOexpense for the year ended August 31,2004 as com-pared to$519 thousand in 2003.CMCZ On December 3,2003,our Swiss subsidiaryacquired 71.1%of the outstanding shares of HutaZawiercie,S.A.(CMCZ),a steel minimill in Zawiercie,Poland.See Note 2,

241、Acquisitions,to the consolidatedfinancial statements.This acquisition greatly expandedour international manufacturing operations.CMCZrecorded net sales of$427.1 million and an adjustedoperating profit of$69.3 million(before minority interests)for the year ended August 31,2004.The factorsdescribed ab

242、ove affecting our domestic steel minimillsaffected CMCZ as well,except that it did not benefit fromthe weaker U.S.dollar.However,although market condi-tions remained favorable,the average selling pricedecreased by 4%during the fourth quarter as comparedto the third quarter of 2004 due to increased c

243、ompetition.Subsequent to our acquisition,CMCZ,in coordinationwith our international marketing and distribution operation,found new outlets for its products.The table belowreflects CMCZs steel and ferrous scrap prices per tonand our key operating statistics(tons in thousands)forthe nine months ended

244、August 31,2004:Average mill selling price(total sales)$380Tons melted1,159Average ferrous scrap purchase price179Tons rolled863Average metal margin201Tons shipped1,082Domestic Fabrication Our domestic fabrication busi-nesses reported an adjusted operating profit of$7.3 millionfor the year ended Augu

245、st 31,2004 as compared to anadjusted operating profit of$701 thousand in 2003.Netsales were$1.0 billion in 2004,an increase of$304.7million(41%)as compared to 2003.On December 23,2003,we acquired 100%of the stock of LoflandAcquisition,Inc.(Lofland)which operates steel reinforcingbar fabrication and

246、construction-related product salesfacilities from 11 locations in Texas,Arkansas,Louisiana,Oklahoma,New Mexico and Mississippi.This acquisitioncomplemented our existing Texas rebar fabrication andconstruction-related products sales operations andexpanded our service areas in each of the neighborings

247、tates.See Note 2,Acquisitions,to the consolidatedfinancial statements.Lofland accounted for$78.3 millionof the increase in net sales and reported a$5.8 millionadjusted operating loss during 2004 subsequent to ouracquisition.Lofland recorded a loss primarily because theoverall purchase costs from our

248、 steel suppliers increasedagainst our selling prices.Loflands sales prices did notincrease as fast as our steel purchase costs becausemuch of our fabrication work was sold months in advanceat a fixed price.However,our domestic fabrication seg-ments overall adjusted operating profit increased in2004

249、as compared to 2003 due to overall higher averageselling prices and shipments.As 2004 progressed,marketconditions became increasingly favorable,resulting inhigher gross margins in all of our product lines includingrebar fabrication,construction-related products,steelfence posts,steel joists,castella

250、ted beams and structuralsteel fabrication.Increases in steel purchase costs weremore than offset by increased selling prices and ship-ments.Although construction activity was mixed and variedby region,some private nonresidential construction marketsimproved and public and institutional construction

251、continuedat a solid level enabling us to obtain higher selling pricesand increase shipments to meet demand.Our acquisition of Lofland resulted in 127 thousandadditional tons shipped.The table below shows the averagefabrication selling prices per ton(excluding stock andbuyout sales)and total fabricat

252、ion plant shipments for theyears ended August 31:20042003IncreaseAverage fabrication selling price$626$53617%Tons shipped(in thousands)1,3111,02828%We recorded$26.3 million of LIFO expense in ourdomestic fabrication segment for the year ended August31,2004,due to the higher cost of steel and moreinv

253、entories on hand.During the year ended August 31,2003,we recorded$1.6 million of LIFO expense.During the year ended August 31,2004,we recordedimpairment charges of$6.6 million.See Note 5,AssetImpairment Charges,to the consolidated financial state-ments.We are continuing to evaluate certain other fac

254、ilitieswhich are performing under expectations or for which we41are considering alternative uses.Our current estimates ofcash flows do not indicate that the assets are impaired.However,these estimates and expected uses couldchange resulting in additional asset impairments.During 2003,we acquired sub

