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Press release from PR Newswire

Steel Dynamics Reports First Quarter 2013 Diluted Earnings Per Share of $0.21

Wednesday, April 17, 2013

Steel Dynamics Reports First Quarter 2013 Diluted Earnings Per Share of $0.21

18:00 EDT Wednesday, April 17, 2013

FORT WAYNE, Ind., April 17, 2013 /PRNewswire/ -- Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced first quarter 2013 net income of $48 million, or $0.21 per diluted share, on net sales of $1.8 billion.  By comparison, prior year first quarter net income was $46 million, or $0.20 per diluted share, on net sales of $2.0 billion; and sequential fourth quarter 2012 net income was $61 million, or $0.27 per diluted share, on net sales of $1.7 billion.  Prior quarters included the following items?first quarter 2012 earnings were reduced by $0.03 per diluted share due to refinancing costs and fourth quarter 2012 earnings were increased by $0.07 per diluted share due to positive tax adjustments.

"The first quarter remained challenging from a market perspective, as customer confidence and buying patterns continued to be impacted by global economic uncertainty;" said President and Chief Executive Officer, Mark Millett, "but the team did a great job.  We hit several production records, and did so safely, as safety records improved from levels already better than industry standards.  We are pleased the first quarter financial performance was at the upper range of our March guidance.  Operating income improved slightly to $96 million compared to last quarter's results.   

"Compared to the fourth quarter, operating income from our steel operations improved four percent to $122 million, as increased long product volumes more than offset weaker sheet steel shipments and somewhat lower overall metal spreads," stated Millett.  "An oversupplied northeastern U.S. galvanized sheet market pressured first quarter shipments from The Techs.  However, increased shipments of wide flange beams, rail and engineered bar products more than offset the decrease.  Despite the slow growth of the commercial construction market, we have seen increased wide flange beam shipments for several consecutive quarters, albeit still very low in relative historical terms, and our fabrication business continues to be profitable.          

"Operating income from our metals recycling operations decreased three percent to $25 million when compared to the fourth quarter, as increased volumes were more than offset by decreased ferrous and nonferrous margins," said Millett. "We noted in our fourth quarter 2012 earnings release that we were anticipating potential challenges in the metals recycling market during the first quarter 2013.  Due to ongoing slow U.S. growth and inclement weather, the availability of unprocessed scrap was limited, particularly in the Midwest and along the northeastern corridor, resulting in increased costs to purchase unprocessed material. 

"The company's continued solid performance in a difficult market environment is driven by our ongoing commitment to provide exceptional value to our customers, while taking advantage of our innovative, low-cost operating culture.  We remain committed to leveraging the full complement of our competitive strengths to sustain and grow shareholder value," Millett concluded.

First Quarter Review

First quarter shipments were higher across the company's operating segments when compared to the fourth quarter of 2012, and to the prior year first quarter, aside from metals recycling which decreased year over year.  Operating income increased slightly when compared to the fourth quarter of last year, but declined 20 percent from prior year's first quarter, primarily due to reduced steel metal spreads, as steel product pricing decreased more than scrap raw material costs. 

The company's steel mill utilization rate improved to 89 percent in the first quarter from 80 percent in the fourth quarter of 2012.  There was a shift toward higher valued-added products in the company's steel shipments during the first quarter of 2013, when compared to the fourth quarter of 2012.  This change helped offset decreased metal spread, resulting in increased operating income of $4 million.  The average selling price per ton shipped increased $5 to $789 in the first quarter, and the average ferrous scrap cost per ton melted increased $8 per ton.   Operating income attributable to the company's long product operations increased 16 percent when compared to the sequential quarter, while earnings from sheet operations decreased four percent.

