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Steel Dynamics Reports Second Quarter 2013 Diluted Earnings Per Share of $0.13

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FORT WAYNE, Ind., July 17, 2013 /PRNewswire/ -- Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced second quarter 2013 net income of $29 million, or $0.13 per diluted share, on net sales of $1.8 billion.  By comparison, prior year second quarter net income was $44 million, or $0.20 per diluted share, on net sales of $1.9 billion; and sequential first quarter 2013 net income was $48 million, or $0.21 per diluted share, on net sales of $1.8 billion.

"Specific to product pricing, the second quarter proved most challenging for our sheet and structural steel operations," said President and Chief Executive Officer, Mark Millett. "Slower anticipated economic growth in China coupled with suppressed economic growth in the European community influenced near-term market sentiment.  The persistent uncertainty in the domestic economic environment continued to influence customer buying patterns as they maintained low inventory levels.   Domestic oversupply, coupled with increased quarter-over-quarter steel imports, resulted in decreased quarterly selling values.

"Compared to the first quarter, operating income from our steel operations decreased 28 percent to $88 million, driven by metal margin compression caused by declines in average consecutive quarterly sheet and structural steel pricing, which more than offset the benefit of increased overall volume," stated Millett.   "We saw meaningful volume improvements for rail, engineered special bar quality products, and galvanized sheet steel from The Techs.  Modest growth in the overall construction market continued in the quarter and supported improved shipments and backlog for our fabrication business, which achieved its fifth consecutive profitable quarter. 

"We noted in our second quarter guidance that we were anticipating potential challenges in the metals recycling market.  Operating income from our metals recycling operations decreased 37% to $16 million, when compared to first quarter.  While ferrous volumes and metal spreads remained somewhat flat, nonferrous volume and margins contracted meaningfully in the quarter, as both copper and stainless steel market prices decreased significantly," said Millett.

Second Quarter Review

Second quarter shipments improved in the company's steel and fabrication operating segments when compared to the first quarter, but were lower for both metals recycling and ferrous operations.  Operating income for the company's steel operations decreased as compared to the sequential first quarter, declining 28 percent, and declined 37 percent as compared to the second quarter 2012, primarily due to lower steel metal spreads, as declining steel prices more than offset increased volume. 

The company's steel mill production utilization rate was 83 percent in the second quarter, compared to 89 percent in the first quarter of 2013.  Planned maintenance downtime in April at the Flat Roll and Engineered Bar divisions was the primary reason for the decrease.  The Structural and Rail Division continued a positive utilization trend as standard rail volume increased 20 percent over the sequential quarter.  The average selling price for the company's steel operations per ton shipped decreased $8 to $781 in the second quarter, and the average ferrous scrap cost per ton melted increased $3 per ton.   Operating income attributable to the company's long product operations decreased 20 percent when compared to the sequential quarter, while earnings from sheet operations decreased 34 percent.

Sequential operating income for the metals recycling operations decreased in the second quarter of 2013 to $16 million, as compared to $25 million of operating income in the first quarter, although contribution to the company's overall operating income was higher than the second quarter 2012 of $5 million.  Nonferrous shipments decreased nine percent sequentially, and when combined with generally lower pricing, the nonferrous metal spread decreased ten percent. The lower nonferrous volume is primarily attributed to a decrease in copper and stainless shipments, as lower pricing adversely impacted flow toward the end of the second quarter.

The impact of losses from the company's Minnesota operations on second quarter 2013 consolidated net income was approximately $9 million, or $0.04 per diluted share, as compared to a loss of $14 million, or $0.06 per diluted share, in the first quarter. As previously indicated and according to plan, the installation of additional equipment and other modifications were made at the iron nugget facility in April.  The facility resumed production in May and the restart has progressed well.  Production is expected to increase steadily and reach a monthly rate of 30,000 metric tons before the end of the year.  The company anticipates the impact of losses related to the Minnesota operations for the third quarter 2013 to be similar to somewhat improved compared to those recorded in the second quarter as expected yield and production improvements are realized.

Year to Date Comparison

A decline in average steel prices and decreased nonferrous shipments resulted in net sales of $3.6 billion for the six months ended June 30, 2013, an eight percent decline from the same period in 2012. Operating income decreased 26 percent, as margins decreased within the company's steel operations.  The average selling price per ton shipped for the company's steel operations in the six months ended June 30, 2013 was $785, a decrease of $79 per ton compared to the same period last year.  The average ferrous scrap cost per ton melted was $54 lower than the comparative period for 2012. 

