Steel Dynamics Reports Fourth Quarter and Full-Year 2015 Results

Jan 25, 2016, 18:30 ET from Steel Dynamics, Inc.

FORT WAYNE, Ind., Jan. 25, 2016 /PRNewswire/ -- Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced fourth quarter and full-year financial results.  Excluding non-cash goodwill and asset impairment charges related to the company's metals recycling operations of $1.13 per diluted share, the company's adjusted fourth quarter 2015 net income was $22 million, or $0.09 per diluted share, on net sales of $1.6 billion.  Including the non-cash impairment charges, the company reported a fourth quarter net loss of $253 million, or $1.04 per diluted share. 

As a part of the company's annual goodwill and indefinite-lived intangible asset assessment, it was determined that the fair market value of its metals recycling operations was less than its carrying value, due to the weak global scrap commodity outlook, as indicated in the company's December 16, 2015 press release.  Upon completion of the final assessment, it was determined that the book value of the metals recycling segment was impaired, resulting in non-cash goodwill and other related asset impairment charges of $435 million.          

Comparatively, prior year fourth quarter net sales were $2.5 billion, with adjusted net income of $97 million, or $0.40 per diluted share, which excluded the impact of non-cash asset impairment and purchase accounting charges of $0.59 per diluted share.  Sequential third quarter 2015 net sales were $2.0 billion, with net income of $61 million, or $0.25 per diluted share.

"The fourth quarter 2015 market environment was one of the most challenging in recent history for our steel and metals recycling operations," said Mark D. Millett, Chief Executive Officer. "The domestic steel industry operated at production rates below 65 percent in November and December, representing the lowest levels this year caused by ongoing pressure from unfairly traded steel imports, customer destocking and seasonally lower demand.  Enabled by our diversified and value-added product portfolio, our steel operations were again able to maintain a higher than industry average production utilization rate at 73 percent for the fourth quarter 2015.  The automotive market remains strong and construction continues to show incremental improvement, as current industry forecasts suggest additional year-over-year growth in 2016. 

"An important barometer for domestic steel consumption is the strength of the construction industry.  Historically, the construction industry has been the largest single domestic steel consuming sector, and it is continuing on an upward trend," continued Millett.  "Steady demand in an otherwise typically seasonally slower quarter, coupled with market share growth related to our recent acquisition of additional deck assets, resulted in a 10 percent increase in fourth quarter 2015 fabrication shipments.  Order entry remains robust, reflecting the steady positive trend in the non-residential construction market.  Our fabrication operations recorded another strong financial outcome in the fourth quarter 2015, and achieved record annual 2015 operating income of $116 million—well over twice the previous record annual results of $52 million earned in 2014. 

"Despite the macro-headwinds encountered during the fourth quarter, we generated strong cash flow from operations of $330 million.  Additionally, we generated record annual 2015 cash flow from operations of over $1.0 billion, and after fixed asset capital expenditures, recorded $924 million of free cash flow.  Including our revolver and available cash of $727 million, we achieved record liquidity of $1.9 billion at the end of the year, providing a firm financial foundation for growth," concluded Millett. 

Additional Fourth Quarter 2015 Comments

Although at levels somewhat lower than experienced earlier in the year, steel imports continued to flood the domestic market during the fourth quarter 2015.  Coupled with seasonally lower demand and buyer hesitancy related to uncertain raw material markets, steel and metals recycling shipments declined.  Fourth quarter 2015 operating income for the company's steel operations decreased 47 percent to $67 million sequentially, due to a 12 percent decrease in shipments. In addition, average steel product pricing declined more than consumed raw material scrap costs, resulting in slight steel metal spread compression.  The fourth quarter 2015 average product selling price for the company's steel operations decreased $51 to $614 per ton.  The average ferrous scrap cost per ton melted decreased $47 to $205 per ton.

Fourth quarter 2015 operating income attributable to the company's sheet products decreased 43 percent when compared to the sequential third quarter.  The company's flat roll metal spread decreased in the quarter as average pricing declined more than scrap costs, and quarterly shipments also decreased 10 percent.  Flat roll products, specifically commodity-grade hot roll, were the most severely impacted by high import volumes.  Operating income from long products decreased 47 percent, caused by average price declines and reduced shipments of 13 percent. The company's steel production utilization rate declined to 73 percent for the fourth quarter 2015, which remains higher than the average U.S. domestic steel mill utilization rate, but lower than the company's third quarter 2015 rate of 82 percent.

