Steel Dynamics Reports Second Quarter 2009 Results

FORT WAYNE, Ind., July 22 /PRNewswire-FirstCall/ -- Steel Dynamics, Inc. (Nasdaq: STLD) today announced a loss of $0.08 per diluted share for the second quarter of 2009. This was a narrower loss than was expected in mid-June due to a change in the company's estimated annual income tax rate, which reduced the second quarter net loss by $0.02 per diluted share. Net losses for the second quarter of 2009 were $16 million, compared to a net loss of $88 million, or $0.48 per diluted share, in the first quarter of 2009 and net income of $210 million, or $1.05 per diluted share, in the second quarter of 2008.

During June 2009, the company issued 31,050,000 shares of its common stock at a public offering price of $13.50 and issued $287.5 million of 5.125% convertible notes due 2014. Net proceeds of slightly more than $675 million were used to repay a term loan of $552 million and for other general purposes. During this time frame, the company also amended its senior secured credit agreement, obtaining greater financial covenant flexibility through 2010. There was no net impact to the second quarter's loss per diluted share due to these transactions, as the weighted average increase in outstanding shares was offset by certain related transaction expenses of approximately $3.5 million.

Net sales for the second quarter of 2009 were $792 million, 3 percent lower than net sales of $815 million in the first quarter 2009. Compared to the second quarter of 2008, net sales were down 67 percent due to much lower volume and lower selling values for steel and recycled metals. Steel shipments for the second quarter were 886,000 tons, 45 percent below second quarter 2008 shipments of 1.6 million tons. SDI's average steel selling price for the second quarter of 2009 declined $126 per ton, to $594 from $720 per ton in the first quarter. Average scrap cost per net ton charged decreased $79 compared to the first quarter. In metals recycling, OmniSource's ferrous metals shipments were 840,000 tons, down 44 percent from the second quarter of 2008, and nonferrous shipments were 170 million pounds, down 33 percent.

"In the second quarter, the company's steel operations produced operating income of $36 million, with overall capacity utilization improving to approximately 50 percent, despite continued low operating rates at the long-products divisions," said Keith Busse, Chairman and CEO. "The Structural and Rail Division operated at about 25 percent of current capacity. In spite of this depressed operating environment, the division achieved an operating profit for the quarter.

"We are very pleased to report that OmniSource generated operating income for the quarter, with May and June results offsetting April losses. The increase in demand for ferrous and nonferrous materials, coupled with stronger material flows and a reduced cost structure, position OmniSource to continue to improve performance in the second half of 2009. We believe OmniSource will be profitable for the full year.

"New Millennium Building Systems, our joist-and-deck fabricating operation, continues to face stiff headwinds as the non-residential building construction market remains very weak. This resulted in basically breakeven operations for the quarter. Joist-and-decking shipments of 35,000 tons were off 53 percent from the year-ago quarter.

"During the second quarter, we experienced a slight improvement in business conditions. Order entry picked up at the Flat Roll Division and at The Techs in early May and has continued to be strong, resulting in improved backlogs. It remains unclear whether this increase in business activity will persist, or will be short-lived, as we continue to see conflicting signs in the economy. While our flat-roll steel businesses are currently operating near capacity, we have seen only marginal improvement in long products. We have yet to see signs of improvement in the construction markets.

"Based on our assumptions that flat-roll demand will remain steady in the near term, recycled metals will continue to recover, and demand for long products will remain sluggish, we currently expect third quarter diluted earnings per share to be in the range of $0.10 to $0.20 for the third quarter. We will provide an update to this guidance in early September.

"Steel Dynamics remains poised to ramp up quickly to meet renewed demand for steel products when it occurs. Our employees demonstrated this responsiveness in June as our flat-roll and metals recycling operations quickly ramped up output in response to increased demand. I would like to salute all of our employees for their positive attitudes, as many continue to receive smaller paychecks due to shorter workweeks and lower production bonuses. They, as in the past, continue to do an excellent job in controlling costs as we all recognize the realities of the current business environment," Busse said.

In June Steel Dynamics relocated their corporate offices to a building obtained through the acquisition of OmniSource, and at which OmniSource continues to also maintain its central offices. Telephone and email contact information for Steel Dynamics corporate office employees remains unchanged.

Second Quarter 2009 Operating Segment Information

The following highlights second quarter 2009 results for each of SDI's three primary operating segments.

