Hello and welcome everyone to the Third Quarter Fiscal 2020 Earnings Call for Commercial Metals Company. Today's call is being recorded. After the Company's remarks, we will have a question-and-answer session which will have a few instructions at that time. I would like to remind all participants that during the course of this conference call, the Company will make statements that provide information other than historical information and will include expectations regarding the economic conditions, the impact of Covid-19, effects of legislation, U.S. steel import levels, U.S. construction activity, demand for finished steel products, the Company's future operations, the Company's future results of operations and capital spending. These and other similar statements are considered forward-looking and may involve forecasts and are subject to risks and uncertainties that could cause actual results to differ materially from the expectations. These actual results – these statements reflect the Company's beliefs based on current conditions but are subject to certain risks and uncertainties, including those that are described in the Risk Factors and forward looking statements disclaimer section on the Company's latest annual report and Form 10-K and subsequent quarterly reports from Form 10-Q. Although these statements are based on management's current expectations and beliefs, CMC offers no assurance that these expectations or beliefs will prove to be correct and actual results may vary materially. All statements are made only as of this date. Except as required by law, CMC does not assume any obligation to update, amend or clarify these statements in connection with future events, changes and assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or otherwise. Some numbers presented are non-GAAP financial measures and reconciliations for such numbers can be found in the Company's earnings release or on the Company's website. Unless stated otherwise, all references made to year or quarter-end are references to the Company's fiscal year or fiscal quarter. And now, for opening remarks and introductions, I will turn the call over to Chairman of the Board, President and Chief Executive Officer of Commercial Metals Company, Ms. Barbara Smith.

Good morning and welcome to our third quarter earnings conference call. I’d like to begin with a sincere thank you to our 11,500 CMC employees around the world. The Covid-19 crisis forced each of them to make significant adjustments and sacrifices in nearly every aspect of their lives. In the phase of these challenges, they proved they are adaptable, creative and collaborative, while showing their commitment to their communities, and each other through countless acts of kindness. The last several months clearly demonstrated the power of CMC’s people and our culture. They are the backbone of CMC and I am enormously proud of how they performed during this personally and professionally difficult time. Turning to our third quarter results, I will now review highlights from the quarter including a discussion of the impact of COVID-19, as well as our response to the crisis and also provide a brief update on current business activity levels. Paul Lawrence will then cover the quarterly financial information in more detail and I will conclude our prepared remarks with a discussion of our outlook for the fourth quarter of fiscal 2020, after which we will open the call to questions. As announced in our earnings release this morning, we reported fiscal third quarter 2020 earnings from continuing operations of $64.2 million or $0.53 per diluted share on net sales of $1.3 billion. Excluding the impact of certain charges which Paul will cover in more detail our adjusted earnings from continuing operations were $70.4 million or $0.59 per diluted share. Both our GAAP and adjusted earnings from continuing operations increased sequentially from the second quarter. CMC’s entire third quarter was impacted by the COVID-19 pandemic. From the onset of the crisis, each of the U.S. jurisdictions where we operate, CMC was recognized as an essential business…

Thank you, Barbara, and good morning to everyone on the call today. I would like to begin with a few comments regarding CMC's balance sheet and liquidity profile, which is currently at its strongest levels in well over a decade. Our purposeful actions over the last several quarters to reduce debt levels have positioned us well to maneuver through today's uncertain environment. As Barbara mentioned, net debt stood at just 1.2x trailing EBITDA at quarter end and our gross debt ratio was two times. We have a conservative capital structure with net debt of only approximately $700 million outstanding. Given the current economic backdrop, we are encouraged to see each of our bonds trading above par a sign that creditors also appreciate our solid financial position. At quarter end, we had liquidity in excess of $1 billion including $462 million of cash, and $604 million of availability on our credit and accounts receivable programs. We currently have no plans or need to draw against our credit facilities. Turning to the third quarter financial results, we reported earnings from continuing operations of $64.2 million or $0.53 per diluted share, compared to $78.6 million or $0.66 per diluted share in the third quarter of 2019. We incurred net after-tax charges of $6.2 million during the quarter, primarily related to our decision to continue to consolidate our West Coast operations and exit a Fabrication facility. This is another action in our ongoing effort to optimize CMC’s network following the 2018 rebar asset acquisition. Vast majority of the charges taken were non-cash and we expect to realize cost benefits in future periods. Our core EBITDA from continuing operations was $154.8 million for the third quarter of 2020, a slight increase from the $153.6 million reported in the third quarter of last year despite the…

