STEEL DYNAMICS, INC. 
By FORT WAYNE, Ind., Jan. 28, 2013 /PRNewswire/ -- Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced fourth quarter 2012 net income of $61 million, or $0.27 per diluted share, on net sales of $1.7 billion. By comparison, prior year fourth quarter net income was $30 million, or $0.14 per diluted share, on net sales of $1.9 billion, and sequential third quarter 2012 net income was $13 million, or $0.06 per diluted share, on net sales of $1.7 billion. Full-year 2012 net income was $164 million, or $0.73 per diluted share, on net sales of $7.3 billion, compared to prior year net income of $278 million, or $1.22 per diluted share, on net sales of $8.0 billion.
Fourth quarter 2012 results included certain positive tax adjustments of $16 million, or $0.07 per diluted share, which was slightly higher than the company's previous estimate for the adjustments of $0.06 per diluted share. Excluding these adjustments the company's fourth quarter effective tax rate was 39.5 percent.
"Similar to the rest of 2012, the fourth quarter was challenging on a number of fronts," said President and Chief Executive Officer, Mark Millett, "but the team did a great job. We are pleased our fourth quarter financial performance was stronger than originally anticipated. On a sequential quarterly basis our operating income increased 31 percent to $95 million, primarily driven by improvements in our metals recycling and sheet steel operations.
"In our December guidance, we suggested that metals recycling was expected to deliver a stronger financial performance in the fourth quarter, and the team's execution was even better than anticipated," stated Millett. "Sequential quarterly operating income increased 56 percent to $26 million, as meaningful improvements in both ferrous and nonferrous metal spreads more than offset decreased volumes. Increased copper margins provided the most notable improvement, as global copper prices increased based in part on improved demand from China. We also took advantage of a strong December ferrous market environment, increasing our expected shipments, as it appeared the typical market strength of January was being challenged.
"Our steel operations also showed improvement with an increase in operating income of seven percent to $117 million, as improvements in sheet steel volumes more than offset weaker long product shipments and lower overall steel metal spreads. Automotive and manufacturing provided improved sheet demand, while nonresidential construction remained weak. Despite the challenging construction market, we are also pleased that our fabrication business reported its third consecutive profitable quarter, as the changes the team implemented earlier in the year have continued to provide greater efficiencies and improved productivity.
"The company's 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.
Fourth Quarter Review
Fourth quarter shipments were mixed across the company's operating segments when compared to the prior-year fourth quarter and the third quarter of 2012. However, with the exception of fabrication, pretax earnings improved for each business platform. The company's operating income increased 15 percent over prior-year performance and 31 percent in comparison to the third quarter of 2012. The increase in sequential quarterly operating income was primarily the result of increased volume coupled with reduced costs in sheet operations, and increased nonferrous margins coupled with reduced direct costs in metals recycling.
The company's steel mill capacity utilization improved to 80 percent in the fourth quarter from 78 percent in the third quarter, while shipments increased four percent. Improved overall volume and product mix more than offset decreased steel margins, resulting in increased operating income of $8 million in the quarter. The average selling price per ton shipped decreased $25 to $784 in the fourth quarter, and the average ferrous scrap cost per ton melted decreased $9 per ton. Operating income attributable to the company's sheet operations increased 15 percent when compared to the sequential quarter, while earnings from long product operations decreased three percent.
Despite lower volumes, profitability from the company's metals recycling operations improved as ferrous metal spreads expanded ten percent and nonferrous metal spreads improved 24 percent when compared to the third quarter of 2012.
The impact of losses from the company's Minnesota operations on fourth quarter 2012 consolidated net income was approximately $10 million, or $0.04 per diluted share. This compares to losses of $11 million, or approximately $0.05 per diluted share in the third quarter of 2012. As previously indicated, a six week outage of the nugget facility began in mid-September 2012 to complete the groundwork necessary for the implementation of improvements expected to be made in the first half of 2013. These modifications are expected to improve both volume and product quality. As planned, operations resumed in November, and the restart has gone well with significant improvements to product quality already achieved.
