STEEL DYNAMICS, INC. FORT WAYNE, Ind., Oct. 20, 2014 /PRNewswire/ -- Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced third quarter 2014 net sales of $2.3 billion and net income of $91 million, or $0.38 per diluted share, which includes the negative impact of approximately $0.09 per diluted share related to acquisition costs, financing fees, and the effect of purchase accounting adjustments for the Severstal Columbus, LLC acquisition that occurred mid-September. The acquisition and financing costs are reflected in the company's consolidated income statement as other expense and the purchase accounting adjustments are reflected as additional costs of goods sold. Excluding these charges, the company's third quarter 2014 earnings would have been $0.47 per diluted share.
Comparatively, prior year third quarter net income was $57 million, or $0.25 per diluted share, on net sales of $1.9 billion; and sequential second quarter 2014 net income was $72 million, or $0.31 per diluted share, on net sales of $2.1 billion.
"We are very pleased with our operational and financial performance," said Chief Executive Officer, Mark Millett. "Our consolidated operating income increased 43 percent to $189 million for the third quarter 2014, as compared to the second quarter. During the third quarter, we achieved record volumes in fabrication and steel, even before including the results from our recent acquisition. Despite the continued elevated levels of steel imports into the U.S., the strength of underlying demand, coupled with our market diversification and customer focus supported our record shipments, and we remain optimistic heading toward the end of the year.
"We also successfully completed the acquisition of the Columbus flat roll steel mill mid-September, adding one of the most technologically advanced steel mills in the U.S. to our portfolio. The acquisition of Columbus represents a significant step in the continuation of our growth strategy. It leverages our core strengths, further increasing value-added product and market diversification. Once again, we enthusiastically welcome the Columbus employees and customers into the Steel Dynamics family, and look forward to working with them to drive future growth and success."
Compared to the second quarter, operating income from the company's steel operations increased 28 percent to $202 million for the third quarter 2014, driven by record quarterly shipments and improved metal spread. Strong demand in automotive, manufacturing and energy markets supported volumes. Growth in the nonresidential construction market also improved, as evidenced by record shipments of both structural and joist steel during the quarter. Operating income from the company's fabrication operations increased to $19 million in the third quarter 2014, more than double the amount achieved in the second quarter of this year.
For the company's metals recycling operations, operating income decreased to $13 million in the third quarter 2014, as compared to $18 million in the sequential quarter. Profitability was negatively impacted by lower nonferrous metals margins, which more than offset the increase in overall shipments. Ferrous scrap availability and volumes improved sequentially.
Third Quarter Review
Third quarter 2014 shipments increased across all of the company's operating platforms, as compared to the sequential quarter. Operating income for the company's steel operations increased 28 percent, as compared to the sequential quarter. Excluding Columbus purchase accounting adjustments, operating income from steel operations increased approximately 37 percent, based on improved metal spreads and record total shipments. The Structural and Rail and Engineered Bar Divisions each achieved record quarterly shipments, with an increase of 8 percent in structural steel beams, 12 percent in rail, and 16 percent in engineered steel. The average product selling price for the company's steel operations increased $7 to $840 per ton. The average ferrous scrap cost per ton melted decreased $8 to $356 per ton.
Third quarter operating income attributable to the company's sheet steel operations increased 11 percent when compared to the sequential quarter, and operating income from long product operations increased 52 percent. The company's steel mill production utilization rate was 90 percent in the third quarter 2014, compared to 95 percent in the sequential quarter. The decrease in rate was a function of increased estimated capacity attributable to the SBQ expansion and the 4-day scheduled maintenance outage at the Butler Flat Roll Division, excluding the impact from these items utilization would have been consistent with the second quarter production rate.
Third quarter operating income from the company's metals recycling operations decreased 29 percent, as the significant decrease in nonferrous metal spread more than offset the 13 percent increase in shipments, as compared to the sequential quarter.
Operating income for the company's fabrication operations more than doubled, increasing from $8 million in the second quarter 2014 to $19 million for the third quarter, driven by record quarterly shipments based on both market share gain and overall demand improvement. Through August 2014, domestic steel joist shipments have increased 21 percent year-over-year, as reported by the Steel Joist Institute. Order inquiries and project bookings remain strong, supporting the positive trend in the nonresidential construction market.
