FORT WAYNE, Ind., July 22 /PRNewswire-FirstCall/ -- Steel Dynamics, Inc. today announced a loss of $0.08 per diluted share for the second quarter of 2009. This was a narrower loss than was expected in mid-June due to a change in the company's estimated annual income tax rate, which reduced the second quarter net loss by $0.02 per diluted share. Net losses for the second quarter of 2009 were $16 million, compared to a net loss of $88 million, or $0.48 per diluted share, in the first quarter of 2009 and net income of $210 million, or $1.05 per diluted share, in the second quarter of 2008.
During June 2009, the company issued 31,050,000 shares of its common stock at a public offering price of $13.50 and issued $287.5 million of 5.125% convertible notes due 2014. Net proceeds of slightly more than $675 million were used to repay a term loan of $552 million and for other general purposes. During this time frame, the company also amended its senior secured credit agreement, obtaining greater financial covenant flexibility through 2010. There was no net impact to the second quarter's loss per diluted share due to these transactions, as the weighted average increase in outstanding shares was offset by certain related transaction expenses of approximately $3.5 million.
Net sales for the second quarter of 2009 were $792 million, 3 percent lower than net sales of $815 million in the first quarter 2009. Compared to the second quarter of 2008, net sales were down 67 percent due to much lower volume and lower selling values for steel and recycled metals. Steel shipments for the second quarter were 886,000 tons, 45 percent below second quarter 2008 shipments of 1.6 million tons. SDI's average steel selling price for the second quarter of 2009 declined $126 per ton, to $594 from $720 per ton in the first quarter. Average scrap cost per net ton charged decreased $79 compared to the first quarter. In metals recycling, OmniSource's ferrous metals shipments were 840,000 tons, down 44 percent from the second quarter of 2008, and nonferrous shipments were 170 million pounds, down 33 percent.
"In the second quarter, the company's steel operations produced operating income of $36 million, with overall capacity utilization improving to approximately 50 percent, despite continued low operating rates at the long-products divisions," said Keith Busse, Chairman and CEO. "The Structural and Rail Division operated at about 25 percent of current capacity. In spite of this depressed operating environment, the division achieved an operating profit for the quarter.
"We are very pleased to report that OmniSource generated operating income for the quarter, with May and June results offsetting April losses. The increase in demand for ferrous and nonferrous materials, coupled with stronger material flows and a reduced cost structure, position OmniSource to continue to improve performance in the second half of 2009. We believe OmniSource will be profitable for the full year.
"New Millennium Building Systems, our joist-and-deck fabricating operation, continues to face stiff headwinds as the non-residential building construction market remains very weak. This resulted in basically breakeven operations for the quarter. Joist-and-decking shipments of 35,000 tons were off 53 percent from the year-ago quarter.
"During the second quarter, we experienced a slight improvement in business conditions. Order entry picked up at the Flat Roll Division and at The Techs in early May and has continued to be strong, resulting in improved backlogs. It remains unclear whether this increase in business activity will persist, or will be short-lived, as we continue to see conflicting signs in the economy. While our flat-roll steel businesses are currently operating near capacity, we have seen only marginal improvement in long products. We have yet to see signs of improvement in the construction markets.
"Based on our assumptions that flat-roll demand will remain steady in the near term, recycled metals will continue to recover, and demand for long products will remain sluggish, we currently expect third quarter diluted earnings per share to be in the range of $0.10 to $0.20 for the third quarter. We will provide an update to this guidance in early September.
"Steel Dynamics remains poised to ramp up quickly to meet renewed demand for steel products when it occurs. Our employees demonstrated this responsiveness in June as our flat-roll and metals recycling operations quickly ramped up output in response to increased demand. I would like to salute all of our employees for their positive attitudes, as many continue to receive smaller paychecks due to shorter workweeks and lower production bonuses. They, as in the past, continue to do an excellent job in controlling costs as we all recognize the realities of the current business environment," Busse said.
In June Steel Dynamics relocated their corporate offices to a building obtained through the acquisition of OmniSource, and at which OmniSource continues to also maintain its central offices. Telephone and email contact information for Steel Dynamics corporate office employees remains unchanged.
Second Quarter 2009 Operating Segment Information
The following highlights second quarter 2009 results for each of SDI's three primary operating segments.
Steel Operations. Steel Operations achieved net sales of $526 million for the second quarter and represented 64 percent of the company's external sales. This segment includes five steel mills and related steel processing facilities, including The Techs. SDI's five steel mills produce a wide variety of flat-rolled and long steel products. The Techs galvanize steel sheet that is sourced primarily from third parties.