Operations began at the company's iron concentrate facility in September 2012 and production has gone well. As the primary raw material for the company's iron nugget facility, this is a pivotal achievement in lowering the raw material input cost of iron nuggets, as the cost of internally-sourced iron concentrate is less than $50 per metric ton compared to current market priced iron concentrate in excess of $140 per metric ton. If pig iron prices remain steady, losses associated with the Minnesota operations for the first quarter of 2013 are anticipated to be similar to those recorded in the fourth quarter, as the plant depletes existing higher priced third-party iron concentrate in inventory.
The company's liquidity position remains strong with $1.5 billion in unrestricted cash, short term commercial paper, and available funding under the revolving credit facility at December 31, 2012. Total debt decreased $178 million during 2012, and the company's debt to equity capitalization rate improved from 50 percent at the end of 2011 to 47 percent at December 31, 2012.
Full-Year Review
The company's 2012 net sales decreased nine percent when compared to 2011, while operating income decreased 33 percent. Decreased operating income was primarily driven by reduced operating margins in the company's sheet operations during the first half of 2012, as compared to the record metal spreads achieved in the first half of 2011. The average annual selling price per ton shipped for the company's steel operations in 2012 was $831, a decrease of $66 per ton compared to 2011. The 2012 average scrap cost per ton melted decreased $32. Operating income from the company's metals recycling operations also decreased 23 percent during 2012, as both volumes and metal margins compressed.
Charges associated with the company's 2012 refinancing initiatives resulted in decreased pretax earnings of approximately $38 million, or approximately $0.10 per diluted share. These initiatives significantly reduced the company's cost of debt, while extending the company's long term debt maturity profile.
Outlook
"We remain optimistic that the organic growth projects we identified in 2012 will position us to continue to build a strong enterprise," Millett said. "We believe there is potential for certain market sectors, such as automotive and manufacturing, to build momentum in 2013. Recent housing start data suggests potential improvements in residential construction, and there are areas across the U.S. indicating signs of strengthening in the nonresidential construction sector, although levels remain historically low. We look forward to executing our strategic growth plans. Demand for high-quality steel products has not abated, and we believe our current capital projects will deliver products that exceed customers' expectations. We remain confident that with our exceptional team, coupled with our superior, low-cost operating culture, we are uniquely prepared to capitalize on the opportunities ahead."
Summary Fourth Quarter and Full-Year 2012 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, special-bar-quality steel, rebar, rail, and specialty shapes.
Fourth Quarter Full Year Sequential
-------------- ---------
2012 2011 2012 2011 3Q 2012
---- ---- ---- ---- -------
Total Sales $1,126,438 $1,236,330 $4,782,240 $5,162,806 $1,120,571
External Sales 1,061,419 1,168,868 4,506,788 4,859,217 1,051,349
Operating Income 117,097 117,434 505,080 668,341 109,215
Total Shipments (tons) 1,457,053 1,465,962 5,832,776 5,842,694 1,405,021
Average External Sales Price Per Ton $784 $853 $831 $897 $809
Average Ferrous Scrap Cost Per Ton $343 $407 $378 $410 $352
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.
Metals Recycling & Ferrous Resources Fourth Quarter Full Year Sequential
-------------- ---------
2012 2011 2012 2011 3Q 2012
---- ---- ---- ---- -------
Total Sales $798,163 $908,436 $3,658,952 $4,157,525 $821,357
External Sales 530,258 593,181 2,342,598 2,769,063 522,231
Operating Income (Loss) 507 (6,508) (11,690) 54,723 (9,461)
Metals Recycling Fourth Quarter Full Year Sequential
-------------- ---------
2012 2011 2012 2011 3Q 2012
---- ---- ---- ---- -------
Total Sales $741,342 $856,481 $3,441,348 $3,940,693 $766,102
External Sales 520,931 592,951 2,329,096 2,768,833 519,101
Operating Income 25,818 15,715 72,473 94,543 16,566
Unrealized Hedging Gains (Losses) 9,820 (2,659) 3,588 3,768 (9,315)
Ferrous Shipments (gross tons) 1,238,143 1,314,588 5,647,058 5,879,729 1,339,853
% Shipments to Co. Steel Mills 46% 44% 46% 43% 43%
Nonferrous Shipments (pounds 000's) 251,080 255,137 1,051,333 1,066,648 249,685
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.
