Steel Dynamics Reports Second Quarter 2014 Diluted Earnings Per Share of $0.31

FORT WAYNE, Ind., July 21, 2014 /PRNewswire/ -- Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced second quarter 2014 net income of $72 million, or $0.31 per diluted share, on net sales of $2.1 billion.  By comparison, prior year second quarter net income was $29 million, or $0.13 per diluted share, on net sales of $1.8 billion; and sequential first quarter 2014 net income was $39 million, or $0.17 per diluted share, on net sales of $1.8 billion.

"Our consolidated operating income increased 63 percent to $132 million for the second quarter 2014, as compared to the first quarter," said Chief Executive Officer Mark Millett. "All of our reporting segments achieved meaningfully higher profitability compared to the sequential quarter, improving beyond the negative inclement weather impact on the first quarter.  Despite elevated import levels, the strength of underlying demand coupled with our continued market diversification and customer focus allowed us to achieve record quarterly steel shipments.  We are optimistic heading into the second half of 2014 and so are our customers."     

Compared to the first quarter 2014, operating income from the company's steel operations increased $50 million, or 47 percent, driven by record shipments and improved metal spreads.  Sheet and structural steel volumes were the primary contributors to the improved profitability.   The automotive and manufacturing markets remain strong and the energy market appears to be strengthening, as evidenced in increased demand for engineered special bar quality steels.   Continued modest growth in the nonresidential construction market benefited both the structural steel and fabrication operations.  Compared to the first quarter 2014, operating income from the company's fabrication operations more than doubled. 

"For our metals recycling operations operating income increased to $18 million in the second quarter 2014, as compared to $10 million in the sequential quarter, but the market environment remains challenging," stated Millett.  "Ferrous scrap availability and volumes improved, but profitability margins compressed from first quarter levels.  However, the quarterly decline in sequential ferrous profitability was more than offset by meaningful improvements in nonferrous volumes and metal spreads."

Second Quarter Review

Second quarter 2014 shipments increased across the company's platforms, as compared to the sequential quarter. Operating income for the company's steel operations increased to $158 million, or 47 percent, as compared to the sequential quarter, based on increased shipments of sheet, engineered bar and structural steel, combined with overall metal margin expansion in long products.  The Flat Roll and Structural and Rail Divisions each achieved record quarterly shipments, as sheet steel increased 21 percent, structural steel beam increased 14 percent, and rail improved 22 percent, in comparison to the first quarter 2014.  The average selling price for the company's total steel operations slightly decreased by $2 per ton.  The average ferrous scrap cost per ton melted decreased $16 per ton. 

Second quarter operating income attributable to the company's sheet steel operations increased 40 percent when compared to the sequential quarter, and operating income from long product operations increased 59 percent.  The company's steel mill production utilization rate was 90 percent in the second quarter 2014, compared to 86 percent in the sequential quarter.

Second quarter operating income from the company's metals recycling operations increased 17 percent, as the increase in nonferrous metal spread and four percent increase in total shipments more the offset lower ferrous metal spread during the second quarter 2014, when compared to the sequential quarter.  

The company's fabrication business increased second quarter 2014 operating income by $4 million, to $8 million, driven by record quarterly shipments based on both market share and overall demand improvement. According to the Steel Joist Institute, domestic year-over year joist shipments have increased 14 percent as of May 2014.   Order inquiries and project bookings continue to strengthen, signaling further recovery in the nonresidential construction market.  

The impact of losses from the company's Minnesota operations for second quarter 2014 consolidated net income was $9.1 million, or $0.04 per diluted share, as compared to $8.9 million, or $0.04 per diluted share in the first quarter 2014.  During the second quarter, as the company indicated on the first quarter earnings teleconference, remaining operating trials were completed and a four week outage was taken to upgrade the rotary hearth furnace, and as anticipated these trials and the outage resulted in second quarter losses similar to those experienced in the first quarter 2014.  The trials resulted in encouraging results related to improvement in yield, quality, volume and raw material input costs, resulting in a potential cost structure that we believe is competitive.  This cost structure must be confirmed on a consistent ongoing basis over the coming months.  In the meantime, as the operations ramp up, third quarter 2014 losses related to the company's Minnesota operations are expected to be meaningfully less than those incurred in the second quarter. 

"We are pleased with the conversion of our 5.125% Convertible Notes, which matured June 15, 2014," stated Chief Financial Officer, Theresa Wagler.  "The holders of $272 million of the security exercised their option to convert the Notes into 15,893,457 shares of our common stock. The remaining $16 million of outstanding Notes was paid in cash.  This security provided an important component of our capital structure the past 5 years and its conversion to equity further strengthens our financial position for growth."  

