IRVING, Texas, Oct. 30 /PRNewswire-FirstCall/ -- Commercial Metals Company (NYSE: CMC) today reported net earnings of $232.0 million or $1.97 per diluted share on net sales of $10.4 billion for the year ended August 31, 2008. This compares with net earnings of $355.4 million or $2.92 per diluted share on net sales of $8.3 billion last year. The annual results included after-tax LIFO expense of a record $209 million or $1.78 per diluted share. This compares with after-tax LIFO expense of $33.3 million or $0.27 per diluted share last year. At year end, our LIFO reserve totaled $562 million. LIFO is an inventory costing method that assumes the most recent inventory purchases or goods manufactured are sold first which in periods of rising prices results in an expense that eliminates inflationary profits from net income. Changes in LIFO are not write-downs, write-offs or market adjustments. They are changes in cost components based on an assumption of inventory flows.

Fourth quarter net earnings were $63.5 million or $0.55 per diluted share on net sales of $3.1 billion. This compares with $104.7 million or $0.86 per diluted share on net sales of $2.3 billion for the fourth quarter last year. The current year quarter included a record after-tax LIFO expense of $90.9 million or $0.78 per diluted share compared with after-tax LIFO income of $5.7 million or $0.05 per diluted share in last year's fourth quarter.

Management had projected an earnings range of $0.90 to $1.00 per diluted share assuming no LIFO effect for the quarter. Actual earnings per diluted share were $0.55 with a LIFO expense of $0.78 per diluted share. Operationally, the Company exceeded its projection by a range of $0.33 to $0.43 per diluted share. The LIFO expense arose from fourth quarter surges in scrap purchase costs. These costs were still in scrap inventories and as a component of finished goods at year end. There were also significant inventories in transit for our domestic steel marketing business.

Selling, general and administrative expenses in the fourth quarter included $10.6 million of costs associated with the investment in the global deployment of SAP software compared to $9.4 million in last year's fourth quarter. For the year ended August 31, 2008, the amount expensed was $53.7 million as compared to $33.8 million last year; project to date we have expensed $88.7 million. Other SAP costs of $83.1 million have been capitalized since inception of the project, of which $49.9 million has been capitalized in the current year and $13.9 million in the current quarter.

The effective tax rate for the quarter was 22.8% compared with last year's 26.6%, and for the whole year was 31.1% compared with fiscal 2007 at 31.9%. The lower rate was due to a geographic shift in earnings (higher profits in Poland which has a lower tax rate).

General Conditions

Murray R. McClean, Chairman, President and CEO, said, 'The quarter continued the upward volatility in ferrous scrap pricing, and steel finished goods pricing outpaced ferrous scrap pricing resulting in metal margin expansion. Management had anticipated a softening of ferrous scrap prices which did occur, but not until the end of the quarter. The increased prices plus in-transit inventories led to yet another enormous LIFO charge. The record LIFO expense of $0.78 per diluted share was the third quarterly record in succession. Though the LIFO charge affords the Company a significant tax deferral, it does mask the underlying strong markets. The continued upward trend in metal pricing propelled our Americas Recycling segment to an all-time quarterly earnings record. For the second quarter in succession, the Americas Mills segment had increases in tons melted, rolled, and shipped. Continually escalating prices waylaid the Americas Fabrication and Distribution operations with a staggering LIFO charge and further margin compression. In the International Mills segment, our mill in Poland was the star performer while we continued the turnaround in Croatia. Our International Fabrication and Distribution segment set an all-time fourth quarter earnings record.'

