2014

Steel Dynamics Reports Second Quarter 2012 Diluted Earnings Per Share of $0.20

FORT WAYNE, Ind., July 23, 2012 /PRNewswire/ -- Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced second quarter net income of $44 million, or $0.20 per diluted share, on net sales of $1.9 billion. By comparison, prior year second quarter net income was $99 million, or $0.43 per diluted share, on net sales of $2.1 billion and sequential first quarter 2012 net income was $46 million, or $0.20 per diluted share, on net sales of $2.0 billion. In the first half of 2012 net income was $90 million, or $0.40 per diluted share, on net sales of $3.9 billion. By comparison, in the first half of 2011 net income was $205 million, or $0.89 per diluted share, on net sales of $4.1 billion.    

"Overall steel demand remained steady in the second quarter with volumes increasing about 5 percent," said Chief Executive Officer Mark Millett. "Stability in demand from the automotive, energy, construction equipment and agricultural sectors supported volumes.  However, decreases in flat roll pricing related to both supply-side pressure caused by increased imports and increased domestic capacity, resulted in somewhat decreased margins as compared to both the first quarter of 2012 and certainly the second quarter of 2011 — a timeframe when historically high margins were achieved. 

"Our overall financial performance was commendable in this environment which continues to be a challenge," stated Millett. "During the second quarter, we achieved stable sequential financial results in our steel and fabrication operations.  However, earnings from our metals recycling operations were severely impacted as margins and volume fell.  The ferrous scrap market was oversupplied as the export market weakened and demand decreased as U.S. steel mill utilization declined."      

Second Quarter Review

Aside from metals recycling and ferrous resources, second quarter volumes in each of the company's operating platforms increased when compared to the sequential first quarter of 2012, while consolidated operating income decreased $16 million, or 13 percent. The decrease in sequential quarterly operating income was the result of weakness in both ferrous and nonferrous recycled metal margins. Ferrous metals spreads declined by approximately 10 percent in the second quarter 2012 compared to the first quarter of the year.  Copper volumes declined and margins compressed as indexed copper prices decreased $0.33 per pound during the second quarter. Operating income for OmniSource was $5 million in the second quarter of 2012, a decrease of $20 million compared to the first quarter of 2012. 

The company's steel operations overall second quarter margins and operating income remained relatively consistent in comparison to first quarter 2012 quarterly results. The average selling price per ton shipped decreased $21 per ton to $854, and the average ferrous scrap cost per ton melted decreased $22.  There was a change in sequential quarterly earnings mix as operating income attributable to sheet operations increased 12 percent based mostly on volume increases and long product operations decreased 10 percent based mostly on pricing declines.  However, in spite of continued non-residential construction market weakness, the company's fabrication operations reported positive quarterly operating income for the first time since the first half of 2009, based on increased volumes and better utilization of manpower brought on to support expanding backlogs.    

The impact of losses from the company's Minnesota operations on second quarter 2012 consolidated net income was $11 million (net of tax), or approximately $0.05 per diluted share, as compared to $8 million for the second quarter of 2011 and $10 million for the first quarter of 2012.  Additional maintenance expenses were incurred during a planned five week outage in April and May 2012.  The company made numerous equipment modifications to improve the percentage of time the plant is available to operate each month.  After restarting, availability for the month of June increased to just over 80 percent—a significant improvement.  This improvement supports the attainability of the target rate for plant availability of over 90 percent. Operating rates, or productivity, also showed improvement post outage.  Operating at higher rates for longer periods of time has allowed for the identification of a number of key process optimization opportunities that are necessary for further improvement in both productivity and product quality. The company has identified several possible solutions which it is currently evaluating and intends to implement within the next twelve months, based on equipment delivery lead times and subsequent installation and startup. 

The company's iron concentrate facility in Minnesota is on schedule to begin supplying the nugget facility with lower-cost iron concentrate later in the third quarter of 2012, although higher priced third-party material remains in inventory for use through the remainder of the year.  If commercial pig iron prices (the index used to determine the nugget sales price) do not decrease from current levels, second half 2012 losses associated with the company's Minnesota operations could be similar to those recorded in the first half of the year.    

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 June 30, 2012.   

2011 Comparison

Despite increased volume, first half 2012 net sales of $3.9 billion were 5 percent less than those achieved in the first half of 2011 and  operating income decreased 43 percent, as margins decreased within the company's flat roll steel and metals recycling operations.  During the first half of 2011 the industry recorded historically high flat roll and metals recycling margins which were not repeated during the first half of this year.  The average selling price per ton shipped for the company's steel operations in the first half of 2012 was $864, a decrease of $54 per ton compared to the same period last year.  The average ferrous scrap cost per ton melted remained unchanged for the same comparative period.      

