Steel Dynamics Reports Sharp Increase in Q3 Profitability
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FORT WAYNE, Ind., Oct. 19 /PRNewswire-FirstCall/ -- Steel Dynamics, Inc. (Nasdaq-GS: STLD) today announced net income of $69 million for the third quarter of 2009, or $0.30 per diluted share. The quarter's earnings compared to a net loss of $16 million, or $0.08 per diluted share, in the second quarter of 2009 and net income of $193 million, or $0.98 per diluted share, in the third quarter of 2008. The principal drivers as to why third quarter earnings exceeded our September guidance were stronger-than-anticipated cost compression, resulting from higher production and shipping volumes at the Flat Roll Division, and better than expected performance in metals recycling.
Third quarter net sales of $1.2 billion increased significantly from $792 million in the second quarter of 2009, up 48 percent, but were down 54 percent from $2.6 billion when compared to the third quarter of 2008, a period when pricing reached historical peaks. Sequentially, shipping volumes in all segments except fabrication were up in the third quarter, as were selling prices. Steel shipments for the third quarter were 1.2 million tons, 41 percent higher than the second quarter. SDI's average steel selling price for the third quarter increased $33 per ton, to $627 from $594 per ton in the second quarter. Average scrap cost per net ton charged increased $49 compared to the second quarter. This further demonstrates the excellent cost compression achieved by both increased volume and team effort. In metals recycling, OmniSource's ferrous metals shipments were 1.3 million tons, up 54 percent from the second quarter, and nonferrous shipments were 217 million pounds, up 28 percent from the second quarter.
"In the third quarter, the company's steel operations produced operating income of $128 million, or $105 per ton, while OmniSource made significant strides in earnings growth, resulting in operating income of $50 million during the quarter," said Keith Busse, Chairman and CEO. "I salute SDI's employees as these results are testament to our focus on efficient operations and cost control throughout the company. Our steelmaking divisions all produced pre-tax profits in the quarter, including the Structural and Rail Division which continues to face very challenging conditions in the construction marketplace. Our steel fabricating operations showed an operating loss of $3 million on continued weakness in non-residential construction.
"Current business conditions remain relatively steady. Orders for flat-rolled steel products continue to be strong; merchant, specialty and engineered bars are reasonably good; but structural steel backlogs remain weak. Our flat-roll steel business, inclusive of The Techs, continues to run at near full capacity utilization rates, while the bar divisions are running at 60 to 70 percent of capacity. The Structural and Rail Division has seen modest improvement, with utilization now in the low thirty-percent range, which is now being calculated on the basis of its expanded annual production capacity of 1.8 million tons. OmniSource has experienced improved metals flows and is now processing at about 75 to 80 percent of capacity.
"Our outlook for the fourth quarter anticipates a slight easing in current operating rates, which could result in somewhat lower earnings than the third quarter. We expect to provide quantitative guidance later in the quarter. Factors that could affect fourth quarter results include lower flat-roll steel shipments, due to seasonality coupled with a slight slowing in market momentum, and margin compression in metals recycling due to lower scrap prices. We also expect to incur increased expenses related to the anticipated start-up of the Mesabi Nugget plant. Overall, though, we expect the combined metals recycling and ferrous resources segment to remain profitable in the fourth quarter on the strength of OmniSource. We currently believe that SDI's second-half earnings will offset first-half losses and foresee the company generating a small profit for the year 2009, a feat few, if any, other steelmakers will accomplish in this very challenging and difficult environment.
"As the Flat Roll Division, The Techs, and OmniSource demonstrated in the third quarter, our Steel Dynamics operations are capable of ramping up quickly to meet renewed demand for our products. Business conditions remain somewhat uncertain for the foreseeable future, but we remain optimistic the recovery will continue to gain a head of steam, and we will continue to be in excellent position to take advantage of it," Busse said.
Third Quarter 2009 Operating Segment Information
The following highlights third quarter 2009 results for each of SDI's three primary operating segments.