The company's metals recycling operations recorded an adjusted fourth quarter 2015 operating loss of $16 million (excluding non-cash goodwill and asset impairment charges), compared to third quarter 2015 operating income of $463,000.  Based on lower domestic steel mill production utilization and traditional year-end steel mill scrap inventory reduction, fourth quarter 2015 ferrous scrap shipments declined 12 percent.  Additionally, sequential quarterly ferrous scrap pricing decreased substantially resulting in a 34 percent margin reduction. 

The company's fabrication operations continued to achieve strong financial performance. Fourth quarter 2015 operating income of $30 million was only surpassed by the sequential third quarter's record of $37 million.  Sustained demand supported a 10 percent increase in quarterly shipments, which partially offset metal spread compression, as average product pricing declined more than raw material steel costs.

Full-Year 2015 Comparison

Despite record full-year fabrication and steel shipments (a function of including the company's Columbus Flat Roll Division shipments for a full year in 2015), annual 2015 net sales were $7.6 billion compared to $8.8 billion in 2014, a decrease of 13 percent, based on significantly lower product pricing.  The dramatic drop in global commodity prices caused the average full-year 2015 selling price for the company's metals recycling operations to decline over 36 percent year-over-year.  Additionally, due to sustained high levels of unfairly traded steel imports during the year, the average full-year 2015 selling price for the company's steel operations decreased $152 per ton, or 18 percent.  As a result, annual 2015 revenues for the company's metals recycling and steel operations fell $794 million and $338 million, respectively.  The average full-year 2015 ferrous scrap cost per ton melted decreased $105 to $255 per ton, resulting in meaningful metal spread compression.  

Adjusted annual 2015 operating income was $398 million, with adjusted net income of $178 million, or $0.74 per diluted share, excluding non-cash asset impairment and other charges related to the company's metals recycling and ferrous production operations and first quarter 2015 refinancing costs.  Including these charges, annual 2015 net loss was $130 million, or $0.54 per diluted share.  Comparatively, adjusted annual 2014 operating income was $612 million, with adjusted net income of $323 million, or $1.35 per diluted share, excluding charges related to the Minnesota asset impairment and Columbus acquisition.  Including these charges, annual 2014 net income was $157 million, or $0.67 per diluted share.

Outlook    

"While underlying steel demand in certain market sectors remains steady and import levels have somewhat declined, the issue of unfairly traded steel imports persists," said Millett.  "We believe that customer steel inventories have started to realign with current demand dynamics, and when combined with scrap price stabilization and moderating steel import volumes, presents an environment that could result in increased 2016 domestic steel production.  We continue to strengthen our financial position through strong cash flow generation, record liquidity, and the execution of our long-term strategy. We are uniquely, well-positioned for additional growth.  Customer focus, coupled with our market diversification and low-cost operating platforms, support our ability to not only maintain our best-in-class industry performance, but to also grow in a challenging environment," concluded Millett.

Supplemental Quarterly Information (1)

 






Fourth Quarter


Year to Date












2015


2014


2015


2014


1Q 2015


2Q 2015


3Q 2015

External Net Sales


(Dollars in thousands)






Steel


$ 1,091,029


$ 1,707,829


$ 5,203,512


$ 5,541,743


$ 1,385,419


$ 1,375,677


$ 1,351,387


Fabrication


182,884


191,044


673,374


631,750


161,023


154,513


174,954


Metals Recycling


270,625


525,546


1,433,003


2,226,827


425,596


391,210


345,572


Other


46,508


92,674


284,522


355,632


75,397


83,607


79,010




Consolidated


$ 1,591,046


$ 2,517,093


$ 7,594,411


$ 8,755,952


$ 2,047,435


$ 2,005,007


$ 1,950,923



















Operating Income
















Steel


$      66,580


$    216,773


$    411,523


$    692,212


$    116,996


$    101,212


$    126,735


Fabrication


30,193


21,704


115,947


51,894


21,361


27,660


36,733


Metals Recycling


(444,547)


2,933


(432,264)


43,901


(480)


12,300


463




Operations


(347,774)


241,410


95,206


788,007


137,877


141,172


163,931




















Non-cash Amortization of Intangible Assets


(6,178)


(6,918)


(25,312)


(27,551)


(6,323)


(6,493)


(6,318)


Profit Sharing Expense


(4,427)


(13,397)


(23,064)


(42,126)


(4,598)


(5,031)


(9,008)


Non-segment Operations


(22,764)


(302,255)


(119,614)


(398,010)


(27,185)


(52,089)


(17,576)




Consolidated Operating Income


(381,143)


(81,160)


(72,784)