Steel Operations. Steel Operations achieved net sales of $526 million for the second quarter and represented 64 percent of the company's external sales. This segment includes five steel mills and related steel processing facilities, including The Techs. SDI's five steel mills produce a wide variety of flat-rolled and long steel products. The Techs galvanize steel sheet that is sourced primarily from third parties.

Second quarter 2009 Steel Operations shipments were 886,000 tons, of which 582,000 tons were flat-rolled shipments. Based on tons shipped, including steel shipments made by The Techs, flat-rolled products accounted for 66 percent of second quarter steel segment shipments, 11 percent was structural steel shipments, 7 percent was engineered bars, 10 percent was merchant bars, and 6 percent was Steel of West Virginia shipments. The second quarter operating profit for the steel segment was $36 million, or $41 per ton shipped, compared to an operating loss of $88 per ton in the first quarter. (Without the effect of the first quarter's lower of cost or market inventory adjustments, Steel Operations would have generated an operating profit of about $17 million, or $22 per ton, in the first quarter.) These figures exclude amortization related to the segment's intangible assets and certain non-allocated corporate overhead expenses, such as profit-sharing costs.

The second quarter's average selling price per ton for Steel Operations was $594, a decrease of $126 per ton from $720 in the first quarter of 2009 and a decrease of $417 per ton from the year-ago quarter. The average scrap cost per net ton charged decreased $79 compared to the first quarter.

Notable items for the second quarter include the completion, late in the quarter, of the second electric-arc-furnace upgrade at the Butler, Indiana, Flat Roll Mill. This brings the mill's total annual production capacity to 3 million tons. Also during the quarter, rail production increased at the Structural and Rail Division. In April, our rail-welding operation shipped its first rail-train of quarter-mile-long rail strings welded from 240-foot rail sections produced at the Columbia City mill. Separately, Dynamic Composites, a majority-owned facility at Columbia City (reported in the "All Other" business segment), shipped a major order for steel-core composite railroad ties. It then received a follow-on order for 25,000 ties from the BNSF Railway Co.

Metals Recycling and Ferrous Resources. This segment includes ferrous and non-ferrous metals recycling by OmniSource Corporation (processing and trading) and SDI's Iron Dynamics scrap-substitute operation that produces pig iron for use by the Flat Roll Division. The segment also includes expenses related to the Mesabi Nugget project, which currently is under construction.

The segment's net sales for second quarter 2009 were $309 million, and represented 30 percent of SDI's second quarter external sales. The operating income for this segment was $4 million, excluding amortization related to the segment's intangible assets and certain non-allocated corporate overhead expenses, such as profit-sharing costs. OmniSource achieved a $9 million operating profit for the quarter. The segment's overall pretax loss is attributable to losses at Iron Dynamics (related to lower market-based pig-iron prices) and to the expenses related to the Mesabi Nugget project as it nears expected start-up in November.

For the second quarter, total ferrous scrap shipments, including shipments to SDI's Steel Operations, were 840,000 tons, 44 percent lower than the year-ago-quarter (excluding Recycle South's second quarter 2008 shipments prior to its acquisition by OmniSource) and 15 percent higher than the first quarter of 2009. Non-ferrous scrap shipments for the second quarter of 2009 were 170 million pounds, 33 percent lower than the year-ago quarter and 11 percent lower than first quarter 2009 shipments.

During the second quarter, the company's scrap operations supplied 313,000 tons of ferrous scrap to SDI's Steel Operations, or approximately 54 percent of the tonnage of ferrous scrap purchased by our mills during the quarter.

Steel Fabrication Operations. Steel Fabrication Operations are the New Millennium Building Systems fabricating plants that produce joists, trusses, and steel deck used in the construction of non-residential buildings. Second quarter net sales were $37 million, or 5 percent of SDI's second quarter external sales. New Millennium reported a very small operating loss for the quarter. Second quarter shipments totaled 35,000 tons at an average selling price of $1,047 per ton. Second quarter shipments were 53 percent lower than the year-ago quarter, and 22 percent lower than the first quarter of 2009.

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' revenue, 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. Such predictive statements are not guarantees of future performance, and actual results could differ materially from our current expectations.

Factors that could cause such predictive statements to turn out other than as anticipated or predicted include, among others: the effects of prolonged or deepening recession on industrial demand; general or specific sector (i.e., automotive, consumer appliance or construction) economic conditions affecting steel consumption; the impact of price competition, whether domestic or the result of foreign imports; difficulties in integrating acquired businesses; risks and uncertainties involving new products or new technologies; changes in the availability or cost of steel scrap or substitute materials; increases in energy costs; occurrence of unanticipated equipment failures and plant outages; labor unrest; and the effect of the elements on production or consumption.

