Steel Dynamics Reports First Quarter 2014 Diluted Earnings Per Share of $0.17

FORT WAYNE, Ind., May 6, 2014 /PRNewswire/ — Steel Dynamics, Inc.
(NASDAQ/GS: STLD) today announced first quarter net income of $39 million, or
$0.17 per diluted share, on net sales of $1.8 billion. By comparison, prior year
first quarter net income was $48 million, or $0.21 per diluted share, on net
sales of $1.8 billion, and sequential fourth quarter 2013 net income was $55
million, or $0.24 per diluted share, on net sales of $1.9 billion.

First quarter 2014 earnings include a benefit of approximately $0.01 per diluted
share related to a recent change in Indiana’s corporate income tax rate which
resulted in the reduction of the company’s deferred income tax liability.

“The first quarter 2014 was one of the most severe winter periods in recent
history across much of the United States, especially in the Midwest where a
majority of our operations are located,” said Chief Executive Officer, Mark
Millett. “The uncharacteristically severe and prolonged winter weather
conditions resulted in increased energy costs, reduced production, diminished
availability of transportation and lower shipments. This environment was a major
driver of the 25 percent decline in our consolidated operating income for the
first quarter 2014, as compared to the sequential fourth quarter of 2013.

“Essentially all of our businesses were negatively impacted in some way;
however, our Midwest steel operations were especially impacted. Operating income
for our steel operations declined $47 million for the first quarter 2014, as
compared to the sequential quarter. Most impactful, sheet steel volumes
decreased 12 percent and metal spread also declined, as transportation issues
delayed shipments; meaningfully higher energy costs were incurred; and the
average quarterly product price improvement did not outpace the higher cost of
scrap that was consumed earlier in the quarter. As weather conditions improved,
demand also strengthened with increased order activity throughout our steel
operations.

“We achieved two important goals during the quarter,” stated Millett. “We
shipped our first premium rail and the first product from our new
smaller-diameter engineered bar rolling mill. We anticipate continued growth in
demand for these products throughout 2014 and into 2015.”

The company’s fabrication business continues to improve, based on increased
market share, and more importantly, increased construction demand. Both order
inquiries and bookings are strong, supporting the premise of a nonresidential
construction market recovery. While first quarter 2014 shipments were seasonally
lower on a sequential basis, operating income improved meaningfully compared to
both the sequential and prior year quarter.

First Quarter Review

First quarter shipments across the company’s operating platforms were generally
lower, when compared to the fourth quarter 2013. As a result of higher energy
costs at our Midwest steel operations resulting from the severe weather and
reduced metal spread at the Flat Roll Division, first quarter 2014 operating
income for the company’s steel operations decreased 31 percent to $108 million,
as compared to the fourth quarter 2013, despite only a 3 percent decline in net
sales. Although overall steel metal margin increased in the first quarter 2014,
metal margin for steel sheet decreased as improved product pricing was more than
offset by early-quarter scrap costs. The average selling price per ton for the
company’s total steel operations increased $30 sequentially to $835 in the first
quarter 2014, while the average ferrous scrap cost per ton melted increased $24
per ton.

First quarter 2014 operating income attributable to the company’s sheet steel
operations decreased 28 percent when compared to the sequential quarter, and
operating income from long product operations decreased 34 percent. The
company’s steel mill production utilization rate decreased slightly to 86
percent in the first quarter 2014, compared to 88 percent in the fourth quarter
2013, unrelated to demand dynamics but rather due to production interruptions
related to power company curtailments.

Operating income from the company’s metals recycling operations was $10 million
for the first quarter 2014, compared to $12 million for the fourth quarter 2013.
The $2 million reduction in profitability was directly related to costs
associated with building damage related to excessive snow accumulation.
Operationally, external ferrous volumes and overall metal spreads were somewhat
lower as transportation was hindered, while nonferrous volumes and metal spreads
were somewhat improved.

During the first quarter 2014, the company initiated a two week outage at the
nugget production facility in February, due to significantly higher natural gas
prices related to weather conditions. The impact of losses from the company’s
Minnesota operations for first quarter 2014 consolidated net income was $8.9
million, or $0.04 per diluted share, as compared to $8.1 million, or $0.03 per
diluted share in the fourth quarter 2013. Despite the outage, the increased loss
was directly related to the higher natural gas costs. As referenced in the
company’s fourth quarter 2013 earnings release, certain meaningful adjunct
trials related to product yield and the cost of production were scheduled to be
completed during the first quarter 2014. Due to the unanticipated severe
weather, not all of the trials were able to be completed; however, meaningful
progress was made. The remaining trials are expected to be completed before the
end of the second quarter 2014. Given the increased cost of production while
testing continues, current expectations concerning losses associated with the
Minnesota operations for the second quarter of 2014 are anticipated to be
similar to those recorded in the first quarter.

