Steel Dynamics Reports Fourth Quarter 2012 Diluted Earnings Per Share of $0.27

FORT WAYNE, Ind., Jan. 28, 2013 /PRNewswire/ -- Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced fourth quarter 2012 net income of $61 million, or $0.27 per diluted share, on net sales of $1.7 billion.  By comparison, prior year fourth quarter net income was $30 million, or $0.14 per diluted share, on net sales of $1.9 billion, and sequential third quarter 2012 net income was $13 million, or $0.06 per diluted share, on net sales of $1.7 billion.  Full-year 2012 net income was $164 million, or $0.73 per diluted share, on net sales of $7.3 billion, compared to prior year net income of $278 million, or $1.22 per diluted share, on net sales of $8.0 billion.

Fourth quarter 2012 results included certain positive tax adjustments of $16 million, or $0.07 per diluted share, which was slightly higher than the company's previous estimate for the adjustments of $0.06 per diluted share.  Excluding these adjustments the company's fourth quarter effective tax rate was 39.5 percent. 

"Similar to the rest of 2012, the fourth quarter was challenging on a number of fronts," said President and Chief Executive Officer, Mark Millett, "but the team did a great job.  We are pleased our fourth quarter financial performance was stronger than originally anticipated.  On a sequential quarterly basis our operating income increased 31 percent to $95 million, primarily driven by improvements in our metals recycling and sheet steel operations.

"In our December guidance, we suggested that metals recycling was expected to deliver a stronger financial performance in the fourth quarter, and the team's execution was even better than anticipated," stated Millett.  "Sequential quarterly operating income increased 56 percent to $26 million, as meaningful improvements in both ferrous and nonferrous metal spreads more than offset decreased volumes.  Increased copper margins provided the most notable improvement, as global copper prices increased based in part on improved demand from China.  We also took advantage of a strong December ferrous market environment, increasing our expected shipments, as it appeared the typical market strength of January was being challenged. 

"Our steel operations also showed improvement with an increase in operating income of seven percent to $117 million, as improvements in sheet steel volumes more than offset weaker long product shipments and lower overall steel metal spreads.  Automotive and manufacturing provided improved sheet demand, while nonresidential construction remained weak.  Despite the challenging construction market, we are also pleased that our fabrication business reported its third consecutive profitable quarter, as the changes the team implemented earlier in the year have continued to provide greater efficiencies and improved productivity.

"The company's solid performance in a difficult market environment is driven by our ongoing commitment to provide exceptional value to our customers, while taking advantage of our innovative, low-cost operating culture.  We remain committed to leveraging the full complement of our competitive strengths to sustain and grow shareholder value," Millett concluded.

Fourth Quarter Review

Fourth quarter shipments were mixed across the company's operating segments when compared to the prior-year fourth quarter and the third quarter of 2012.  However, with the exception of fabrication, pretax earnings improved for each business platform.  The company's operating income increased 15 percent over prior-year performance and 31 percent in comparison to the third quarter of 2012.  The increase in sequential quarterly operating income was primarily the result of increased volume coupled with reduced costs in sheet operations, and increased nonferrous margins coupled with reduced direct costs in metals recycling.

The company's steel mill capacity utilization improved to 80 percent in the fourth quarter from 78 percent in the third quarter, while shipments increased four percent.  Improved overall volume and product mix more than offset decreased steel margins, resulting in increased operating income of $8 million in the quarter.  The average selling price per ton shipped decreased $25 to $784 in the fourth quarter, and the average ferrous scrap cost per ton melted decreased $9 per ton.  Operating income attributable to the company's sheet operations increased 15 percent when compared to the sequential quarter, while earnings from long product operations decreased three percent.

Despite lower volumes, profitability from the company's metals recycling operations improved as ferrous metal spreads expanded ten percent and nonferrous metal spreads improved 24 percent when compared to the third quarter of 2012. 

The impact of losses from the company's Minnesota operations on fourth quarter 2012 consolidated net income was approximately $10 million, or $0.04 per diluted share.  This compares to losses of $11 million, or approximately $0.05 per diluted share in the third quarter of 2012.  As previously indicated, a six week outage of the nugget facility began in mid-September 2012 to complete the groundwork necessary for the implementation of improvements expected to be made in the first half of 2013.  These modifications are expected to improve both volume and product quality.  As planned, operations resumed in November, and the restart has gone well with significant improvements to product quality already achieved. 

