FORT WAYNE, Ind., April 21 /PRNewswire-FirstCall/ -- Steel Dynamics, Inc. today announced first quarter 2008 net income of $143 million, or $0.72 per diluted share, reflecting the company's recent two-for-one stock split ($1.44 per diluted share on a pre-split basis). Net income increased 40 percent and net sales more than doubled to $1.9 billion, compared to the first quarter of 2007. Comparing first quarter 2008 results to the fourth quarter of 2007, net income grew 46 percent and net sales increased 31 percent. First quarter 2008 results benefit from the company's acquisitions of The Techs (July 2007) and OmniSource Corporation (October 2007). All per-share figures reflect the company's two-for-one-stock split effective on March 19, 2008.
A major factor positively impacting the quarter results is a significant improvement in steel operations results. First quarter steel shipments of 1.6 million tons reflect increased sequential shipping volumes by all six steelmaking operations. Flat-rolled steel shipments from the Flat Roll Division and The Techs were particularly strong, together totaling 947,000 tons, an increase of 109,000 tons, or 13 percent, compared to the fourth quarter of 2007. Shipments by the four long-products steel mills increased 7 percent sequentially.
Another significant impact on the quarter's increased net sales and earnings is OmniSource Corporation. OmniSource was accretive to first quarter earnings by approximately $0.09 per diluted share. During the quarter, OmniSource experienced very strong demand for recycled ferrous scrap, both from the Steel Dynamics mills and from other mini mills, integrated steel mills, and foundries. Its favorable inventory posture entering the quarter put OmniSource in a position to capitalize on high scrap demand during the first quarter.
"SDI's first quarter results exceeded our March 11 earnings guidance of $0.625 to $0.65 per diluted share, primarily due to the continued strengthening in the quarter of the flat-roll steel market and the metals recycling business," said Keith Busse, Chairman and CEO. "Prices for both flat-rolled steel and scrap climbed faster and higher than we had anticipated, accelerating the margin growth we had predicted for the second quarter. Current market conditions suggest that resource cost increases can be offset by surcharges and selling price adjustments resulting in growing margins.
"Our outlook for 2008 continues to be very positive," Busse said. "Even with weakness in the U.S. economy, we continue to see strong demand for flat- rolled steels, due principally to constrained domestic supply, low steel inventories, and limited steel imports. Second quarter backlogs for structural steel, merchant bars, and SBQ remain strong due to relatively steady demand as well as limited import activity. Likewise, we expect our metals recycling business to continue to perform well during this period of high demand for ferrous and non-ferrous recycled resources and pricing above historical levels. As long as global steel demand remains high and global steel prices meet or exceed U.S. prices, we should expect that steel imports into the U.S. will remain at a low level especially in light of a weak dollar.
"The path that resource costs and product pricing will take in the second half of the year is uncertain, although we believe that second quarter as well as third quarter domestic market conditions will remain favorable, allowing us to adequately recover any increase in costs. As a result, our preliminary earnings estimate for the second quarter of 2008 is in a range of $0.80 to $0.90 per diluted share," Busse said.
First Quarter 2008 Operating Segment Information
The following highlights first quarter 2008 results for each of SDI's three primary operating segments.
Steel Operations. Steel Operations remain SDI's largest segment, representing 58 percent of the company's first quarter net sales. This segment includes five steel mills and related steel processing facilities, such as The Techs. The Techs galvanize steel sheet that is sourced primarily from third parties. Other steel products included in this segment are produced in SDI's electric-arc-furnace mini mills. Some flat-rolled and SBQ steels that SDI produces are finished in SDI facilities, utilizing various value-adding processes.
First quarter 2008 Steel Operations shipments were 1.6 million tons on net sales of $1.3 billion. Based on tons shipped, including steel shipments made by The Techs, flat-rolled products accounted for 58 percent of first quarter steel segment shipments, 18 percent was structural steel shipments, 9 percent was engineered bars, 9 percent was merchant bars, and 5 percent was Steel of West Virginia shipments. Operating income for the steel segment was $240 million, or $148 per ton shipped, compared to $131 per ton in the fourth quarter. These figures exclude profit-sharing costs.
The first quarter's average selling price per ton for Steel Operations was $782, an increase of $72 per ton from $710 in the fourth quarter of 2007 and an increase of $136 from the year-ago quarter. Compared to the fourth quarter of 2007, the strongest increases in selling values were in flat-rolled steel products. The average scrap cost per net ton charged increased $50 compared to the fourth quarter, and was $82 higher than in the first quarter of 2007.
Scrap and Scrap Substitute Operations. This segment now includes ferrous and non-ferrous metals recycling by OmniSource Corporation (processing and trading) and SDI's Iron Dynamics scrap-substitute operation producing pig iron for use by the Flat Roll Division. The segment also includes expenses related to the Mesabi Nugget project, which is currently under construction. The segment's net sales for first quarter 2008 were $804 million, representing 37 percent of SDI's first quarter net sales. Operating income for this segment was $54 million, excluding profit-sharing costs.