The financial performance of the company's Minnesota operations improved in the third quarter 2014, resulting in the impact of losses on consolidated net income decreasing to $5 million, or $0.02 per diluted share, compared to $9 million, or $0.04 per diluted share recorded in the second quarter of this year. Improvements in yield, volume and quality were achieved, and the company believes there will be further improvement, as the facilities continue to be operated on a consistent basis and further reductions in raw material costs are achieved.
In connection with the Columbus acquisition, during the third quarter 2014 the company issued $1.2 billion senior unsecured notes, comprised of a $700 million 5.125% seven-year tranche and $500 million 5.500% ten-year tranche. The remainder of the $1.6 billion purchase price was paid with a combination of available cash and borrowings on the company's revolving credit facility. "We are pleased with the successful execution of the recent financing related to the Columbus acquisition," stated Chief Financial Officer, Theresa Wagler. "The team did a great job and accessed the high yield bond market at an opportune time, raising $1.2 billion at an attractive long term average interest rate of 5.28%."
Year-to-Date Comparison
Year-to-date September 30, 2014, net income was $202 million, or $0.85 per diluted share, on net sales of $6.2 billion, as compared to net income of $135 million, or $0.59 per diluted share, on net sales of $5.5 billion for the prior year period. Consolidated net sales increased 13 percent, primarily as a result of higher average steel pricing and improved shipments across the company's operating platforms. As compared to the prior year period, consolidated operating income increased $123 million, or 44 percent, primarily as a result of improved steel metal spread. The average selling price for the company's steel operations increased $48 per ton. The average ferrous scrap cost per ton melted increased $15 per ton.
Outlook
"Looking ahead, we remain optimistic," Millett said. "Despite recent broader global concerns, the U.S. economy is continuing to improve, inflation remains low and borrowing rates remain at historically attractive levels. We continue to be the beneficiaries of strong end markets, such as automotive, manufacturing, transportation and energy. We also believe growth in the construction market will continue as evidenced by the increased demand for our construction-related steel products. With the Columbus acquisition, we gain geographic and product diversification in higher-growth markets in the southern U.S. and Mexico. We believe our diversified offerings of value-added products delivered by our exceptional team, combined with our unique operating culture, provides us a compelling advantage as we capitalize on the opportunities ahead. Our organic growth projects and latent steel capacity, coupled with the acquisition of Columbus, and our belief that domestic steel consumption will continue to improve--all point toward meaningful growth opportunities for Steel Dynamics' employees, customers and shareholders," concluded Millett.
Summary Third 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 six electric-arc-furnace steel mills and related steel finishing and processing facilities (with The Techs), which includes the results of the Columbus flat roll steel mill from the date of acquisition on September 16, 2014. The company's steel operations produce flat-roll steel, structural steel, merchant bars, engineered special-bar-quality steel, rebar, rail, and specialty shapes.
Third Quarter Year to Date Sequential
------------- ------------
2014 2013 2014 2013 2Q 2014
---- ---- ---- ---- -------
Total Sales $1,564,112 $1,237,247 $4,125,040 $3,545,097 $1,370,995
External Sales 1,451,211 1,162,429 3,833,914 3,314,756 1,265,104
Operating Income 202,084 148,698 467,943 358,120 158,083
------- ------- ------- ------- -------
Total Shipments (tons) 1,900,043 1,585,125 5,028,541 4,577,595 1,677,766
External Shipments (tons) 1,728,023 1,463,867 4,585,478 4,204,679 1,518,882
Production (tons) 1,885,299 1,612,824 5,113,117 4,678,115 1,708,252
--------- --------- --------- --------- ---------
Average External Sales Price Per Ton $840 $794 $836 $788 $833
Average Ferrous Scrap Cost Per Ton $356 $349 $366 $351 $364
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.