Operations began at the company's iron concentrate facility in September 2012 and production has gone well.  As the primary raw material for the company's iron nugget facility, this is a pivotal achievement in lowering the raw material input cost of iron nuggets, as the cost of internally-sourced iron concentrate is less than $50 per metric ton compared to current market priced iron concentrate in excess of $140 per metric ton.  If pig iron prices remain steady, losses associated with the Minnesota operations for the first quarter of 2013 are anticipated to be similar to those recorded in the fourth quarter, as the plant depletes existing higher priced third-party iron concentrate in inventory.

The company's liquidity position remains strong with $1.5 billion in unrestricted cash, short term commercial paper, and available funding under the revolving credit facility at December 31, 2012.  Total debt decreased $178 million during 2012, and the company's debt to equity capitalization rate improved from 50 percent at the end of 2011 to 47 percent at December 31, 2012. 

Full-Year Review

The company's 2012 net sales decreased nine percent when compared to 2011, while operating income decreased 33 percent.  Decreased operating income was primarily driven by reduced operating margins in the company's sheet operations during the first half of 2012, as compared to the record metal spreads achieved in the first half of 2011.  The average annual selling price per ton shipped for the company's steel operations in 2012 was $831, a decrease of $66 per ton compared to 2011.  The 2012 average scrap cost per ton melted decreased $32.  Operating income from the company's metals recycling operations also decreased 23 percent during 2012, as both volumes and metal margins compressed.

Charges associated with the company's 2012 refinancing initiatives resulted in decreased pretax earnings of approximately $38 million, or approximately $0.10 per diluted share.  These initiatives significantly reduced the company's cost of debt, while extending the company's long term debt maturity profile.

Outlook

"We remain optimistic that the organic growth projects we identified in 2012 will position us to continue to build a strong enterprise," Millett said. "We believe there is potential for certain market sectors, such as automotive and manufacturing, to build momentum in 2013.   Recent housing start data suggests potential improvements in residential construction, and there are areas across the U.S. indicating signs of strengthening in the nonresidential construction sector, although levels remain historically low.  We look forward to executing our strategic growth plans.  Demand for high-quality steel products has not abated, and we believe our current capital projects will deliver products that exceed customers' expectations.  We remain confident that with our exceptional team, coupled with our superior, low-cost operating culture, we are uniquely prepared to capitalize on the opportunities ahead." 

Summary Fourth Quarter and Full-Year 2012 Operating Segment Information

The following tables highlight operating results for each of the company's primary operating platforms. References to operating income in the following paragraphs exclude profit-sharing expenses and amortization pertaining to intangible assets.  Dollar amounts are in thousands, excluding per ton data. 

Steel Operations

This segment includes five electric-arc-furnace steel mills and related steel finishing and processing facilities, including The Techs. The company's steel operations produce flat-rolled steel, structural steel, merchant bars, special-bar-quality steel, rebar, rail, and specialty shapes.



Fourth Quarter


Full Year


Sequential



2012


2011


2012


2011


3Q 2012

Total Sales


$1,126,438


$1,236,330


$4,782,240


$5,162,806


$1,120,571

External Sales


1,061,419


1,168,868


4,506,788


4,859,217


1,051,349

Operating Income


117,097


117,434


505,080


668,341


109,215

Total Shipments (tons)


1,457,053


1,465,962


5,832,776


5,842,694


1,405,021

Average External Sales Price Per Ton


$784


$853


$831


$897


$809

Average Ferrous Scrap Cost Per Ton


$343


$407


$378


$410


$352

Metals Recycling and Ferrous Resources Operations

This segment principally includes the company's metals recycling operations (OmniSource Corporation), a liquid pig iron production facility (Iron Dynamics), and the company's Minnesota operations.