Second quarter 2009 Steel Operations shipments were 886,000 tons, of which 582,000 tons were flat-rolled shipments. Based on tons shipped, including steel shipments made by The Techs, flat-rolled products accounted for 66 percent of second quarter steel segment shipments, 11 percent was structural steel shipments, 7 percent was engineered bars, 10 percent was merchant bars, and 6 percent was Steel of West Virginia shipments. The second quarter operating profit for the steel segment was $36 million, or $41 per ton shipped, compared to an operating loss of $88 per ton in the first quarter. (Without the effect of the first quarter's lower of cost or market inventory adjustments, Steel Operations would have generated an operating profit of about $17 million, or $22 per ton, in the first quarter.) These figures exclude amortization related to the segment's intangible assets and certain non-allocated corporate overhead expenses, such as profit-sharing costs.
The second quarter's average selling price per ton for Steel Operations was $594, a decrease of $126 per ton from $720 in the first quarter of 2009 and a decrease of $417 per ton from the year-ago quarter. The average scrap cost per net ton charged decreased $79 compared to the first quarter.
Notable items for the second quarter include the completion, late in the quarter, of the second electric-arc-furnace upgrade at the Butler, Indiana, Flat Roll Mill. This brings the mill's total annual production capacity to 3 million tons. Also during the quarter, rail production increased at the Structural and Rail Division. In April, our rail-welding operation shipped its first rail-train of quarter-mile-long rail strings welded from 240-foot rail sections produced at the Columbia City mill. Separately, Dynamic Composites, a majority-owned facility at Columbia City (reported in the "All Other" business segment), shipped a major order for steel-core composite railroad ties. It then received a follow-on order for 25,000 ties from the BNSF Railway Co.
Metals Recycling and Ferrous Resources. This segment includes ferrous and non-ferrous metals recycling by OmniSource Corporation (processing and trading) and SDI's Iron Dynamics scrap-substitute operation that produces pig iron for use by the Flat Roll Division. The segment also includes expenses related to the Mesabi Nugget project, which currently is under construction.
The segment's net sales for second quarter 2009 were $309 million, and represented 30 percent of SDI's second quarter external sales. The operating income for this segment was $4 million, excluding amortization related to the segment's intangible assets and certain non-allocated corporate overhead expenses, such as profit-sharing costs. OmniSource achieved a $9 million operating profit for the quarter. The segment's overall pretax loss is attributable to losses at Iron Dynamics (related to lower market-based pig-iron prices) and to the expenses related to the Mesabi Nugget project as it nears expected start-up in November.
For the second quarter, total ferrous scrap shipments, including shipments to SDI's Steel Operations, were 840,000 tons, 44 percent lower than the year-ago-quarter (excluding Recycle South's second quarter 2008 shipments prior to its acquisition by OmniSource) and 15 percent higher than the first quarter of 2009. Non-ferrous scrap shipments for the second quarter of 2009 were 170 million pounds, 33 percent lower than the year-ago quarter and 11 percent lower than first quarter 2009 shipments.
During the second quarter, the company's scrap operations supplied 313,000 tons of ferrous scrap to SDI's Steel Operations, or approximately 54 percent of the tonnage of ferrous scrap purchased by our mills during the quarter.
Steel Fabrication Operations. Steel Fabrication Operations are the New Millennium Building Systems fabricating plants that produce joists, trusses, and steel deck used in the construction of non-residential buildings. Second quarter net sales were $37 million, or 5 percent of SDI's second quarter external sales. New Millennium reported a very small operating loss for the quarter. Second quarter shipments totaled 35,000 tons at an average selling price of $1,047 per ton. Second quarter shipments were 53 percent lower than the year-ago quarter, and 22 percent lower than the first quarter of 2009.
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, 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: the effects of prolonged or deepening recession on industrial demand; general or specific sector (i.e., automotive, consumer appliance or construction) economic conditions affecting steel consumption; the impact of price competition, whether domestic or the result of foreign imports; 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.
