Steel Dynamics Reports Third Quarter 2013 Earnings

FORT WAYNE, Ind., Oct. 16, 2013 /PRNewswire/ -- Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced third quarter net income of $57 million, or $0.25 per diluted share, on net sales of $1.9 billion. By comparison, prior year third quarter net income was $13 million, or $0.06 per diluted share, on net sales of $1.7 billion, and sequential second quarter 2013 net income was $29 million, or $0.13 per diluted share, on net sales of $1.8 billion. In the nine months ended September 30, 2013 net income was $135 million, or $0.59 per diluted share, on net sales of $ 5.5 billion.  By comparison, in the nine months ended September 30, 2012 net income was $103 million, or $0.47 per diluted share, on net sales of $5.6 billion.

The company's prior year financial results included unique charges related to refinancing expenses and non-cash impairment charges.  Excluding these items, the company's adjusted earnings per diluted share would have been $0.15 for the third quarter 2012 and $0.59 for the nine months ended September 30, 2012.

"Our consolidated operating income increased 64 percent to $113 million for the third quarter 2013, as compared to the second quarter of this year," said Chief Executive Officer, Mark Millett.  "Stronger steel sheet pricing combined with increased overall steel shipments, provided significant improvement to our third quarter financial results, as operating income from our steel operations sequentially increased $61 million.  We continued to see meaningful improvement in galvanized and painted sheet product demand.  The automotive market remained strong and the steel consuming manufacturing market, such as HVAC and appliance, rose in concert with the improved residential construction market.  Although volumes have increased, customer buying patterns continue to reflect a preference to manage relatively low inventory levels.  Additionally, the continued modest growth in the overall construction market benefited our structural steel and fabrication businesses, as evidenced by sequentially higher shipments and profitability.

"Operating income for our metals recycling operations decreased 29 percent to $11 million in the third quarter 2013, as compared to the second quarter of this year, which was the result of decreased ferrous metal spread, as increased ferrous volume did not offset the decline in market prices.  Profitability from our Midwest operations was actually slightly improved; however the continued industry overcapacity of shredding locations in the Southeast resulted in deterioration in earnings for those locations."  

Third Quarter Review

Third quarter 2013 shipments across the company's operating platforms increased as compared to the sequential quarter. Operating income for the company's steel operations increased to $149 million, or 69 percent as compared to the second quarter 2013, primarily due to an increase in metal spread as a result of both higher average steel selling prices and a nominal decrease in the average scrap cost per ton melted.

The company's steel mill production utilization rate was 89 percent in the third quarter 2013, compared to 83 percent in the second quarter of 2013.  The Structural and Rail Division continued to improve production utilization as structural steel shipments increased 17 percent over the sequential quarter. The average selling price per ton for the company's steel operations increased $13 to $794 in the third quarter 2013, and the average ferrous scrap cost per ton melted decreased $5 per ton.  Operating income attributable to the company's steel sheet operations increased 92 percent as compared to the sequential quarter and earnings from long product operations increased 46 percent. 

Sequential operating income for the company's metals recycling operations decreased in the third quarter of 2013 to $11 million, as compared to $16 million.  Reduced earnings were the result of decreased average ferrous metal spreads in the third quarter, which more than offset the benefit of a ten percent increase in volume.  Generally, sequential earnings associated with nonferrous materials improved modestly during the third quarter as volume increased four percent and margins increased slightly.

The impact of losses from the company's Minnesota operations for third quarter 2013 consolidated net income was $10.6 million, or $0.04 per diluted share, as compared to a loss of $9.3 million, or $0.04 per diluted share in the second quarter 2013.  The iron concentrate plant continues to operate as designed, providing raw material to the iron nugget plant at a cash cost below $50 per metric ton.  As noted in the company's recent earnings guidance, production rates and plant availability at the iron nugget plant improved during the quarter, meeting current expectations.  However, at higher production rates, product yield has unexpectedly deteriorated.  Given the increase in costs related to the unforeseen yield impact and current pig iron prices, profitability related to the Minnesota operations is expected to approach a monthly cash  breakeven before the end of 2013, but not to achieve pre-tax breakeven in that same timeframe.  Having achieved near-term production targets, the focus is now to reduce the overall cost of production. 

Year to Date Comparison

Consolidated net sales were lower for the nine months ended September 30, 2013, at $5.5 billion, compared to $5.6 billion for the same period in 2012, as a result of lower average steel product pricing combined with both lower product pricing and decreased volumes in the company's metals recycling operations.  Consolidated operating income decreased $18 million, or 6 percent, as declines in average steel prices more than offset the benefit of reduced scrap costs in the company's steel operations. 

