Hello, and welcome everyone to today's Commercial Metal's Company Third Fiscal Quarter of 2017 Earnings Call. Today's call is being recorded. After the Company's remarks, we will have a question-and-answer session and we'll 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 key macroeconomic drivers that impact our business, our margins, the effects of ongoing trade actions, refinancing plans, the exit from our International Marketing and Distribution segment, the Company’s future operations, the Company’s planned new steel mill in Oklahoma and capital spending. These statements generally can be identified by phrases such as we, the Company, CMC or management, expects, anticipates, believes, estimates, intends, plans to, ought, could, will, should, likely, appears, potential, outlook, or other similar words or phrases. These and other similar statements are considered forward-looking within the meanings of federal securities laws and may involve speculation, and are subject to risks and uncertainties that could cause actual results to differ materially from these expectations. These statements reflect the Company's expectations and beliefs based on current conditions, but are subject to certain risks and uncertainties, including those that are described in the Risk Factor section of the Company's latest Annual Report on Form 10-K. Although these statements are based on management's current expectations and beliefs and the Company believe that such expectations and beliefs are reasonable CMC offers no assurance that events or facts will happen as expected and we caution those listening to this call to not place undue reliance on any forward-looking statements. 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 in assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances, or otherwise. Some numbers discussed or presented will be 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 third quarter are references to the Company's fiscal year or third fiscal quarter respectively. And now, for opening remarks and introductions, I will turn the call over to the Chairman of the Board, and Chief Executive Officer of Commercial Metals Company, Mr. Joe Alvarado.

Good morning, and welcome to everyone joining us to review the results of our third quarter 2017. Today I am joined by Barbara Smith, President and Chief Operating Officer, and Mary Lindsey, Vice President and Chief Financial Officer. I will review highlights from the quarter and then Mary will cover the quarter financial information in more detail. Afterwards, I will conclude our prepared remarks with some comments on our recently announced exit from the International Marketing and Distribution segment and a discussion of our outlook for our 2017 fourth quarter after which we will open the call to questions. As announced in our earnings release this morning, we reported net sales of $1.4 billion for our third quarter 2017 and we are particularly pleased to report that our net earnings were $39.3 million or $0.34 per diluted share. This is our best third quarter since 2012. Also as noted in our press release on June 21, our Board of Directors declared a regular quarterly cash dividend of $0.12 per share of common stock for stockholders of record on July 6, 2017 and the dividend will be paid on July 20, 2017. This cash dividend reflects CMC's 211th consecutive quarterly dividend. Now I’ll cover current trends and conditions in the markets in which we operate. First and foremost, continued optimism of a growing U.S. economy led to strong results in our third fiscal quarter of 2017. As of April 2017, non-residential construction starts have increased almost 15% in comparison to the prior year. Additionally, the Architectural Billings Index a leading indicator of construction activity has been above 50 for three consecutive months providing confidence that construction growth should continue. While the demand for construction products particularly rebar is very strong, supply side factors in the U.S. have negatively impacted margins resulting…

Thank you, Joe, and good morning to everyone joining us on the call. As Joe mentioned for our 2017 third quarter, we reported net earnings of $39.3 million or $0.34 per diluted share, which compares to net earnings of $19.3 million or $0.17 per diluted share for the third quarter of the prior year. Adjusted EBITDA from continuing operations of $96.9 million represents the strongest quarterly result since our third quarter of 2015. I'm also pleased to report that similar to last quarter, all of our operating segments contributed positively to these results. Summarizing our results by segments, the 2017 third quarter Americas Recycling segment results were very strong, reflecting the impact of strong flows through the yards and resulting in $9.3 million of adjusted operating profit for the quarter in this segment. As you will recall, this is the second consecutive positive quarterly adjusted operating profit after a number of quarterly losses. I am pleased to report that the seven recycling yards in the Southeastern U.S., acquired at the beginning of the quarter have been integrated with the Commercial Metals systems and processes and generating a positive contribution to our results this quarter. Our Americas Mills segment recorded adjusted operating profit to $50.7 million for our third quarter 2017 compared to adjusted operating profit of $55 million for the same period in 2016. As Joe previously mentioned, strong end market demand resulted in shipment volume increasing by almost 10% when compared to our prior quarter. With relative stability in scrap costs during the most recent quarter, there was not significant difference in cost of material produced versus sold that occurred in the prior quarter. While selling prices increased $16 per ton is compared to the prior quarter yielded scrap cost increased $21 per ton. However, we were able to…

