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

Brian Yu, Citigroup
Okay. Then the other question I’ve got is just on the scrap market. It did seem like prices were weakening and now they’re starting to pick up a bit. Would you attribute that just to typical seasonality, given the constraint on flows and as we exit winter if you guys do any kind of trading on scrap backs towards the…Is the international market demand for U.S. material weak enough where we should see scrap prices begin to drop after the seasonal impact goes away?

Joseph Alvarado, Chairman of the Board, President, and CEO, Commercial Metals Company
Yes. As you know, Brian, there is a lot of seasonality in scrap and scrap purchasing. We will see fluctuations just based on that. A bigger driver in scrap pricing, I think, these days is the influence of export product and I can only tell you what I have read is that there appears to be a little bit more demand for export in scrap product. We ourselves don’t heavily participate in that. We are impacted by it but we don’t see it directly, so it is hard to comment on how good that market may or may not be. We will see how the current month settles out, but it doesn’t feel a lot different than what we’ve been seeing in the last few months.

Brian Yu, Citigroup
Okay, thanks.

Operator
Next question comes from Phil Gibbs with KeyBanc Capital Markets, Inc..

Philip Gibbs, KeyBanc Capital Markets, Inc.
Good morning.

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

Barbara Smith, SVP and Chief Financial Officer, Commercial Metals Company
Phil.

Philip Gibbs, KeyBanc Capital Markets, Inc.
I just had a general question on the backlog in the U.S. business, just how that may be looking relative to last year and maybe versus the August quarter?

Barbara Smith, SVP and Chief Financial Officer, Commercial Metals Company
Yes, let me take a look here, Phil. Both the fab backlog if you look at it compared to a year ago, it is up over 5% and it is up marginally over the fourth quarter, which is a really good sign going into the seasonally slower period of the year.

Philip Gibbs, KeyBanc Capital Markets, Inc.
What are you seeing from a regional perspective across the Sun Belt as far as Texas, California, etcetera? What is stronger? What is weaker? Sort of what does the picture look like to you guys, right now?

Barbara Smith, SVP and Chief Financial Officer, Commercial Metals Company
I think if we were talking a year ago, we would have said Texas continues to be strong and California was picking up and the Southeast was the weaker market for us. I think we are seeing good demand broadly across all three regions. At this point in time, California continues to pick up momentum. We are now starting to see more activity in Southern California where it was previously being driven out as activity in Northern California. We are seeing very good activity levels in the Southeast.

Joseph Alvarado, Chairman of the Board, President, and CEO, Commercial Metals Company
And continue to see stronger demand in the Texas market.

Philip Gibbs, KeyBanc Capital Markets, Inc.
Okay, I appreciate that. Just a housekeeping question, Barbara, as far as what the… I’m not going to ask you for LIFO by all the segments, just curious as to what it was in the Mills division, in particular, and if you have a view on what the tax rate should look like here?

Barbara Smith, SVP and Chief Financial Officer, Commercial Metals Company
Okay. The mills, Americas Mills, had a LIFO income of $2.7 million for the quarter. As far as the tax rates, it does depend somewhat on income in foreign jurisdictions where we enjoy a lower tax rate, but we are projecting a tax rate somewhere in the 30% to 32% for the year.

Philip Gibbs, KeyBanc Capital Markets, Inc.
Okay. I appreciate it. Thank you very much.

Barbara Smith, SVP and Chief Financial Officer, Commercial Metals Company
Thank you so.