The impact of losses from the company's Minnesota operations on first quarter 2013 consolidated net income was approximately $14 million, or $0.06 per diluted share, which included a unique loss of $2 million (after taxes), or $0.01 per diluted share, related to the sale of excess iron concentrate reserves purchased from third parties.  In addition, despite achieving record production levels, the use of higher cost iron concentrate during the quarter also resulted in increased operating losses.  Comparatively, the impact of losses on fourth quarter 2012 earnings was $10 million, or approximately $0.04 per diluted share.  As previously indicated and according to plan, the installation of additional oxygen-burners and other equipment modifications will be made at the iron nugget facility in April.  These modifications are expected to further improve production volumes.

Production at the company's iron concentrate facility continues to proceed well, and the plant is operating at a cash-cost of less than $50 per metric ton, which is substantially less than current market prices in excess of $135 per metric ton.  As iron concentrate is the primary raw material for the iron nugget facility, this is a pivotal achievement in lowering the raw material input cost of iron nuggets. 

The company plans to start solely using its lower-cost iron concentrate for nugget production in May.  However, due to costs related to the outage, the company still anticipates second quarter 2013 losses associated with the Minnesota operations to be similar to those recorded in the fourth quarter of 2012.      

During the first quarter the company issued $400 million of new 5¼% senior notes due in 2023 and offered to repay $500 million of its existing 6¾% senior notes due in 2015.  At March 31, 2013, the company had repaid $302 million of the existing senior notes, repaying the remaining amount of $198 million on April 9, 2013.  After giving effect to the April repayment, total debt decreased $100 million and liquidity remained strong with $1.4 billion in unrestricted cash and available funding under the revolving credit facility. These transactions, along with the resulting repayment of debt with available cash, not only extended the company's overall debt maturity profile, but should also provide an estimated annual interest savings of approximately $13 million.

Outlook

"Demand for high-quality steel products has not abated," Millett said. "We remain optimistic. 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 we believe there is potential for manufactured goods to continue to build momentum in 2013.   Housing start data also suggests an increasingly higher potential for a recovery in residential construction. We continue to be cautiously optimistic about the nonresidential construction market in 2013, as market indices continue to trend higher. We also view the increase in our long product and fabrication sales as a positive sign, even though they are improving from historically low levels. 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 First 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.

First Quarter

Sequential

2013

2012

4Q 2012

Total Sales

$1,142,075

$1,254,464

$1,126,438

External Sales

1,061,312

1,186,720

1,061,419

Operating Income

121,589

139,740

117,097

Total Shipments (tons)

1,469,802

1,450,123

1,457,053

Average External Sales Price Per Ton  

$789

$875

$784

Average Ferrous Scrap Cost Per Ton

$351

$417

$343

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

First Quarter

Sequential

2013

2012

4Q 2012

Total Sales

$  914,568

$ 1,112,340

$  798,163

External Sales

621,128

699,600

530,258

Operating Income (Loss)

(4,309)

10,399

507

 

Metals Recycling (Standalone)

First Quarter

Sequential

2013

2012

4Q 2012

Total Sales

$  835,039

$ 1,057,173

$  741,342

External Sales

609,918

699,342

520,931

Operating Income

24,965

25,004

25,818

Unrealized Hedging Gains

691

2,003

9,820

Ferrous Shipments (gross tons)

1,342,929

1,582,840

1,238,143

% Shipments to SDI Steel Mills

41%

48%

46%

Nonferrous Shipments (pounds 000's)

279,656

291,636

251,080

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. 

First Quarter

Sequential

2013

2012

4Q 2012

Total Sales

$  94,375

$   74,896

$  98,301

Operating Income (Loss)

1,530

(2,668)

1,448

Total Shipments (tons)

77,583

60,183

76,870

Average External Sales Price Per Ton

$1,214

$1,244

$1,278

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, April 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 first 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 April 25, 2013.  A downloadable podcast and an MP3 file of the event will also be available on our website.    

