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

Ended


Nine Months

Ended


Three Months

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

  Steel Dynamics, Inc. stockholders

$

0.38

$

0.26

$

0.88

$

0.61

$

0.32












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

  equivalents outstanding (Note 1)


242,244


239,001


241,895


238,497


242,048












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,

2014


December 31,

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










 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/steel-dynamics-reports-third-quarter-2014-diluted-earnings-per-share-of-038-254946785.html

SOURCE Steel Dynamics, Inc.

Copyright 2014 PR Newswire

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