Thank you, Mary. We recently announced the strategic decision to exit the International Marketing and Distribution segment. The first step in that process is a definitive agreement to sell the CMC Cometals Division to Traxys, Carlyle. We've also committed to pursuing the sale of our steel product trading business Cometals Steel Division, which is located here in Irving, Texas as well as the restructuring and sale of our remaining trading operations in Asia and Australia. These actions will allow us to focus our capital and other resources on our core steel manufacturing operations in the U.S. and Poland. Our fourth quarter is typically a strong shipping quarter as construction seasons in both the U.S. and in Poland are in full swing. And most indicators point to the continuation of strong demand for our products for the balance of 2017. We also expect margins to remain stable similar to what we saw in the third quarter. We’re also encouraged by the recent focus of the U.S. administration on an infrastructure regeneration program and simplifying of the permitting process associated with project initiation. While it is too early to tell how or when these policies may contribute to improve results. We believe Commercial Metals is well poised to benefit from any incremental infrastructure spending. This is an exciting time for Commercial Metals Company. We are reallocating capital to businesses that generate higher returns for our shareholders. Activity on the trade front and the apparent need for infrastructure spending gives us confidence in our strategic direction. In the meantime, we remain operationally focused on what we can control. The service levels that we provide our customers and our quest for continuous cost reduction. These elements are essential to our long-term success and while we support efforts aimed at a reduction in the flood of unfairly traded imports. We are also committed to ensuring our competitiveness regardless of the environment we are faced with. Thank you for your attention. And at this time, we will now open the call to questions.

We will now begin the question-and-answer session. We request that you ask one initial question and one follow-up question. If you have additional questions please reenter the question queue. Follow-up questions will be addressed if time permits. [Operator Instructions] Our first question comes from Evan Kurtz with Morgan Stanley. Please go ahead.

Hey. Good morning Joe, Barbara, Mary. Hope you are doing well.

Good morning.

Good morning.

So first question is just on rebar, I think we talked a little bit about last quarter, a large buildup of inventory at the ports as a lot of materials kind of coming in, maybe in – trying to get in ahead of some of these trade cases. And I think that created a little bit of an overhang in the market, and I just wonder if you can give us an update on where kind of the inventories are at the port these days and if you would expect the margins maybe to improve a little bit in the second half of the year given that we have seen some trade protection and at some point I would assume we would start to dissipate some on those inventories?

Yes. Thanks. There is still a good amount of the inventory in Port of Houston somewhere in 160,000 to 180,000 tons. So it's still going to take some time for that inventory to make its way through the system. And therefore, in terms of margins, we would welcome the opportunity for margins to improve. It’s definitely pressured things over the last 12 months to 24 months, but it's a bit early to make predictions there at this point.

Okay, thanks. And then my second question is on international manufacturing. So historically I’ve always used a rebar price, actually the crude rebar price in Germany to kind of forecast and back check your results in your ASPs in that segment and for years and years and years, it was almost identical, the series is really messed up really well. But I notice beginning kind of in 2016, your ASPs started to creep against just the kind of the rolled rebar number and I'm assume a lot of that has to do with some of these mix improvements that you’ve been talking about in selling more merchants in Europe. And I'm just trying to get a sense of how sustainable that is and how we are or how you should are thinking about how your mix is going to look like going forward?

Yes. Well, this has been a long-term strategy and we had made investments in Poland to increase our capability to produce merchant product and we felt as the Polish economy evolved into more of a consuming economy that there would be more demand for merchant. So this has been a long-term key strategy for us at the Polish operation and [Indiscernible] and his team have done a good job of selling the merchant product into the market. So it is part of our overall strategy there. There are obvious seasonality factors that will play into this. Poland has harsh winter, which tends to slow construction activity and that's where merchant and other products that tend to have a more steady flow are also important to us. But I think the mix – it will fluctuate throughout the year, but definitely we would like to have 20% plus mix of merchant off of that mill.

Okay. And where are you today if 20% is your goal?

We reported shipments in the most recent quarter at 35% level. So that’s a really good month, it's a record quarter – that's a record quarter for us and our merchants, but as Barbara said that we've been aiming to grow that business and so we're seeing success.

Okay. Great. Thanks. I’ll hand it over.

The next question comes from Curt Woodworth with Credit Suisse. Please go ahead.

Yes. Hi, good morning.

Good morning.

Good morning, Curt.