Contact:  Marlene Owen, Director Investor Relations ?+1.260.969.3500

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)

Three Months Ended

Three Months

Ended

March 31,

December 31,

2013

2012

2012

Net sales 

$

1,795,696

$

1,982,040

$

1,705,001

Costs of goods sold               

1,619,432

1,780,776

1,524,904

        Gross profit

176,264

201,264

180,097

Selling, general and administrative expenses

65,262

64,384

69,340

Profit sharing

6,643

8,072

6,750

Amortization of intangible assets

8,127

8,992

8,722

Impairment charges

-

-

356

        Operating income         

96,232

119,816

94,929

Interest expense, net of capitalized interest

34,629

41,112

34,877

Other expense (income), net

(1,046)

10,248

(3,852)

        Income before income taxes

62,649

68,456

63,904

Income taxes          

21,397

26,679

8,810

        Net income

41,252

41,777

55,094

Net loss attributable to noncontrolling interests

6,963

3,898

5,477

        Net income attributable to Steel Dynamics, Inc.

$

48,215

$

45,675

$

60,571

Basic earnings per share attributable to

    Steel Dynamics, Inc. stockholders

$

.22

$

.21

$

.28

Weighted average common shares outstanding

219,995

218,996

219,346

Diluted earnings per share attributable to Steel Dynamics,

Inc. stockholders, including the effect of assumed 

   conversions when dilutive              

$

.21

$

.20

$

.27

Weighted average common shares and

    equivalents outstanding      

238,087

236,526

236,890

Dividends declared per share

$

.11

$

.10

$

.10

 

 

Steel Dynamics, Inc.

UNAUDITED SUPPLEMENTAL OPERATING INFORMATION

(dollars in thousands)

Quarter Ended

Quarter Ended

March 31,

December 31,

2013

2012

2012

Steel Operations*

Shipments (tons)

Flat Roll Division

704,290

658,505

713,770

Structural and Rail Division

Structural

228,089

227,059

225,100

Rail

52,808

33,947

37,341

Engineered Bar Products Division

112,821

157,489

98,858

Roanoke Bar Division

139,950

151,296

127,952

Steel of West Virginia

80,707

77,212

73,581

The Techs

151,137

144,615

180,451

Total

1,469,802

1,450,123

1,457,053

   Intra-company

(125,370)

(94,176)

(102,772)

External

1,344,432

1,355,947

1,354,281

Production, excluding The Techs (tons)

1,407,508

1,351,818

1,290,567

Net sales

Total

$   1,142,075

$   1,254,464

$      1,126,438

   Intra-company

(80,763)

(67,744)

(65,019)

External

$   1,061,312

$   1,186,720

$      1,061,419

Operating income before amortization of intangibles

$      121,589

$      139,740

$         117,097

Amortization of intangibles

(2,288)

(2,432)

(2,289)

Operating income (Note 1)

$      119,301

$      137,308

$         114,808

Metals Recycling and Ferrous Resources Operations**

OmniSource

  Ferrous metals shipments (gross tons)

Total

1,342,929

1,582,840

1,238,143

   Intra-company

(553,890)

(763,767)

(573,293)

External

789,039

819,073

664,850

  Nonferrous metals shipments (thousands of pounds)

Total

279,656

291,636

251,080

   Intra-company

(3,529)

(1,958)

(3,456)

External

276,127

289,678

247,624

Mesabi Nugget shipments (metric tons) - Intra-company

59,685

46,230

36,481

Iron Dynamics (metric tons) - Intra-company

64,685

56,628

57,117

Net sales

Total

$      914,568

$   1,112,340

$         798,163

   Intra-company

(293,440)

(412,740)

(267,905)

External

$      621,128

$      699,600

$         530,258

Operating income (loss) before amortization of intangibles

$        (4,309)

$        10,399

$                507

Amortization of intangibles

(5,515)

(6,236)

(6,110)

Operating income (loss) (Note 1)

$        (9,824)

$          4,163

$            (5,603)

Steel Fabrication Operations***

Shipments (tons)

Total

77,583

60,183

76,870

   Intra-company

(334)

(2)

(187)

