Commercial Metals Company Business Information, Profile, and History

Company Perspectives:

CMC's history goes back more than 85 years. By all key internal measures we are an extremely successful company. But there still is much more for us to achieve. We are committed to creating long-term growth and building earnings power through continuous internal improvements, a focus on cash flows, strong regional positions and outstanding people. In the past several years we have taken major steps to increase our output, expand our product lines, add value downstream and build our talent pool.

History of Commercial Metals Company

Commercial Metals Company (CMC) is a major vertically integrated player in the metals industry. The manufacturing division is the company's dominant and most rapidly expanding business. This segment consists of two entities, the CMC Steel Group and Howell Metal Company. The CMC Steel Group is vertically integrated and includes four steel minimills with a capacity of 2.3 million tons and over 70 manufacturing plants located from California through the Southeast. The products produced include reinforcing bars, beams, angles, rounds, channels, flats, steel joists, castellated and cellular beams, metal fence post stock, sign posts, and squares. The products are sold to the construction, service center, energy, petrochemical, transportation, steel warehousing, fabrication, and original equipment manufacturing industries. Howell Metal Company manufactures primarily copper water tubing and air conditioning and refrigeration tubing, for use in commercial, industrial, and residential construction. CMC's recycling division is one of the largest processors of scrap ferrous and nonferrous metals in the United States. It operates 34 metal recycling plants, excluding eight recycling plants in the CMC Steel Group. The recycled metals are sold to steel mills, specialty steel producers, high temperature alloy manufacturers, foundries, aluminum refineries and mills, copper and brass mills, and other consumers. The marketing and trading division is involved in marketing steel, nonferrous metals, and other industrial products through a network of 17 offices located around the world.

Origins and Early Post-World War II Years

The resurgence of the U.S. economy following the conclusion of World War II obliterated any lingering effects of the country's decade-long, financial free-fall during the 1930s, invigorating businesses and industries across the nation. For the decades to follow, a general and wide-sweeping era of prosperity reigned, increasing the magnitude of the country's major industries and engendering the rise of subsidiary, or minor, industries to levels of importance and worth substantially higher than during the first half of the 20th century.

Among other major industries in the United States, the metals industry achieved robust growth during the postwar era, strengthened by an increasing demand for metals as manufacturers labored to produce larger quantities of consumer and industrial products. As the country's metals needs mounted, the metals industry was propelled forward, recording growth that closely paralleled the growth of the U.S. population following the war, but as the need for metals increased, the primary reserves of metallic ores dwindled, a natural effect of ravenous demand that dramatically altered the stature of the country's scrap metals industry. For decades, scrap metals companies had represented a largely insignificant segment of the broad-based metals industry, earning little compared to the manufacturers of virgin metal and suffering from the opprobrious image that they were junkyard peddlers. All this changed when soaring metals demand threatened to deplete ore reserves and technological advancements lowered the processing costs associated with converting scrap metals into "new" metals. Long the shunned stepchildren of the metals industry, scrap metals companies underwent a significant transformation, becoming integral contributors to annual production volume and, along the way, garnering a greater share of the revenues generated by the metals industry as a whole. By purchasing scrap metals from small individual dealers, salvage firms, manufacturing facilities, refineries, automobile wreckers, and other sources, and then processing the materials through giant presses, power shears, or shredders, scrap metal companies became essential suppliers of recycled metals to primary metals processors, carving a lasting position for themselves within the metals industry.

Such was the case for Commercial Metals, a scrap metals company that struggled to survive during its early years, then blossomed into one of the largest companies of its kind during the halcyon years following World War II. The company's historical roots stretch back to 1915, when Moses Feldman started a scrap metals company named American Iron & Metal Company. Feldman, who emigrated from Russia and settled in Houston ten years before he founded American Iron & Metal, superintended his company's growth during its early years, then was joined by son Jacob Feldman, who eventually would take control of the company. The younger Feldman joined the family business after he graduated from Southern Methodist University and in 1932, with the help of family members, formed a brokerage house in Dallas named Commercial Metals Company to buttress the family's scrap operations. In 1946, the two family-owned operations were incorporated, just as the scrap metals industry as a whole began to burgeon, with the combined company's first acquisition occurring seven years later, when Jacob Feldman negotiated the purchase of the Charles Harley Company, a California-based scrap metals processor founded in 1856.