So I just wanted to know what level of interaction you're having with [Commerce or Ross] [ph] on the 232 and do you – what you know today, do you think it's likely that will come out with some sort of product specific quota or tariff rate quota system?

Yes, I was in Washington and testified in front of Wilbur and the Commission for the 232 case. We're obviously following the developments very carefully and there's a lot of speculation out there as to which direction this is going to take. I think we're going to have to just wait and see what he delivers in terms of a recommendation to the President and we would anticipate that shortly.

Okay. And then just in terms of rebar sort of price dynamics, I get that there is a fair amount of inventory at the port, but you've got sort of total trailing 12-month imports from Turkey at one point - I think 5 million tons, 70% of the total allocation of the rebar imports coming to this country. I mean given your thoughts that I guess metal spreads stays sort of flat should we think about that as these tariffs that just came in, you said 21% on the largest supplier effectively aren’t effective either because a) you need to work through the inventory, there's enough slack capacity in the U.S., or you think that the remaining producers in Turkey are hit with this mean 8% level, that's a level that will allow them to just kind of replace other suppliers?

Yes, so metal spread compresses over time and so it's going to take time for margin expansion as well and there are many different factors. There is excess capacity here in the U.S., in other words the rebar mills in the U.S. are not running full. So as the tariff start to take effect that's going to be a good situation overall for rebar producers because it should give some relief on the margin side, it should give some additional volume to take up some of the slack capacity here in the U.S. I'm just merely suggesting that margins compressed over a long period of time and so margin expansion will probably follow the same pattern. But overall, we're very pleased with the outcome of this most recent case while we always would welcome a higher duty, a more prohibitive duty and some producers have the more modest duty, but certainly the 21% is going to be quite helpful, but it's going to take a little bit of time for all of the supply chain to adjust and for that to flow through the market.

Okay, understood. Thank you very much.

The next question comes from PT Luther with Bank of America Merrill Lynch. Please go ahead.

Hi. Good morning, everyone. How are you?

Good morning, PT.

Good morning.

Wonder if I could start with demand, some of your peers recently put out some guidance cited some disappointing piece of activity in non-res construction and you didn’t really allude to that in your commentary this morning. So I just want to drill bit further to see if you're seeing any sort of change in momentum on the construction side?

Quite the opposite and then reading comments of some of the others, it wasn't that demand will slack; it wasn't as good as anticipated where we're seeing good demand and market is strong. That was part of our prepared remarks is that we've seen the year-on-year improvement about 15% in non-res. So we see good healthy demand. The leading indicators like the ABI also suggests continued strong demand. The issue for us has been more as Barbara just talked about on the compression on metal margins affecting our results, not inside of demand issue for us, demand remain strong and robust, and we're encouraged by the activity that we're seeing.

Okay, great. And then if I could switch over to the domestic fab side, there was a bit of an improvement in quarter-over-quarter in terms of the profitability there. I'm wondering if you're seeing any sort of inflection point on that competitive pressure that's been building over the past year or if that's largely unchanged from recent quarter or from the past quarter?

Yes, I think part of the change was the contribution coming from our most latest acquisition now in Hawaii, ASW. Overall, there continues to be significant margin pressure on the fab side, particularly when – well, we just have seen the margin impression as we're cycling through that backlog, it's going to take some time for that to work through the balance of the backlog.

Okay, got it. Thanks Barbara and Joe. I’ll get back in queue.

The next question comes from David Deterding with Wells Fargo. Please go ahead.

Hey, Joe, Barbara, and Mary. Good morning. Just quick question. I know we've talked several quarters now about haven't seen FAST Act money kind of coming to the state level and being spent. Are you starting some of the channel checks that we've had, we're starting to see that being allocated at the state level and would expect that to pick up as we move into 2018, no matter what happens out of Washington on an new infrastructure bill? Can you just comment on what you're seeing there in your markets?

Yes, David I think that's consistent with what we're seeing. Actually infrastructure is a very broad category, but we are seeing an increase in streets and highways and bridges that’s slightly up year-over-year. And I think we've talked about this in the past. There are 17 states who have initiated either gas or sales in [huge] tax increases to fund their matching portion of the FAST Act, so that together with other data would suggest that we are seeing that, start to make its way into the market and that's a good sign.

Perfect. And then just moving over to the balance sheet, you guys have a maturity coming due really in about 30 days and I know we've kind of not talked about it for five or six months now, but any updates on how we think about the balance sheet and bond maturities going forward?