320,320


99,771


77,559


131,029


Non-cash Asset Impairment Charges


428,500


260,000


428,500


260,000


-


-


-


Minnesota Idle & Non-cash Inventory Charges


-


5,732


33,167


5,732


-


33,167


-


Iron Dynamics Outage


-


-


9,403


-


-


9,403


-


Non-cash Purchase Accounting


-


10,916


-


25,965


-


-


-




Adjusted Operating Income (Loss) (2)


$      47,357


$    195,488


$    398,286


$    612,017


$      99,771


$    120,129


$    131,029



















External Shipments
















Steel (In tons)


1,777,597


2,119,236


7,703,749


6,704,714


1,816,371


2,078,685


2,031,096




Steel Shipped to Internal Locations


167,921


210,589


624,401


653,652


132,649


163,723


160,108




















Fabrication (In tons)


141,731


136,906


492,875


480,470


112,729


109,662


128,753


Metals Recycling

















Nonferrous (In 000's of pounds)


241,442


268,876


997,367


1,084,693


241,580


253,273


261,072



Ferrous (In gross tons)


564,868


693,832


2,384,288


2,892,461


642,080


626,264


551,076




Ferrous Scrap Shipped to Internal Steel Mills


629,543


631,505


2,755,218


2,673,777


590,921


731,491


803,263



















Other Operating Information
















Steel

















Average External Sales Price (Per ton shipped)

$           614


$           806


$           675


$           827


$           763


$           662


$           665



Average Ferrous Cost (Per ton melted)


$           205


$           346


$           255


$           360


$           312


$           255


$           252



Flat Roll Shipments


















Butler Division


601,502


759,059


2,539,399


2,917,259


579,493


721,115


637,289




Columbus Division (Acquired Sept 2014)

627,934


698,907


2,598,939


873,661


564,241


693,772


712,992




The Techs


149,358


163,570


667,661


714,158


145,934


182,239


190,130



Long Product Shipments


















Structural and Rail Division-Structural


216,659


266,149


923,564


1,103,213


237,644


227,338


241,923




                                             -Rail


55,775


64,190


261,545


221,722


66,708


74,912


64,150




Engineered Bar Products Division


99,257


172,769


509,083


646,731


156,366


120,559


132,901




Roanoke Bar Division


119,208


131,613


515,440


572,373


125,123


140,795


130,314




Steel of West Virginia


75,825


73,568


312,519


309,249


73,511


81,678


81,505




    Total Steel Shipments (In tons)


1,945,518


2,329,825


8,328,150


7,358,366


1,949,020


2,242,408


2,191,204





















Steel Production (In tons)


1,982,315


2,263,540


8,528,885


7,376,657


1,949,263


2,344,895


2,252,412




















Fabrication

















Average External Sales Price (Per ton shipped)

$        1,290


$        1,395


$        1,366


$        1,315


$        1,428


$        1,409


$        1,359


Consolidated EBITDA

















Earnings (Loss) Before Taxes


$  (417,923)


$  (124,467)


$  (242,117)


$    164,803


$      40,492


$      41,608


$      93,706



Net Interest Expense


36,107


44,415


152,609


135,346


42,874


36,890


36,738



Depreciation


65,621


72,614


263,162


229,393


64,860


66,281


66,400



Amortization


6,178


6,918


25,312


27,551


6,323


6,493


6,318



Non-controlling Interest


3,077


51,015


14,859


65,374


3,807


6,225


1,750




 EBITDA


(306,940)


50,495


213,825


622,467


158,356


157,497


204,912



Non-cash Adjustments


















Unrealized Hedging (Gain) Loss


435


(634)


2,580


(5,327)


3,215


(1,808)


738




Inventory Valuation

2,349


6,514


28,541


9,802


4,990


18,075


3,127




Asset Impairment Charges


428,500


213,453


428,500


213,453


-


-


-




Equity Based Compensation


9,947


8,478


28,835


22,972


7,199


6,356


5,333




Financing Expenses


-


-


3,326


-


3,326


-


-




    Adjusted EBITDA


$    134,291


$    278,306


$    705,607


$    863,367


$    177,086


$    180,120


$    214,110





































(1)  Effective the third quarter 2015, our reporting segments are Steel, which includes our steel mills and finishing facilities as well as Iron Dynamics; Metals Recycling, which consists solely of OmniSource: and Fabrication, which consists solely of New Millennium Building Systems. Minnesota operations is reflected in non-segment operations. All prior periods have been restated consistent with this new segment presentation.