Steel Operations. Steel Operations achieved net sales of $782 million for the third quarter and represented 63 percent of the company's external sales. This segment includes five steel mills and related steel processing facilities, including The Techs. SDI's five steel mills produce a wide variety of flat-rolled and long steel products. The Techs galvanize steel sheet that is sourced primarily from third parties.
Third quarter 2009 Steel Operations shipments were 1.2 million tons, of which 877,000 tons were flat-rolled steel shipments. Based on tons shipped, including steel shipments made by The Techs, flat-rolled products accounted for 70 percent of third quarter steel segment shipments, 11 percent was structural steel shipments, 8 percent was merchant bars, 6 percent was engineered bars, and 5 percent was Steel of West Virginia shipments. The third quarter operating profit for the steel segment was $128 million, or $105 per ton shipped, compared to an operating profit of $41 per ton in the second quarter. These figures exclude amortization related to the segment's intangible assets and certain non-allocated corporate overhead expenses, such as profit-sharing costs.
The third quarter's average selling price per ton for Steel Operations was $627, an increase of $33 per ton from $594 in the second quarter of 2009 and a decrease of $559 per ton from the year-ago quarter. The average scrap cost per net ton charged increased $49 compared to the second quarter.
Most notable for the quarter was the performance of the Butler, Indiana, Flat Roll Division. After completion of an electric-furnace upgrade early in July, the mill in August achieved a new monthly production record, operating at an annualized rate slightly exceeding 3 million tons per year.
Metals Recycling and Ferrous Resources. This segment includes ferrous and non-ferrous metals recycling by OmniSource Corporation (processing and trading) and SDI's Iron Dynamics scrap-substitute operation that produces pig iron for use by the Flat Roll Division. The segment also includes expenses related to the Mesabi Nugget project, which currently is under construction.
The segment's net sales for third quarter 2009 were $555 million, and represented 33 percent of SDI's third quarter external sales. The operating income for this segment was $45 million, excluding amortization related to the segment's intangible assets and certain non-allocated corporate overhead expenses, such as profit-sharing costs. OmniSource's $50 million in operating profit was partially offset by losses at Iron Dynamics (related to lower market-based pig-iron prices) and to expenses related to the Mesabi Nugget project as it nears the expected start-up in November.
For the third quarter, total ferrous scrap shipments, including shipments to SDI's Steel Operations, were 1.3 million tons, 26 percent lower than the year-ago-quarter and 54 percent higher than the second quarter of 2009. Non-ferrous scrap shipments for the third quarter of 2009 were 217 million pounds, 11 percent lower than the year-ago quarter and 28 percent higher than second quarter 2009 shipments.
During the third quarter, the company's scrap operations supplied 576,000 tons of ferrous scrap to SDI's Steel Operations, which was 45 percent of the total tonnage of ferrous scrap OmniSource shipped and was 50 percent of the tonnage of ferrous scrap purchased by our mills during the quarter.
Steel Fabrication Operations. Steel Fabrication Operations are the New Millennium Building Systems fabricating plants that produce joists, trusses, and steel deck used in the construction of non-residential buildings. Third quarter net sales were $33 million, or 3 percent of SDI's third quarter external sales. New Millennium reported an operating loss of $3 million for the quarter. Third quarter shipments totaled 35,000 tons at an average selling price of $953 per ton. Third quarter shipments were 56 percent lower than the year-ago quarter, and 2 percent lower than the second quarter of 2009.
Forward-Looking Statements
This press release contains some predictive statements about future events, including statements related to conditions in the steel and metallic scrap markets, Steel Dynamics' revenue, costs of purchased materials, future profitability and earnings, and the operation of new or existing facilities. These statements are intended to be made as "forward-looking," subject to many risks and uncertainties, within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. Such predictive statements are not guarantees of future performance, and actual results could differ materially from our current expectations.