The average selling price per ton shipped for the company's steel operations in the nine months ended September 30, 2013 was $788, a decrease of $59 per ton as compared to the same period in 2012. The average ferrous cost per ton melted was $38 lower than the comparative 2012 period.

Outlook

"We are optimistic, as the demand for high-quality steel products continues to improve", Millett said.  "The automotive market remains strong, and manufactured goods continue to strengthen.  We remain cautiously optimistic about the nonresidential construction market, as evidence of increased demand is shown by improved shipments of our structural and fabricated steel products.  However, we recognize the political environment within the U.S. concerning fiscal issues could have a limiting or negative impact on any continued improvement if not resolved in a timely manner.  In addition to improved market momentum, we are on schedule to complete two more sizable organic growth projects before the end of 2013:  a 325,000 ton capacity expansion at our Engineered Bar Products Division and a product capability expansion into premium rail at our Structural and Rail Division.  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 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.



Third Quarter


Year To Date


Sequential



2013


2012


2013


2012


2Q 2013

Total Sales


$1,237,247


$1,120,571


$3,545,097


$3,655,802


$1,165,775

External Sales


1,162,429


1,051,349


3,314,756


3,445,369


1,091,015

Operating Income


148,698


109,215


358,120


387,983


87,833












Shipments (tons)


1,585,125


1,405,021


4,577,595


4,375,723


1,522,668

Average External Sales Price Per Ton  


$794


$809


$788


$847


$781

Average Ferrous Scrap Cost Per Ton


$349


$352


$351


$389


$354

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 operations.




Metals Recycling & Ferrous Resources


Third Quarter


Year To Date


Sequential




2013


2012


2013


2012


2Q 2013


Total Sales


$ 948,134


$ 821,357


$ 2,755,818


$2,860,789


$ 893,116


External Sales


605,381


522,231


1,812,001


1,812,340


585,492


Operating Loss


(11,695)


(9,461)


(17,815)


(12,197)


(1,811)














Metals Recycling (OmniSource)


Third Quarter


Year To Date


Sequential




2013


2012


2013


2012


2Q 2013


Total Sales


$  848,043


$  766,102


$2,477,832


$2,700,006


$ 794,750


External Sales


577,087


519,101


1,742,001


1,808,165


554,996


Operating Income


11,166


16,566


51,905


46,655


15,774


Unrealized Hedging Losses


(1,391)


(9,315)


(2,283)


(6,232)


(1,583)


Ferrous Shipments (gross tons)


1,472,418


1,339,853


4,149,737


4,408,915


1,334,390


% Shipments to Company Steel Mills


46%


43%


43%


45%


41%


Nonferrous Shipments (pounds 000's)


263,467


249,685


797,618


800,253


254,495


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. 



Third Quarter


Year To Date


Sequential



2013


2012


2013


2012


2Q 2013

Total Sales


$ 119,268


$ 102,442


$  317,802


$  273,105


$      104,159

Operating Income


3,265


3,141


7,125


666


2,330












Shipments (tons)


101,590


80,176


265,544


218,291


86,371

Average External Sales Price Per Ton


$1,174


$1,278


$1,196


$1,251


$1,206

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 6,700 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 Thursday, October 17, 2013, at 10:00 a.m. Eastern Time, Steel Dynamics will host a conference call with investors and analysts to discuss the company's third quarter 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 October 24, 2013.  A podcast 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


Nine Months Ended


Three Months
Ended


September 30,


September 30,


June 30,


2013


2012


2013


2012


2013























Net sales

$

1,911,738

$

1,693,390

$

5,508,774

$

5,585,233

$

1,801,340

Costs of goods sold               


1,714,546


1,536,989


4,987,626


5,045,432


1,653,648

        Gross profit


197,192


156,401


521,148


539,801


147,692












Selling, general and administrative expenses


67,553


62,984


198,171


188,603


65,356

Profit sharing


8,469


3,954


19,891


20,237


4,779

Amortization of intangible assets


7,897


8,848


24,075


26,831


8,051

Impairment charges


-


7,894


308


7,894


308

        Operating income       


113,273


72,721


278,703


296,236


69,198












Interest expense, net of capitalized interest


30,970


41,490


97,064


123,708


31,465

Other expense (income), net


(1,852)


24,010


(4,144)


32,366


(1,246)

        Income before income taxes


84,155


7,221


185,783


140,162


38,979












Income taxes          


33,065


1,116


70,168


52,975


15,706

        Net income


51,090


6,105


115,615


87,187


23,273












Net loss attributable to noncontrolling interests


6,396


6,728


19,044


15,793


5,685












        Net income attributable to Steel    
             Dynamics, Inc.