More specifically, we refer you to SDI's 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, available publicly on the SEC Web site, www.sec.gov, and on the Steel Dynamics Web site, www.steeldynamics.com

Forward-looking or predictive statements we make are based upon information and assumptions, concerning our businesses and the environments in which they operate, which we consider reasonable as of the date on which these statements are made. Due to the foregoing risks and uncertainties however, as well as, matters beyond our control which can affect forward-looking statements, you are cautioned not to place undue reliance on these predictive statements, which speak only as of the date of this press release. We undertake no duty to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Conference Call and Webcast

On Thursday, July 23, 2009, at 9:30 a.m. Eastern time, Steel Dynamics will host a conference call in which management will discuss second quarter results. You are invited to listen to the live audio broadcast of the conference call over the Internet, accessible from the Steel Dynamics Web site:

www.steeldynamics.com

Dial-in information is available on our Web site. An audio replay of the Webcast and a downloadable podcast will be available from the SDI Web site. No telephone replay will be available.

                                   Steel Dynamics, Inc.
                       CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                           (in thousands, except per share data)


                             Three                    Six             Three
                             Months                  Months           Months
                             Ended                   Ended            Ended
                            June 30,                 June 30,        March 31,
                       2009          2008       2009        2008       2009

    Net sales       $792,158     $2,403,939  $1,606,808  $4,306,144  $814,650
     Costs of goods
      sold           723,321      1,924,284   1,578,598   3,479,180   855,277

        Gross profit
         (loss)       68,837        479,655      28,210     826,964   (40,627)

     Selling,
      general, and
     administrative
      expenses        48,559         85,766     105,879     150,631    57,320
    Profit sharing         -         26,897         (42)     45,404       (42)
    Amortization
     of intangible
     assets           13,994          8,120      29,692      19,650    15,698
       Operating
        income (loss)  6,284        358,872    (107,319)    611,279  (113,603)

     Interest
      expense, net
      capitalized
      interest        37,043         35,475      73,294      65,282     36,251
     Other (income)
      expense, net       786        (16,901)         38     (24,707)     (748)
        Income (loss)
         before income
         taxes       (31,545)       340,298    (180,651)    570,704  (149,106)

    Income taxes     (15,024)       129,013     (74,356)    216,387   (59,332)
         Net income
          (loss)     (16,521)       211,285    (106,295)    354,317   (89,774)
    Net income
     (loss)
     attributable
     to
     non-controlling
     interests          (530)           791      (2,442)      1,266    (1,912)

      Net income
      (loss)
      attributable
      to Steel
      Dynamics,
      Inc.          $(15,991)      $210,494   $(103,853)   $353,051  $(87,862)


    Basic earnings
     (loss) per
     share
     attributable
     to
     Steel Dynamics,
     Inc. stockholders $(.08)         $1.11       $(.56)      $1.86     $(.48)

    Weighted
     average
     common shares
     outstanding     189,848        190,351     185,924     189,695    182,000

    Diluted
     earnings
     (loss) per
     share
     attributable
     to Steel
     Dynamics,
     Inc.
     stockholders,
     including
     the effect of
     assumed
     conversions
     when dilutive     $(.08)         $1.05       $(.56)      $1.77     $(.48)

    Weighted
     average
     common shares
     and equivalents
     outstanding     189,848        200,345     185,924     199,831    182,000


    Dividends
     declared per
     share             $.075           $.10       $.175        $.20       $.10

                                   Steel Dynamics, Inc.
                     UNAUDITED SUPPLEMENTAL OPERATING INFORMATION
             (dollars in thousands / volume data in actual net tons, except
                                   non-ferrous data)

                            Three                   Six               Three
                            Months                 Months             Months
                            Ended                  Ended              Ended
                           June 30,               June 30,           March 31,
                        2009        2008      2009        2008         2009

    Steel Operations*

    Shipments
      Flat Roll
       Division        454,745     706,281     758,683   1,391,601    303,938
      Structural and
       Rail
       Division         96,476     286,150     226,031     585,837    129,555
      Engineered Bar
       Products
       Division         63,124     145,085     134,664     293,033     71,540
      Roanoke Bar
       Division         89,112     136,582     165,722     287,950     76,610
      Steel of West
       Virginia         54,959      80,334      98,083     156,058     43,124
      The Techs        127,290     262,908     245,649     524,919    118,359
        Combined       885,706   1,617,340   1,628,832   3,239,398    743,126
        Intra-
         company       (47,590)   (124,128)    (99,602)   (254,813)   (52,012)
        External       838,116   1,493,212   1,529,230   2,984,585    691,114