Factors that could cause such predictive statements to turn out other than as anticipated or predicted include, among others: the effects of prolonged or deepening recession on industrial demand; general or specific sector (i.e., automotive, consumer appliance or construction) economic conditions affecting steel consumption; the impact of price competition, whether domestic or the result of foreign imports; difficulties in integrating acquired businesses; risks and uncertainties involving new products or new technologies; changes in the availability or cost of steel scrap or substitute materials; increases in energy costs; occurrence of unanticipated equipment failures and plant outages; labor unrest; and the effect of the elements on production or consumption.
More specifically, we refer you to SDI's detailed explanation of these and other factors and risks that may cause such predictive statements to turn out differently, as set forth in our most recent Annual Report on Form 10-K, in our quarterly reports on Form 10-Q or in other reports which we from time to time file with the Securities and Exchange Commission, available publicly on the SEC Web site, www.sec.gov, and on the Steel Dynamics Web site, www.steeldynamics.com
Forward-looking or predictive statements we make are based upon information and assumptions, concerning our businesses and the environments in which they operate, which we consider reasonable as of the date on which these statements are made. Due to the foregoing risks and uncertainties however, as well as, matters beyond our control which can affect forward-looking statements, you are cautioned not to place undue reliance on these predictive statements, which speak only as of the date of this press release. We undertake no duty to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Conference Call and Webcast
On Tuesday, October 20, 2009, at 10:00 a.m. Eastern time, Steel Dynamics will host a conference call in which management will discuss third quarter results. You are invited to listen to the live audio broadcast of the conference call over the Internet, accessible from the Steel Dynamics Web site:
Dial-in information is available on our Web site. An audio replay of the Webcast and a downloadable podcast will be available from the SDI Web site. No telephone replay will be available.
Steel Dynamics, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
Three Nine Three
Months Ended Months Ended Months Ended
September 30, September 30, June 30,
2009 2008 2009 2008 2009
---- ---- ---- ---- ----
Net sales $1,172,196 $2,563,943 $2,779,004 $6,870,087 $792,158
Costs of
Goods sold 955,503 2,118,737 2,534,101 5,597,917 723,321
------- --------- --------- --------- -------
Gross
profit 216,693 445,206 244,903 1,272,170 68,837
Selling,
general, and
administrative
expenses 56,133 72,723 162,012 223,353 48,559
Profit sharing 451 30,800 409 76,204 -
Amortization
of intangible
assets 11,661 10,765 41,353 30,416 13,994
------ ------ ------ ------ ------
Operating
income 148,448 330,918 41,129 942,197 6,284
Interest
expense, net
capitalized
interest 34,520 37,446 107,814 102,728 37,043
Other (income)
expense, net (2,167) (8,342) (2,129) (33,048) 786
------ ------ ------ ------- ---
Income
(loss)
before
income
taxes 116,095 301,814 (64,556) 872,517 (31,545)
Income taxes
(benefit) 47,365 114,070 (26,991) 330,456 (15,024)
------ ------- ------- ------- -------
Net
income
(loss) 68,730 187,744 (37,565) 542,061 (16,521)
Net loss
attributable
to
non-controlling
interests (288) (5,264) (2,730) (3,998) (530)
Net income
(loss)
attributable
to
Steel
Dynamics,
Inc. $69,018 $193,008 $(34,835) $546,059 $(15,991)
======= ======== ======== ======== ========
Basic earnings
(loss) per share
attributable
to Steel Dynamics,
Inc. stock-
holders
$.32 $.99 $(.18) $2.85 $(.08)
==== ==== ===== ===== =====
Weighted average
common shares
outstanding 215,218 195,347 195,689 191,579 189,848
======= ======= ======= ======= =======
Diluted
earnings
(loss) per
share
attributable
to Steel
Dynamics,
Inc.
stockholders,
including
the effect of
assumed
conversions
when dilutive $.30 $.98 $(.18) $2.75 $(.08)
==== ==== ===== ===== =====
Weighted
average
common shares
and
equivalents
outstanding 234,080 196,859 195,689 198,840 189,848
======= ======= ======= ======= =======
Dividends
declared per
share $.075 $.10 $.25 $.30 $.075
===== ==== ==== ==== =====
Steel Dynamics, Inc.