Outlook

"Looking ahead," Millett said, "we anticipate continued demand in such sectors as automotive, manufacturing, energy and construction equipment, while transportation and agriculture appears to be tempering.  We believe order rates could be somewhat uneven throughout the third quarter, as fluctuations in immediate product needs and hesitancy for customers to carry inventory persists.  Ferrous scrap pricing fell further in July, which could further challenge our metals recycling operations.  We should see the benefit from these lower raw material costs for our steel operations early in the third quarter, but if the scrap market firms due to potential resumption in exports and mill buying, margins could moderate over the quarter.  The U.S. and world economies remain challenging; although, we believe we are uniquely equipped to capitalize on the opportunities ahead,  supported by our superior, low-cost, highly-variable cost structure, our diversified, value-added product mix, our vertical integration and our exceptional team of employees." 

Summary Operating 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.

 



Second Quarter


Year To Date


Sequential



2012


2011


2012


2011


1Q 2012

Total Sales


$1,280,767


$1,354,665


$2,535,231


$2,628,137


$1,254,464

External Sales


1,207,300


1,267,275


2,394,020


2,462,339


1,186,720

Operating Income


139,028


216,647


278,768


412,281


139,740

Total Shipments (tons)


1,520,579


1,453,018


2,970,702


2,906,393


1,450,123

Average External Sales Price Per Ton  


$854


$947


$864


$918


$875

Average Ferrous Scrap Cost Per Ton


$395


$414


$407


$407


$417

Metals Recycling and Ferrous Resources

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, which currently primarily includes an iron nugget manufacturing facility (Mesabi Nugget, which is 81 percent company-owned).

 

Metals Recycling & Ferrous Resources


Second Quarter


Year To Date


Sequential



2012


2011


2012


2011


1Q 2012

Total Sales


$ 927,092


$1,080,129


$ 2,039,432


$2,188,544


$ 1,112,340

     External Sales


590,509


724,679


1,290,109


1,467,844


699,600

Operating Income (Loss)


(13,135)


10,967


(2,736)


57,538


10,399























Metals Recycling


Second Quarter


Year To Date


Sequential



2012


2011


2012


2011


1Q 2012

Total Sales


$ 876,731


$1,023,421


$ 1,933,904


$2,077,465


$ 1,057,173

External Sales


589,722


724,679


1,289,064


1,467,844


699,342

Operating Income


5,085


18,270


30,089


67,389


25,004

Unrealized Hedging Gains (Losses)


1,080


(4,845)


3,083


4,678


2,003

Ferrous Shipments (gross tons)


1,486,222


1,553,828


3,069,062


3,082,019


1,582,840

     % Shipments to Company Steel Mills


45%


42%


46%


43%


48%

Nonferrous Shipments (pounds 000's)


258,932


255,113


550,568


541,758


291,636

 

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.  

 



Second Quarter


Year To Date


Sequential



2012


2011


2012


2011


1Q 2012

Total Sales


$    95,767


$   61,962


$  170,663


$  114,614


$      74,896

Operating Income (Loss)


193


(1,635)


(2,475)


(4,518)


(2,668)

Total Shipments (tons)


77,932


47,770


138,115


91,821


60,183

Average External Sales Price Per Ton


$1,229


$1,298


$1,236


$1,250


$1,244

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 $8.0 billion in 2011, over 6,500 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, July 24, 2012, at 10:00 a.m. Eastern time, Steel Dynamics will host a conference call with investors and analysts to discuss the company's second quarter operating and financial results.  We invite you to listen to the live audiocast of the conference call accessible from our website (http://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 following the conclusion of the conference call.  


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


Three Months Ended


Six Months Ended


Three Months Ended


June 30,


June 30,


March 31,


2012


2011


2012


2011


2012























Net sales 

$

1,909,803

$

2,079,731

$

3,891,843

$

4,095,700

$

1,982,040

Costs of goods sold               


1,727,667


1,803,345


3,508,443


3,523,560


1,780,776

        Gross profit


182,136


276,386


383,400


572,140


201,264












Selling, general and administrative expenses


61,235


63,631


125,619


128,772


64,384

Profit sharing


8,211


14,454


16,283


29,657


8,072

Amortization of intangible assets


8,991


10,082


17,983


20,166


8,992

        Operating income         


103,699


188,219


223,515


393,545


119,816












Interest expense, net of capitalized interest


41,106


44,812


82,218


88,158


41,112

Other expense (income), net


(1,892)


(5,745)


8,356


(10,312)


10,248

        Income before income taxes


64,485


149,152


132,941


315,699


68,456












Income taxes          


25,180


53,326


51,859


115,643


26,679

        Net income


39,305


95,826


81,082


200,056


41,777












Net loss attributable to noncontrolling interests


5,167


2,884


9,065


4,557


3,898












        Net income attributable to Steel         Dynamics, Inc.