Yes. Thanks. Well, the balance sheet as it stands is in very good shape as you're well aware and we continue to watch the market very carefully and obviously we'll be making some decisions regarding the maturity in the next month or so. We’ve got plenty of options given the balance sheet strength and more to come. I really probably – at this point can’t say anymore about exactly what the plan will be. But obviously we're taking a careful look at it on a daily basis, keeping an eye on the markets and our own performance and fortunately that’s been very good.

Great. Thank you.

The next question comes from Martin Englert with Jefferies. Please go ahead.

Hi. Good morning, everyone.

Good morning.

Hi, Martin.

Within recycling, did the segment benefit from any inventory holding gains quarter-on-quarter and was there anything with purchase accounting gains or losses for the quarter?

No I mean the gains in recycling were really related to volume and pricing and there were new inventory pick up during the quarter. So it's really pure performance of the segment and just reflecting the strength in the market.

Okay. And the nothing with purchase accounting…

Excuse me. I should add – again I mean we had some good contribution from the seven recycling yards that we acquired in the East of the United States as well.

Okay. And how did that contribution compare from the seven new yards versus I guess the aggregate operations?

Well, we really not going to disclose any specifics, but I would say that the contribution was very good and we'll just continue to get the benefit from then on a going forward basis.

Okay. Thank you very much.

The next question comes from Jorge Beristain with Deutsche Bank. Please go ahead.

Hey, guys. Good morning.

Good morning, Jorge

Question on the $25 rebar price hike, is that sticking and what's your feedback from customers?

Well, we're encouraged by the recent trade action, which has certainly taken Japan out of that West Coast market and so as I indicated earlier that does give us more opportunity for volume and potential margin expansion.

Okay. And then on the trading business, can you comment on the split between what is steel trading and what is raw materials business just for our modeling purposes when we divest that unit or part of the unit?

Well, the business will be moving down to discontinued ops and with the sale of Cometals, there are some regulatory filing and the closing date is not yet set for that, but maybe that something Mary could probably take up with you offline to help you with your modeling, but it will certainly continue to show in our results until that that closing and then the remaining business will be dropped down to discontinued op.

Okay. Sorry, the entirety of the business, not just the part that's been sold?

Right.

Correct, correct with our announcement to exit the entirety of the business, yes.

Okay and maybe just one last question. On the fab side, what are your backlogs looking like we seen obvious the EBITDA still fairly anemic there, but are you seeing growing backlogs at this point?

I would say our backlogs are healthy and steady. They have been flow quarter-to-quarter, but there is definitely good activity to bit on and we're seeing stable good levels in our backlog.

Okay. Thank you.

[Operator Instructions] The next question comes from Phil Gibbs with KeyBanc Capital Markets, Inc. Please go ahead.

Hey, good morning.

Hey, good morning Phil.

Good morning, Phil.

I had a question on the volumes for both Americas Mills and Poland. Are you anticipating that volumes will be up a bit further this quarter versus last quarter, given the normal seasonality we see in construction or what’s your comments more towards stability versus 3Q?

Well, hi, Phil. This is Mary. The third quarter typically the strongest quarter from a volume perspective, so we're going to see the effect of the seasonality and while we do expect volumes to remain good, we're going to see that typical lower volume effect we believe in the fourth quarter as well.

So volume is actually a little lower than the third quarter than as what you signed?

Yes.

Yes. Third is usually strongest. Fourth is second strongest quarter and then we get into weather and holidays in the first and second quarter. But as Mary said, we expected to be still good and strong, but some seasonal pullback.

Okay. And the Fabrication business in this past quarter, do you think that fabrication spreads although they maybe slow to rebound as you noted? Do you think that they hit their practical low point here in the third quarter or is there more to go?

Phil, we are looking for the bottom on pricing and it's hard to call that at this point and as we discussed earlier, there's still quite a bit of import inventory on the ground as to make its way through the system and that's an alternative and that tends to put a lot of pressure on fab pricing, so probably a little too early to call in.

Okay. And then just the last one here, I have real quick. You mentioned oil and gas being a nice contributor to iMD which makes sense. Is that business with then the Cometals piece that you sold on the raw material side, or would that be contained in the steel products business? Thanks.

As far as part of our steel trading activity.

Thank you.

The next question comes from John Tumazos with John Tumazos Very Independent Research. Please go ahead.