Third Quarter Year to Date Sequential
------------- ------------
2014 2013 2014 2013 2Q 2014
---- ---- ---- ---- -------
Metals Recycling & Ferrous Resources
Total Sales $1,111,300 $948,134 $3,118,966 $2,755,818 $1,014,161
External Sales 672,397 605,381 1,893,387 1,812,001 645,216
Operating Loss (798) (11,695) (13,296) (17,815) (1,517)
Unrealized Hedging Gain (Loss), Net 3,125 (2,451) 4,692 (2,317) (2,499)
OmniSource Standalone
Total Sales $953,483 $848,043 $2,725,728 $2,477,832 $891,627
External Sales 597,648 577,087 1,701,281 1,742,001 580,509
Operating Income 13,021 11,166 40,968 51,905 18,398
Unrealized Hedging Gain (Loss), Net 2,664 (1,391) 3,023 (2,283) (2,371)
----- ------ ----- ------ ------
Ferrous Shipments (gross tons) 1,453,671 1,472,418 4,240,901 4,149,737 1,422,697
% Shipments to SDI Steel Mills 46% 46% 48% 43% 46%
Nonferrous Shipments (pounds 000's) 325,436 263,467 884,647 797,618 288,233
Steel Fabrication Operations
Steel fabrication operations include New Millennium Building Systems, which fabricates steel joists, trusses, and decking used in the construction of nonresidential buildings.
Third Quarter Year to Date Sequential
------------- ------------
2014 2013 2014 2013 2Q 2014
---- ---- ---- ---- -------
Total Sales $190,036 $119,268 $440,749 $317,802 $134,852
Operating Income 19,474 3,265 30,190 7,125 7,590
------ ----- ------ ----- -----
Total Shipments (tons) 143,737 101,590 343,592 265,544 105,188
Average Sales Price Per Ton $1,322 $1,174 $1,283 $1,196 $1,282
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 7,600 employees, and manufacturing facilities primarily located throughout the United States (including six 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 website, www.sec.gov, and on the Steel Dynamics website, www.steeldynamics.com.
Conference Call and Webcast
On Tuesday, October 21, 2014, 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 2014 operating and financial results. We invite you to listen to the live webcast 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 October 28, 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 Nine Months Three Months
Ended Ended Ended
September 30, September 30, June 30,
------------- -------------
2014 2013 2014 2013 2014
---- ---- ---- ---- ----
Net sales $2,339,016 $1,911,738 $6,238,859 $5,508,774 $2,069,761
Costs of goods sold 2,050,504 1,714,546 5,564,272 4,987,626 1,846,990
--------- --------- --------- --------- ---------
Gross profit 288,512 197,192 674,587 521,148 222,771
Selling, general and administrative expenses 80,240 67,553 223,745 198,171 73,463
Profit sharing 12,865 8,469 28,729 19,891 10,469
Amortization of intangible assets 6,764 7,897 20,633 24,075 6,934
Impairment charges - - - 308 -
--- --- --- ---
Operating income 188,643 113,273 401,480 278,703 131,905
Interest expense, net of capitalized interest 31,904 30,970 92,523 97,064 30,050
Other expense (income), net 22,072 (1,852) 19,687 (4,144) (1,754)
------ ------ ------ ------ ------
Income before income taxes 134,667 84,155 289,270 185,783 103,609
Income taxes 47,010 33,065 101,574 70,168 37,268
------ ------ ------- ------ ------
Net income 87,657 51,090 187,696 115,615 66,341
Net loss attributable to noncontrolling interests 3,516 6,396 14,359 19,044 5,962
Net income attributable to Steel Dynamics, Inc.