 

$

 

44,472

 

$

 

98,710

 

$

 

90,147

 

$

 

204,613

 

$

45,675


































Basic earnings per share attributable to

        Steel Dynamics, Inc. stockholders

$

.20

$

.45

$

.41

$

.94

$

.21












Weighted average common shares     outstanding


219,104


218,500


219,050


218,246


218,996























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

$

.20

$

.43

$

.40

$

.89

$

.20












Weighted average common shares and

        equivalents outstanding  


236,208


236,266


236,367


236,245


236,526












Dividends declared per share

$

.10

$

.10

$

.20

$

.20

$

.10

 

 

Steel Dynamics, Inc.
UNAUDITED SUPPLEMENTAL OPERATING INFORMATION
(dollars in thousands)





Three Months Ended


Six Months Ended


Three Months Ended






June 30,


June 30,


March 31,






2012


2011


2012


2011


2012


Steel Operations*


























Shipments (tons)













Flat Roll Division


706,944


680,679


1,365,449


1,390,293


658,505



Structural and Rail Division














Structural


214,347


178,568


441,406


338,736


227,059




Rail


38,177


34,800


72,124


65,293


33,947



Engineered Bar Products Division


166,208


144,280


323,697


303,295


157,489



Roanoke Bar Division


149,010


152,906


300,306


274,211


151,296



Steel of West Virginia


74,456


74,882


151,668


146,938


77,212



The Techs


171,437


186,903


316,052


387,627


144,615




Total


1,520,579


1,453,018


2,970,702


2,906,393


1,450,123




   Intra-company


(106,875)


(115,410)


(201,051)


(225,383)


(94,176)




External


1,413,704


1,337,608


2,769,651


2,681,010


1,355,947
















Production, excluding The Techs (tons)


1,328,290


1,321,273


2,680,108


2,605,724


1,351,818
















Net sales













Total


$   1,280,767


$   1,354,665


$   2,535,231


$   2,628,137


$   1,254,464



   Intra-company


(73,467)


(87,390)


(141,211)


(165,798)


(67,744)



External


$   1,207,300


$   1,267,275


$   2,394,020


$   2,462,339


$   1,186,720




























Operating income before amortization of intangibles


$      139,028


$      216,647


$      278,768


$      412,281


$      139,740



Amortization of intangibles


(2,431)


(2,679)


(4,863)


(5,358)


(2,432)


Operating income (Note 1)


$      136,597


$      213,968


$      273,905


$      406,923


$      137,308
















Metals Recycling and Ferrous Resources**


























OmniSource












  Ferrous metals shipments (gross tons)













Total


1,486,222


1,553,828


3,069,062


3,082,019


1,582,840



   Intra-company


(666,668)


(660,688)


(1,430,435)


(1,330,316)


(763,767)



External


819,554


893,140


1,638,627


1,751,703


819,073
















  Non-ferrous metals shipments (thousands of pounds)













Total


258,932


255,113


550,568


541,758


291,636



   Intra-company


(4,598)


(1,978)


(6,556)


(4,239)


(1,958)



External


254,334


253,135


544,012


537,519


289,678
















Mesabi Nugget shipments (metric tons) - Intra-company


33,840


38,265


80,070


74,032


46,230
















Iron Dynamics (metric tons) - Intra-company


59,103


59,854


115,731


120,997


56,628
















Net sales













Total


$      927,092


$   1,080,129


$   2,039,432


$   2,188,544


$   1,112,340



   Intra-company


(336,583)


(355,450)


(749,323)


(720,700)


(412,740)



External


$      590,509


$      724,679


$   1,290,109


$   1,467,844


$      699,600
















Operating income (loss) before amortization of intangibles


$      (13,135)


$        10,967


$        (2,736)


$        57,538


$        10,399



Amortization of intangibles


(6,236)


(7,082)


(12,472)


(14,163)


(6,236)


Operating income (loss) (Note 1)


$      (19,371)


$          3,885


$      (15,208)


$        43,375


$          4,163
















Steel Fabrication***


























Shipments (tons)













Total


77,932


47,770


138,115


91,821


60,183



   Intra-company


-


(51)


(2)


(609)


(2)



External


77,932


47,719


138,113


91,212


60,181
















Net sales













Total


$        95,767


$        61,962


$      170,663


$      114,614


$        74,896



   Intra-company


-


(23)


(4)


(596)


(4)



External


$        95,767


$        61,939


$      170,659


$      114,018


$        74,892
















Operating income (loss) (Note 1)