The first quarter of 2008 is the first to include full-quarter results for OmniSource Corporation as a part of Steel Dynamics. OmniSource is now the principal reporting entity in this segment. Because SDI's fourth quarter results for this segment included a partial quarter for OmniSource (following the purchase of OmniSource on October 26, 2007), a meaningful quarter-to- quarter comparison of scrap operations is not possible.
For the first quarter, total ferrous scrap shipments, including shipments to SDI's Steel Operations, were 1.4 million tons and non-ferrous scrap shipments were 239 million pounds. During the first quarter, the company's scrap operations supplied 464,000 tons of ferrous scrap to SDI's steel operations, or approximately 34 percent of the tonnage of ferrous scrap purchased by our mills during the quarter.
Steel Fabrication Operations. Steel Fabrication Operations includes five New Millennium Building Systems fabricating plants that produce joists, trusses, and steel decking used in the construction of non-residential buildings. First quarter net sales were $79 million, or 4 percent of SDI's first quarter net sales. Operating income for this segment was $4 million, or $54 per ton shipped, excluding profit-sharing costs. First quarter shipments totaled 69,000 tons at an average selling price of $1,145 per ton. First quarter shipping volume and average selling price per ton for New Millennium products declined from the prior quarter, due to seasonal weakening in demand and a slowdown in projects related to residential construction. The three plants that were acquired as a part of the Roanoke Electric Steel acquisition in 2006 have been reconfigured to provide an improved cost structure and to expand their capabilities. Margins at these facilities were weak to non- existent as a result of reconstruction and sagging market demand. All five plants are well positioned to become stronger competitors in their regions, capable of generating stronger margins with any improvement in building demand.
Forward-Looking Statements
This press release contains some predictive statements about future events, including statements related to conditions in the steel and metallic scrap markets, Steel Dynamics' revenue growth, 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. Such predictive statements are not guarantees of future performance, and actual results could differ materially from our current expectations.
Factors that could cause such predictive statements to turn out other than as anticipated or predicted include, among others: changes in economic conditions affecting steel consumption; increased foreign imports; increased price competition; difficulties in integrating acquired businesses; risks and uncertainties involving new products or new technologies; changes in the availability or cost of steel scrap or substitute materials; increases in energy costs; occurrence of unanticipated equipment failures and plant outages; labor unrest; and the effect of the elements on production or consumption.
In addition, we refer you to SDI's 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 and in other reports which we from time to time file with the Securities and Exchange Commission, available publicly on the SEC Web site, http://www.sec.gov/, and on the Steel Dynamics Web site, http://www.steeldynamics.com/
Forward-looking or predictive statements we make are based on our knowledge of our businesses and the environment in which they operate as of the date on which the statements were made. Due to these risks and uncertainties, as well as matters beyond our control which can affect forward- looking statements, you are cautioned not to place undue reliance on these predictive statements, which speak only as of the date of this press release. We undertake no duty to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Conference Call and Webcast
On Tuesday, April 22, 2008, at 10:00 a.m. Eastern time, Steel Dynamics will host a conference call in which management will discuss first quarter results. You are invited to listen to the live audio broadcast of the conference call over the Internet, accessible from the Steel Dynamics Web site:
http://www.steeldynamics.com/
Dial-in information is available on our Web site. An audio replay of the Webcast and a downloadable podcast will be available from the SDI Web site. No telephone replay will be available.
Steel Dynamics, Inc. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) Three Months Ended Three Months Ended March 31, December 31, 2008 2007 2007 Net sales $1,902,205 $865,674 $1,451,034 Costs of goods sold 1,554,896 649,271 1,196,776 Gross Profit 347,309 216,403 254,258 Selling, general, and administrative expenses 65,340 28,860 52,622 Profit sharing 18,507 15,258 17,963 Amortization of intangible assets 11,530 974 5,416 Operating income 251,932 171,311 178,257 Interest expense, net capitalized interest 29,807 7,246 26,370 Other income, net other expense (7,806) (715) (4,705) Income before income taxes 229,931 164,780 156,592 Income taxes 87,374 62,616 58,722 Net income $142,557 $102,164 $97,870 Basic earnings per share $.75 $.53 $.53 Weighted average common shares outstanding 189,039 192,632 186,314 Diluted earnings per share, including the effect of assumed conversions $.72 $.50 $.50 Weighted average