 

$

 

57,486

 

$

 

12,833

 

$

 

134,659

 

$

 

102,980

 

$

 

28,958


































Basic earnings per share attributable to

        Steel Dynamics, Inc. stockholders

$

0.26

$

0.06

$

0.61

$

0.47

$

0.13












Weighted average common shares outstanding


220,926


219,191


220,464


219,097


220,471























Diluted earnings per share attributable to        

Steel Dynamics, Inc. stockholders, 
    including the effect of assumed
    conversions when dilutive              

$

0.25

$

0.06

$

0.59

$

0.47

$

0.13












Weighted average common shares and

        equivalents outstanding  (Note 1)


239,001


220,044


238,497


236,536


221,736












Dividends declared per share

$

0.11

$

0.10

$

0.33

$

0.30

$

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 September 30, 2012 and 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


Nine Months Ended


Three Months Ended





September 30,


September 30,


March 31,


June 30,





2013


2012


2013


2012


2013


2013

Steel Operations*




























Shipments (tons)














Flat Roll Division


740,279


638,776


2,165,151


2,004,225


704,290


720,582


Structural and Rail Division















Structural


261,125


220,829


712,914


662,235


228,089


223,700



Rail


54,683


34,704


170,765


106,828


52,808


63,274


Engineered Bar Products Division


127,788


113,327


364,528


437,024


112,821


123,919


Roanoke Bar Division


144,323


152,922


418,274


453,228


139,950


134,001


Steel of West Virginia


80,214


76,481


238,896


228,149


80,707


77,975


The Techs


176,713


167,982


507,067


484,034


151,137


179,217



Total


1,585,125


1,405,021


4,577,595


4,375,723


1,469,802


1,522,668



   Intra-company


(121,258)


(105,789)


(372,916)


(306,840)


(125,370)


(126,288)



External


1,463,867


1,299,232


4,204,679


4,068,883


1,344,432


1,396,380
















Production, excluding The Techs (tons)


1,434,596


1,257,515


4,171,426


3,937,623


1,407,508


1,329,322
















Net sales














Total


$ 1,237,247


$ 1,120,571


$ 3,545,097


$ 3,655,802


$ 1,142,075


$ 1,165,775


   Intra-company


(74,818)


(69,222)


(230,341)


(210,433)


(80,763)


(74,760)


External


$ 1,162,429


$ 1,051,349


$ 3,314,756


$ 3,445,369


$ 1,061,312


$ 1,091,015





























Operating income before amortization of intangibles


$    148,698


$    109,215


$    358,120


$    387,983


$    121,589


$      87,833


Amortization of intangibles


(2,134)


(2,288)


(6,710)


(7,151)


(2,288)


(2,288)

Operating income (Note 1)


$    146,564


$    106,927


$    351,410


$    380,832


$    119,301


$      85,545
















Metals Recycling and Ferrous Resources Operations**




























OmniSource













  Ferrous metals shipments (gross tons)














Total


1,472,418


1,339,853


4,149,737


4,408,915


1,342,929


1,334,390


   Intra-company


(682,245)


(582,942)


(1,784,403)


(2,013,377)


(553,890)


(548,268)


External


790,173


756,911


2,365,334


2,395,538


789,039


786,122
















  Nonferrous metals shipments (thousands of pounds)














Total


253,467


249,685


797,618


800,253


279,656


254,495


   Intra-company


(4,446)


(8,476)


(14,712)


(15,032)


(3,529)


(6,737)


External


249,021


241,209


782,906


785,221


276,127


247,758
















Mesabi Nugget shipments (metric tons) - Intra-company


52,234


52,082


156,373


132,152


59,685


44,454
















Iron Dynamics (metric tons) - Intra-company


66,674


53,548


197,644


169,279


64,685


66,285
















Net sales














Total


$    948,134


$    821,357


$ 2,755,818


$ 2,860,789


$    914,568


$    893,116


   Intra-company


(342,753)


(299,126)


(943,817)


(1,048,449)


(293,440)


(307,624)


External


$    605,381


$    522,231


$ 1,812,001


$ 1,812,340


$    621,128


$    585,492
















Operating loss before amortization of intangibles


$    (11,695)


$      (9,461)


$    (17,815)


$    (12,197)


$      (4,309)


$      (1,811)


Amortization of intangibles


(5,440)


(6,236)


(16,395)


(18,708)


(5,515)


(5,440)

Operating loss (Note 1)


$    (17,135)


$    (15,697)


$    (34,210)


$    (30,905)


$      (9,824)


$      (7,251)
















Steel Fabrication Operations***




























Shipments (tons)














Total


101,590


80,176


265,544


218,291


77,583


86,371


   Intra-company


(138)


(53)


(932)


(55)


(334)


(460)


External


101,452


80,123


264,612


218,236


77,249


85,911
















Net sales














Total


$    119,268


$    102,442


$    317,802


$    273,105


$      94,375


$    104,159


   Intra-company


(134)