Unaudited Supplemental Operating Information
(dollars in thousands / volume data in actual net tons,
except non-ferrous data)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
Steel Operations*
Shipments
Flat Roll Division 656,512 576,059 1,415,195 1,967,660
Structural and
Rail Division 134,390 281,126 360,421 866,963
Engineered Bar
Products Division 80,428 149,708 215,092 442,741
Roanoke Bar
Division 97,895 148,128 263,617 436,078
Steel of West
Virginia 57,539 62,849 155,622 218,907
The Techs 220,383 209,191 466,032 734,110
------- ------- ------- -------
Combined 1,247,147 1,427,061 2,875,979 4,666,459
Intra-company (84,396) (141,113) (183,998) (395,926)
------- -------- -------- --------
External 1,162,751 1,285,948 2,691,981 4,270,533
========= ========= ========= =========
Production
(excluding The
Techs) 1,112,145 1,279,341 2,565,932 4,019,776
Net sales
Combined $782,169 $1,692,522 $1,843,818 $4,596,470
Intra-company (39,079) (140,863) (88,793) (336,827)
------- -------- ------- --------
External $743,090 $1,551,659 $1,755,025 $4,259,643
======== ========== ========== ==========
Operating income
(loss) before
amortization of
intangibles $128,352 $281,732 $99,020 $852,973
Amortization of
intangibles (3,174) (3,432) (10,057) (12,573)
------ ------ ------- -------
Operating income
(loss) $125,178 $278,300 $88,963 $840,400
======== ======== ======= ========
--
Metals Recycling
and Ferrous
Resources**
Ferrous metals shipments
Combined 1,293,820 1,755,608 2,863,888 4,654,495
Intra-company (575,840) (714,234) (1,103,616) (1,832,244)
-------- -------- ---------- ----------
External 717,980 1,041,374 1,760,272 2,822,251
======= ========= ========= =========
Non-ferrous metals
shipments
(thousands of
pounds) 217,068 243,897 577,246 736,833
Iron Dynamics shipments
Liquid pig iron 55,007 44,254 140,625 142,039
Hot briquetted
iron 4,497 17,715 26,306 48,404
Other 36 7,689 739 13,936
-- ----- --- ------
Intra-company 59,540 69,658 167,670 204,379
====== ====== ======= =======
Net sales
Combined $555,233 $1,338,847 $1,160,579 3,303,562
Intra-company (171,351) (469,345) (298,593) (1,084,686)
-------- -------- -------- ----------
External $383,882 $869,502 $861,986 $2,218,876
======== ======== ======== ==========
Operating income
(loss) before
amortization of
intangibles $45,313 $103,025 $36,476 $240,772
Amortization of
intangibles (8,398) (7,195) (30,914) (17,427)
------ ------ ------- -------
Operating income
(loss) $36,915 $95,830 $5,562 $223,345
======= ======= ====== ========
--
Steel Fabrication***
Shipments
Combined 34,546 78,205 115,193 222,829
Intra-company (457) (552) (682) (868)
---- ---- ---- ----
External 34,089 77,653 114,511 221,961
====== ====== ======= =======
Net sales
Combined $32,930 $110,526 $130,763 $282,337
Intra-company (620) (442) (1,198) (559)
---- ---- ------ ----
External $32,310 $110,084 $129,565 $281,778
======= ======== ======== ========
Operating income
(loss) before
amortization of
intangibles $(3,259) $4,512 $(97) $12,849
Amortization of
intangibles (32) (82) (232) (248)
--- --- ---- ----
Operating income
(loss) $(3,291) $4,430 $(329) $12,601
======= ====== ===== =======
First Second
Quarter Quarter
2009 2009
---- ----
Steel Operations*
Shipments
Flat Roll Division 303,938 454,745
Structural and
Rail Division 129,555 96,476
Engineered Bar
Products
Division 71,540 63,124
Roanoke Bar
Division 76,610 89,112
Steel of West
Virginia 43,124 54,959
The Techs 118,359 127,290
------- -------
Combined 743,126 885,706
Intra-company (52,012) (47,590)
------- -------
External 691,114 838,116
======= =======
Production
(excluding The
Techs) 697,806 755,981
Net sales
Combined $535,184 $526,465