Metals Recycling & Ferrous Resources


Fourth Quarter


Full Year


Sequential



2012


2011


2012


2011


3Q 2012

Total Sales


$  798,163


$  908,436


$ 3,658,952


$4,157,525


$  821,357

External Sales


530,258


593,181


2,342,598


2,769,063


522,231

Operating Income (Loss)


507


(6,508)


(11,690)


54,723


(9,461)








Metals Recycling


Fourth Quarter


Full Year


Sequential



2012


2011


2012


2011


3Q 2012

Total Sales


$  741,342


$  856,481


$3,441,348


$3,940,693


$  766,102

External Sales


520,931


592,951


2,329,096


2,768,833


519,101

Operating Income


25,818


15,715


72,473


94,543


16,566

Unrealized Hedging Gains (Losses)


9,820


(2,659)


3,588


3,768


(9,315)

Ferrous Shipments (gross tons)


1,238,143


1,314,588


5,647,058


5,879,729


1,339,853

% Shipments to Co. Steel Mills


46%


44%


46%


43%


43%

Nonferrous Shipments (pounds 000's)


251,080


255,137


1,051,333


1,066,648


249,685

Steel Fabrication Operations

Steel fabrication operations include New Millennium Building Systems, which fabricates steel joists, trusses, and decking used in the construction of non-residential buildings. 



Fourth Quarter


Full Year


Sequential



2012


2011


2012


2011


3Q 2012

Total Sales


$  98,301


$   78,684


$  371,406


$  276,408


$      102,442

Operating Income (Loss)


1,448


(1,820)


2,114


(6,584)


3,141

Total Shipments (tons)


76,870


61,428


295,161


217,838


80,176

Average External Sales Price Per Ton


$1,278


$1,281


$1,258


$1,270


$1,278

About Steel Dynamics, Inc.

Steel Dynamics, Inc. is one of the largest domestic steel producers and metals recyclers in the United States based on estimated annual steelmaking and metals recycling capability, with annual sales of $7.3 billion in 2012, over 6,600 employees, and manufacturing facilities primarily located throughout the United States (including five steel mills, six steel processing facilities, two iron production facilities, over 70 metals recycling locations and six steel fabrication plants). 

Forward-Looking Statement

This press release contains some predictive statements about future events, including statements related to conditions in the steel and metallic scrap markets, Steel Dynamics' revenues, costs of purchased materials, future profitability and earnings, and the operation of new or existing facilities. These statements are intended to be made as "forward-looking," subject to many risks and uncertainties, within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These statements speak only as of this date and are based upon information and assumptions, which we consider reasonable as of this date, concerning our businesses and the environments in which they operate. Such predictive statements are not guarantees of future performance, and we undertake no duty to update or revise any such statements. Some factors that could cause such forward-looking statements to turn out differently than anticipated include: (1) the effects of a prolonged or deepening recession on industrial demand; (2) changes in economic conditions, either generally or in any of the steel or scrap-consuming sectors which affect demand for our products, including the strength of the non-residential and residential construction, automotive, appliance, and other steel-consuming industries; (3) fluctuations in the cost of key raw materials (including steel scrap, iron units, and energy costs) and our ability to pass-on any cost increases; (4) the impact of domestic and foreign import price competition; (5) risks and uncertainties involving product and/or technology development; and (6) occurrences of unexpected plant outages or equipment failures.

More specifically, we refer you to SDI's more detailed explanation of these and other factors and risks that may cause such predictive statements to turn out differently, as set forth in our most recent Annual Report on Form 10-K, in our quarterly reports on Form 10-Q or in other reports which we from time to time file with the Securities and Exchange Commission. These are available publicly on the SEC Web site, www.sec.gov, and on the Steel Dynamics Web site, www.steeldynamics.com.

Conference Call and Webcast

On Tuesday, January 29, 2013, at 9:30 a.m. Eastern Time, Steel Dynamics will host a conference call with investors and analysts to discuss the company's fourth quarter and full-year 2012 operating and financial results.  We invite you to listen to the live audiocast of the conference call accessible from our website (http://www.steeldynamics.com/), or via telephone (the conference call number may also be obtained on our website).  A replay of the discussion will be available on our website until midnight on February 5, 2013.  A podcast of the event will also be available and can be downloaded from our website.    