The 1960s

By the beginning of the 1960s, nearly five decades of operation had built a roughly $50 million company, one that was ready to take on the trappings characterizing Commercial Metals during the 1990s. In 1960, ownership of Commercial Metals changed from private to public hands when the company became the first independent metals firm to be listed on the American Stock Exchange (the company would eventually move to the New York Stock Exchange). The switch to public ownership ushered in a period of diversification and expansion, touching off the first definitive surge of growth recorded by the company.

Entering the decade, Commercial Metals' scrap business was thriving, prompting Jacob Feldman to diversify the company's interests and branch into manufacturing. During the 1960s, Feldman orchestrated the acquisition of a small steel manufacturer, a copper fabricator, and then later he started another steel minimill, making Commercial Metals one of the few scrap metals companies to operate its own steel mills. The broadening of the company's interests began in 1963, when Commercial Metals acquired a 74 percent interest in Structural Metals, Inc. Located in Seguin, Texas, near San Antonio, Structural Metals operated an electric furnace steel mill that provided Commercial Metals with a new source of sales and increased the company's market for its own processed raw materials. The remaining percentage of Structural Metals, which constituted Commercial Metals' largest operating division during the 1990s, was purchased between 1963 and 1969, pushing the company's sales upward as more and more of the electric furnace steel mill came under Commercial Metals' ownership. Annual sales swelled from slightly less than $60 million in 1963 to nearly $150 million four years later, while the company's net income leaped from just under $600,000 to $1.85 million during the four-year period.

The acquisition of Structural Metals provided a significant boost to Commercial Metals' standing in the scrap metals industry, distinguishing it as a model for other scrap metals companies to emulate as they too diversified into the manufacturing side of the business, but the financial growth recorded during the 1960s was also fueled by the company's accomplishments overseas. During the years bridging the conclusion of World War II and the completion of the Structural Metals acquisition, Commercial Metals had extended its corporate reach overseas, establishing metals trading offices in key foreign markets. By the late 1960s, Commercial Metals ranked as the largest single exporter of ferrous scrap metals in the United States and one of the largest competitors in the metals industry in the world, deriving nearly half of its annual sales from abroad, particularly from Japan and Mexico, the company's two largest export markets. Its sixth international office was opened at the end of 1967 in Zug, Switzerland, complementing the company's other trading offices in Amsterdam, Tokyo, Taipei, Montreal, and Mexico City. In total, the growing Commercial Metals empire comprised 32 plants and offices in the United States and abroad by the late 1960s, positioning it as a major competitor in what was becoming an increasingly important and lucrative global industry.

The 1970s and 1980s

The company continued to expand its international network as it entered the 1970s, recording financial growth as its foreign offices solidified their position in respective overseas markets. In 1970, three years into its program to foster trade in Central and Latin American countries, Commercial Metals generated nearly $290 million in sales and earned nearly $6.5 million in net income, the product of the company's resolute expansion during the 1960s. As the decade began, Commercial Metals was obtaining half of its annual sales and 40 percent of its profits from direct trading operations, while, comparatively, the company was deriving a third of its sales volume from the processing of secondary metals, 9 percent from manufacturing operations, and the balance from the production of semi-finished products and other metals-related businesses.

By virtue of its success as a broker, manufacturer, and processor of scrap metals, Commercial Metals soared to the top of its industry, ranking as one of the largest independent companies in the country, but after the encouraging results of 1970, Jacob Feldman suffered a heart attack a year later and the company's financial health likewise deteriorated. Though Feldman remained titular head of the company, Charlie Merritt, who joined Commercial Metals in 1937 as a stenographer, essentially assumed control of the company's day-to-day operations. Under Merritt's stewardship, Commercial Metals' financial growth came to an abrupt halt, but the blame did not rest on Merritt's shoulders. A nationwide recession and laggard demand overseas combined to hamper Commercial Metals' growth, curtailing production volume at its 22 scrap processing plants and diminishing its scrap metals trading activities. Annual sales declined as a result, plunging from $287 million in 1970 to $207 million in 1971, then slipped again the following year, falling to $200 million.

Despite the retrogressive financial slide, Commercial Metals continued to be regarded as one of the largest independent worldwide processors and brokers of secondary metals, so when national economic conditions rallied and ferrous scrap prices rose to as high as $100 a ton, the company benefited commensurately. Annual sales eclipsed $320 million in 1973, then nearly doubled the following year, reaching $643 million, while earnings nearly quadrupled, soaring to more than $19 million.

Once the company's financial health was restored, it diversified into new areas and into new metals. Commercial Metals expanded its vital trading business into commodities such as coal, then bolstered its core businesses when it acquired part interest in two companies in 1976, Corpus Christi, Texas-based General Export Iron and Metals Company and Mobile, Alabama-based Pinto Island Metals Company.