(41)


(1,276)


(45)


(578)


(564)


External


$    119,134


$    102,401


$    316,526


$    273,060


$      93,797


$    103,595
















Operating income (Note 1)


$        3,265


$        3,141


$        7,125


$           666


$        1,530


$        2,330































*

  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)












September 30,
2013



December 31,
2012





(unaudited)





Assets








Current assets








        Cash and equivalents     


$

370,056


$

375,917


        Investments in short-term commercial paper



-



31,520


        Accounts receivable, net



772,873



642,363


        Inventories     



1,192,032



1,202,507


        Deferred income taxes    



25,228



23,449


        Other current assets       



25,126



20,469


                     Total current assets



2,385,315



2,296,225










Property, plant and equipment, net 



2,241,067



2,231,198










Restricted cash     



23,016



27,749










Intangible assets, net



393,531



416,635










Goodwill



733,650



738,542










Other assets         



97,726



105,067


                    Total assets      


$

5,874,305


$

5,815,416










                                Liabilities and Equity








Current liabilities








        Accounts payable          


$

426,406


$

360,097


        Income taxes payable



7,649



16,941


        Accrued expenses          



184,806



203,008


        Current maturities of long-term debt



335,341



29,631


                     Total current liabilities 



954,202



609,677










Long-term debt








        Term note



226,875



247,500


        Senior notes   



1,500,000



1,600,000


        Convertible senior notes



-



287,496


        Other long-term debt     



46,744



37,610


                     Total long-term debt



1,773,619



2,172,606










Deferred income taxes        



565,798



537,304


Other liabilities



22,898



19,173










Commitments and contingencies
















Redeemable noncontrolling interests



110,054



98,814










Equity








        Common stock               



641



637


        Treasury stock, at cost  



(718,373)



(720,479)


        Additional paid-in capital              



1,060,780



1,037,687


        Retained earnings           



2,149,389



2,087,620


                     Total Steel Dynamics, Inc. equity



2,492,437



2,405,465


        Noncontrolling interests



(44,703)



(27,623)


                     Total equity     



2,447,734



2,377,842


                     Total liabilities and equity


$

5,874,305


$

5,815,416













 

 

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







Three Months Ended


Nine Months Ended


September 30,


September 30,


2013


2012


2013


2012



















Operating activities:









        Net income                     

$

51,090

$

6,105

$

115,615

$

87,187










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









                Depreciation and amortization              


58,202


58,953


172,089


170,027

                Impairment charges


-


7,894


308


7,894

                Equity-based compensation


2,515


738


9,612


9,463

                Deferred income taxes            


9,861


34,633


31,608


54,464

                Changes in certain assets and liabilities:









                        Accounts receivable       


254


2,690


(130,510)


15,604

                        Inventories     


(23,648)


43,005


10,360


6,702

                        Accounts payable          


59,801


6,920


52,419


(19,015)

                        Income taxes receivable/payable


16,354


25,993


(9,972)


16,917

                        Other assets and liabilities             


8,837


(69,565)


(5,838)


(109,857)

                Net cash provided by operating activities             


183,266


117,366


245,691


239,386










Investing activities:









        Purchase of property, plant and equipment  


(52,162)


(58,342)


(146,744)


(158,686)

        Other investing activities


844


10,653


35,641


64,451

                Net cash used in investing activities


(51,318)


(47,689)


(111,103)


(94,235)










Financing activities:









        Issuance of current and long-term debt          


9,526


760,000


418,819


1,049,969

        Repayment of current and long-term debt     


(4,097)


(946,858)


(512,100)


(1,252,202)

        Debt issuance costs       


-


(11,625)


(6,192)


(13,813)

        Proceeds from exercise of stock options, including related tax effect


7,925


583


18,516


2,021

        Contributions from noncontrolling investors, net


5,275


16,320


10,972


30,943

        Dividends paid               


(24,274)


(21,915)


(70,464)


(65,710)

                Net cash used in financing activities      


(5,645)


(203,495)


(140,449)


(248,792)










        Increase (decrease) in cash and equivalents   


126,303


(133,818)


(5,861)


(103,641)

        Cash and equivalents at beginning of period  


243,753


420,938


375,917


390,761










        Cash and equivalents at end of period

$

370,056

$

287,120

$

370,056

$

287,120























































Supplemental disclosure information:









        Cash paid for interest

$

40,075

$

42,413

$

107,390

$

123,973

        Cash paid for federal and state income taxes, net

$

3,022

$

3,629

$

41,547

$

43,976










 

 

 

 

SOURCE Steel Dynamics, Inc.



RELATED LINKS
http://www.steeldynamics.com

More by this Source


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.