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)







Three Months


Three Months Ended


Year Ended


Ended


December 31,


December 31,


 September 30,


2012


2011


2012


2011


2012























Net sales

$

1,705,001

$

1,858,345

$

7,290,234

$

7,997,500

$

1,693,390

Costs of goods sold               


1,524,904


1,698,210


6,570,336


7,065,982


1,536,989

        Gross profit


180,097


160,135


719,898


931,518


156,401












Selling, general and administrative expenses


69,340


61,947


257,943


263,595


62,984

Profit sharing


6,750


6,064


26,987


43,149


3,954

Amortization of intangible assets


8,722


9,634


35,553


39,954


8,848

Impairment charges


356


-


8,250


-


7,894

        Operating income       


94,929


82,490


391,165


584,820


72,721












Interest expense, net of capitalized interest


34,877


44,117


158,585


176,977


41,490

Other expense (income), net


(3,852)


(2,641)


28,514


(16,476)


24,010

        Income before
          income taxes


63,904


41,014


204,066


424,319


7,221












Income taxes          


8,810


15,235


61,785


158,627


1,116

        Net income


55,094


25,779


142,281


265,692


6,105












Net loss attributable to noncontrolling interests


5,477


4,424


21,270


12,428


6,728












        Net income attributable
         to Steel Dynamics, Inc.

 

$

60,571

 

$

 

30,203

 

$

163,551

 

$

 

278,120

 

$

 

12,833


































Basic earnings per share attributable to Steel Dynamics, Inc. stockholders

$

.28

$

.14

$

.75

$

1.27

$

.06












Weighted average common shares outstanding


219,346


218,718


219,159


218,471


219,191























Diluted earnings per share attributable to Steel Dynamics, Inc. stockholders, including the effect of assumed conversions when dilutive              

$

.27

$

.14

$

.73

$

1.22

$

.06












Weighted average common shares and equivalents outstanding 


236,890


219,336


236,624


235,992


220,044












Dividends declared per share

$

.10

$

.10

$

.40

$

.40

$

.10

 

Steel Dynamics, Inc.

UNAUDITED SUPPLEMENTAL OPERATING INFORMATION

(dollars in thousands)




Quarter Ended


Year Ended


Quarter Ended


Quarter Ended


Quarter Ended



December 31,


December 31,


March 31,


June 30,


September 30,



2012


2011


2012


2011


2012


2012


2012

Steel Operations*
































Shipments (tons)
















Flat Roll Division


713,770


678,961


2,717,995


2,770,466


658,505


706,944


638,776


Structural and Rail Division

















Structural


225,100


229,748


887,335


761,682


227,059


214,347


220,829



Rail


37,341


20,854


144,169


117,463


33,947


38,177


34,704


Engineered Bar Products Division


98,858


171,020


535,882


634,964


157,489


166,208


113,327


Roanoke Bar Division


127,952


129,113


581,180


544,384


151,296


149,010


152,922


Steel of West Virginia


73,581


74,477


301,730


297,902


77,212


74,456


76,481


The Techs


180,451


161,789


664,485


715,833


144,615


171,437


167,982



Total


1,457,053


1,465,962


5,832,776


5,842,694


1,450,123


1,520,579


1,405,021



   Intra-company


(102,772)


(96,458)


(409,612)


(422,958)


(94,176)


(106,875)


(105,789)



External


1,354,281


1,369,504


5,423,164


5,419,736


1,355,947


1,413,704


1,299,232


















Production, excluding The Techs (tons)


1,290,567


1,307,117


5,228,190


5,218,552


1,351,818


1,328,290


1,257,515


















Net sales
















Total


$   1,126,438


$   1,236,330


$   4,782,240


$   5,162,806


$      1,254,464


$      1,280,767


$      1,120,571


   Intra-company


(65,019)


(67,462)


(275,452)


(303,589)


(67,744)


(73,467)


(69,222)


External


$   1,061,419


$   1,168,868


$   4,506,788


$   4,859,217


$      1,186,720


$      1,207,300


$      1,051,349

































Operating income before
 amortization of intangibles


$      117,097


$      117,434


$      505,080


$      668,341


$         139,740


$         139,028


$         109,215


Amortization of intangibles


(2,289)