Thank you, Paul. As we previously indicated, CMC exited the third quarter with near record level backlogs. This will support fourth quarter shipments at our Americas Mills and Fabrication segments where we expect normal volume seasonality despite COVID-19. Fabrication margins are anticipated to remain strong as we continue to benefit from a solidly priced backlogs and easing of input costs. Recycling should return to a modest profitability with activity levels picking up from depressed third quarter levels. International Mill performance is expected to be relatively stable quarter-over-quarter. Stepping outside of our internal view, I’ll share the 2020 and 2021 outlook published last week by the Portland Cement Association, one of the most reputable forecasters of construction activity. The organization expects cement consumption to decline just under 4% this calendar year followed by roughly 1% growth next year. We are proud of our company’s excellent third quarter performance, the strong profits and cash flows are a result of the extraordinary efforts of our CMC team. The last three months were unlike anything we’ve ever experienced. The determination, creativity, and collaboration of our people, which is the CMC way, steered our company through every challenge and brought us out stronger than ever. Thank you. And at this time, we will now open the call to questions.

[Operator Instructions] Our first question today will come from Chris Terry with Deutsche Bank. Please go ahead.

Hi, Barbara and Paul. Thanks for your comments. My question just relates to the overall market in terms of the backlog and what you are seeing there. In some of the comments you indicated that it may have shortened a little bit, so just wanted if you could elaborate on maybe some more detail on your specific backlog? And then, as part of that question, I noted the market share comments. You’ve done a great job with it during the quarter. Just wanted if you could comment on other opportunities there and whether you think you’ll be able to continue to get market share in future quarters?

Yes. Excuse me. In terms of the backlog, our backlog is extremely strong as we indicated. And in every year, our backlog has a certain amount of seasonality in it. Construction is obviously impacted by weather and so this is the busy time a year when you move into spring and summer. And typically, you tend to see the backlogs go down a little bit in the fall and then it picks back up as you enter the New Year and build for the spring. But what I would – so, we are not seeing any change in and in a normal pattern of our backlog. We are obviously monitoring that carefully given the economic carnage from COVID-19. But, thus far, we are not seeing any project cancellations to speak of. We continue to see good projects to bid on. We continue to see a nice booking rate which follows historical patterns. So, we are really pleased with how that’s evolving and of course, many states are reopening and economic activity is beginning to pick up nicely. In terms of the market share, and we had a stated strategy to grow our merchant business and with the added flexibility of our larger mill footprint that gives us more flexibility for the mills that do produce merchant products. We have made some rather small investments in order to improve that product offering, increase the size ranges available, be able to better protect the product in a climate-controlled environment in certain geographies. And I would remind you that there was some capacity that has been taken out of the market on the merchant side and that has presented a nice opportunity for us to step in and supply the needs.

Great. Thanks, Barbara.

Thank you, Chris.

And the next question will come from Seth Rosenfeld with Exane BNP Paribas. Please go ahead.

Good morning. Thank you all for taking my questions today. If I may, I have a question with regards to the outlook for conversion cost within Americas Mills. Obviously very strong performance this past quarter significantly improved after the Gerdau acquisition. How should we think about this on a go-forward basis? Are we now approaching a, kind of post-Gerdau steady state worker down conversion cost for on par with the legacy commercial metals assets? Or do you see any significant more to come? You could comment on some of the non-cash charges in this past quarter. How much contribution if anything from that moving forward? And then, secondly please, with regard to the outlook for working capital, obviously strong release this past quarter. Do you please give some little bit of guidance on the outlook for Q4 and past going into 2021 assuming the market continues to strengthen. Thank you.

Good morning, Seth. Yes, as far as conversion cost fits, if we look year-over-year, again we see a huge benefit in terms of the decision that we took in terms of closing the melt operations in California and that’s – that really has provided a significant opportunity for us to drive the overall costs lower. In addition to that, there – because of some of the negative economic activities, we’ve seen some deflationary pressures in some of the costs, some of the alloy pricing has come down and some of the electrode costs have also come off certainly their peaks from 12 to 18 months ago. And so, we believe that these costs that we saw in this past quarter certainly are things that we can continue into the future. I think in addition, we are not done optimizing the network of facilities and there are still opportunities to drive these costs lower. But I think you will see cost in the fourth quarter probably be similar to what we had in the third quarter. With respect to working capital, we are obviously very proud of the release of working capital in the quarter. If we look at the components of what drove that is, we saw some tightening in terms of the days receivables and days of inventory that we have outstanding at this time. So those were very prudent measures that we took in order to manage our working capital levels as we got ourselves into this uncertain period. But we also saw a fair bit of valuation reduction in terms of our inventory levels, given that the value of scrap in the second quarter was substantially higher than what it was in the third quarter. We do see however, as we look forward that the fourth quarter will likely be another generator of working capital. There is still more opportunity, but it certainly won’t be at the same level as the third quarter unless of course we have a major price change of the underlying assets which we don’t see.

Great. Thank you very much.

Thanks, Seth.

The next question will come from Timna Tanners with Bank of America Merrill Lynch. Please go ahead.