Year to Date Comparison

For the six months ended June 30, 2014, net income was $111 million, or $0.48 per diluted share, on net sales of $3.9 billion, as compared to net income of $77 million, or $0.34 per diluted share, on net sales of $3.6 billion for the six months ended June 30, 2013.   Year-to-date 2014 consolidated net sales increased eight percent, primarily as a result of higher average steel pricing and shipments.  Year-to-date 2014 consolidated operating income increased $47 million, or 29 percent, primarily as a result of improved steel metal spread.  The average selling price for the company's total steel operations increased $49 per ton.  The average ferrous scrap cost per ton melted increased $18 per ton. 

Outlook

"We continue to remain optimistic," Millett said. "The improvement in our financial and operational performance is indicative of more than a mere weather recovery from the first quarter. The demand for our products continues to improve. The recent growth projects which began ramping-up in 2014 are also beginning to contribute to our earnings.  The automotive and manufacturing markets remain strong, and we believe the increase in domestic energy investments is continuing to strengthen.  We continue to have confidence that the broader U.S. economic recovery is strengthening, and that the non-service sector portion of the domestic GDP remains capable of growing at a faster rate than the overall GDP.  We believe our diversified offerings of value-added products and our exceptional team, combined with our unique operating culture provides us a unique competitive advantage as we capitalize on the opportunities ahead.

"Our organic growth projects and latent steel capacity, coupled with our planned acquisition of the Severstal Columbus steel mill, and our belief that domestic steel consumption is on the upward trend—all point toward meaningful growth opportunities for Steel Dynamics' employees, customers and shareholders," concluded Millett. 

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



2014


2013


2014


2013


1Q 2014

Total Sales


$1,370,995


$1,165,775


$2,560,928


$2,307,850


$1,189,933

External Sales


1,265,104


1,091,015


2,382,703


2,152,327


1,117,599

Operating Income


158,083


87,833


265,859


209,422


107,776












Total Shipments (tons)


1,677,766


1,522,668


3,128,498


2,992,470


1,450,732

External Shipments (tons)


1,518,882


1,396,380


2,857,455


2,740,812


1,338,573

Production (tons)


1,708,252


1,500,224


3,227,818


3,065,291


1,519,566












Average External Sales Price Per Ton  


$833


$781


$834


$785


$835

Average Ferrous Scrap Cost Per Ton


$364


$354


$371


$353


$380

 

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.

 



Second Quarter


Year To Date


Sequential



2014


2013


2014


2013


1Q 2014

Metals Recycling & Ferrous Resources











Total Sales


$1,014,161


$ 893,116


$2,007,666


$1,807,684


$ 993,505

     External Sales


645,216


585,492


1,220,990


1,206,620


575,774

Operating Loss


(1,517)


(1,811)


(12,498)


(6,120)


(10,981)

Unrealized Hedging Gain (Loss), Net


(2,499)


(2,220)


1,567


134


4,066



















OmniSource Standalone









Total Sales


$ 891,627


$ 794,750


$1,772,245


$1,629,789


$ 880,618

External Sales


580,509


554,996


1,103,633


1,164,914


523,124

Operating Income


18,398


15,774


27,947


40,739


9,549

Unrealized Hedging Gain (Loss), Net


(2,371)


(1,583)


359


(892)


2,730












Ferrous Shipments (gross tons)


1,422,697


1,334,390


2,787,230


2,677,319


1,364,533

% Shipments to SDI Steel Mills


46%


39%


49%


41%


52%

Nonferrous Shipments (pounds 000's)


288,233


254,495


559,211


534,151


270,978

 

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



2014


2013


2014


2013


1Q 2014

Total Sales


$134,852


$   104,159


$ 250,713


$  198,534


$115,861

Operating Income


7,590


2,330


10,716


3,860


3,126












Total Shipments (tons)


105,188


86,371


199,855


163,954


94,667

Average Sales Price Per Ton


$1,282


$1,206


$1,254


$1,210


$1,224

 

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 $7.4 billion in 2013, over 6,800 employees, and manufacturing facilities primarily located throughout the United States (including five steel mills, six steel processing facilities, two iron production facilities, over 90 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 Tuesday, July 22, 2014, 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 2014 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 11:59 p.m. Eastern Time on July 29, 2014.  A podcast/MP3 file of the event will also be available and can be downloaded from our website.   