(2,431)


(9,440)


(10,221)


(2,432)


(2,431)


(2,288)

Operating income (Note 1)




$      114,808


$      115,003


$      495,640


$      658,120


$         137,308


$         136,597


$         106,927


















Metals Recycling and Ferrous Resources**
































OmniSource















  Ferrous metals shipments (gross tons)
















Total


1,238,143


1,314,588


5,647,058


5,879,729


1,582,840


1,486,222


1,339,853


   Intra-company


(573,293)


(585,484)


(2,586,670)


(2,564,699)


(763,767)


(666,668)


(582,942)


External


664,850


729,104


3,060,388


3,315,030


819,073


819,554


756,911


















  Non-ferrous metals shipments

   (thousands of pounds)
















Total


251,080


255,137


1,051,333


1,066,648


291,636


258,932


249,685


   Intra-company


(3,456)


(2,230)


(18,488)


(8,273)


(1,958)


(4,598)


(8,476)


External


247,624


252,907


1,032,845


1,058,375


289,678


254,334


241,209


















Mesabi Nugget shipments

 (metric tons) - Intra-company

36,481


52,943


168,633


159,641


46,230


33,840


52,082


















Iron Dynamics (metric tons) - Intra-company


57,117


47,471


226,396


229,502


56,628


59,103


53,548


















Net sales
















Total


$      798,163


$      908,436


$   3,658,952


$   4,157,525


$      1,112,340


$         927,092


$         821,357


   Intra-company


(267,905)


(315,255)


(1,316,354)


(1,388,462)


(412,740)


(336,583)


(299,126)


External


$      530,258


$      593,181


$   2,342,598


$   2,769,063


$         699,600


$         590,509


$         522,231


















Operating income (loss) before

 amortization of intangibles


$             507


$        (6,508)


$      (11,690)


$        54,723


$           10,399


$          (13,135)


$            (9,461)


Amortization of intangibles


(6,110)


(6,882)


(24,818)


(28,126)


(6,236)


(6,236)


(6,236)

Operating income (loss) (Note 1)




$        (5,603)


$      (13,390)


$      (36,508)


$        26,597


$             4,163


$          (19,371)


$          (15,697)


















Steel Fabrication***
































Shipments (tons)
















Total


76,870


61,428


295,161


217,838


60,183


77,932


80,176


   Intra-company


(187)


(11)


(242)


(632)


(2)


-


(53)


External


76,683


61,417


294,919


217,206


60,181


77,932


80,123


















Net sales
















Total


$        98,301


$        78,684


$      371,406


$      276,408


$           74,896


$           95,767


$         102,442


   Intra-company


(277)


(13)


(322)


(625)


(4)


-


(41)


External


$        98,024


$        78,671


$      371,084


$      275,783


$           74,892


$           95,767


$         102,401


















Operating income (loss) (Note 1)




$          1,448


$        (1,820)


$          2,114


$        (6,584)


$            (2,668)


$                193


$             3,141



































*     Steel Operations include the company's five steelmaking divisions and The Techs three galvanizing plants.

**   Metals Recycling and Ferrous Resources Operations include OmniSource; Iron Dynamics (all shipments are internal); and Minnesota Operations, 

       including Mesabi Nugget (all shipments have been internal).

***  Steel Fabrication Operations include the company's joist and deck fabrication operations.

(Note 1) Segment operating income (loss) excludes profit sharing expense.

 

Steel Dynamics, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)



December 31,

2012


December 31,

2011



(unaudited)