Yes. Hey. Good morning. Wanted to ask about a little bit more about the American Mill – Americas Mills segment. Just broadly, when you made the comments, Paul talked about single-digit declines, potentially in construction relative to double-digit declines for overall steel. Is that just using like high level industry forecasts? Or is there something specific you are seeing there that you can talk through and what timing you are referring to? And also on the Americas Mills, if you could talk a little bit about the supply side in terms of the – if you are seeing much impact of the increase in imports in April and May and some new supply coming into the market. Thanks.

Thanks, Timna. Hope you are doing well. So, as you can appreciate, everybody is trying to get their arms around the go-forward forecasts coming out of COVID-19 and what I would say is that, each time we see some expert in the market and there are many, many indicators that we all follow. The revision seems to more optimistic. In other words, the magnitude of economic decline following the pandemic is not as dramatic as what folks thought two or three months ago when we were in the beginning of it. So, what I reported was the Portland Cement latest projections which is calling for a 4% decline year-over-year in cement consumption for 2020 and then a rebound of 1% next year. And we highlighted that one because we have found of all the indicators that we monitor Portland Cement tends to be fairly accurate in their projections. But, clearly, there is a lot more that we need to monitor and watch is, as time moves on. But I am still fairly optimistic in the go-forward, because of course, the President is discussing his Infrastructure Bill. The House and the Senate have a proposal out there and that’s before you think about onshoring or reshoring of manufacturing and supply chain adjustments that may occur as a result of this. But certainly, we are going to continue to monitor all the different market projections going forward. On the supply side, you are very familiar, of course with the capacity coming online. More specifically, the two NUCOR rebar mills and Sedalia is coming online and of course NUCOR will update their progress on that and we are starting to see a bit of that product in the market. But, as they had plans to introduce that commercially, we had plans to make…

Okay. That’s really helpful overview. Thanks. And then either a question I want to sneak in if I could is just on the mention of the much improved liquidity or the best liquidity in over a decade is I think a really important point. And I just wondered if along those lines you could update us on your capital allocation priorities, any thoughts on M&A or increasing the dividend or other uses of cash and what timeframe are you thinking with it? Be to get past this current environment or are you thinking maybe opportunistically about opportunities really in the downturn?

Thank you, Timna. We are so proud of where we stand. Of course, we could never have anticipated that we would be facing a global pandemic, but this is a cyclical business. So you always need to protect the balance sheet for any unexpected situation. And so, it’s really helping us in this current moment. And having said that, this could be a moment where there are opportunities that present themselves. And I think that we are in a position where we have enormous flexibility for potentially M&A if it were to present itself. The dividend, we have a fairly robust dividend and it’s certainly something that we look out on a continuous basis. I think we would like to see a little more clarity before making a dividend change. So we have all options available to us. see :

Okay. Thanks again.

Thanks, Timna.

The next question will come from Phil Gibbs with KeyBanc Capital Markets. Please go ahead.

Hey. Good morning, Paul and Barbara and team. How are you?

Doing great.

Good. Pricing in Americas Mills, I think was pretty stable quarter-on-quarter and we’ve seen some easing at least in the indications from folks like Platts just in the rebar pricing. And clearly that didn’t play out as a result. So I am curious if this is a product mix issue or any good way or a timing thing where we may see some pricing creep down in Q4. You’ve obviously given the outlook on the volume side, but I am curious in terms of spreads?

Yes, Phil. We really don’t give pricing guidance. That’s an area that we don’t step into. However, we manage the business by trying to manage the metal margin which really what drives our earnings and our results. And I think, Paul gave some great information around the stability of metal margin in this space owing in part to relatively strong construction markets, but also I think it speaks to our commercial approach and it speaks to the benefits of the acquisition that we did in 2018. But if you go back in time, rebar metal margin have had a lot more stability and a tighter range around peak to trough than many other steel products. And we believe over the long-term, given the repositioning of our portfolio, that will be to more stability in our margin and our earnings profile when compared to other products that tend to have a lot more volatility in their metal margins.

Thanks, Barbara. And I know you have an expansion project in Poland that you talked about a handful of times on these calls over the last couple of years. Where does that project stand right now? And maybe you can remind us what it is or what the timing is and what the benefit is to you all over the next, call it, mid-term time horizon?

Yes. Good morning, Phil. The Polish investment is progressing well. Earlier this fiscal year, we received all of the necessary permitting and are continuing to complete that project. We are looking to start commissioning near the end of fiscal 2021 and just by way of reminder, this was a project to debottleneck our rolling activities in Poland to really free up an incremental 200,000 tons of capability at the site for some of the higher margin wire rod products that we produced in Poland. And so, it is an attractive project from an overall return perspective. But from an overall incremental impact to our business, we are looking at 2022 and it will ramp up through that fiscal period to start contributing to our earnings.