 

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)



Three Months Ended


Six Months Ended


Three Months
Ended


June 30,


June 30,


March 31,


2014


2013


2014


2013


2014












Net sales

$

2,069,761

$

1,801,340

$

3,899,843

$

3,597,036

$

1,830,082

Costs of goods sold               


1,846,990


1,653,648


3,513,768


3,273,080


1,666,778

        Gross profit


222,771


147,692


386,075


323,956


163,304












Selling, general and administrative expenses


73,463


65,356


143,505


130,618


70,042

Profit sharing


10,469


4,779


15,864


11,422


5,395

Amortization of intangible assets


6,934


8,051


13,869


16,178


6,935

Impairment charges


-


308


-


308


-

        Operating income       


131,905


69,198


212,837


165,430


80,932












Interest expense, net of capitalized interest


30,050


31,465


60,619


66,094


30,569

Other expense (income), net


(1,754)


(1,246)


(2,385)


(2,292)


(631)

        Income before income taxes


103,609


38,979


154,603


101,628


50,994












Income taxes          


37,268


15,706


54,564


37,103


17,296

        Net income


66,341


23,273


100,039


64,525


33,698












Net loss attributable to noncontrolling interests


5,962


5,685


10,843


12,648


4,881












        Net income attributable to Steel Dynamics, Inc.

 

$

 

72,303

 

$

 

28,958

 

$

 

110,882

 

$

 

77,173

 

$

38,579


































Basic earnings per share attributable to

        Steel Dynamics, Inc. stockholders

$

0.32

$

0.13

$

0.49

$

0.35

$

0.17












Weighted average common shares outstanding


226,220


220,471


224,615


220,233


223,011























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

$

0.31

$

0.13

$

0.48

$

0.34

$

0.17












Weighted average common shares and

        equivalents outstanding  (Note 1)


242,048


221,736


241,721


238,246


241,394












Dividends declared per share

$

0.115

$

0.11

$

0.23

$

0.22

$

0.115


(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, because the impact to diluted earnings per share was 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,




2014


2013


2014


2013


2014

Steel Operations*






















Shipments (tons)











Flat Roll Division

778,220


720,582


1,419,740


1,424,872


641,520


Structural and Rail Division












Structural

282,681


223,700


531,061


451,789


248,380



Rail

53,699


63,274


97,635


116,082


43,936


Engineered Bar Products Division

152,768


123,919


297,071


236,740


144,303


Roanoke Bar Division

143,583


134,001


287,365


273,951


143,782


Steel of West Virginia

74,881


77,975


150,455


158,682


75,574


The Techs

191,934


179,217


345,171


330,354


153,237



Total

1,677,766


1,522,668


3,128,498


2,992,470


1,450,732



   Intra-company

(158,884)


(126,288)


(271,043)


(251,658)


(112,159)



External

1,518,882


1,396,380


2,857,455


2,740,812


1,338,573













Steel Operations Production (tons)

1,708,252


1,500,224


3,227,818


3,065,291


1,519,566













Net sales











Total

$   1,370,995


$   1,165,775


$   2,560,928


$   2,307,850


$   1,189,933


   Intra-company

(105,891)


(74,760)


(178,225)


(155,523)


(72,334)


External

$   1,265,104


$   1,091,015


$   2,382,703


$   2,152,327


$   1,117,599























Operating income before amortization of intangibles

$      158,083


$        87,833


$      265,859


$      209,422


$      107,776


Amortization of intangibles

(2,134)


(2,288)


(4,267)


(4,576)


(2,133)

Operating income (Note 1)

$      155,949


$        85,545


$      261,592


$      204,846


$      105,643

























Metals Recycling and Ferrous Resources Operations**






















OmniSource (Stand alone)










  Ferrous metals shipments (gross tons)











Total

1,422,697


1,334,390


2,787,230


2,677,319


1,364,533


   Intra-company

(653,651)


(548,268)


(1,368,632)


(1,102,158)


(714,981)


External

769,046


786,122


1,418,598


1,575,161


649,552













  Nonferrous metals shipments (thousands of pounds)











Total

288,233


254,495


559,211


534,151


270,978


   Intra-company

(17,962)


(6,737)


(37,352)


(10,266)


(19,390)


External

270,271


247,758


521,859


523,885


251,588

























Mesabi Nugget shipments (metric tons) - Intra-company

32,542


44,454


70,030


104,139


37,488













Iron Dynamics (metric tons) - Intra-company

64,756


66,285


121,878


130,970


57,122













Metal Recycling and Ferrous Resources Operations










Net sales











Total

$   1,014,161


$      893,116


$   2,007,666


$   1,807,684


$      993,505


   Intra-company

(368,945)


(307,624)


(786,676)


(601,064)


(417,731)


External

$      645,216


$      585,492


$   1,220,990


$   1,206,620


$      575,774













Operating loss before amortization of intangibles

$        (1,517)


$        (1,811)


$      (12,498)


$        (6,120)


$      (10,981)


Amortization of intangibles

(4,536)


(5,440)


(9,074)


(10,955)


(4,538)

Operating loss (Note 1)

$        (6,053)


$        (7,251)


$      (21,572)


$      (17,075)


$      (15,519)

























Steel Fabrication Operations***






















Shipments (tons)