Outlook

"We remain optimistic as the demand for high-quality steel products has not abated," Millett said. "The team is on track to complete the organic growth projects scheduled to start at the end of this year, including the engineered special-bar-quality capacity expansion and the premium rail product addition.  The automotive market remains strong, and manufactured goods is strengthening.  Housing start data continues to suggest increasingly higher potential for a sustainable recovery in residential construction.  We remain cautiously optimistic about the nonresidential construction market in 2013, as the most recent key market indices showed upward improvements. We also view the increase in our engineered special-bar-quality products and fabrication shipments as positive signs of momentum.  We are confident that with our exceptional team, and our superior, low-cost operating culture, we are uniquely prepared to capitalize on the opportunities ahead." 

Summary Second Quarter 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, engineered special-bar-quality steel, rebar, rail, and specialty shapes.

 



Second Quarter


Year To Date


Sequential



2013


2012


2013


2012


1Q 2013

Total Sales


$1,165,775


$1,280,767


$2,307,850


$2,535,231


$1,142,075

External Sales


1,091,015


1,207,300


2,152,327


2,394,020


1,061,312

Operating Income


87,833


139,028


209,422


278,768


121,589












Total Shipments (tons)


1,522,668


1,520,579


2,992,470


2,970,702


1,469,802

Average External Sales Price Per Ton 


$781


$854


$785


$864


$789

Average Ferrous Scrap Cost Per Ton


$354


$395


$353


$407


$351

 

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 iron producing operations.

 

Metals Recycling & Ferrous Resources


Second Quarter


Year To Date


Sequential



2013


2012


2013


2012


1Q 2013

Total Sales


$ 893,116


$ 927,092


$ 1,807,684


$2,039,432


$ 914,568

     External Sales


585,492


590,509


1,206,620


1,290,109


621,128

Operating Loss


(1,811)


(13,135)


(6,120)


(2,736)


(4,309)

 

Metals Recycling


Second Quarter


Year To Date


Sequential



2013


2012


2013


2012


1Q 2013

Total Sales


$  794,750


$876,731


$ 1,629,789


$1,933,904


$ 835,039

External Sales


554,996


589,722


1,164,914


1,289,064


609,918

Operating Income


15,774


5,085


40,739


30,089


24,965

Unrealized Hedging Gains (Losses)


(1,583)


1,080


(892)


3,083


691












Ferrous Shipments (gross tons)


1,334,390


1,486,222


2,677,319


3,069,062


1,342,929

   % Shipments to Company Steel Mills


39%


45%


41%


46%


43%

Nonferrous Shipments (pounds 000's)


254,495


258,932


534,151


550,568


279,656

 

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



2013


2012


2013


2012


1Q 2013

Total Sales


$   104,159


$   95,767


$  198,534


$  170,663


$     94,375

Operating Income (Loss)


2,330


193


3,860


(2,475)


1,530

Total Shipments (tons)


86,371


77,932


163,954


138,115


77,583

Average External Sales Price Per Ton


$1,206


$1,229


$1,210


$1,236


$1,214

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 recurrent slowing economy 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 Thursday, July 18, 2013, 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 2013 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 July 25, 2013.  A downloadable podcast and MP3 file of the event will also be available on our website.    

 

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,


2013


2012


2013


2012


2013












Net sales

$

1,801,340

$

1,909,803

$

3,597,036

$

3,891,843

$

1,795,696

Costs of goods sold               


1,653,648


1,727,667


3,273,080


3,508,443


1,619,432

        Gross profit


147,692


182,136


323,956


383,400


176,264












Selling, general and administrative expenses


65,356


61,235


130,618


125,619


65,262

Profit sharing


4,779


8,211


11,422


16,283


6,643

Amortization of intangible assets


8,051


8,991


16,178


17,983


8,127

Impairment charges


308


-


308


-


-

        Operating income       


69,198


103,699


165,430


223,515


96,232












Interest expense, net of capitalized interest


31,465


41,106


66,094


82,218


34,629

Other expense (income), net


(1,246)


(1,892)


(2,292)


8,356


(1,046)

        Income before income taxes


38,979


64,485


101,628


132,941


62,649












Income taxes          


15,706


25,180


37,103


51,859


21,397

        Net income


23,273


39,305


64,525


81,082


41,252












Net loss attributable to noncontrolling interests


5,685


5,167


12,648


9,065


6,963












        Net income attributable to Steel Dynamics, Inc.