What’s the investment cost, Paul?

It’s approximately $80 million.

And have you all started spending that money yet?

Yes. At this stage, it’s approximately half spent.

All half spent. Okay. Thank you. Appreciated.

Thanks, Phil.

Thanks.

Next question will come from Andreas Bokkenheuser from UBS. Please go ahead.

Well, thank you very much. Thank you for taking my question. Just a brief two-part question for me related, it’s been a little while now since your rebar asset acquisitions in the U.S. The question is really, what were the kind of the problem areas you saw in those existing assets and that made you think that we can do a better job with these assets? And could you give us just an update on how that’s going now that you’ve been operating them for a while? Those are my questions. Thank you very much.

Thank you, Andreas. Well, we are approaching 18 months of operating the combined platform of assets and really the biggest area of opportunity that we saw was to have a consistent commercial approach and to improve the overall service to the customers. The assets were fairly well maintained. Initially, we thought we would have to put a bit of capital into the assets, but after taking ownership, the capital need has not been as great as we originally anticipated. But a lot of it is just basic locking and tackling in terms of really more on the customer service side and having the appropriate inventory available. Those assets had been starved of working capital which did not give them any flexibility to serve the customers’ needs. The other opportunity for us is really optimizing our network of operations and servicing the customer from the lowest cost site. And not freighting product past one facility to the end-customer. So there has been some logistics savings and that type of things. Interestingly enough, there were even leverage by procurement savings. We didn’t expect that, because Gerdau is a much larger company. So we thought they had more leverage over their supplier. But there were even opportunities in that regard. So, I think, it’s just been a home run for us all the way around and while we do see some opportunities going forward in terms of continuing to optimize the network and maybe bring out some additional working capital and it’s just our nature to constantly be working on cost opportunities. But at this point, we are well past the integration of those assets into our complete portfolio. And I would further add that, we acquired a lot of really talented individuals and it was really giving them the tools that they needed to be successful and they have fully embraced and just really delivered beyond our expectations.

That’s clear. Thank you very much.

Thank you.

[Operator Instructions] Now our next question will come from David Gagliano with BMO Capital Markets. Please go ahead.

All right. Thanks for taking my question. Since you mentioned the potential for infrastructure spending specifically as another potential tailwind, I do want to drill down on this a bit more. And I think a lot of us that have been around for a while have actually been down this path a few times. We had the joy of trying to frame what the actual impact on steel consumption in the U.S. would be from a – say, for example, a $1 trillion spending bill, based on things like steel intensity of projects, total capital cost and projecting that over a $1 trillion incremental spending boost. And I think many came to the conclusion that it may not necessarily be this massive demand booster that obviously the headlines would imply. Definitely helps obviously, but perhaps not a massive demand boost and it could even incentivize more supply that is needed. And then there is also a time lag issue I think that comes up as well. So my question specifically is, what do you think the specific impact would be on steel consumption in the U.S. from a – for example, $1 trillion spending bill and what do you project to be the timing of the onset of that impact in terms of actual orders for steel?

Well, thank you, David. And you are right. Infrastructure is the topic that’s been something certainly I talked about for the last ten years that I’ve been around CMC and fifteen years in this industry. And I think what’s encouraging about the current situation and we are not really even thinking in terms of the President’s $1 trillion. What you have is a House proposal on the table and you have a Senate proposal on the table. And you have the existing FAST Act which is due to expire at the end of September. So, first and foremost to have both the House and the Senate have a proposal on the table at this stage is a good development. It’s not something that we’ve seen historically. Second, both bills are an increase over the existing spending in the existing FAST Act. I think that there is no debate over the need for and that has never been the issue. I think – but there has been an unwillingness of both sides to come together to, to agree on something. And I think that, the pandemic, both sides of the aisle are highly incented to help the U.S. economy recover from the after effects and that means, creating jobs and jobs that create economic value. And building our infrastructure is vitally necessary for the United States to remain competitive over the long-term. So, I think, there is going to be something that they can agree upon and I think it will be above the current spending levels. And there are many people that will make predictions on what the increase in steel demand will be as a result. We do our own projections and our estimate would suggest that there is any one – anywhere from 1 million to 1.5 million…

Okay. That’s helpful. I appreciate. I think there is some misquotes out there on Bloomberg. So I really appreciate clarifying the views on potential for an infrastructure spending package. Appreciate it. Thanks.

Thank you, David.

At this time, there appears to be no further questions. Ms. Smith, I’d now like to turn the call back over to you.

Thank you, Sean. Thank you all for joining us on today’s conference call. We look forward to speaking with many of you during our investor calls in the coming weeks. Have a great afternoon. Thank you.

This concludes today’s Commercial Metals Company conference call. You may now disconnect.