255、stantially all of the oper-ating assets of the Denver,Colorado location of SymonsCorporation,E.L.Wills in Fresno,California and DunnDel Re Steel in Chandler,Arizona for a total of$13.4million.No single one of these acquisitions was significantto our operations,nor were they significant in the aggreg

256、ate.Recycling Our recycling segment reported an adjustedoperating profit of$67.9 million for the year endedAugust 31,2004 as compared with an adjusted operat-ing profit of$15.2 million in 2003.Net sales for the yearended August 31,2004 were 75%higher at$774.2million.Gross margins in 2004 were much h

257、igher ascompared to 2003.Our selling prices,particularly ferrousscrap,increased significantly because demand from FarEastern buyers,especially China,and the weaker U.S.dollar resulted in more scrap exports by our competitors.In addition,domestic demand for ferrous scrap increaseddue to high levels o

258、f steel production,resulting in highershipments.We exported nonferrous scrap to both Asiaand Europe during 2004.Our sales volumes increasedas well,partially due to additional materials that we wereable to obtain through our National Accounts programdirected at the management of scrap for our manufac

259、turingcustomers.The following table reflects our recycling seg-ments average selling prices per ton and tons shipped(inthousands)for the year ended August 31:20042003IncreaseAverage ferrous selling price$172$10072%Average nonferrous selling price$1,382$1,02135%Ferrous tons shipped1,9791,63921%Nonfer

260、rous tons shipped25823112%Total volume processed and shipped*3,4112,81121%*Includes all of our domestic processing plants.Also,we recorded$5.2 million LIFO expense for the yearended August 31,2004 as compared to$1.3 million in2003,due primarily to increased material purchase costs.Marketing and Dist

261、ribution Net sales in our marketingand distribution segment increased$732.1 million(64%)for the year ended August 31,2004 as com-pared to 2003,$93.4 million of which resulted fromfunctional currency fluctuations.Our adjusted operatingprofit for the year ended August 31,2004 was$39.4million as compar

262、ed to$21.8 million in 2003,anincrease of 81%.Our increased profitability in marketingand distribution was largely the result of our strategy inrecent years to build up our regional business around theworld and to increase our downstream presence.The neteffect of functional currency fluctuations on o

263、ur adjustedoperating profit was an increase of$2.7 million.Theremainder of the increases in net sales and adjustedoperating profit was due to higher shipments and sellingprices in 2004 as compared to 2003 for all divisions.The effect of these increases was partially offset by$13.8 million LIFO expen

264、se in 2004.LIFO expense of$266 thousand was recorded in 2003.Our higher 2004LIFO expense was due to increases in both inventorypurchase costs and quantities.Markets were favorable inseveral geographic regions around the world.Our salesincreased significantly in the United States and Europe.We import

265、ed more steel,aluminum,copper and stainlesssteel into the United States,and gross margins for theseproducts were higher in 2004 as compared to 2003.Also,sales increased for most of our product lines.Salesto and within Asia were up significantly,and the economyin Australia was still strong.Our 2004 s

266、ales and adjustedoperating profits for industrial materials and productswere at record levels because of strong demand,espe-cially in China,Europe and the U.S.During 2004,wereceived a dividend of CZK 34.1 million($1.6 million)from our 11%investee,Trinecke Zelezarny,a Czechsteel mill.Corporate and El

267、iminations Commensurate with ouroverall increase in profitability,discretionary items suchas bonuses,profit sharing and contributions increased forthe year ended August 31,2004 as compared to 2003.Our interest expense for the year ended August 31,2004 increased as compared to 2003 due primarily toou

268、r issuance of$100 million additional long-term debtwhich we used to finance the acquisitions of CMCZand Lofland.See Note 6,Credit Arrangements,to theconsolidated financial statements.Also,our averageshort-term borrowings increased in 2004 as comparedto 2003 to finance additional working capital incl

269、udingour operations in Poland.Our overall effective tax rate decreased to 30.7%forthe year ended August 31,2004 as compared to 37.8%in 2003,due to the effective tax rate in Poland of 20%.We consider our investment in CMCZ to be permanent.Near-Term OutlookWe expect that the positive market conditions

270、 that resultedin our record 2004 net sales and adjusted operatingprofits will continue in our fiscal year ending August 31,2005.Overall,our selling prices and volumes should besustainable.We believe that activity in China has slowedas the Chinese government moderates the growth rate;however,increase