Entering the 1980s, the company was once again subjected to recessionary economic conditions, its financial health drained by the pernicious effects of an anemic economy. Like a decade earlier, however, the passing of time healed all wounds. When the economy recovered, Commercial Metals resumed its strategy of controlled growth and strengthening of its core businesses. In 1984, the company acquired Connors Steel Co.'s mini-mill in Birmingham, Alabama. Next, the company acquired Galveston, Texas-based Island City Iron & Supply Inc. in January 1984, then purchased two additional companies, Newell Recycling Co. and Richelson Iron and Metal, later in 1984.

The following year, 1985, marked Commercial Metals' 70th year of business, a milestone that marked the passing of two world wars and numerous economic hills and valleys since Moses Feldman had arrived in Galveston and founded American Iron & Metals Company. Over the course of seven decades, Commercial Metals had evolved into an internationally recognized firm, involved in three main metals-related businesses through the manufacturing and fabrication of steel products and copper tubing, the recycling of ferrous and nonferrous scrap metals, and the marketing and trading of metals products and raw materials. As the company moved past its anniversary year, it endeavored to augment its core businesses, acquiring Industrial Salvage in Corpus Christi in 1988, two scrap metal yards in Victoria, Texas, in 1989, and the processing operations of four companies, three based in Florida and one in Tennessee, in 1990.

The 1990s and Beyond

The new decade brought the familiar refrain of economic malaise in the United States, but Commercial Metals emerged from the recessive early 1990s with dynamic vigor, its recovery engendered by the gradual recovery of the economy and the strides gained by steel minimills. Minimills such as Nucor Corporation and Birmingham Steel Corporation relied heavily on scrap steel to feed their manufacturing facilities, a dependence that buoyed the price of scrap and fueled Commercial Metals' resurgence. During the 1980s, minimills began to wrest away market share from large steel corporations, increasing their share of total steel production in the country from 25 percent to 35 percent. As minimills grew in stature, producing increasingly greater amounts of the nation's steel output, the price of scrap rose as demand increased, providing Commercial Metals with a much needed boost to its business. Once economic conditions regained their prerecessionary vitality, Commercial Metals began to realize the financial benefits accrued from the burgeoning minimill industry. During the first nine months of 1993, the company's revenues increased 44 percent, while its profits exploded exponentially, jumping a prodigious 135 percent.

With scrap prices remaining at enviable levels, Commercial Metals moved to expand its operations in 1994. In August, the company acquired Jacksonville, Florida-based Tri-State Recycling Corporation, then at the end of the year completed its acquisition of Columbia, South Carolina-based Owen Steel Co. Inc. for $50 million. The addition of Owen Steel, which was renamed SMI-Owen Steel Co. Inc. and absorbed by Commercial Metals' largest manufacturing division, the CMC Steel Group, increased annual steel production capacity to more than 1.7 million tons and raised steel fabrication capacity to more than 500,000 tons.

As Commercial Metals entered the mid-1990s and prepared for the remainder of the 1990s, its expectations for future growth were optimistic, predicated on the anticipated increasing demand for scrap metals and its own stalwart position within the industry as a diversified secondary metals processor, broker, and manufacturer. Lending credence to the company's confidence in achieving sustained growth, sales increased strongly in 1995, climbing from $1.65 billion to $2.1 billion. More encouraging, the company's earnings ballooned between 1994 and 1995, soaring 44 percent to $38.2 million. As these financial records were being achieved, the company strengthened its processing capabilities further, acquiring the assets of three Texas scrap processing facilities, Atlas Iron & Metal, Federal Iron & Metal, and Laredo Scrap Metals, in September 1995.

In 1998 CMC purchased A-1 Iron & Metal Company, one of Houston's major nonferrous metals processors and recyclers. The new acquisition was used to expand the operations of CMC's Houston plant on Quitman Street.

A CMC press release on May 2, 2000 announced the company's acquisitions of two southern California rebar fabrication companies. Operating in Rancho Cucamonga and San Marcos, Fontana Steel, Inc. had been started in 1946 by Paul Ware. It employed over 400 persons. C&M Steel, Inc. was a 40-employee, Fontana company that had been founded in 1983.

Commercial Metals Company reported sales of $2.7 billion and net earnings of $46.3 million for its fiscal year ending August 31, 2000. That compared to sales of $2.3 billion and net earnings of $47.1 million the previous year. CMC Chairman, President, and CEO Stanley A. Rabin also stated in a company press release that CMC's four minimills shipped 1.85 million tons of steel, up from 1.68 million tons the year before.

