COMMERCIAL METALS Co - 10-Q filing on 2011-07-08

Business Segments

9 Months Ended

May 31, 2011

NOTE 15 — BUSINESS SEGMENTS

The Company’s reportable segments are based on strategic business areas, which offer different products and services. These segments have different lines of management responsibility as each business requires different marketing strategies and management expertise.

Effective September 1, 2010, the Company’s scrap metal processing facilities which directly support the domestic mills are included as part of the Americas Mills segment. Prior to September 1, 2010, these facilities were included as part of the Americas Recycling segment. All prior period financial information has been recast to the current segment reporting structure.

The Company structures the business into the following five segments: Americas Recycling, Americas Mills, Americas Fabrication, International Mills and International Marketing and Distribution. The Americas Recycling segment consists of the scrap metal processing and sales operations primarily in Texas, Florida and the southern United States. The Americas Mills segment includes the Company’s domestic steel mills, including the scrap processing facilities which directly support these mills, and the copper tube minimill. The copper tube minimill is aggregated with the Company’s steel mills because it has similar economic characteristics. The Americas Fabrication segment consists of the Company’s rebar fabrication operations, fence post manufacturing plants, construction-related and other products facilities. The International Mills segment includes the minimills in Poland and Croatia, recycling operations in Poland and fabrication operations in Europe, which have been presented as a separate segment because the economic characteristics of their markets and the regulatory environment in which they operate are different from that of the Company’s domestic mills and rebar fabrication operations. International Marketing and Distribution includes international operations for the sales, distribution and processing of steel products, ferrous and nonferrous metals and other industrial products. Additionally, the International Marketing and Distribution segment includes the Company’s two U.S. based trading and distribution divisions, CMC Cometals and CMC Cometals Steel (previously CMC Dallas Trading). The international distribution operations consist only of physical transactions and not positions taken for speculation. Corporate contains expenses of the Company’s corporate headquarters and interest expense relating to its long-term public debt and commercial paper program.

The financial information presented for the Americas Fabrication segment excludes its joist and deck fabrication operations. This operation has been classified as discontinued operations in the consolidated statements of operations. See Note 7, Discontinued Operations and Dispositions, for more detailed information.

The Company uses adjusted operating profit (loss) to measure segment performance. Intersegment sales are generally priced at prevailing market prices. Certain corporate administrative expenses are allocated to segments based upon the nature of the expense. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The following is a summary of certain financial information from continuing operations by reportable segment:


	Three Months Ended May 31, 2011
								International
										Marketing
	Americas									and
(in thousands)	Recycling		Mills		Fabrication			Mills		Distribution		Corporate			Eliminations			Consolidated
Net sales-unaffiliated customers	$	443,898	$	341,972	$	323,997		$	332,019	$	633,706	$	972		$	—		$	2,076,564
Intersegment sales		35,878		204,043		4,453			12,145		12,721		—			(269,240	)		—
Net sales		479,776		546,015		328,450			344,164		646,427		972			(269,240	)		2,076,564
Adjusted operating profit (loss)		13,194		71,050		(14,737	)		15,456		16,978		(28,503	)		(2,089	)		71,349


	Three Months Ended May 31, 2010
								International
											Marketing
	Americas										and
(in thousands)	Recycling		Mills		Fabrication			Mills			Distribution		Corporate			Eliminations			Consolidated
Net sales-unaffiliated customers	$	369,089	$	248,417	$	322,797		$	190,898		$	635,520	$	(1,567	)	$	—		$	1,765,154
Intersegment sales		28,982		183,781		3,292			24,792			5,573		327			(246,747	)		—
Net sales		398,071		432,198		326,089			215,690			641,093		(1,240	)		(246,747	)		1,765,154
Adjusted operating profit (loss)		14,240		14,544		(24,452	)		(10,885	)		30,941		(11,390	)		(482	)		12,516


	Nine Months Ended May 31, 2011
								International
										Marketing
	Americas									and
(in thousands)	Recycling		Mills		Fabrication			Mills		Distribution		Corporate			Eliminations			Consolidated
Net sales-unaffiliated customers	$	1,203,046	$	926,213	$	856,350		$	767,676	$	1,884,886	$	12,639		$	—		$	5,650,810
Intersegment sales		103,087		533,120		11,823			30,639		30,122		—			(708,791	)		—
Net sales		1,306,133		1,459,333		868,173			798,315		1,915,008		12,639			(708,791	)		5,650,810
Adjusted operating profit (loss)		32,251		116,138		(86,311	)		412		53,588		(55,574	)		(2,018	)		58,486
Goodwill		7,267		295		57,144			3,238		4,659		—			—			72,603
Total assets		304,693		649,190		619,116			873,937		795,324		1,165,569			(652,771	)		3,755,058


	Nine Months Ended May 31, 2010
									International
												Marketing
	Americas											and
(in thousands)	Recycling		Mills			Fabrication			Mills			Distribution		Corporate			Eliminations			Consolidated
Net sales-unaffiliated customers	$	873,250	$	621,869		$	813,782		$	450,142		$	1,726,496	$	4,316		$	—		$	4,489,855
Intersegment sales		80,958		451,687			7,068			82,078			16,894		327			(639,012	)		—
Net sales		954,208		1,073,556			820,850			532,220			1,743,390		4,643			(639,012	)		4,489,855
Adjusted operating profit (loss)		6,196		(3,335	)		(90,685	)		(84,373	)		62,158		(50,554	)		10,479			(150,114	)
Goodwill		6,961		601			57,144			2,460			3,887		—			—			71,053
Total assets		260,147		624,587			708,625			675,290			670,163		967,570			(341,882	)		3,564,500

The following table provides a reconciliation of earnings (loss) from continuing operations to adjusted operating profit (loss):


	Three Months Ended						Nine Months Ended
	May 31,						May 31,
(in thousands)	2011			2010			2011			2010
Earnings (loss) from continuing operations	$	37,095		$	(10,741	)	$	(8,704	)	$	(174,671	)
Income taxes (benefit)		14,493			3,952			8,688			(36,101	)
Interest expense		18,254			18,184			54,857			57,871
Discounts on sales of accounts receivable		1,507			1,121			3,645			2,787

Adjusted operating profit (loss) from continuing operations	$	71,349		$	12,516		$	58,486		$	(150,114	)
Adjusted operating profit (loss) from discontinued operations		(1,429	)		4,002			(779	)		(62,506	)

Adjusted operating profit (loss)	$	69,920		$	16,518		$	57,707		$	(212,620	)

The following represents the Company’s external net sales from continuing operations by major product and geographic area:


	Three Months Ended				Nine Months Ended
	May 31,				May 31,
(in thousands)	2011		2010		2011		2010
Major product information:
Steel products	$	1,150,654	$	998,538	$	3,169,240	$	2,614,756
Industrial materials		319,724		244,941		811,632		599,626
Non-ferrous scrap		251,229		195,563		725,700		506,435
Ferrous scrap		215,610		190,514		556,997		407,266
Construction materials		58,475		64,546		160,938		166,863
Non-ferrous products		54,396		52,817		145,376		132,557
Other		26,476		18,235		80,927		62,352

Net sales	$	2,076,564	$	1,765,154	$	5,650,810	$	4,489,855


Geographic area:
United States	$	1,158,841	$	936,410	$	3,119,925	$	2,284,434
Europe		406,061		371,839		1,185,644		905,467
Asia		304,388		268,189		781,383		746,013
Australia/New Zealand		124,953		133,261		387,870		395,402
Other		82,321		55,455		175,988		158,539

Net sales	$	2,076,564	$	1,765,154	$	5,650,810	$	4,489,855