271、d exports from China to other Asiancountries should benefit our international division.We42believe that the moderate slowing of Chinas economy(thereby avoiding a hard landing),the continued U.S.economic recovery and improved state budgets in theU.S.will all positively impact our business.However,our

272、adjusted operating profits could be reduced if very highpetroleum prices cause further increases in utility andfreight costs.We expect that while our overall level ofprofitability will be sustained in 2005 as compared to2004,a higher proportion of our adjusted operating profitswill be from our domes

273、tic fabrication segment becauseour backlog has higher selling prices.CMCZs adjustedoperating profit will be lower partially due to increasedcompetition in their marketplace.Our domestic mills andmarketing and distribution segments should continue toreport comparable levels of adjusted operating prof

274、its in2005 as compared to 2004,while recyclings adjustedoperating profit should be lower as ferrous prices moderate.Orders and selling prices in our domestic mills and mar-keting and distribution segments should remain firm.OurLIFO expenses should be lower in fiscal 2005 as com-pared to 2004.We anti

275、cipate that our effective tax rate for the firstquarter of 2005 will be 33%,excluding any impact fromrecent legislation.On October 1,2004,the Presidentsigned the American Jobs Creation Act of 2004(theAct)which offers a limited window of opportunity to repa-triate certain cash dividends from foreign

276、subsidiaries ata reduced rate.The Company is currently evaluating theAct.Due to the uncertainties regarding the new legislation,the Company has not had sufficient time to evaluate allavailable alternatives.We anticipate reaching final con-clusions regarding the implications of the Act in fiscal2005.

277、We estimate that our net earnings per dilutedshare(including the impact of adjusting our inventory val-uation to the LIFO method)will be between$1.70 and$1.90 for the three months ending November 30,2004.We have successfully reinstalled our principal trans-former at SMI-Texas.We maintain business in

278、terruptioninsurance which should cover a substantial portion of thereduction in profitability at SMI-Texas as a result of theproduction curtailment during the fourth quarter of 2004.We also expect to file an additional business interruptionclaim covering a failure during start up in August 2003of a

279、new,higher capacity transformer at SMI-SouthCarolina.We have returned this transformer to its manu-facturer in Italy,and it is now scheduled to be reinstalledin November 2004.We have not considered any busi-ness interruption insurance recoveries,which may besubstantial,in our earnings estimate for t

280、he three monthsended November 30,2004 because we are unable toestimate the minimum recoverable amount.Also,we areuncertain as to the timing of recoveries.We anticipate that our capital spending for 2005 willbe$130 million,including acquisition costs for a shredderat CMCZ and a continuous caster proj

281、ect at our SMI-Texas melt shop.Long-Term OutlookThe rapid expansion of a number of emergingeconomies,including China,has been a major catalystfor the strong steel and nonferrous markets around theworld.The magnitude of the growth in these economieshas been a new dynamic in the global marketplace.The

282、refore,we believe that there is an enhanced prospectof significant long-term growth in demand for the globalmaterials sector.We believe that we are well-positionedto exploit long-term opportunities.We expect strongdemand for our products due to continuing recovery indemand throughout the major globa

283、l economies as wellas continued growth in developing countries.Emergingcountries often have a higher growth rate for steel andnonferrous metals consumption.We believe that thedemand will increase in Asia,particularly in China,as wellas in Central and Eastern Europe.We believe that there will be furt

284、her consolidation inour industries,and we plan to continue to participate in aprudent way.The reasons for further consolidationinclude a historically inadequate return on capital formany companies,a high degree of fragmentation,theneed to eliminate non-competitive capacity and moreeffective marketin

285、g.2003 Compared to 2002Domestic Mills Our domestic mills adjusted operatingprofit decreased$21.3 million as compared to 2002.Alitigation settlement at the steel mills in 2002 accountedfor$2.5 million of the decrease.Excluding this item,adjusted operating profit decreased 49%in 2003 ascompared to 200

286、2.The effect of valuing inventoriesunder the LIFO method and increased utility costsaccounted for$5.1 million and$9.4 million,respectively,of the decrease in adjusted operating profit.The remaining$4.3 million was due to higher scrap purchase costs,netof the effect of higher selling prices and shipm