Outlook

“We are optimistic,” said Millett. “Rather than a structural change in growth
during the first quarter, we believe weather conditions impacted the economy. We
have confidence that the broader U.S. economy will continue to improve and that
the non-service sector portion of domestic GDP has the ability to grow at a
higher rate than overall GDP, driven by strengthened asset values, domestic
energy investment and increased infrastructure spending. Steel consuming
industries, such as manufacturing, automotive, heavy machinery and the
construction market continue to grow, indicative of underlying strength in steel
demand. We are poised to be the beneficiaries. We believe our broad range of
quality products, our differentiated customer value, combined with the strength
of our exceptional employees and historically low-cost operating platforms,
uniquely position us to capitalize on the imminent opportunities.”

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, except for 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.

First Quarter Sequential
————-

2014 2013 4Q 2013
—- —- ——-

Total Sales $1,189,933 $1,142,075 $1,222,907

External Sales 1,117,599 1,061,312 1,146,701

Operating Income 107,776 121,589 155,107
——- ——- ——-

Total Shipments
(tons) 1,450,732 1,469,802 1,542,289

External Shipments
(tons) 1,338,573 1,344,432 1,423,953

Production (tons) 1,519,566 1,565,067 1,588,394
——— ——— ———

Average External
Sales Price Per Ton $835 $789 $805

Average Ferrous Scrap
Cost Per Ton $380 $351 $356

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.

First Quarter Sequential
————-

2014 2013 4Q 2013
—- —- ——-

Metals Recycling &
Ferrous Resources

Total Sales $993,505 $914,568 $907,668

External Sales 575,774 621,128 572,840

Operating Income (Loss) (10,981) (4,309) (13,020)

Unrealized Hedging Gain
(Loss), Net 4,066 2,354 (2,626)

OmniSource Standalone

Total Sales $880,618 $835,039 $797,034

External Sales 523,124 609,918 535,549

Operating Income 9,549 24,965 11,667

Unrealized Hedging Gain
(Loss), Net 2,730 691 (1,707)

Ferrous Shipments
(gross tons) 1,364,533 1,342,929 1,356,258

% Shipments to SDI
Steel Mills 52% 43% 47%

Nonferrous Shipments
(pounds 000’s) 270,978 279,656 254,876

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
————-

2014 2013 4Q 2013
—- —- ——-

Total Sales $115,861 $94,375 $121,853

Operating Income
(Loss) 3,126 1,530 (122)
—– —– —-

Total Shipments
(tons) 94,667 77,583 101,132

Average Sales Price
Per Ton $1,224 $1,214 $1,205

About Steel Dynamics, Inc.

Steel Dynamics, Inc. is one of the largest domestic steel producers and metals
recyclers in the United States based on estimated annual steelmaking and metals
recycling capability, with annual sales of $7.4 billion in 2013, over 6,800
employees, and manufacturing facilities primarily located throughout the United
States (including five steel mills, six steel processing facilities, two iron
production facilities, over 90 metals recycling locations and six steel
fabrication plants).

Forward-Looking Statement

This press release contains some predictive statements about future events,
including statements related to conditions in the steel and metallic scrap
markets, Steel Dynamics’ revenues, costs of purchased materials, future
profitability and earnings, and the operation of new or existing facilities.
These statements are intended to be made as “forward-looking,” subject to many
risks and uncertainties, within the safe harbor protections of the Private
Securities Litigation Reform Act of 1995. These statements speak only as of this
date and are based upon information and assumptions, which we consider
reasonable as of this date, concerning our businesses and the environments in
which they operate. Such predictive statements are not guarantees of future
performance, and we undertake no duty to update or revise any such statements.
Some factors that could cause such forward-looking statements to turn out
differently than anticipated include: (1) the effects of a recurrent slowing
economy on industrial demand; (2) changes in economic conditions, either
generally or in any of the steel or scrap-consuming sectors which affect demand
for our products, including the strength of the non-residential and residential
construction, automotive, appliance, and other steel-consuming industries; (3)
fluctuations in the cost of key raw materials (including steel scrap, iron
units, and energy costs) and our ability to pass-on any cost increases; (4) the
impact of domestic and foreign import price competition; (5) risks and
uncertainties involving product and/or technology development; and (6)
occurrences of unexpected plant outages or equipment failures.