Intra-company (30,142) (19,572)
------- -------
External $505,042 $506,893
======== ========
Operating income
(loss) before
amortization of
intangibles $(65,463) $36,131
Amortization of
intangibles (3,451) (3,432)
------ ------
Operating income
(loss) $(68,914) $32,699
======== =======
--
Metals Recycling
and Ferrous
Resources**
Ferrous metals shipments
Combined 729,869 840,199
Intra-company (214,753) (313,023)
-------- --------
External 515,116 527,176
======= =======
Non-ferrous metals
shipments
(thousands of
pounds) 190,394 169,784
Iron Dynamics shipments
Liquid pig iron 41,226 44,392
Hot briquetted
iron 20,326 1,483
Other 674 29
--- --
Intra-company 62,226 45,904
====== ======
Net sales
Combined $296,408 $308,938
Intra-company (58,702) (68,540)
------- -------
External $237,706 $240,398
======== ========
Operating income
(loss) before
amortization of
intangibles $(12,422) $3,585
Amortization of
intangibles (12,044) (10,472)
------- -------
Operating income
(loss) $(24,466) $(6,887)
======== =======
--
Steel Fabrication***
Shipments
Combined 45,278 35,369
Intra-company (15) (210)
--- ----
External 45,263 35,159
====== ======
Net sales
Combined $60,807 $37,026
Intra-company (22) (556)
--- ----
External $60,785 $36,470
======= =======
Operating income
(loss) before
amortization of
intangibles $3,167 $(5)
Amortization of
intangibles (167) (33)
---- ---
Operating income (loss) $3,000 $(38)
====== ====
* Steel Operations include the company's five steelmaking divisions and
The Techs three galvanizing plants.
** Metals Recycling and Ferrous Resources Operations include OmniSource
and Recycle South metals recycling operations, as well as Iron
Dynamics' (IDI) pig iron substitute production facility (all IDI
shipments are consumed internally).
Operating income (loss) also includes the expenses associated with the
construction and start up of the company's Mesabi
Nugget facilities.
***Steel Fabrication Operations include the company's joist and
deck fabrication operations.
Steel Dynamics, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
2009 2008
---- ----
(unaudited)
Assets
Current assets
Cash and equivalents $8,094 $16,233
Accounts receivable, net 480,397 502,932
Inventories 835,079 1,023,235
Deferred income taxes 37,631 23,562
Income taxes receivable 92,755 86,321
Other current assets 14,820 57,632
------ ------
Total current assets 1,468,776 1,709,915
Property, plant and equipment, net 2,214,998 2,072,857
Restricted cash 12,480 18,515
Intangible assets, net 545,327 614,786
Goodwill 759,983 770,438
Other assets 107,400 67,066
------- ------
Total assets $5,108,964 $5,253,577
========== ==========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $359,207 $263,393
Income taxes payable 5,080 4,107
Accrued expenses 187,948 209,697
Accrued profit sharing 507 62,561
Senior secured revolving credit facility,
matures 2012 85,000 366,000
Current maturities of long-term debt 1,145 65,223
----- ------
Total current liabilities 638,887 970,981
Long-term debt
Senior secured term A loan - 503,800
7 3/8% senior notes, due 2012 700,000 700,000
5.125% convertible senior notes, due 2014 287,500 -
6 3/4% senior notes, due 2015 500,000 500,000
7 3/4% senior notes, due 2016 500,000 500,000
Other long-term debt 63,563 15,361
------ ------
Total long-term debt 2,051,063 2,219,161
Deferred income taxes 362,520 365,496
Other liabilities 68,411 65,626
Commitments and contingencies
Stockholders' equity
Common stock 628 545
Treasury stock, at cost (730,857) (737,319)
Additional paid-in
capital 967,103 541,686
Other accumulated comprehensive loss - (1,411)
Retained earnings 1,735,060 1,820,385
--------- ---------
Total Steel Dynamics, Inc.