287、ents.Netsales for the year ended August 31,2003 increased$49million(7%)as compared to 2002.Our steel minimillsimplemented higher selling prices that became partiallyeffective during the second half of 2003,although steelmill selling prices were at very low levels for much of2003.However,scrap purcha

288、se prices were drivensharply higher by offshore demand and the weakeningvalue of the U.S.dollar.The selling price increases andincreased shipments did not fully offset higher scrap andutility costs.Gross margins were significantly lower as a43result of these conditions.Our copper tube mills grossmar

289、gins were also lower due to increased copper scrappurchase prices and lower selling prices for its products.Adjusted operating profit for our four domestic steelminimills decreased$18.2 million(52%)for the yearended August 31,2003 as compared to 2002.Theeffect of valuing inventories under the LIFO m

290、ethodaccounted for$3.5 million(19%)of the decrease inadjusted operating profit for the year ended August 31,2003 as compared to 2002.Also,during the yearended August 31,2002,our domestic steel minimillsreceived$2.5 million from a nonrecurring graphite elec-trode litigation settlement.Even excluding

291、these items,adjusted operating profit in 2003 decreased as com-pared to 2002 because higher shipments and averageselling prices were not enough to offset higher inputcosts,including scrap and utilities.The table belowreflects domestic steel and scrap prices per ton for theyear ended August 31:200320

292、02Average mill selling price(finished goods)$287$275Average mill selling price(total sales)278269Average ferrous scrap purchase price9780The domestic mills production and shipment levels(tonsmelted,rolled and shipped)were as follows for the yearended August 31:Increase/(in thousands)20032002(Decreas

293、e)Tons melted2,0812,100(1%)Tons rolled1,9722,026(3%)Tons shipped2,2842,1715%Our adjusted operating profit at SMI-Texas decreased25%to$19.3 million for the year ended August 31,2003 as compared to an adjusted operating profit of$25.8 million in 2002.SMI-South Carolina lost$7.1million for the year end

294、ed August 31,2003 as com-pared to a$2.8 million adjusted operating profit in 2002.Higher scrap costs,higher energy costs and a weakdemand for our products were the most significant reasonsfor SMI-South Carolinas loss in 2003.SMI-Arkansasreported a$160 thousand adjusted operating profit in2003 as com

295、pared to a$3.5 million adjusted operatingprofit in 2002.Most of the decrease in adjusted operatingprofit at SMI-Arkansas was attributable to LIFO expensecaused by higher year-end inventories of rerolling rail.However,adjusted operating profit at our SMI-Alabamamill for the year ended August 31,2003

296、increased 63%to$4.2 million as compared to$2.5 million in 2002.Cost reduction efforts,improved operating efficiencies and better market conditions were the key factors in SMI-Alabamas improved profitability.Utility expensesincreased by$9.4 million for the year ended August 31,2003 as compared to 200

297、2.The increase in utility costswas mostly due to higher natural gas costs,although elec-tricity expenses also increased.Our copper tube minimill reported an adjusted operatingprofit of$620 thousand for the year ended August 31,2003 as compared to an adjusted operating profit of$5.1 million in 2002.N

298、et sales were 2%lower in 2003as compared to 2002.The difference between the salesprice and copper scrap purchase cost is commonlyreferred to as“the metal margin.”The metal margindeclined in 2003 as compared to 2002 because sellingprices decreased while copper scrap purchase costsincreased.Although s

299、ingle family residential constructionheld up relatively well,other market sectors were weakerwhich put pressure on selling prices.The table belowreflects our copper tube minimills prices and costs perpound and operating statistics for the year endedAugust 31:Increase/(pounds in millions)20032002(Dec

300、rease)Pounds shipped61.959.34%Pounds produced60.756.28%Average selling price$1.17$1.24(6%)Average scrap purchase cost$0.72$0.686%Average metal margin$0.45$0.56(20%)Domestic Fabrication Our domestic fabrication operationswere significantly less profitable in 2003 as compared to2002,primarily due to l

301、ower selling prices which morethan offset the impact of higher shipments.Our domesticfabrication operations reported an adjusted operatingprofit of$701 thousand for the year ended August 31,2003 as compared to a profit of$30.4 million in 2002.We recorded a$5.2 million gain from the sale of SMI-Owen