Fourth Quarter Full Year Sequential
-------------- ---------
2012 2011 2012 2011 3Q 2012
---- ---- ---- ---- -------
Total Sales $98,301 $78,684 $371,406 $276,408 $102,442
Operating Income (Loss) 1,448 (1,820) 2,114 (6,584) 3,141
Total Shipments (tons) 76,870 61,428 295,161 217,838 80,176
Average External Sales Price Per Ton $1,278 $1,281 $1,258 $1,270 $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 prolonged or deepening recession 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 Tuesday, January 29, 2013, at 9:30 a.m. Eastern Time, Steel Dynamics will host a conference call with investors and analysts to discuss the company's fourth quarter and full-year 2012 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 February 5, 2013. A podcast 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
Three Months Ended Year Ended Ended
December 31, December 31, September 30,
------------ ------------
2012 2011 2012 2011 2012
---- ---- ---- ---- ----
Net sales $1,705,001 $1,858,345 $7,290,234 $7,997,500 $1,693,390
Costs of goods sold 1,524,904 1,698,210 6,570,336 7,065,982 1,536,989
--------- --------- --------- --------- ---------
Gross profit 180,097 160,135 719,898 931,518 156,401
Selling, general and administrative expenses 69,340 61,947 257,943 263,595 62,984
Profit sharing 6,750 6,064 26,987 43,149 3,954
Amortization of intangible assets 8,722 9,634 35,553 39,954 8,848
Impairment charges 356 - 8,250 - 7,894
--- --- ----- --- -----
Operating income 94,929 82,490 391,165 584,820 72,721
Interest expense, net of capitalized interest 34,877 44,117 158,585 176,977 41,490
Other expense (income), net (3,852) (2,641) 28,514 (16,476) 24,010
------ ------ ------ ------- ------
Income before 63,904 41,014 204,066 424,319 7,221
income taxes
Income taxes 8,810 15,235 61,785 158,627 1,116
----- ------ ------ ------- -----
Net income 55,094 25,779 142,281 265,692 6,105
Net loss attributable to noncontrolling interests 5,477 4,424 21,270 12,428 6,728
Net income attributable 60,571 163,551
to Steel Dynamics, Inc. $ $30,203 $ $278,120 $12,833
=== ===
Basic earnings per share attributable to Steel
Dynamics, Inc. stockholders $.28 $.14 $.75 $1.27 $.06
Weighted average common shares outstanding 219,346 218,718 219,159 218,471 219,191
======= ======= ======= ======= =======
Diluted earnings per share attributable to Steel
Dynamics, Inc. stockholders, including the effect of
assumed conversions when dilutive $.27 $.14 $.73 $1.22 $.06
Weighted average common shares and equivalents outstanding 236,890 219,336 236,624 235,992 220,044
======= ======= ======= ======= =======
Dividends declared per share $.10 $.10 $.40 $.40 $.10
Steel Dynamics, Inc.