 

$

 

28,958

 

$

 

44,472

 

$

 

77,173

 

$

 

90,147

 

$

48,215


































Basic earnings per share attributable to

        Steel Dynamics, Inc. stockholders

$

0.13

$

0.20

$

0.35

$

0.41

$

0.22












Weighted average common shares outstanding


220,471


219,104


220,233


219,050


219,995























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

$

0.13

$

0.20

$

0.34

$

0.40

$

0.21












Weighted average common shares and

        equivalents outstanding  (Note 1)


221,736


236,208


238,246


236,367


238,087












Dividends declared per share

$

0.11

$

0.10

$

0.22

$

0.20

$

0.11

 

(Note 1)  Excludes the impact of the 5.125% convertible senior notes from net income (numerator) and share equivalents outstanding (denominator) for the three months ended June 30, 2013, as the impact to diluted earnings per share is anti-dilutive.


 

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,





2013


2012


2013


2012


2013


Steel Operations*
























Shipments (tons)












Flat Roll Division

720,582


706,944


1,424,872


1,365,449


704,290



Structural and Rail Division













Structural

223,700


214,347


451,789


441,406


228,089




Rail

63,274


38,177


116,082


72,124


52,808



Engineered Bar Products Division

123,919


166,208


236,740


323,697


112,821



Roanoke Bar Division

134,001


149,010


273,951


300,306


139,950



Steel of West Virginia

77,975


74,456


158,682


151,668


80,707



The Techs

179,217


171,437


330,354


316,052


151,137




Total

1,522,668


1,520,579


2,992,470


2,970,702


1,469,802




   Intra-company

(126,288)


(106,875)


(251,658)


(201,051)


(125,370)




External

1,396,380


1,413,704


2,740,812


2,769,651


1,344,432















Production, excluding The Techs (tons)

1,329,322


1,328,290


2,736,830


2,680,108


1,407,508















Net sales












Total

$   1,165,775


$   1,280,767


$   2,307,850


$   2,535,231


$   1,142,075



   Intra-company

(74,760)


(73,467)


(155,523)


(141,211)


(80,763)



External

$   1,091,015


$   1,207,300


$   2,152,327


$   2,394,020


$   1,061,312


























Operating income before amortization of intangibles

$        87,833


$      139,028


$      209,422


$      278,768


$      121,589



Amortization of intangibles

(2,288)


(2,431)


(4,576)


(4,863)


(2,288)


Operating income (Note 1)

$        85,545


$      136,597


$      204,846


$      273,905


$      119,301















Metals Recycling and Ferrous Resources Operations**
























OmniSource











  Ferrous metals shipments (gross tons)












Total

1,334,390


1,486,222


2,677,319


3,069,062


1,342,929



   Intra-company

(548,268)


(666,668)


(1,102,158)


(1,430,435)


(553,890)



External

786,122


819,554


1,575,161


1,638,627


789,039















  Nonferrous metals shipments (thousands of pounds)












Total

254,495


258,932


534,151


550,568


279,656



   Intra-company

(6,737)


(4,598)


(10,266)


(6,556)


(3,529)



External

247,758


254,334


523,885


544,012


276,127















Mesabi Nugget shipments (metric tons) - Intra-company

44,454


33,840


104,139


80,070


59,685















Iron Dynamics (metric tons) - Intra-company

66,285


59,103


130,970


115,731


64,685















Net sales












Total

$      893,116


$      927,092


$   1,807,684


$   2,039,432


$      914,568



   Intra-company

(307,624)


(336,583)


(601,064)


(749,323)


(293,440)



External

$      585,492


$      590,509


$   1,206,620


$   1,290,109


$      621,128















Operating loss before amortization of intangibles

$        (1,811)


$      (13,135)


$        (6,120)


$        (2,736)


$        (4,309)



Amortization of intangibles

(5,440)


(6,236)


(10,955)


(12,472)


(5,515)


Operating loss (Note 1)

$        (7,251)


$      (19,371)


$      (17,075)


$      (15,208)


$        (9,824)















Steel Fabrication Operations***
























Shipments (tons)












Total

86,371


77,932


163,954


138,115


77,583



   Intra-company

(460)


-


(794)


(2)


(334)



External

85,911


77,932


163,160


138,113


77,249















Net sales












Total

$      104,159


$        95,767


$      198,534


$      170,663


$        94,375



   Intra-company

(564)


-


(1,142)


(4)


(578)