Assets








Current assets








        Cash and equivalents     


$

375,917


$

390,761


        Investments in short-term commercial paper



31,520



84,830


        Accounts receivable, net



642,363



722,791


        Inventories     



1,202,507



1,199,584


        Deferred income taxes    



23,449



25,341


        Income taxes receivable



893



16,722


        Other current assets       



19,576



15,229


                     Total current assets        



2,296,225



2,455,258










Property, plant and equipment, net  



2,231,198



2,193,745










Restricted cash     



27,749



26,528










Intangible assets, net



416,635



450,893










Goodwill



738,542



745,066










Other assets         



105,067



107,736


                    Total assets      


$

5,815,416


$

5,979,226










Liabilities and Equity








Current liabilities








        Accounts payable          


$

360,097


$

420,824


        Income taxes payable



16,941



10,880


        Accrued expenses          



179,702



185,964


        Accrued profit sharing   



23,306



38,671


        Current maturities of long-term debt



29,631



444,078


                     Total current liabilities 



609,677



1,100,417










Long-term debt








        Term note



247,500



-


        7 3/8% senior notes, due 2012         



-



261,250


        5.125% convertible senior notes, due 2014



287,496



287,500


        6 ¾% senior notes, due 2015



500,000



500,000


        7 ¾% senior notes, due 2016



-



500,000


        6 1/8% senior notes, due 2019         



400,000



-


        7 5/8% senior notes, due 2020



350,000



350,000


        6 3/8% senior notes, due 2022         



350,000



-


        Other long-term debt     



37,610



37,272


                     Total long-term debt



2,172,606



1,936,022










Deferred income taxes        



537,304



489,915


Other liabilities



19,173



82,278










Commitments and contingencies
















Redeemable noncontrolling interests



98,814



70,694










Equity








        Common stock               



637



636


        Treasury stock, at cost  



(720,479)



(722,653)


        Additional paid-in capital              



1,037,687



1,026,157


        Retained earnings           



2,087,620



2,011,801


                     Total Steel Dynamics, Inc. equity



2,405,465



2,315,941


        Noncontrolling interests



(27,623)



(16,041)


                     Total equity     



2,377,842



2,299,900


                     Total liabilities and equity            


$

5,815,416


$

5,979,226













 

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)



Three Months Ended


Year Ended


December 31,


December 31,


2012


2011


2012


2011



















Operating activities:









        Net income                     

$

55,094

$

25,779

$

142,281

$

265,692










        Adjustments to reconcile net income to net cash
         provided by
            operating activities:









                Depreciation and amortization              


55,189


55,642


225,216


222,607

                Equity-based compensation


2,986


5,928


12,449


17,283

                Deferred income taxes            


64


5,355


54,528


34,436

                Impairment charges


356


-


8,250


-

                Changes in certain assets and liabilities:









                        Accounts receivable       


70,373


93,077


85,977


(100,602)

                        Inventories     


7,143


(40,736)


13,845


(85,523)

                        Accounts payable          


(13,578)


(35,999)


(32,593)


56,551

                        Income taxes receivable/payable


4,727


3,832


21,644


26,242

                        Other assets and liabilities             


24,564


(18,921)


(85,293)


49,669

                Net cash provided by operating
                  activities             


206,918


93,957


446,304


486,355










Investing activities:









        Purchase of property, plant and equipment  


(64,839)


(75,212)


(223,525)


(167,007)

        Other investing activities


(32,527)


(70,776)


31,924


(68,830)

                Net cash used in investing activities


(97,366)


(145,988)


(191,601)


(235,837)










Financing activities:









        Issuance of current and long-term debt          


-


-


1,049,969


10,103

        Repayment of current and long-term debt     


(6,640)


(5,693)


(1,258,842)


(7,740)

        Debt issuance costs       


(88)


(85)


(13,901)


(6,969)

        Proceeds from exercise of stock options,
          including related tax effect


1,031


130


3,052


13,396

        Contributions from noncontrolling investors, net


6,865


13,615


37,808


26,822

        Dividends paid               


(21,923)


(21,869)


(87,633)


(81,882)

                Net cash used in financing activities      


(20,755)


(13,902)


(269,547)


(46,270)










        Increase (decrease) in cash and equivalents   


88,797


(65,933)


(14,844)


204,248

        Cash and equivalents at beginning of period  


287,120


456,694


390,761


186,513










        Cash and equivalents at end of period

$

375,917

$

390,761

$

375,917

$

390,761























































Supplemental disclosure information:









        Cash paid for interest

$

30,163

$

70,720

$

154,136

$

171,808

        Cash paid for federal and state income
         taxes, net

$

2,944

$

1,549

$

46,920

$

75,927










 

SOURCE Steel Dynamics, Inc.



RELATED LINKS
http://www.steeldynamics.com

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