UNAUDITED SUPPLEMENTAL OPERATING INFORMATION
(dollars in thousands)
Quarter Ended Year Ended Quarter Ended Quarter Ended Quarter Ended
December 31, December 31, March 31, June 30, September 30,
2012 2011 2012 2011 2012 2012 2012
---- ---- ---- ---- ---- ---- ----
Steel Operations*
Shipments (tons)
Flat Roll Division 713,770 678,961 2,717,995 2,770,466 658,505 706,944 638,776
Structural and Rail
Division
Structural 225,100 229,748 887,335 761,682 227,059 214,347 220,829
Rail 37,341 20,854 144,169 117,463 33,947 38,177 34,704
Engineered Bar Products
Division 98,858 171,020 535,882 634,964 157,489 166,208 113,327
Roanoke Bar Division 127,952 129,113 581,180 544,384 151,296 149,010 152,922
Steel of West Virginia 73,581 74,477 301,730 297,902 77,212 74,456 76,481
The Techs 180,451 161,789 664,485 715,833 144,615 171,437 167,982
Total 1,457,053 1,465,962 5,832,776 5,842,694 1,450,123 1,520,579 1,405,021
Intra-company (102,772) (96,458) (409,612) (422,958) (94,176) (106,875) (105,789)
--------
External 1,354,281 1,369,504 5,423,164 5,419,736 1,355,947 1,413,704 1,299,232
========= ========= ========= ========= ========= ========= =========
Production, excluding The Techs (tons) 1,290,567 1,307,117 5,228,190 5,218,552 1,351,818 1,328,290 1,257,515
Net sales
Total $1,126,438 $1,236,330 $4,782,240 $5,162,806 $1,254,464 $1,280,767 $1,120,571
Intra-company (65,019) (67,462) (275,452) (303,589) (67,744) (73,467) (69,222)
External $1,061,419 $1,168,868 $4,506,788 $4,859,217 $1,186,720 $1,207,300 $1,051,349
Operating income before $117,097 $117,434 $505,080 $668,341 $139,740 $139,028 $109,215
amortization of intangibles
Amortization of
intangibles (2,289) (2,431) (9,440) (10,221) (2,432) (2,431) (2,288)
Operating income (Note 1) $114,808 $115,003 $495,640 $658,120 $137,308 $136,597 $106,927
======== ======== ======== ======== ======== ======== ========
Metals Recycling and Ferrous Resources**
OmniSource
Ferrous metals shipments (gross tons)
Total 1,238,143 1,314,588 5,647,058 5,879,729 1,582,840 1,486,222 1,339,853
Intra-company (573,293) (585,484) (2,586,670) (2,564,699) (763,767) (666,668) (582,942)
External 664,850 729,104 3,060,388 3,315,030 819,073 819,554 756,911
Non-ferrous metals shipments
(thousands of pounds)
Total 251,080 255,137 1,051,333 1,066,648 291,636 258,932 249,685
Intra-company (3,456) (2,230) (18,488) (8,273) (1,958) (4,598) (8,476)
External 247,624 252,907 1,032,845 1,058,375 289,678 254,334 241,209
Mesabi Nugget shipments 36,481 52,943 168,633 159,641 46,230 33,840 52,082
(metric tons) - Intra-company
Iron Dynamics (metric tons) - Intra-company 57,117 47,471 226,396 229,502 56,628 59,103 53,548
====== ====== ======= ======= ====== ====== ======
Net sales
Total $798,163 $908,436 $3,658,952 $4,157,525 $1,112,340 $927,092 $821,357
Intra-company (267,905) (315,255) (1,316,354) (1,388,462) (412,740) (336,583) (299,126)
External $530,258 $593,181 $2,342,598 $2,769,063 $699,600 $590,509 $522,231
Operating income (loss) before $507 $(6,508) $(11,690) $54,723 $10,399 $(13,135) $(9,461)
amortization of intangibles
Amortization of
intangibles (6,110) (6,882) (24,818) (28,126) (6,236) (6,236) (6,236)
Operating income (loss) (Note 1) $(5,603) $(13,390) $(36,508) $26,597 $4,163 $(19,371) $(15,697)
======= ======== ======== ======= ====== ======== ========
Steel Fabrication***
Shipments (tons)
Total 76,870 61,428 295,161 217,838 60,183 77,932 80,176
Intra-company (187) (11) (242) (632) (2) - (53)
External 76,683 61,417 294,919 217,206 60,181 77,932 80,123
Net sales
Total $98,301 $78,684 $371,406 $276,408 $74,896 $95,767 $102,442
Intra-company (277) (13) (322) (625) (4) - (41)
External $98,024 $78,671 $371,084 $275,783 $74,892 $95,767 $102,401
Operating income (loss) (Note 1) $1,448 $(1,820) $2,114 $(6,584) $(2,668) $193 $3,141
====== ======= ====== ======= ======= ==== ======
* 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)
December 31, December 31,
2012 2011
---- ----
(unaudited)
Assets
Current assets
Cash and equivalents $375,917 $390,761