More specifically, we refer you to SDI’s more detailed explanation of these and
other factors and risks that may cause such predictive statements to turn out
differently, as set forth in our most recent Annual Report on Form 10-K, in our
quarterly reports on Form 10-Q or in other reports which we from time to time
file with the Securities and Exchange Commission. These are available publicly
on the SEC Web site, www.sec.gov, and on the Steel Dynamics Web site,
www.steeldynamics.com.

Conference Call and Webcast

On Thursday, April 17, 2014, 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 2014 operating and financial results. We invite you to listen to
the live audiocast of the conference call accessible from our website
(http://www.steeldynamics.com), or via telephone (the conference call number may
also be obtained on our website). A replay of the discussion will be available
on our website until 11:59 p.m. Eastern Time on April 24, 2014. A podcast/MP3
file of the event will also be available and can be downloaded from our website.

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)

Three Months
Ended Three Months
Ended

March 31, December 31,
———

2014 2013 2013
—- —- —-

Net sales $1,830,082 $1,795,696 $1,864,150

Costs of goods
sold 1,666,778 1,619,432 1,666,154
——— ——— ———

Gross profit 163,304 176,264 197,996

Selling,
general and
administrative
expenses 70,042 65,262 74,606

Profit sharing 5,395 6,643 7,873

Amortization
of intangible
assets 6,935 8,127 7,695

Operating
income 80,932 96,232 107,822

Interest
expense, net
of
capitalized
interest 30,569 34,629 30,664

Other expense
(income), net (631) (1,046) 111
—- —— —

Income before
income taxes 50,994 62,649 77,047

Income taxes 17,296 21,397 29,146
—— —— ——

Net income 33,698 41,252 47,901

Net loss
attributable
to
noncontrolling
interests 4,881 6,963 6,754

Net income
attributable
to Steel 38,579 48,215 54,655
Dynamics, Inc.
$ $ $
=== === ===

Basic
earnings
per share
attributable
to $0.17 $0.22 $0.25

Steel
Dynamics,
Inc.
stockholders

Weighted
average
common shares
outstanding 223,011 219,995 222,273
======= ======= =======

Diluted
earnings
per share
attributable
to $0.17 $0.21 $0.24

Steel
Dynamics,
Inc.
stockholders,

including the
effect of
assumed

conversions
when dilutive

Weighted
average
common shares
and 241,394 238,087 240,493

equivalents
outstanding

Dividends
declared
per share $0.115 $0.110 $0.110

Steel Dynamics, Inc.
UNAUDITED SUPPLEMENTAL OPERATING INFORMATION
(dollars in thousands)

Quarter Ended Quarter Ended

March 31, December 31,

2014 2013 2013
—- —- —-

Steel Operations*

Shipments (tons)

Flat Roll Division 641,520 704,290 738,998

Structural and Rail Division

Structural 248,380 228,089 259,884

Rail 43,936 52,808 35,043

Engineered Bar Products Division 144,303 112,821 123,865

Roanoke Bar Division 143,782 139,950 150,986

Steel of West Virginia 75,574 80,707 70,972

The Techs 153,237 151,137 162,541
———

Total 1,450,732 1,469,802 1,542,289

Intra-company (112,159) (125,370) (118,336)
——– ——–

External 1,338,573 1,344,432 1,423,953
========= ========= =========

Steel Operations Production (tons) 1,519,566 1,565,067 1,588,394

Net sales

Total $1,189,933 $1,142,075 $1,222,907

Intra-company (72,334) (80,763) (76,206)
————-

External $1,117,599 $1,061,312 $1,146,701
========

Operating income before amortization of intangibles $107,776 $121,589 $155,107

Amortization of intangibles (2,133) (2,288) (2,133)
——————–

Operating income (Note 1) $105,643 $119,301 $152,974
======== ======== ========

Metals Recycling and Ferrous Resources Operations**

OmniSource

Ferrous metals shipments (gross tons)

Total 1,364,533 1,342,929 1,356,258

Intra-company (714,981) (553,890) (638,333)

External 649,552 789,039 717,925
========

Nonferrous metals shipments (thousands of pounds)

Total 270,978 279,656 254,876

Intra-company (19,390) (3,529) (3,738)
————-

External 251,588 276,127 251,138
========

Mesabi Nugget shipments (metric tons) – Intra-company 37,488 59,685 59,460
====== ====== ======