External

77,249

60,181

76,683

Net sales

Total

$        94,375

$        74,896

$           98,301

   Intra-company

(578)

(4)

(277)

External

$        93,797

$        74,892

$           98,024

Operating income (loss) (Note 1)

$          1,530

$        (2,668)

$             1,448

*

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)

March 31,

2013

December 31,

2012

(unaudited)

Assets

Current assets

        Cash and equivalents      

$

477,861

$

375,917

        Investments in short-term commercial paper  

-

31,520

        Accounts receivable, net 

753,301

642,363

        Inventories     

1,170,159

1,202,507

        Deferred income taxes    

23,564

23,449

        Income taxes receivable

412

893

        Other current assets        

23,644

19,576

                     Total current assets         

2,448,941

2,296,225

Property, plant and equipment, net   

2,232,413

2,231,198

Restricted cash     

23,400

27,749

Intangible assets, net

408,832

416,635

Goodwill

736,912

738,542

Other assets          

106,076

105,067

                    Total assets       

$

5,956,574

$

5,815,416

                  Liabilities and Equity

Current liabilities

        Accounts payable           

$

410,632

$

360,097

        Income taxes payable

13,438

16,941

        Accrued expenses          

159,035

203,008

        Current maturities of long-term debt

231,582

29,631

                     Total current liabilities    

814,687

609,677

Long-term debt

        Term note

240,625

247,500

        Senior notes   

1,500,000

1,600,000

        Convertible senior notes

287,496

287,496

        Other long-term debt      

41,093

37,610

                     Total long-term debt

2,069,214

2,172,606

Deferred income taxes         

546,722

537,304

Other liabilities

19,947

19,173

Commitments and contingencies

Redeemable noncontrolling interests

99,414

98,814

Equity

        Common stock               

639

637

        Treasury stock, at cost    

(719,076)

(720,479)

        Additional paid-in capital               

1,045,973

1,037,687

        Retained earnings           

2,111,597

2,087,620

                     Total Steel Dynamics, Inc. equity

2,439,133

2,405,465

        Noncontrolling interests

(32,543)

(27,623)

                     Total equity      

2,406,590

2,377,842

                     Total liabilities and equity              

$

5,956,574

$

5,815,416

 

 

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Three Months Ended

March 31,

2013

2012

Operating activities:

        Net income                     

$

41,252

$

41,777

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

                Depreciation and amortization

57,061

55,572

                Equity-based compensation

4,753

6,123

                Deferred income taxes            

10,935

9,197

                Changes in certain assets and liabilities:

                        Accounts receivable       

(110,938)

(60,820)

                        Inventories     

32,348

(55,090)

                        Accounts payable           

38,988

34,902

                        Income taxes receivable/payable

(3,022)

17,392

                        Other assets and liabilities              

(41,667)

(27,632)

                Net cash provided by operating activities               

29,710

21,421

Investing activities:

        Purchase of property, plant and equipment    

(45,346)

(45,555)

        Other investing activities

33,934

(1,864)

                Net cash used in investing activities

(11,412)

(47,419)

Financing activities:

        Issuance of current and long-term debt          

409,261

289,969

        Repayment of current and long-term debt      

(305,691)

(283,448)

        Debt issuance costs        

(5,997)

(2,191)

        Proceeds from exercise of stock options, including related tax effect

7,614

1,097

        Contributions from noncontrolling investors, net

411

9,506

        Dividends paid               

(21,952)

(21,887)

                Net cash provided by (used in) financing activities

83,646

(6,954)

        Increase (decrease) in cash and equivalents    

101,944

(32,952)

        Cash and equivalents at beginning of period  

375,917

390,761

        Cash and equivalents at end of period

$

477,861

$

357,809

Supplemental disclosure information:

        Cash paid for interest

$

49,732

$

18,753

        Cash paid (received) for federal and state income taxes, net

$

11,165

$

(955)

SOURCE Steel Dynamics, Inc.

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