Investments in short-term commercial paper 31,520 84,830
Accounts receivable, net 642,363 722,791
Inventories 1,202,507 1,199,584
Deferred income taxes 23,449 25,341
Income taxes receivable 893 16,722
Other current assets 19,576 15,229
------ ------
Total current assets 2,296,225 2,455,258
Property, plant and equipment, net 2,231,198 2,193,745
Restricted cash 27,749 26,528
Intangible assets, net 416,635 450,893
Goodwill 738,542 745,066
Other assets 105,067 107,736
------- -------
Total assets $5,815,416 $5,979,226
========== ==========
Liabilities and Equity
Current liabilities
Accounts payable $360,097 $420,824
Income taxes payable 16,941 10,880
Accrued expenses 179,702 185,964
Accrued profit sharing 23,306 38,671
Current maturities of long-term debt 29,631 444,078
------ -------
Total current liabilities 609,677 1,100,417
Long-term debt
Term note 247,500 -
7 (3)/8% senior notes, due 2012 - 261,250
5.125% convertible senior notes, due 2014 287,496 287,500
6 3/4% senior notes, due 2015 500,000 500,000
7 3/4% senior notes, due 2016 - 500,000
6 (1)/8% senior notes, due 2019 400,000 -
7 5/8% senior notes, due 2020 350,000 350,000
6 (3)/8% senior notes, due 2022 350,000 -
Other long-term debt 37,610 37,272
------ ------
Total long-term debt 2,172,606 1,936,022
Deferred income taxes 537,304 489,915
Other liabilities 19,173 82,278
Commitments and contingencies
Redeemable noncontrolling interests 98,814 70,694
Equity
Common stock 637 636
Treasury stock, at cost (720,479) (722,653)
Additional paid-in capital 1,037,687 1,026,157
Retained earnings 2,087,620 2,011,801
--------- ---------
Total Steel Dynamics, Inc. equity 2,405,465 2,315,941
Noncontrolling interests (27,623) (16,041)
------- -------
Total equity 2,377,842 2,299,900
--------- ---------
Total liabilities and equity $5,815,416 $5,979,226
========== ==========
Steel Dynamics, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2012 2011 2012 2011
---- ---- ---- ----
Operating activities:
Net income $55,094 $25,779 $142,281 $265,692
Adjustments to reconcile net income to net cash
provided by
operating activities:
Depreciation and amortization 55,189 55,642 225,216 222,607
Equity-based compensation 2,986 5,928 12,449 17,283
Deferred income taxes 64 5,355 54,528 34,436
Impairment charges 356 - 8,250 -
Changes in certain assets and liabilities:
Accounts receivable 70,373 93,077 85,977 (100,602)
Inventories 7,143 (40,736) 13,845 (85,523)
Accounts payable (13,578) (35,999) (32,593) 56,551
Income taxes receivable/payable 4,727 3,832 21,644 26,242
Other assets and liabilities 24,564 (18,921) (85,293) 49,669
------ ------- ------- ------
Net cash provided by operating 206,918 93,957 446,304 486,355
activities
Investing activities:
Purchase of property, plant and equipment (64,839) (75,212) (223,525) (167,007)
Other investing activities (32,527) (70,776) 31,924 (68,830)
------- ------- ------ -------
Net cash used in investing activities (97,366) (145,988) (191,601) (235,837)
Financing activities:
Issuance of current and long-term debt - - 1,049,969 10,103
Repayment of current and long-term debt (6,640) (5,693) (1,258,842) (7,740)
Debt issuance costs (88) (85) (13,901) (6,969)
Proceeds from exercise of stock options, 1,031 130 3,052 13,396
including related tax effect
Contributions from noncontrolling investors, net 6,865 13,615 37,808 26,822
Dividends paid (21,923) (21,869) (87,633) (81,882)
------- ------- ------- -------
Net cash used in financing activities (20,755) (13,902) (269,547) (46,270)
------- ------- -------- -------
Increase (decrease) in cash and equivalents 88,797 (65,933) (14,844) 204,248
Cash and equivalents at beginning of period 287,120 456,694 390,761 186,513
------- ------- ------- -------
Cash and equivalents at end of period $375,917 $390,761 $375,917 $390,761
Supplemental disclosure information:
Cash paid for interest $30,163 $70,720 $154,136 $171,808
Cash paid for federal and state income $2,944 $1,549 $46,920 $75,927
taxes, net
SOURCE Steel Dynamics, Inc.