common shares and share equivalents outstanding 199,317 203,274 196,525 Dividends declared per share $.10 $.075 $.075 Note: All prior period share data has been adjusted to include the company's two-for-one stock split effective March 19, 2008. Steel Dynamics, Inc. UNAUDITED SUPPLEMENTAL OPERATING INFORMATION Three Months Ended Three Months Ended March 31, December 31, 2008 2007 2007 Steel Operations * Shipments (net tons) Flat Roll Division 685,320 612,109 613,999 Structural and Rail Division 299,687 283,876 279,158 Engineered Bar Products Division 147,948 142,359 138,455 Division Roanoke Bar Division 151,368 170,611 141,788 Steel of West Virginia 75,724 74,487 69,111 The Techs 262,011 - 224,186 1,622,058 1,283,442 1,466,697 Intercompany (130,685) (120,897) (122,039) Net shipments 1,491,373 1,162,545 1,344,658 Average selling price per ton shipped $782 $646 $710 Production (excludes The Techs) 1,372,364 1,250,387 1,242,136 Steel Fabrication Operations ** Shipments (net tons) 68,606 66,507 71,460 Intercompany (273) (1,784) (761) Net shipments 68,333 64,723 70,699 Average selling price per ton shipped $1,145 $1,251 $1,339 Steel Scrap and Scrap Substitute *** Shipments (net tons) Ferrous 1,391,382 34,841 833,779 Scrap substitute 67,994 63,393 61,427 Intercompany (531,886) (102,414) (300,672) Net shipments 927,490 (4,180) 594,534 Non-ferrous (pounds) 238,787,934 - 137,417,428 Other Operations **** Shipments (net tons) 48,841 33,113 33,961 Intercompany (222) - (451) Net shipments 48,619 33,113 33,510 * Steel Operations include the company's Flat Roll Division, Structural and Rail Division, Engineered Bar Products Division, Roanoke Bar Division, Steel of West Virginia, and The Techs operations (acquired July 2007). ** Steel Fabrication Operations include the company's five joist and deck fabrication operations. *** Steel Scrap and Scrap Substitute Operations include Iron Dynamics, the company's previously existing five scrap procurement and processing locations, and most recently, OmniSource Corporation operations (acquired October 26, 2007). **** Other Operations include Paragon Steel Enterprises and Dynamic Composites operations. Steel Dynamics, Inc. CONSOLIDATED BALANCE SHEETS (in thousands) March 31, December 31, 2008 2007 (unaudited) Assets Current assets Cash and equivalents $58,889 $28,486 Accounts receivable 899,916 714,123 Inventories 894,759 904,398 Deferred income taxes 11,456 10,427 Other current assets 62,522 38,795 Total current assets 1,927,542 1,696,229 Property, plant and equipment, net 1,720,276 1,652,097 Restricted cash 11,867 11,945 Intangible assets 488,436 514,547 Goodwill 518,759 510,983 Other assets 154,732 133,652 Total assets $4,821,612 $4,519,453 Liabilities and Stockholders' Equity Current liabilities Accounts payable $494,701 $378,849 Income taxes payable 98,479 25,870 Accrued expenses 184,329 150,687 Accrued profit sharing 19,994 53,958 Senior secured revolving credit facility 147,000 239,000 Other current maturities of long-term debt 65,477 56,162 Total current liabilities 1,009,980 904,526 Long-term debt Senior secured term A loan 552,100 481,250 73/8% senior notes due 2012 700,000 700,000 63/4% senior notes due 2015 500,000 500,000 4.0% convertible subordinated notes due 2012 37,250 37,250 Other long-term debt 16,085 16,183 Total long-term debt 1,805,435 1,734,683 Deferred income taxes 338,922 301,470 Minority interest 11,513 11,038 Other liabilities 39,705 38,540 Stockholders' equity Common stock 543 542 Treasury stock, at cost (501,432) (457,368) Additional paid-in capital 562,847 553,805 Other accumulated comprehensive income (loss) (1,761) 21 Retained earnings 1,555,860 1,432,196 Total stockholders' equity 1,616,057 1,529,196 Total liabilities and stockholders' equity $4,821,612 $4,519,453 Steel Dynamics, Inc. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Three Months Ended March 31, 2008 2007 Operating activities: Net income $142,557 $102,164 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 53,212 29,265 Equity-based compensation 3,929 2,269 Deferred income taxes (973) (321) Minority interest 475 (381) Changes in certain assets and liabilities: Accounts receivable (185,793) (13,602) Inventories 9,575 (56,901) Accounts payable 114,515 77,341 Income taxes payable 72,608 54,850 Other working capital 3,491 (46,249) Net cash provided by operating activities 213,596 148,435 Investing activities: Purchases of property, plant and equipment (93,764) (53,929) Purchase of securities (20,373) - Other investing activities 1,329 (223) Net cash used in investing activities (112,808) (54,152) Financing activities: Issuance of current and long-term debt 218,000 145,000 Repayment of current and long-term debt (233,214) (130,078) Debt issuance costs (1,946) - Issuance of common stock (net of expenses) and proceeds from exercise of stock options, including related tax effect 7,177 7,187 Purchase of treasury stock (46,128) (102,886) Dividends paid (14,274) (14,547) Net cash used in financing activities (70,385) (95,324) Increase (decrease) in cash and equivalents 30,403 (1,041) Cash and equivalents at beginning of period 28,486 29,373 Cash and equivalents at end of period $58,889 $28,332 Supplemental disclosure of cash flow information: Cash paid for interest $11,385 $16,339 Cash paid for federal and state income taxes $1,387 $468