In 2001 the company continued to grow, partly through acquisitions. Effective February 13, 2001, it acquired Allform Inc. based in Tampa, Florida, with another operation in Orlando. Started in 1984, Allform provided concrete forms and supplies and related accessories for the central Florida area. It became part of CMC Concrete Accessories, Inc.

Strengthened by vertical integration in which its scrap metals production was used in its minimills, Commercial Metals Company seemed well prepared for the challenges of the new millennium. It was diversified to the point where downturns in one part of its business could be offset by good performance in another segment. A still growing U.S. economy in mid-2001 also helped. Of course, with stiff competition from other U.S. steel and metals companies and also foreign steel producers, Commercial Metals Company faced plenty of challenges in the days ahead.

Principal Subsidiaries: AHT, Inc., CMC (Australia) Pty. Ltd.; CMC Commercio de Metias, Ltda. (Brazil); CMC Concrete Accessories, Inc. (90%); CMC Fareast Ltd. (Hong Kong); CMC International (S.E. Asia) Pte. Ltd. (Singapore); CMC Oil Co.; CMC Steel Holding Co.; CMC Steel Fabricators, Inc.; CMC Steel IPH Company; CMC Trading AG (Switzerland); CMC Trinec GmbH (Germany); CMC (UK) Limited; Cometals China, Inc.; Cometals Far East, Inc.; Cometals, Inc.; Commercial Metals - Austin Inc.; Commercial Metals Deutschland GmbH (Germany); Commercial Metals (International) A.G. (Switzerland); Commercial Metals Overseas Export Co.; Commercial Metals Overseas Export (FSC) Corp.; Commercial Metals Railroad Salvage Co.; Commercial Metals SF/JV Co.; Commonwealth Metal Corp.; Construction Materials, Inc.; Daltrading Ltd. (South Korea); Howell Metal Co.; Owen Electric Steel Company of South Carolina; Owen Industrial Products, Inc.; Owen Joist Corporation; Owen Joist of Florida, Inc.; Owen of Georgia, Inc.; Owen Steel Company of Florida; Owen Steel Company of N.C., Inc.; Owen Supply Company, Inc.; Pyrosteel Limited, Sydney (Australia); Regency Advertising Agency, Inc.; SMI-Owen Steel Company, Inc.; SMSI Rebar Coating JV, Inc.; SMI Steel Inc.; Structural Metals, Inc.; Zenith Finance & Construction Co.

Principal Divisions: Manufacturing; Recycling; Marketing and Trading.

Principal Competitors: Nucor Corporation; Birmingham Steel Corporation; Oregon Steel Mills, Inc.; Schnitzer Steel Industries, Inc.

Chronology

• Key Dates:
• 1915: Moses Feldman starts American Iron & Metal Company.
• 1932: Feldman family founds a brokerage house called Commercial Metals Company.
• 1946: Commercial Metals Company (CMC) is incorporated.
• 1953: Charles Harley Company is CMC's first acquisition.
• 1960: CMC goes public.
• 1963: Company acquires 74 percent of Structural Metals, Inc.
• 1967: Company's sixth international office is opened in Zug, Switzerland.
• 1976: Parts of General Export Iron and Metals Company and the Pinto Island Metals Company are acquired.
• 1983: CMC acquires the Connors minimill in Birmingham, Alabama.
• 1984: Company acquires Island City Iron & Supply Inc., Newell Recycling Company, Richelson Iron & Metal, and a minimill in Birmingham, Alabama.
• 1987: Operations begin at minimill in Magnolia, Arkansas.
• 1989: Two Victoria, Texas scrap metal yards are acquired; CMC acquires Hope, Arkansas' Tex-Ark Joist Company, which becomes SMI Joist Company.
• 1993: CMC begins chain of concrete supply stores through purchase of Shepler's in Houston.
• 1994: Tri-State Recycling Corporation and Owen Steel Company are acquired.
• 1995: Atlas Iron & Metal, Federal Iron & Metal, and Laredo Scrap Metals are acquired.
• 1998: Company acquires Houston-based A-1 Iron & Metals Company, Inc.
• 1999: CMC acquires Suncoast Steel Corporation and Construction Materials, Inc.
• 2000: Company announces its 25 percent stake in Europickling NV; CMC acquires Fontana Steel, Inc. and C&M Steel, Inc., both in southern California.
• 2001: CMC acquires Allform Inc. of Tampa, Florida.