Commercial Metals Company (CMC) First Quarter 2015 Earnings Call Transcript

Page 12 of 13

Operator
The next question comes from Charles Bradford of Bradford Research.

Charles Bradford, Bradford Research
Good morning.

Joseph Alvarado, Chairman of the Board, President, and CEO, Commercial Metals Company
Good morning, Chuck.

Charles Bradford, Bradford Research
Hi. A couple of questions. First of all, a year ago when we had that pretty bad winter weather, the price of electricity and natural gas just soared. Have you seen any signs of that yet or is it just back to normal?

Joseph Alvarado, Chairman of the Board, President, and CEO, Commercial Metals Company
Yes, no signs of that whatsoever. Last year we were impacted particularly in the East Coast by some heavy storms and ice storms. We were impacted here in Texas as well in December. The weather hasn’t been that terribly bad. In fact, it’s been pretty good. So far, no, but that doesn’t mean that we won’t see something before the quarter is out. I guess they’re getting snow in the Midwest today, but otherwise, it’s been a pretty tame winter.

Charles Bradford, Bradford Research
I’m more worried about franklythe price of electricity. We can track the gas pretty easily, but you use a lot of electricity.

Joseph Alvarado, Chairman of the Board, President, and CEO, Commercial Metals Company
Yes, Chuck, but for us the electricity is availability. Utilities need to the take care of the public sector. That means that we get squeezed. That’s what happened to us last year in South Carolina. We get curtailed and so that’s something that we’re subjected to which affects our electricity cost and availability. I wasn’t talking about gas as much as I was about electricity and availability.

Charles Bradford, Bradford Research
Understood. About a year and-a-half ago you gave a speech at apipe distributors’ conference with a pretty long list of new capacity coming online. Do you have any sense how much of that capacity has come online and whether U.S. Steel’s announcement today of a big cutback at Lorraine is more to do with the price of energy as they said or is it just new supply?

Joseph Alvarado, Chairman of the Board, President, and CEO, Commercial Metals Company
I was going to decline anything that said a year and half ago, but as far as tubular capacity, there are all kinds of reports about those projects still coming on stream and being strong, but as far as U.S. Steel’s decision to lay off, I think I read in March and May that’s a better question for Mario and the U.S. Steel people and what they are seeing in the market.

Charles Bradford, Bradford Research
Understood. Thank you very much.

Joseph Alvarado, Chairman of the Board, President, and CEO, Commercial Metals Company
Okay. Thanks, Chuck.

Operator
(Operator Instructions) Our next question comes from Phil Gibbs atKeyBanc Capital Markets, Inc..

Philip Gibbs, KeyBanc Capital Markets, Inc.
Barbara, I just had a question on the SG&A side as it related to the Australian distribution assets, if you could give us an idea about how much of the SG&A was tied up in that line last year?

Barbara Smith, SVP and Chief Financial Officer, Commercial Metals Company
Phil, I would probably have to take that offline and get back to you because there will be some portion of the SG&A that will remain to support our trading operations in Southeast Asia, but we can and we are still candidly working through that. How much goes and how much is required to support the remaining activity in the region. We haven’t put the pen down yet on that. I would be happy to look at it and give you some.

Philip Gibbs, KeyBanc Capital Markets, Inc.
Okay. I was not sure if you addressed this or not because I missed a portion of the call, but did you talk about whether or not you were winding down those assets or whether or not you intended to sell them or is that still a bit up in the air?

Barbara Smith, SVP and Chief Financial Officer, Commercial Metals Company
Well, in order to drop it down to discontinued operations, we need to meet certain criteria and we are holding them for sale.

Page 12 of 13