302、in March 2002.Also,prior to its sale,SMI-Owenhad an adjusted operating profit of$2.9 million for theyear ended August 31,2002.Excluding these items,domestic fabrications adjusted operating profitsdecreased by$21.6 million for the year ended August31,2003 as compared to 2002.The$21.6 milliondecrease

303、was due primarily to lower selling prices.Thetable below shows the average fabrication selling pricesper ton(excluding stock and buyout sales)and total fab-rication plant shipments for the year ended August 31:Increase/20032002(Decrease)Average fabrication selling price$536$608(12)%Tons shipped(in t

304、housands)1,0289844%44During 2003,we acquired substantially all of the operatingassets of the Denver,Colorado location of SymonsCorporation,E.L.Wills in Fresno,California,and DunnDel Re Steel in Chandler,Arizona.The Symons locationis a concrete formwork supplier,and E.L.Wills and DunnDel Re Steel are

305、 rebar fabrication operations.The purchaseprices for these businesses totaled$13.4 million.No singleone of these acquisitions was significant to our operations.Recycling Our recycling segment reported an adjustedoperating profit of$15.2 million for the year endedAugust 31,2003 as compared to an adju

306、sted operatingprofit of$5.1 million in 2002.All four of the geographicregions where the segment operates were substantiallymore profitable.Net sales for the year ended August 31,2003 were$441.4 million,an increase of 17%as com-pared to our net sales of$378.1 million in 2002.Ourgross margins were 24%

307、higher in 2003 as comparedto 2002,partially due to controls over costs.Higher fer-rous selling prices resulting from greater demand fromoverseas markets contributed to this increase,as well asthe weaker U.S.dollar.The following table reflects ourrecycling segments average selling prices per ton andt

308、ons shipped(in thousands)for the year ended August 31:Increase/20032002(Decrease)Average ferrous selling price$100$8123%Average nonferrous selling price$1,021$9478%Ferrous tons shipped1,6391,49410%Nonferrous tons shipped231238(3)%Total volume processed and shipped*2,8112,5689%*Includes all of our do

309、mestic processing plants.Marketing and Distribution Net sales for the yearended August 31,2003 for our marketing and distribu-tion segment increased$372.7 million(48%)to$1.15billion.Adjusted operating profit for the year endedAugust 31,2003 was$21.8 million,an increase of53%as compared to 2002.Most

310、of the increases in netsales and adjusted operating profit related to sales out-side of the United States.International steel prices for flat-rolled products rose and then weakened,because ofdecreased demand from China,during the first threequarters of 2003.However,the prices for flat-rolled steelpr

311、oducts rose again during the fourth quarter.Prices forlong products slowly increased during 2003.Our steelshipments increased,except for imports into the U.S.Ourbusiness in the U.S.was reduced because of the weakeconomy and the weaker U.S.dollar.Due to these fac-tors,volumes,prices and margins for n

312、onferrous semi-finished products were lower in 2003 as compared to2002.However,sales and margins for ores,minerals,ferroalloys and special metals were generally higher.Also,freight costs increased in 2003 as compared to2002.Our marketing and distribution and service centeroperations in Australia wer

313、e more profitable in 2003 ascompared to 2002.Our joint venture Europickling facilityin Belgium became profitable during 2003.Also,thejoint venture arrangements with our 11%investee,Trinecke Zelezarny,contributed to our sales in CentralEurope.Sales into Asia,including China,were strong,especially dur

314、ing the first and second quarters of our fiscal2003.In July 2003,our international subsidiary enteredinto a definitive agreement to purchase a controlling interestin CMCZ.This acquisition closed on December 3,2003.Corporate and Eliminations Our employees retirementplan expenses were 16%lower for the

315、 year endedAugust 31,2003 as compared to 2002.Discretionaryitems,including bonuses and contributions,were lowerfor the year ended August 31,2003 as compared to2002 because 2003 was less profitable.Interestexpense for the year ended August 31,2003 was loweras compared to 2002 due primarily to lower o

316、verallinterest rates on short-term borrowings and two interestrate swaps on parts of our long-term debt which resultedin lower effective interest rates.During 2002,we favorably resolved all issues for ourfederal income tax returns through 1999.Due to the lackof any material adjustments,we reevaluate

317、d our taxaccruals and,consequently,reduced the net tax expenseby$1.0 million during 2002.2004 Liquidity and Capital ResourcesWe discuss liquidity and capital resources on a consoli-dated basis.Our discussion includes the sources anduses of our five operating segments and centralized cor-porate funct