    Production
     (excluding The
     Techs)            755,981   1,368,071   1,453,787   2,740,435    697,806

    Net sales
      Combined        $526,465  $1,635,559   1,061,649  $2,903,948   $535,184
      Intra-company    (19,572)   (110,904)    (49,714)   (195,964)   (30,142)
        External      $506,893  $1,524,655  $1,011,935  $2,707,984   $505,042

    Operating income
     (loss) before
     amortization
     of intangibles    $36,131    $330,906    $(29,332)   $571,241   $(65,463)
      Amortization of
       intangibles      (3,432)     (3,363)     (6,883)     (9,141)    (3,451)
      Operating
       income (loss)   $32,699    $327,543    $(36,215)   $562,100   $(68,914)

    Metals Recycling
     and Ferrous
     Resources**

    Ferrous metals shipments
      Combined         840,199   1,506,902   1,570,068   2,898,284    729,869
      Intra-company   (313,023)   (654,117)   (527,776) (1,118,010)  (214,753)
        External       527,176     852,785   1,042,292   1,780,274    515,116

    Non-ferrous
     metals shipments
     (thousands of
     pounds)           169,784     254,147     360,178     492,935    190,394

    Iron Dynamics shipments
      Liquid pig iron   44,392      52,342      85,618      97,785     41,226
      Hot briquetted
       iron              1,483      10,947      21,809      30,689     20,326
      Other                 29       3,438         703       6,247        674
        Intra-
         company        45,904      66,727     108,130     134,721     62,226

    Net sales
      Combined        $308,938  $1,160,950    $605,346   1,964,715   $296,408
      Intra-company    (68,540)   (418,336)   (127,242)   (615,342)   (58,702)
        External      $240,398    $742,614    $478,104  $1,349,373   $237,706

    Operating income
     (loss) before
     amortization
     of intangibles     $3,585     $84,954     $(8,837)   $137,747   $(12,422)
      Amortization of
       intangibles     (10,472)     (4,615)    (22,516)    (10,232)   (12,044)
      Operating
       income (loss)   $(6,887)    $80,339    $(31,353)   $127,515   $(24,466)

    Steel
     Fabrication***

    Shipments
      Combined          35,369      76,018      80,647     144,624     45,278
      Intra-company       (210)        (43)       (225)       (316)       (15)
        External        35,159      75,975      80,422     144,308     45,263

    Net sales
      Combined         $37,026     $93,288     $97,833    $171,811    $60,807
      Intra-company       (556)        (52)       (578)       (117)       (22)
        External       $36,470     $93,236     $97,255    $171,694    $60,785

    Operating income
     (loss) before
     amortization
     of intangibles        $(5)     $4,444      $3,162      $8,171     $3,167
      Amortization of
       intangibles         (33)        (83)       (200)       (166)      (167)
      Operating
       income             $(38)     $4,361      $2,962      $8,005     $3,000

    *    Steel Operations include the company's five steelmaking divisions and
         The Techs three galvanizing plants.
    **   Metals Recycling and Ferrous Resources Operations include OmniSource
         and Recycle South metals recycling operations, as well as Iron
         Dynamics' (IDI) pig iron substitute production facility (all IDI
         shipments are consumed internally). Operating income (loss) also
         includes the expenses associated with the construction and start up
         of the company's Mesabi Nugget facilities.
    ***  Steel Fabrication Operations include the company's joist and deck
         fabrication operations.

                                 Steel Dynamics, Inc.
                              CONSOLIDATED BALANCE SHEETS
                                    (in thousands)

                                                     June 30,     December 31,
                                                      2009            2008
                                                   (unaudited)
                 Assets
    Current assets
       Cash and equivalents                         $18,217        $16,233
       Accounts receivable, net                     364,736        502,932
       Inventories                                  738,470      1,023,235
       Deferred income taxes                         32,179         23,562
            Income taxes receivable                 125,912         86,321
       Other current assets                          22,017         57,632
            Total current assets                  1,301,531      1,709,915

    Property, plant and equipment, net            2,144,360      2,072,857

    Restricted cash                                  13,932         18,515

    Intangible assets, net                          557,194        614,786

    Goodwill                                        780,321        770,438

    Other assets                                     84,474         67,066
                        Total assets             $4,881,812     $5,253,577