stockholders' equity 1,971,934 1,623,886
Non-controlling interests 16,149 8,427
------ -----
Total stockholders' equity 1,988,083 1,632,313
--------- ---------
Total liabilities and
stockholders' equity $5,108,964 $5,253,577
========== ==========
Steel Dynamics, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Nine
Months Ended Months Ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
Operating activities:
Net income (loss) attributable
to Steel Dynamics, Inc. $69,018 $193,008 $(34,835) $546,059
Adjustments to reconcile net
income (loss) attributable
to Steel Dynamics, Inc. to
net cash provided by
operating activities:
Depreciation and
amortization 51,915 55,359 166,643 156,153
Equity-based
compensation 2,887 3,293 14,779 9,976
Deferred income taxes 8,341 (2,047) 21,833 (9,893)
Non-controlling
interests (288) (3,365) (2,730) (2,099)
Changes in certain
assets and
liabilities:
Accounts receivable (117,442) 89,664 18,354 (307,540)
Inventories (96,062) (135,430) 192,331 (353,125)
Accounts payable 130,610 (133,911) 82,763 230,269
Income taxes payable 2,432 (32,114) 1,027 5,743
Other working capital 86,251 42,778 (36,142) 70,580
------ ------ ------- ------
Net cash provided by
operating activities 137,662 77,235 424,023 346,123
Investing activities:
Purchase of property,
plant and equipment (95,662) (115,636) (243,166) (310,625)
Acquisition of businesses,
net of cash acquired - - - (271,159)
Purchase of securities - - - (20,373)
Sale of securities - 32,533 - 32,758
Investment in direct
financing lease (27,967) - (27,967) -
Other investing
activities (2,857) (1,753) (13,370) 2,176
------ ------ ------- -----
Net cash used in
investing activities (126,486) (84,856) (284,503) (567,223)
Financing activities:
Issuance of current
and long-term debt 240,586 1,186,000 949,330 2,190,900
Repayment of current
and long-term debt (251,219) (814,665) (1,451,666) (1,449,820)
Debt issuance costs (221) (28) (13,972) (7,544)
Issuance of common stock
(net of expenses) and
proceeds from exercise
of stock options,
including related
tax effect 5,665 2,029 416,154 19,483
Purchase of treasury
stock - (439,166) - (485,293)
Contribution from
non-controlling
investor - - 5,000 -
Dividends paid (16,110) (19,819) (52,505) (52,977)
------- ------- ------- -------
Net cash provided by
(used in) financing
activities (21,299) (85,649) (147,659) 214,749
------- ------- -------- -------
Decrease in cash and
equivalents (10,123) (93,270) (8,139) (6,351)
Cash and equivalents
at beginning of period 18,217 115,405 16,233 28,486
------ ------- ------ ------
Cash and equivalents
at end of period $8,094 $22,135 $8,094 $22,135
====== ======= ====== =======
Supplemental disclosure of cash
flow information:
Cash paid for interest $3,849 $7,982 $83,282 $76,701
====== ====== ======= =======
Cash paid for federal
and state income taxes,
net of refunds $228 $153,938 $(53,546) $315,847
==== ======== ======== ========
SOURCE Steel Dynamics, Inc.
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