318、ions.We have a centralized treasury functionand use inter-company loans to efficiently manage theshort-term cash needs of our operating divisions.Weinvest any excess funds centrally.We rely upon cash flows from operating activities,andto the extent necessary,external short-term financingsources for

319、liquidity.Our short-term financing sources45include the issuance of commercial paper,sales ofaccounts receivable,documentary letters of credit withextended terms,short-term trade financing arrangementsand borrowing under our bank credit facilities.From timeto time,we have issued long-term public and

320、 private debt.See Note 6,Credit Arrangements,to the consolidatedfinancial statements.Our investment grade credit ratingsand general business conditions affect our access toexternal financing on a cost-effective basis.Depending onthe price of our common stock,we may realize significantcash flows from

321、 the exercise of stock options.Moodys Investors Service(P-2)and Standard&Poors Corporation(A-2)rate our$275 million com-mercial paper program in the second highest category.Tosupport our commercial paper program,we have anunsecured contractually committed revolving creditagreement with a group of si

322、xteen banks.Our$275 mil-lion facility expires in August 2006.Under the program,our commercial paper capacity is reduced by our out-standing standby letters of credit which totaled$19.9million at August 31,2004.The costs of our revolvingcredit agreement may be impacted by a change in ourcredit rating

323、s.We plan to continue our commercial paperprogram and the revolving credit agreements in comparableamounts to support the commercial paper program.Also,we have numerous informal,uncommitted,short-termcredit facilities available from domestic and internationalbanks.These credit facilities are availab

324、le to supportimport letters of credit,foreign exchange transactions and,in certain instances,short-term working capital loans.Our long-term public debt was$360 million at August31,2004 and is investment grade rated by Standard&Poors Corporation(BBB)and by Moodys InvestorsServices(Baa2).We believe we

325、 have access to the publicmarkets for potential refinancing or the issuance of addi-tional long-term debt.During the year ended August 31,2004,we purchased$90 million of our 7.20%notesotherwise due in 2005,and issued$200 million of5.625%notes due November 2013.In March 2004,we refinanced the notes p

326、ayable thatwe assumed upon the acquisition of CMCZ with a five-year term note with a group of four banks for 150 millionPLN($38.4 million)and a revolving credit facility withmaximum borrowings of 60 million PLN($16.4 million).The term note and the revolving credit facilities aresecured by the majori

327、ty of CMCZ assets and contain cer-tain financial covenants.There are no guarantees by theCompany or any of its subsidiaries for any of CMCZsdebt.At August 31,2004,only a minimal amount wasoutstanding on CMCZs revolving credit facility.In order to facilitate certain trade transactions,we utilizelette

328、rs of credit,advances and non-or limited-recoursetrade financing arrangements to provide assurance ofpayments and advance funding to our suppliers.The lettersof credit may be for prompt payment or for payment at afuture date,conditional upon the bank finding the docu-mentation presented to be in str

329、ict compliance with allterms and conditions of the letter of credit.Our banksissue these letters of credit under informal,uncommittedlines of credit which are in addition to the committedrevolving credit agreement.In some cases,if our supplierschoose to discount the future dated obligation we mayabs

330、orb the discount cost.The trade financing arrange-ments consist of a financing agreement with a lenderwhich is secured by a supply agreement with our supplier.The lender is repaid after the product is delivered to us inconformance with the supply agreement.We are notliable for repayment of the princ

331、ipal and/or interest to thebank unless and until we have received the conformingdeliveries from the supplier.Credit ratings affect our ability to obtain short-andlong-term financing and the cost of such financing.If therating agencies were to reduce our credit ratings,wewould pay higher financing co

332、sts and probably wouldhave less availability of the informal,uncommitted facili-ties.In determining our credit ratings,the rating agenciesconsider a number of both quantitative and qualitativefactors.These factors include earnings,fixed chargessuch as interest,cash flows,total debt outstanding,off-b

333、alance sheet obligations and other commitments,totalcapitalization and various ratios calculated from these fac-tors.The rating agencies also consider predictability ofcash flows,business strategy,industry condition and con-tingencies.Maintaining our investment grade ratings is ahigh priority for us.Certain of our financing agreements include variouscovenants.Our revolving credit agreement contain