$             193


$        (1,635)


$        (2,475)


$        (4,518)


$        (2,668)






























*

  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 



  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)


June 30, 
2012


December 31,

2011



(unaudited)



Assets








Current assets








        Cash and equivalents      


$

420,938


$

390,761


        Investments in short-term commercial paper  



9,998



84,830


        Accounts receivable, net 



715,440



722,791


        Inventories     



1,252,153



1,199,584


        Deferred income taxes    



26,917



25,341


        Income taxes receivable



17,082



16,722


        Other current assets        



15,816



15,229


                     Total current assets         



2,458,344



2,455,258










Property, plant and equipment, net   



2,208,660



2,193,745










Restricted cash     



27,806



26,528










Intangible assets, net



433,559



450,893










Goodwill



741,817



745,066










Other assets          



101,194



107,736


                    Total assets       


$

5,971,380


$

5,979,226


















Liabilities and Equity








Current liabilities








        Accounts payable           


$

393,174


$

420,824


        Income taxes payable



2,164



10,880


        Accrued expenses          



168,928



185,964


        Accrued profit sharing   



15,271



38,671


        Current maturities of long-term debt



439,912



444,078


                     Total current liabilities    



1,019,449



1,100,417










Long-term debt








        Term note



254,375



-


        7 3/8% senior notes, due 2012        



-



261,250


        5.125% convertible senior notes, due 2014



287,498



287,500


        6 ¾% senior notes, due 2015



500,000



500,000


        7 ¾% senior notes, due 2016



500,000



500,000


        7 5/8% senior notes, due 2020



350,000



350,000


        Other long-term debt      



36,224



37,272


                     Total long-term debt



1,928,097



1,936,022










Deferred income taxes         



510,479



489,915










Other liabilities



81,795



82,278










Commitments and contingencies

 








Redeemable noncontrolling interests



77,424



70,694


 

Equity








        Common stock               



636



636


        Treasury stock, at cost    



(720,481)



(722,653)


        Additional paid-in capital               



1,033,086



1,026,157


        Retained earnings           



2,058,108



2,011,801


                     Total Steel Dynamics, Inc. equity



2,371,349



2,315,941


        Noncontrolling interests



(17,213)



(16,041)


                     Total equity      



2,354,136



2,299,900


                     Total liabilities and equity              


$

5,971,380


$

5,979,226













 

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


Three Months Ended


Six Months Ended


June 30,


June 30,


2012


2011


2012


2011



















Operating activities:









        Net income                     

$

39,305

$

95,826

$

81,082

$

200,056










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









                Depreciation and amortization


55,502


56,257


111,074


111,003

                Equity-based compensation


2,602


3,812


8,725


7,522

                Deferred income taxes            


10,634


9,028


19,831


21,963

                Changes in certain assets and liabilities:









                        Accounts receivable       


73,734


34,536


12,914


(227,212)

                        Inventories     


18,787


(9,026)


(36,303)


(81,133)

                        Accounts payable           


(60,837)


2,750


(25,935)


96,925

                        Income taxes receivable/payable


(26,468)


(17,119)


(9,076)


28,320

                        Other working capital     


(12,657)


(10,067)


(40,292)


12,490

                Net cash provided by operating activities               


100,602


165,997


122,020


169,934










Investing activities:









        Purchase of property, plant and equipment    


(54,789)


(34,976)


(100,344)


(53,669)

        Other investing activities


55,662


2,142


53,798


999

                Net cash provided by (used in) investing activities


873


(32,834)


(46,546)


(52,670)










Financing activities:









        Issuance of current and long-term debt          


-


-


289,969


5,126

        Repayment of current and long-term debt      


(21,896)


(491)


(305,344)


(7,816)

        Debt issuance costs        


-


-


(2,188)


-

        Proceeds from exercise of stock options, including related tax effect


341


4,569


1,438


12,865

        Contributions from noncontrolling investors, net


5,117


1,470


14,623


1,887

        Dividends paid               


(21,908)


(21,830)


(43,795)


(38,148)

                Net cash used in financing activities       


(38,346)


(16,282)


(45,297)


(26,086)










        Increase in cash and equivalents     


63,129


116,881


30,177


91,178

        Cash and equivalents at beginning of period  


357,809


160,810


390,761


186,513










        Cash and equivalents at end of period

$

420,938

$

277,691

$

420,938

$

277,691























































Supplemental disclosure information:









        Cash paid for interest

$

62,807

$

71,047

$

81,560

$

86,157

        Cash paid for federal and state income taxes, net

$

41,302

$

60,455

$

40,347

$

61,975










 

SOURCE Steel Dynamics, Inc.



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