             Liabilities and Stockholders' Equity
    Current liabilities
       Accounts payable                            $227,446       $263,393
       Income taxes payable                           2,702          4,107
       Accrued expenses                             143,136        209,697
       Accrued profit sharing                            56         62,561
       Senior secured revolving credit facility,
        matures 2012                                114,000        366,000
       Current maturities of long-term debt           1,049         65,223
            Total current liabilities               488,389        970,981

    Long-term debt
       Senior secured term A loan                         -        503,800
       7 3/8% senior notes, due 2012                700,000        700,000
       5.125% convertible senior notes, due 2014    287,500              -
       6 3/4% senior notes, due 2015                500,000        500,000
       7 3/4% senior notes, due 2016                500,000        500,000
       Other long-term debt                          42,392         15,361
            Total long-term debt                  2,029,892      2,219,161

    Deferred income taxes                           371,953        365,496

    Other liabilities                                67,095         65,626

    Commitments and contingencies

    Stockholders' equity
       Common stock                                     626            545
       Treasury stock, at cost                     (730,862)      (737,319)
       Additional paid-in capital                   958,558        541,686
       Other accumulated comprehensive loss               -         (1,411)
       Retained earnings                          1,682,208      1,820,385
            Total Steel Dynamics, Inc.
             stockholders' equity                 1,910,530      1,623,886
       Non-controlling interests                     13,953          8,427
            Total stockholders' equity            1,924,483      1,632,313
            Total liabilities and stockholders'
             equity                              $4,881,812     $5,253,577

                                    Steel Dynamics, Inc.
                        CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                        (in thousands)


                                       Three Months             Six Months
                                          Ended                   Ended
                                         June 30,                June 30,
                                    2009          2008       2009       2008

    Operating activities:
       Net income (loss)
        attributable to
        Steel Dynamics, Inc.     $(15,991)   $210,494   $(103,853)   $353,051

       Adjustments to
        reconcile net income
        (loss) attributable
        to Steel Dynamics, Inc.
        to net cash provided by
        operating activities:
          Depreciation and
           amortization            57,765      47,582     114,728     100,794
          Equity-based
           compensation             3,313       2,754      11,892       6,683
          Deferred income taxes     5,797      57,038      13,492      56,065
          Non-controlling
           interests                 (530)        792      (2,442)      1,267
          Changes in certain
           assets and
           liabilities:
              Accounts receivable  (5,297)   (211,411)    135,796    (397,204)
             Inventories           95,296    (227,270)    288,393    (217,695)
             Accounts payable     (13,793)    249,665     (47,847)    364,180
             Income taxes payable   2,702     (34,751)     (1,405)     37,857
             Other working
              capital             (57,596)    (39,602)   (122,393)    (36,111)

          Net cash provided by
           operating activities    71,666      55,291     286,361     268,887

    Investing activities:
       Purchase of property,
        plant and equipment       (73,166)   (101,225)   (147,504)   (194,989)
       Acquisition of
        businesses, net of
        cash acquired                   -    (271,247)          -    (271,158)
       Purchase of
        securities                      -           -           -     (20,373)
       Other investing
        activities                 (7,290)      2,913     (10,513)      4,153
          Net cash used in
           investing activities   (80,456)   (369,559)   (158,017)   (482,367)

    Financing activities:
       Issuance of current
        and long-term debt        471,685     786,900     708,744   1,004,900
       Repayment of current
        and long-term debt       (841,781)   (401,941) (1,200,447)   (635,155)
       Debt issuance costs        (13,298)     (5,568)    (13,751)     (7,514)
       Issuance of common
        stock (net of
        expenses) and
        proceeds from
        exercise of stock
        options, including
        related tax effect        412,547      10,277    410,489       17,454
       Purchase of treasury
        stock                           -           -          -      (46,128)
            Contribution from
             non-controlling
             investor                   -           -      5,000            -
       Dividends paid             (18,213)    (18,884)   (36,395)     (33,158)
          Net cash provided by
           (used in) financing
            activities             10,940     370,784   (126,360)     300,399

       Increase in cash and
        equivalents                 2,150      56,516      1,984       86,919
       Cash and equivalents
        at beginning of
        period                     16,067      58,889     16,233       28,486

       Cash and equivalents
        at end of period          $18,217    $115,405    $18,217     $115,405



    Supplemental
     disclosure of cash
     flow information:
       Cash paid for
        interest                  $67,450     $57,334    $79,433      $68,719
       Cash paid for federal
        and state income
        taxes, net of
        refunds                    $1,656    $160,522   $(53,774)    $161,909

SOURCE Steel Dynamics, Inc.