$91,173 $57,486 $202,055 $134,659 $72,303
Basic earnings per share attributable to $0.38 $0.26 $0.88 $0.61 $0.32
Steel Dynamics, Inc. stockholders
Weighted average common shares outstanding 240,087 220,926 229,772 220,464 226,220
======= ======= ======= ======= =======
Diluted earnings per share attributable to Steel Dynamics, Inc. stockholders, including the
effect of assumed conversions when dilutive $0.38 $0.25 $0.85 $0.59 $0.31
Weighted average common shares and 242,244 239,001 241,895 238,497 242,048
equivalents outstanding (Note 1)
Dividends declared per share $0.115 $0.110 $0.345 $0.330 $0.115
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,
------------- -------------
2014 2013 2014 2013 2014 2014
---- ---- ---- ---- ---- ----
Steel Operations*
Net sales
Total $1,564,112 $1,237,247 $4,125,040 $3,545,097 $1,189,933 $1,370,995
Intra-company (112,901) (74,818) (291,126) (230,341) (72,334) (105,891)
External $1,451,211 $1,162,429 $3,833,914 $3,314,756 $1,117,599 $1,265,104
Operating income before amortization of intangibles $202,084 $148,698 $467,943 $358,120 $107,776 $158,083
Amortization of intangibles (1,968) (2,134) (6,235) (6,710) (2,133) (2,134)
Operating income (Note 1) $200,116 $146,564 $461,708 $351,410 $105,643 $155,949
======== ======== ======== ======== ======== ========
Shipments (tons)
Flat Roll Group - Butler 738,460 740,279 2,158,200 2,165,151 641,520 778,220
- Columbus 174,754 - 174,754 - - -
- The Techs 205,417 176,713 550,588 507,067 153,237 191,934
Structural and Rail Division
Structural 306,003 261,125 837,064 712,914 248,380 282,681
Rail 59,897 54,683 157,532 170,765 43,936 53,699
Engineered Bar Products Division 176,891 127,788 473,962 364,528 144,303 152,768
Roanoke Bar Division 153,395 144,323 440,760 418,274 143,782 143,583
Steel of West Virginia 85,226 80,214 235,681 238,896 75,574 74,881
Total 1,900,043 1,585,125 5,028,541 4,577,595 1,450,732 1,677,766
Intra-company (172,020) (121,258) (443,063) (372,916) (112,159) (158,884)
External 1,728,023 1,463,867 4,585,478 4,204,679 1,338,573 1,518,882
========= ========= ========= ========= ========= =========
Steel Operations Production (tons) 1,885,299 1,612,824 5,113,117 4,678,115 1,519,566 1,708,252
Metals Recycling and Ferrous Resources Operations**
Net sales
Total $1,111,300 $948,134 $3,118,966 $2,755,818 $993,505 $1,014,161
Intra-company (438,903) (342,753) (1,225,579) (943,817) (417,731) (368,945)
External $672,397 $605,381 $1,893,387 $1,812,001 $575,774 $645,216
Operating loss before amortization of intangibles $(798) $(11,695) $(13,296) $(17,815) $(10,981) $(1,517)
Amortization of intangibles (4,532) (5,440) (13,606) (16,395) (4,538) (4,536)
Operating loss (Note 1) $(5,330) $(17,135) $(26,902) $(34,210) $(15,519) $(6,053)
======= ======== ======== ======== ======== =======
OmniSource
Ferrous metals shipments (gross tons)
Total 1,453,671 1,472,418 4,240,901 4,149,737 1,364,533 1,422,697
Intra-company (673,640) (682,245) (2,042,272) (1,784,403) (714,981) (653,651)
External 780,031 790,173 2,198,629 2,365,334 649,552 769,046
Nonferrous metals shipments (thousands of pounds)
Total 325,436 263,467 884,647 797,618 270,978 288,233
Intra-company (31,478) (4,446) (68,830) (14,712) (19,390) (17,962)
External 293,958 259,021 815,817 782,906 251,588 270,271
Mesabi Nugget shipments (metric tons) - Intra-company 77,335 52,234 147,365 156,373 37,488 32,542
====== ====== ======= ======= ====== ======
Iron Dynamics (metric tons) - Intra-company 61,107 66,674 182,985 197,644 57,122 64,756
====== ====== ======= ======= ====== ======
Steel Fabrication Operations***
Net sales
Total $190,036 $119,268 $440,749 $317,802 $115,861 $134,852
Intra-company (43) (134) (43) (1,276) - -
External $189,993 $119,134 $440,706 $316,526 $115,861 $134,852
Operating income (Note 1) $19,474 $3,265 $30,190 $7,125 $3,126 $7,590
======= ====== ======= ====== ====== ======
Shipments (tons)
Total 143,737 101,590 343,592 265,544 94,667 105,188
Intra-company (28) (138) (28) (932) - -
External 143,709 101,452 343,564 264,612 94,667 105,188
* Steel Operations include the company's five steelmaking divisions and The Techs three galvanizing plants.
Columbus results are included since the September 16, 2014 acquisition date.