Iron Dynamics (metric tons) – Intra-company 57,122 64,685 57,659
====== ====== ======

Net sales

Total $993,505 $914,568 $907,668

Intra-company (417,731) (293,440) (334,828)
————-

External $575,774 $621,128 $572,840
========

Operating loss before amortization of intangibles $(10,981) $(4,309) $(13,020)

Amortization of intangibles (4,538) (5,515) (5,238)
——————–

Operating loss (Note 1) $(15,519) $(9,824) $(18,258)
======== ======= ========

Steel Fabrication Operations***

Shipments (tons)

Total 94,667 77,583 101,132

Intra-company – (334) (98)
————-

External 94,667 77,249 101,034
========

Net sales

Total $115,861 $94,375 $121,853

Intra-company – (578) (125)
————-

External $115,861 $93,797 $121,728
========

Operating income (loss) (Note 1) $3,126 $1,530 $(122)
====== ====== =====

* 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, December
31,

2014 2013
—- —-

(unaudited)

Assets

Current
assets

Cash and
equivalents $342,919 $395,156

Accounts
receivable,
net 811,100 720,600

Inventories 1,332,101 1,314,747

Deferred
income taxes 17,871 17,964

Other current
assets 24,363 25,167
—— ——

Total current
assets 2,528,354 2,473,634

Property,
plant and
equipment,
net 2,197,503 2,226,134

Restricted
cash 18,588 23,827

Intangible
assets, net 379,488 386,159

Goodwill 730,360 731,996

Other assets 59,564 91,256
—— ——

Total
assets $5,913,857 $5,933,006

Liabilities
and Equity

Current
liabilities

Accounts
payable $417,168 $414,932

Income taxes
payable 23,531 4,023

Accrued
expenses 167,010 214,679

Current
maturities
of long-
term debt 343,722 341,544
——- ——-

Total current
liabilities 951,431 975,178

Long-term
debt

Term note 209,687 220,000

Senior notes 1,500,000 1,500,000

Other long-
term debt 45,341 46,045
—— ——

Total long-
term debt 1,755,028 1,766,045

Deferred
income taxes 550,225 556,038

Other
liabilities 22,843 23,376

Commitments
and
contingencies

Redeemable
noncontrolling
interests 121,834 116,514

Equity

Common stock 646 645

Treasury
stock, at
cost (716,545) (718,529)

Additional
paid-in
capital 1,092,281 1,085,694

Retained
earnings 2,192,413 2,179,513
——— ———

Total Steel
Dynamics,
Inc. equity 2,568,795 2,547,323

Noncontrolling
interests (56,299) (51,468)
——- ——-

Total equity 2,512,496 2,495,855
——— ———

Total
liabilities
and
equity $5,913,857 $5,933,006

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

Three Months
Ended

March 31,
———

2014 2013
—- —-

Operating activities:

Net income $33,698 $41,252

Adjustments to
reconcile net income
to net cash provided
by
(used in) operating
activities:

Depreciation and
amortization 57,568 57,061

Equity-based
compensation 5,768 4,753

Deferred income taxes (4,091) 10,935

Changes in certain
assets and
liabilities:

Accounts receivable (88,950) (110,938)

Inventories (17,354) 32,348

Accounts payable 5,041 38,988

Income taxes
receivable/payable 19,393 (3,022)

Other assets and
liabilities (38,320) (41,667)
——- ——-

Net cash provided by
(used in) operating
activities (27,247) 29,710

Investing activities:

Purchase of property,
plant and equipment (24,841) (45,346)

Other investing
activities 28,884 33,934
—— ——

Net cash provided by
(used in) investing
activities 4,043 (11,412)

Financing activities:

Issuance of current
and long-term debt – 409,261

Repayment of current
and long-term debt (12,793) (305,691)

Debt issuance costs – (5,997)

Proceeds from
exercise of stock
options, including 2,905 7,614
related tax effect

Contributions from
noncontrolling
investors, net 5,370 411

Dividends paid (24,515) (21,952)
——- ——-

Net cash provided by
(used in) financing
activities (29,033) 83,646
——- ——

Increase (decrease)
in cash and
equivalents (52,237) 101,944

Cash and equivalents
at beginning of
period 395,156 375,917
——- ——-

Cash and
equivalents at end
of period $342,919 $477,861

Supplemental
disclosure
information:

Cash paid for
interest $39,663 $49,732

Cash paid for
federal and state
income taxes, net $2,143 $11,165

SOURCE Steel Dynamics, Inc.

 

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