(2) Amount excludes 4Q 2015 Metals Recycling goodwill, intangibles, and property, plant, and equipment impairments, 2Q 2015 expenses associated with the idled Minnesota Operations (amount includes non-controlling interests of approximately $4 million), the impact from the Q2 2015 Iron Dynamics planned furnace maintenance outage that generally is required once every 5 years, and the Q3 2014 impact of purchase accounting related to the Severstal Columbus acquisition.

Conference Call and Webcast

Steel Dynamics, Inc. will hold a conference call to discuss fourth quarter and full-year 2015 operating and financial results on Tuesday, January 26, 2016, at 9:00 a.m. Eastern Time.  You may access the call and find dial-in information on the Investor Relations section of the company's website at www.steeldynamics.com.  A replay of the call will be available on our website until 11:59 p.m. Eastern Time on January 31, 2016.

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 $7.6 billion in 2015, approximately 7,500 employees, and manufacturing facilities primarily located throughout the United States (including six electric-arc-furnace steel mills, eight steel coating lines, an iron production facility, approximately 80 metals recycling locations and eight steel fabrication plants).

Note Regarding Non-GAAP Financial Measures

The company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). Management believes that Adjusted Operating Income, EBITDA and Adjusted EBITDA, non-GAAP financial measures, provide additional meaningful information regarding the company's performance and financial strength. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the company's reported results prepared in accordance with GAAP.  In addition, because not all companies use identical calculations, EBITDA included in this release may not be comparable to similarly titled measures of other companies.

Forward-Looking Statements

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, which we generally precede or accompany by such typical conditional words as "anticipate," "intend," "believe," "estimate," "plan," "seek," "project" or "expect," or by the words "may," "will," or "should," 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 uncertain economic conditions; (2) cyclical and changing industrial demand; (3) changes in conditions in any of the steel or scrap-consuming sectors of the economy which affect demand for our products, including the strength of the non-residential and residential construction, automotive, appliance, pipe and tube, and other steel-consuming industries; (4) 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; (5) the impact of domestic and foreign import price competition; (6) unanticipated difficulties in integrating or starting up new or acquired businesses; (7) risks and uncertainties involving product and/or technology development; and (8) occurrences of unexpected plant outages or equipment failures.

More specifically, we refer you to Steel Dynamics' 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 under the headings Special Note Regarding Forward-Looking Statements and Risk Factors, 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 website, www.sec.gov, and on the Steel Dynamics website, www.steeldynamics.com.

 

 

 

 

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)

 


Three Months Ended


Year Ended


Three Months Ended


December 31,


December 31,


September 30,


2015


2014


2015


2014


2015












Net sales 

$

1,591,046

$

2,517,093

$

7,594,411

$

8,755,952

$

1,950,923

Costs of goods sold


1,446,839


2,225,469


6,862,693


7,789,741


1,722,197

        Gross profit


144,207


291,624


731,718


966,211


228,726












Selling, general and administrative expenses


86,245


92,469


327,626


316,214


82,371

Profit sharing


4,427


13,397


23,064


42,126


9,008

Amortization of intangible assets


6,178


6,918


25,312


27,551


6,318

Asset impairment charges


428,500


260,000


428,500


260,000


-

        Operating income (loss)               


(381,143)


(81,160)


(72,784)


320,320


131,029












Interest expense, net of capitalized interest


36,616


44,740


153,950


137,263


37,084

Other expense (income), net


164


(1,433)


15,383


18,254


239

        Income (loss) before income taxes


(417,923)


(124,467)


(242,117)


164,803


93,706












Income taxes (benefit)            


(161,607)


(28,421)


(96,947)


73,153


34,839

        Net income (loss)


(256,316)


(96,046)


(145,170)


91,650


58,867

Net loss attributable to noncontrolling interests


3,077


51,015


14,859


65,374


1,750

Net income (loss) attributable to Steel         Dynamics, Inc.

 

$

 

(253,239)

 

$

 

(45,031)

 

$

 

(130,311)

 

$

 

157,024

 

$

 

60,617


































Basic earnings (loss) per share attributable to

    Steel Dynamics, Inc. stockholders

$

(1.04)

$

(0.19)

$

(0.54)

$

0.68

$

0.25












Weighted average common shares outstanding


242,558


240,870


242,017


232,547


242,074























Diluted earnings (loss) per share attributable    to Steel Dynamics, Inc. stockholders,            

    including the effect of assumed

    conversions when dilutive              

$

(1.04)

$

(0.19)

$

(0.54)

$

0.67

$

0.25












Weighted average common shares and

    equivalents outstanding


242,558


240,870


242,017


242,078


243,822












Dividends declared per share

$

0.1375

$

0.1150

$

0.5500

$

0.4600

$

0.1375

Note 1   Excludes the impact of common share equivalents outstanding for the three months ended December 31, 2015 and 2014, and the year ended December 31, 2015, because the impact on diluted loss per share is anti-dilutive.