** 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)
September 30, December 31,
2014 2013
---- ----
(unaudited)
Assets
Current assets
Cash and equivalents $159,591 $395,156
Accounts receivable, net 1,058,668 720,600
Inventories 1,664,212 1,314,747
Deferred income taxes 18,402 17,964
Other current assets 29,263 25,167
------ ------
Total current assets 2,930,136 2,473,634
Property, plant and equipment, net 3,420,654 2,226,134
Restricted cash 18,257 23,827
Intangible assets, net 406,318 386,159
Goodwill 727,128 731,996
Other assets 75,790 91,256
------ ------
Total assets $7,578,283 $5,933,006
Liabilities and Equity
Current liabilities
Accounts payable $640,121 $414,932
Income taxes payable 26,949 4,023
Accrued expenses 242,612 214,679
Current maturities of long-term debt 131,858 341,544
------- -------
Total current liabilities 1,041,540 975,178
Long-term debt
Senior term loan 189,062 220,000
Senior notes 2,700,000 1,500,000
Other long-term debt 40,932 46,045
------ ------
Total long-term debt 2,929,994 1,766,045
Deferred income taxes 543,838 556,038
Other liabilities 24,922 23,376
Commitments and contingencies
Redeemable noncontrolling interests 126,340 116,514
Equity
Common stock 649 645
Treasury stock, at cost (398,818) (718,529)
Additional paid-in capital 1,075,593 1,085,694
Retained earnings 2,300,660 2,179,513
--------- ---------
Total Steel Dynamics, Inc. equity 2,978,084 2,547,323
Noncontrolling interests (66,435) (51,468)
------- -------
Total equity 2,911,649 2,495,855
--------- ---------
Total liabilities and equity $7,578,283 $5,933,006
Note: The company completed its acquisition of Severstal Columbus, LLC (Columbus) on September 16, 2014. The initial purchase price allocation is preliminarily and subject to
adjustments based on final determination of fair value, asset lives, and amortization methods of the acquired assets, assumed liabilities and any identified intangible assets.
Steel Dynamics, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2014 2013 2014 2013
---- ---- ---- ----
Operating activities:
Net income $87,657 $51,090 $187,696 $115,615
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 65,957 58,202 181,966 172,089
Equity-based compensation 5,104 2,515 15,572 9,612
Deferred income taxes (3,417) 9,861 (7,788) 31,608
Changes in certain assets and liabilities:
Accounts receivable 30,955 254 (157,691) (130,510)
Inventories 27,212 (23,648) 21,088 10,360
Accounts payable 9,690 59,801 28,116 52,419
Income taxes receivable/payable 8,062 16,354 22,491 (9,972)
Other assets and liabilities 18,004 8,837 6,541 (5,530)
------ ----- ----- ------
Net cash provided by operating activities 249,224 183,266 297,991 245,691
Investing activities:
Purchase of property, plant and equipment (24,531) (52,162) (82,906) (146,744)
Acquisition of business, net of cash acquired (1,647,463) - (1,647,463) -
Other investing activities 2,959 844 34,157 35,641
----- --- ------ ------
Net cash used in investing activities (1,669,035) (51,318) (1,696,212) (111,103)
Financing activities:
Issuance of current and long-term debt 1,394,497 9,526 1,501,895 418,819
Repayment of current and long-term debt (138,533) (4,097) (271,191) (512,100)
Debt issuance costs (18,020) - (18,020) (6,192)
Exercise of stock options proceeds, including related tax impact 11,576 7,925 22,997 18,516
Contributions from noncontrolling investors, net (52) 5,275 4,712 10,972
Dividends paid (27,556) (24,274) (77,737) (70,464)
------- ------- ------- -------
Net cash provided by (used in) financing activities 1,221,912 (5,645) 1,162,656 (140,449)
--------- ------ --------- --------
Increase (decrease) in cash and equivalents (197,899) 126,303 (235,565) (5,861)
Cash and equivalents at beginning of period 357,490 243,753 395,156 375,917
------- ------- ------- -------
Cash and equivalents at end of period $159,591 $370,056 $159,591 $370,056
Supplemental disclosure information:
Cash paid for interest $40,022 $40,075 $100,523 $107,390
Cash paid for federal and state income taxes, net $41,267 $3,022 $86,418 $41,547
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SOURCE Steel Dynamics, Inc.