Americas Recycling

According to McClean, 'Adjusted operating profit of $52.9 million represented the second consecutive time the segment set an all-time quarterly earnings record. It was aided by a small pre-tax LIFO income of $5.1 million compared to LIFO income of $9.3 million in last year's fourth quarter. Ferrous scrap prices advanced during the quarter, peaking in July and beginning to tail by quarter end. Pricing was supported by continued strong international demand, record iron ore prices, and reduced prime scrap availability due to a slowdown in U.S. manufacturing. Ferrous operations accounted for almost 90% of the segment's profitability. The average ferrous scrap sales price for the fourth quarter compared to last year's fourth quarter increased $233 per short ton to $450 per short ton, while shipments (including the units that formerly were reported under the old Domestic Mills segment) increased 11% to 782 thousand tons. Nonferrous pricing advanced a more modest 7% compared to the prior year fourth quarter, but was dropping as the quarter ended. Chinese demand weakened during the quarter and, combined with a rebounding U.S. dollar, drove nonferrous shipments down 14% to 79 thousand tons versus last year's fourth quarter. We exported 33% of our nonferrous scrap material during the quarter.'

Americas Mills

McClean said, 'With demand strong and scrap prices rising, our Americas Mills segment's tons melted, rolled, and shipped all exceeded last year's fourth quarter. Prices increased each month of the quarter (softening only in late August) leading to a pre-tax LIFO expense of $40.2 million compared to income of $135 thousand in the prior year fourth quarter.

'Our steel mills adjusted operating profit of $45.1 million was down 14.7% compared to the prior year fourth quarter on the heels of a $41.5 million pre- tax LIFO expense compared to a negligible amount last year. Metal margins were 11% higher at $390 per ton, necessary to keep pace with higher costs for utilities, freight, and alloys. The price of ferrous scrap consumed rose a stunning 87% compared to last year. Our average selling price was up $247 per ton to $838 per ton while the average selling price for finished goods was up $227 per ton to $866 per ton. Margins were affected by a 131% increase in alloys and an 86% increase in energy. Combined, these two additional costs accounted for another $29.8 million in costs this quarter compared to the fourth quarter of last year. Sales volumes increased 15.1% to 631 thousand tons. Rebar shipments rose 29%, and merchant tonnage rose 6%. Included in the sales volumes were 120 thousand tons of billets of which 22 thousand tons were exported. Total export tonnage was 33 thousand tons. The price premium of merchant bar over reinforcing bar averaged $158 per ton. On a quarter-to- quarter basis, tonnage melted for the fourth quarter was up 34% to 618 thousand tons while tonnage rolled was 546 thousand tons, an increase of 45%. During the quarter we received the last required environmental permits that allowed us to begin construction of our micro mill project in Arizona and to date have invested $63 million of the expected $165 million total cost. Hot commissioning is expected in September 2009.

'Our copper tube mill reported an adjusted operating profit of $4.1 million, substantially below last year's $11.1 million as slowing demand and sliding prices took their toll. The mill recorded a pre-tax LIFO income of $1.3 million compared to a pre-tax expense of $636 thousand in last year's fourth quarter. Pounds shipped fell 8% to 12.8 million pounds. The average copper selling price decreased 12 cents to $4.53 per pound and metal spreads fell 69 cents per pound. The cost of copper scrap decreased 57 cents to $3.67 per pound. Copper tube production decreased 35% to 9.7 million pounds compared to last year's fourth quarter.'

Americas Fabrication & Distribution

McClean added, 'The segment continued to suffer the negative consequences of rapid upward price escalation -- titanic LIFO charges and margin compression. Adjusted operating loss was $68 million compared to $36.1 million income in last year's fourth quarter. Pre-tax LIFO expense was $100.9 million, a quarterly charge for one segment larger than any consolidated year's expense in CMC's history, sinking the profitability for the quarter. The comparable LIFO number last year was income of $0.4 million. The composite average fab selling price (excluding stock and buyouts) increased 7% to $1,146 a ton, not enough to match the increase in steel finished goods prices compared to the backlog pricing as we entered the quarter. When considering operations absent the enormous LIFO charge, our construction services, structural fabrication, and post plants had improved earnings over last year's fourth quarter; rebar fabrication profitability fell slightly, but joist and deck were off substantially. The bright spot for the segment was our domestic steel import and distribution operations that saw a significant increase in profitability compared to last year on the strength of strong contributions from pipe, SBQ, and flat rolled.