 

Steel Dynamics, Inc.

    CONSOLIDATED BALANCE SHEETS

(in thousands)

 





December 31,

2015



December 31,

2014





(unaudited)





Assets








Current assets








        Cash and equivalents      


$

727,032


$

361,363


        Accounts receivable, net 



613,605



902,825


        Inventories     



1,149,390



1,618,419


        Other current assets        



47,914



55,655


                     Total current assets         



2,537,941



2,938,262










Property, plant and equipment, net   



2,951,210



3,123,906










Restricted cash     



19,565



19,312










Intangible assets, net



278,960



370,669










Goodwill



397,470



745,158










Other assets          



16,936



35,852


                    Total assets       


$

6,202,082


$

7,233,159










                                Liabilities and Equity








Current liabilities








        Accounts payable           


$

283,355


$

511,056


        Income taxes payable



2,023



6,086


        Accrued expenses          



233,232



286,980


        Current maturities of long-term debt



16,680



46,460


                     Total current liabilities    



535,290



850,582










Long-term debt



2,577,976



2,935,389










Deferred income taxes         



400,770



506,482


Other liabilities



16,595



18,839










Commitments and contingencies



-



-










Redeemable noncontrolling interests



126,340



126,340










Equity








        Common stock               



638



635


        Treasury stock, at cost    



(396,455)



(398,898)


        Additional paid-in capital



1,110,253



1,083,435


        Retained earnings           



1,965,291



2,227,843


                     Total Steel Dynamics, Inc. equity



2,679,727



2,913,015


        Noncontrolling interests



(134,616)



(117,488)


                     Total equity      



2,545,111



2,795,527


                     Total liabilities and equity              


$

6,202,082


$

7,233,159













 

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 



Three Months Ended


Year Ended



December 31,


December 31,



2015


2014


2015


2014










Operating activities:









        Net income (loss)           

$

(256,316)

$

(96,046)

$

(145,170)

$

91,650










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









                Depreciation and amortization


73,289


81,359


294,595


263,325

                Asset impairment charges


428,500


260,000


428,500


260,000

                Equity-based compensation


2,372


(1,556)


22,604


14,016

                Deferred income taxes            


(145,537)


(17,254)


(99,323)


(25,042)

                Changes in certain assets and liabilities:









                        Accounts receivable       


189,006


155,500


311,302


(2,191)

                        Inventories     


170,593


47,642


488,003


68,730

                        Accounts payable           


(100,017)


(104,257)


(227,092)


(76,141)

                        Income taxes receivable/payable


(16,603)


(44,577)


12,706


(22,086)

                        Other assets and liabilities              


(15,101)


38,770


(47,642)


45,311

                Net cash provided by operating activities               


330,186


319,581


1,038,483


617,572










Investing activities:









        Purchase of property, plant and equipment    


(28,043)


(28,879)


(114,501)


(111,785)

        Acquisition of business, net of cash acquired


-


(21,986)


(45,000)


(1,669,449)

        Other investing activities


3,690


(190)


9,874


33,967

                Net cash used in investing activities


(24,353)


(51,055)


(149,627)


(1,747,267)










Financing activities:









        Issuance of current and long-term debt          


28,897


320,201


207,930


1,822,096

        Repayment of current and long-term debt      


(51,105)


(364,387)


(612,534)


(635,578)

        Debt issuance costs        


(608)


(4,199)


(608)


(22,219)

        Exercise of stock options proceeds, including

            related tax effect


3,520


9,312


10,781


32,307

        Contributions from (distributions to) noncontrolling

                investors, net


 

(7)


 

(39)


 

(1,187)


 

4,675

        Dividends paid               


(33,288)


(27,642)


(127,569)


(105,379)

                Net cash provided by (used in) financing activities


(52,591)


(66,754)


(523,187)


1,095,902










        Increase (decrease) in cash and equivalents    


253,242


201,772


365,669


(33,793)

        Cash and equivalents at beginning of period  


473,790


159,591


361,363


395,156










        Cash and equivalents at end of period

$

727,032

$

361,363

$

727,032

$

361,363























































Supplemental disclosure information:









        Cash paid for interest

$

44,845

$

13,787

$

160,190

$

114,310

        Cash paid (received) for federal and state income taxes, net

$

423

$

34,103

$

(9,898)

$

120,521










 

 

 

SOURCE Steel Dynamics, Inc.



RELATED LINKS

http://www.steeldynamics.com