External

$      103,595


$        95,767


$      197,392


$      170,659


$        93,797















Operating income (loss) (Note 1)

$          2,330


$             193


$          3,860


$        (2,475)


$          1,530




























*

  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)

 



June 30,

2013


December 31,

2012



(unaudited)



Assets








Current assets








        Cash and equivalents     


$

243,753


$

375,917


        Investments in short-term commercial paper



-



31,520


        Accounts receivable, net



773,127



642,363


        Inventories     



1,168,499



1,202,507


        Deferred income taxes    



23,682



23,449


        Other current assets       



33,028



20,469


                     Total current assets        



2,242,089



2,296,225










Property, plant and equipment, net  



2,232,852



2,231,198










Restricted cash     



23,231



27,749










Intangible assets, net



401,104



416,635










Goodwill



735,281



738,542










Other assets         



101,353



105,067


                    Total assets      


$

5,735,910


$

5,815,416










Liabilities and Equity








Current liabilities








        Accounts payable          


$

364,330


$

360,097


        Income taxes payable



2,862



16,941


        Accrued expenses          



178,416



203,008


        Current maturities of long-term debt



324,241



29,631


                     Total current liabilities 



869,849



609,677










Long-term debt








        Term note



233,750



247,500


        Senior notes   



1,500,000



1,600,000


        Convertible senior notes



-



287,496


        Other long-term debt     



40,493



37,610


                     Total long-term debt



1,774,243



2,172,606










Deferred income taxes        



556,023



537,304


Other liabilities



20,324



19,173










Commitments and contingencies
















Redeemable noncontrolling interests



104,734



98,814










Equity








        Common stock               



640



637


        Treasury stock, at cost  



(718,373)



(720,479)


        Additional paid-in capital              



1,050,470



1,037,687


        Retained earnings           



2,116,262



2,087,620


                     Total Steel Dynamics, Inc. equity



2,448,999



2,405,465


        Noncontrolling interests



(38,262)



(27,623)


                     Total equity     



2,410,737



2,377,842


                     Total liabilities and equity            


$

5,735,910


$

5,815,416













 

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 






Three Months Ended


Six Months Ended


June 30,


June 30,


2013


2012


2013


2012










Operating activities:









        Net income                     

$

23,273

$

39,305

$

64,525

$

81,082










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









                Depreciation and amortization              


56,826


55,502


113,887


111,074

                Equity-based compensation


2,344


2,602


7,097


8,725

                Deferred income taxes            


10,812


10,634


21,747


19,831

                Changes in certain assets and liabilities:









                        Accounts receivable       


(19,826)


73,734


(130,764)


12,914

                        Inventories     


1,660


18,787


34,008


(36,303)

                        Accounts payable          


(46,370)


(60,837)


(7,382)


(25,935)

                        Income taxes receivable/payable


(23,304)


(26,468)


(26,326)


(9,076)

                        Other assets and liabilities             


27,300


(12,657)


(14,367)


(40,292)

                Net cash provided by operating activities             


32,715


100,602


62,425


122,020










Investing activities:









        Purchase of property, plant and equipment  


(49,236)


(54,789)


(94,582)


(100,344)

        Other investing activities


863


55,662


34,797


53,798

                Net cash provided by (used in) investing activities


(48,373)


873


(59,785)


(46,546)










Financing activities:









        Issuance of current and long-term debt          


32


-


409,293


289,969

        Repayment of current and long-term debt     


(202,312)


(21,896)


(508,003)


(305,344)

        Debt issuance costs       


(195)


-


(6,192)


(2,188)

        Proceeds from exercise of stock options, including related tax effect


2,977


341


10,591


1,438

        Contributions from noncontrolling investors, net


5,286


5,117


5,697


14,623

        Dividends paid               


(24,238)


(21,908)


(46,190)


(43,795)

                Net cash used in financing activities      


(218,450)


(38,346)


(134,804)


(45,297)










        Increase (decrease) in cash and equivalents   


(234,108)


63,129


(132,164)


30,177

        Cash and equivalents at beginning of period  


477,861


357,809


375,917


390,761










        Cash and equivalents at end of period

$

243,753

$

420,938

$

243,753

$

420,938























































Supplemental disclosure information:









        Cash paid for interest

$

17,583

$

62,807

$

67,315

$

81,560

        Cash paid for federal and state income taxes, net

$

27,360

$

41,302

$

38,525

$

40,347










 

 

 

SOURCE Steel Dynamics, Inc.



RELATED LINKS
http://www.steeldynamics.com

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