Thank you very much. Congratulations on the Cometals decision. I guess something like a half century ago different business is merged to form Commercial Metals and some were manufacturing and some were marketing or trading. Does this signal – should we view this is a one-off event or is there a broader effort to simplify the Company and focus on the particular businesses with the lowest variability and the highest return?

John, I’ll take the question and just take you back a little bit. We've been focusing on everything we can improve the performance of the Company and that meant calling out some businesses and then strengthening other parts for business. So we've been reallocating capital on a regular basis and this is just another move in the same direction and it is of course directed towards improving our returns and shareholder values. So it's not new. It's a major decision in that. As you point out, we've been in the trading business for a long time. The genesis of the Company was in recycling, which itself is a trading business, which is still an important part of our manufacturing segment. But the raw materials and steel trading business model is one that’s challenge and one that we believe – the decision would allow us to better focus our investments in the highest priorities of projects that we're looking at and faced with in terms of recapitalizing or reinvesting in our facilities.

Is there a particular structural change in the physical trading business Glencore going public or Noble being in distress or why do you think the business was better 10 or 20 years ago?

I'm just going to speculate and say that there's a lot of things that have changed, but this does not leases, which is better flow information on a global basis. And I think in the past some of the street would look at us as having some good deep inside information on global activity and I think we did have the information. That information gets some [dated] more wide decision to the fact that there is significant global overcapacity and mean that commodity pricing volatility is – I think little bit sharper and it times little bit more difficult to control to the point that we would get the returns that we're looking for. So that's why we made the decision and in this case of the decision with Cometals will be with the Company that has a different capital structure and one that will be good for that business. So we have different priorities and needs in our business and things change over time all the time. And one thing that we’re custom to as we look back at our history when we try to capture that at our 100 year anniversary is just how many times our business model changed for good reason and so I expect that we will continue to evolve as should every company focus on improving their results.

Super. Thank you very much.

The next question is a follow-up from Evan Kurtz with Morgan Stanley. Please go ahead.

Okay. Thanks for taking my follow-up. Just wanted to try, I know you haven't disclosed the price that you're getting for this asset sales here in iMD. But just trying to get a sense of what the ballpark is for, how that’s going to impact cash inflows? And I was wondering if as its guidepost would it be fair to kind of work off of what your segment assets are? I think you have about $600 million, would that put me in the right range and maybe if I get some detail there of that $600 million roughly how much of that is say inventory versus derivative contracts and sort of thing?

Yes. I'll take a stab at that one. So we didn't disclose, we did file an 8-K to disclose the maximum price that we're going to get for the Cometals trading business. So I guess I would refer you to that one. And then it's really early in terms of the process for the sale of the balance of the assets in that segment. And if you're looking at $600 million in assets, I would also caution you that probably there are some liabilities on the balance sheet as well associated with the segments and those have to be considered. So with regard to Cometals trading, I think the maximum selling price in the contract that we disclosed was $210 million and we'll certainly do our best as we exit and try to sell the balance of that segment.

Are there any physical assets in there or is that purely just inventory and derivative contracts?

Well, there is actually a manufacturing facility associated with the Cometals trading business in South Carolina that was part of their portfolio, but the balance of the other businesses are primarily trading working capital assets.

Got it. Okay. Thanks guys.

The next question is a follow-up from Phil Gibbs with KeyBanc Capital Markets. Please go ahead.

Thanks. We're getting closer and closer as you noted to the ramp up to rent and just curious how long do you think that ramp toward your stated capacity is going to take or what are your expectations in terms of getting there and anything that you could frame up for us on Mesa in terms of maybe how long it took to get to stated capacity could help? Thanks.

Thanks, Phil. Yes, so the construction continues to go quite well. And as Joe indicated in his remarks, we do expect to start coal commissioning later in July and early August and we would expect full commissioning to be around late calendar year and based upon our experience in Mesa and of course having the benefit of having Mesa in our portfolio for a period of time now, we would expect a quick ramp up of that facility following the full commissioning late calendar year. As you know our fiscal start September 1, so that ramp will occur in the beginning of the calendar year 2018. So there's not going to be a massive contribution to the 2018 results, but we would expect a fairly fast ramp up.

Thank you. End of Q&A

At this time, there appear to be no further questions. Mr. Alvarado, I'll now turn the call back over to you.

Okay. Well, thank you everyone for joining us on today's conference call. We appreciate it very much and we also look forward to speaking with many of you during our Investor visits in the coming weeks. So have a good day and we look forward to talk to you again soon. Thanks. Bye-bye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.