Total

105,188


86,371


199,855


163,954


94,667


   Intra-company

-


(460)


-


(794)


-


External

105,188


85,911


199,855


163,160


94,667













Net sales











Total

$      134,852


$      104,159


$      250,713


$      198,534


$      115,861


   Intra-company

-


(564)


-


(1,142)


-


External

$      134,852


$      103,595


$      250,713


$      197,392


$      115,861













Operating income (Note 1)

$          7,590


$          2,330


$        10,716


$          3,860


$          3,126

























*

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 (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,

2014



December 31,

2013





(unaudited)





Assets








Current assets








        Cash and equivalents     


$

357,490


$

395,156


        Accounts receivable, net



910,796



720,600


        Inventories     



1,320,871



1,314,747


        Deferred income taxes    



17,813



17,964


        Other current assets       



23,216



25,167


                     Total current assets        



2,630,186



2,473,634










Property, plant and equipment, net  



2,177,007



2,226,134










Restricted cash     



18,460



23,827










Intangible assets, net



372,819



386,159










Goodwill



728,751



731,996










Other assets         



57,979



91,256


                    Total assets      


$

5,985,202


$

5,933,006










                                Liabilities and Equity








Current liabilities








        Accounts payable          


$

440,691


$

414,932


        Income taxes payable



19,448



4,023


        Accrued expenses          



191,323



214,679


        Current maturities of long-term debt



61,761



341,544


                     Total current liabilities 



713,223



975,178










Long-term debt








        Senior term loan



199,375



220,000


        Senior notes   



1,500,000



1,500,000


        Other long-term debt     



42,753



46,045


                     Total long-term debt



1,742,128



1,766,045










Deferred income taxes        



548,285



556,038


Other liabilities



22,356



23,376










Commitments and contingencies
















Redeemable noncontrolling interests



124,180



116,514










Equity








        Common stock               



647



645


        Treasury stock, at cost  



(398,818)



(718,529)


        Additional paid-in capital              



1,058,921



1,085,694


        Retained earnings           



2,237,147



2,179,513


                     Total Steel Dynamics, Inc. equity



2,897,897



2,547,323


        Noncontrolling interests



(62,867)



(51,468)


                     Total equity     



2,835,030



2,495,855


                     Total liabilities and equity            


$

5,985,202


$

5,933,006


 

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)



Three Months Ended


Six Months Ended


June 30,


June 30,


2014


2013


2014


2013










Operating activities:









        Net income                     

$

66,341

$

23,273

$

100,039

$

64,525










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









                Depreciation and amortization  


58,441


56,826


116,009


113,887

                Equity-based compensation


4,700


2,344


10,468


7,097

                Deferred income taxes            


(280)


10,812


(4,371)


21,747

                Changes in certain assets and liabilities:









                        Accounts receivable       


(99,696)


(19,826)


(188,646)


(130,764)

                        Inventories     


11,230


1,660


(6,124)


34,008

                        Accounts payable          


13,385


(46,370)


18,426


(7,382)

                        Income taxes receivable/payable


(4,964)


(23,304)


14,429


(26,326)

                        Other assets and liabilities             


26,857


27,300


(11,463)


(14,367)

                Net cash provided by operating activities             


76,014


32,715


48,767


62,425










Investing activities:









        Purchase of property, plant and equipment  


(33,534)


(49,236)


(58,375)


(94,582)

        Other investing activities


2,314


863


31,198


34,797

                Net cash used in investing activities


(31,220)


(48,373)


(27,177)


(59,785)










Financing activities:









        Issuance of current and long-term debt          


63,945


32


107,398


409,293

        Repayment of current and long-term debt     


(76,412)


(202,312)


(132,658)


(508,003)

        Debt issuance costs       


-


(195)


-


(6,192)

        Proceeds from exercise of stock options, including related tax effect


8,516


2,977


11,421


10,591

        Contributions from noncontrolling investors, net


(606)


5,286


4,764


5,697

        Dividends paid               


(25,666)


(24,238)


(50,181)


(46,190)

                Net cash used in financing activities      


(30,223)


(218,450)


(59,256)


(134,804)










        Increase (decrease) in cash and equivalents   


14,571


(234,108)


(37,666)


(132,164)

        Cash and equivalents at beginning of period  


342,919


477,861


395,156


375,917










        Cash and equivalents at end of period

$

357,490

$

243,753

$

357,490

$

243,753























































Supplemental disclosure information:









        Cash paid for interest

$

20,838

$

17,583

$

60,501

$

67,315

        Cash paid for federal and state income taxes, net

$

43,008

$

27,360

$

45,151

$

38,525










 

SOURCE Steel Dynamics, Inc.



RELATED LINKS
http://www.steeldynamics.com

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