More specifically, 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, 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, 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 upon information and assumptions, concerning our businesses and the environments in which they operate, which we consider reasonable as of the date on which these statements are made. Due to the foregoing risks and uncertainties however, 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 Thursday, July 23, 2009, at 9:30 a.m. Eastern time, Steel Dynamics will host a conference call in which management will discuss second 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. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) Three Six Three Months Months Months Ended Ended Ended June 30, June 30, March 31, 2009 2008 2009 2008 2009 Net sales $792,158 $2,403,939 $1,606,808 $4,306,144 $814,650 Costs of goods sold 723,321 1,924,284 1,578,598 3,479,180 855,277 Gross profit (loss) 68,837 479,655 28,210 826,964 (40,627) Selling, general, and administrative expenses 48,559 85,766 105,879 150,631 57,320 Profit sharing - 26,897 (42) 45,404 (42) Amortization of intangible assets 13,994 8,120 29,692 19,650 15,698 Operating income (loss) 6,284 358,872 (107,319) 611,279 (113,603) Interest expense, net capitalized interest 37,043 35,475 73,294 65,282 36,251 Other (income) expense, net 786 (16,901) 38 (24,707) (748) Income (loss) before income taxes (31,545) 340,298 (180,651) 570,704 (149,106) Income taxes (15,024) 129,013 (74,356) 216,387 (59,332) Net income (loss) (16,521) 211,285 (106,295) 354,317 (89,774) Net income (loss) attributable to non-controlling interests (530) 791 (2,442) 1,266 (1,912) Net income (loss) attributable to Steel Dynamics, Inc. $(15,991) $210,494 $(103,853) $353,051 $(87,862) Basic earnings (loss) per share attributable to Steel Dynamics, Inc. stockholders $(.08) $1.11 $(.56) $1.86 $(.48) Weighted average common shares outstanding 189,848 190,351 185,924 189,695 182,000 Diluted earnings (loss) per share attributable to Steel Dynamics, Inc. stockholders, including the effect of assumed conversions when dilutive $(.08) $1.05 $(.56) $1.77 $(.48) Weighted average common shares and equivalents outstanding 189,848 200,345 185,924 199,831 182,000 Dividends declared per share $.075 $.10 $.175 $.20 $.10 Steel Dynamics, Inc. UNAUDITED SUPPLEMENTAL OPERATING INFORMATION (dollars in thousands / volume data in actual net tons, except non-ferrous data) Three Six Three Months Months Months Ended Ended Ended June 30, June 30, March 31, 2009 2008 2009 2008 2009 Steel Operations* Shipments Flat Roll Division 454,745 706,281 758,683 1,391,601 303,938 Structural and Rail Division 96,476 286,150 226,031 585,837 129,555 Engineered Bar Products Division 63,124 145,085 134,664 293,033 71,540 Roanoke Bar Division 89,112 136,582 165,722 287,950 76,610 Steel of West Virginia 54,959 80,334 98,083 156,058 43,124 The Techs 127,290 262,908 245,649 524,919 118,359 Combined 885,706 1,617,340 1,628,832 3,239,398 743,126 Intra- company (47,590) (124,128) (99,602) (254,813) (52,012) External 838,116 1,493,212 1,529,230 2,984,585 691,114 Production (excluding The Techs) 755,981 1,368,071 1,453,787 2,740,435 697,806 Net sales Combined $526,465 $1,635,559 1,061,649 $2,903,948 $535,184 Intra-company (19,572) (110,904) (49,714) (195,964) (30,142) External $506,893 $1,524,655 $1,011,935 $2,707,984 $505,042 Operating income (loss) before amortization of intangibles $36,131 $330,906 $(29,332) $571,241 $(65,463) Amortization of intangibles (3,432) (3,363) (6,883) (9,141) (3,451) Operating income (loss) $32,699 $327,543 $(36,215) $562,100 $(68,914) Metals Recycling and Ferrous Resources** Ferrous metals shipments Combined 840,199 1,506,902 1,570,068 2,898,284 729,869 Intra-company (313,023) (654,117) (527,776) (1,118,010) (214,753) External 527,176 852,785 1,042,292 1,780,274 515,116 Non-ferrous metals shipments (thousands of pounds) 169,784 254,147 360,178 492,935 190,394 Iron Dynamics shipments Liquid pig iron 44,392 52,342 85,618 97,785 41,226 Hot briquetted iron 1,483 10,947 21,809 30,689 20,326 Other 29 3,438 703 6,247 674 Intra- company 45,904 66,727 108,130 134,721 62,226 Net sales Combined $308,938 $1,160,950 $605,346 1,964,715 $296,408 Intra-company (68,540) (418,336) (127,242) (615,342) (58,702) External $240,398 $742,614 $478,104 $1,349,373 $237,706 Operating income (loss) before amortization of intangibles $3,585 $84,954 $(8,837) $137,747 $(12,422) Amortization of intangibles (10,472) (4,615) (22,516) (10,232) (12,044) Operating income (loss) $(6,887) $80,339 $(31,353) $127,515 $(24,466) Steel Fabrication*** Shipments Combined 35,369 76,018 80,647 144,624 45,278 Intra-company (210) (43) (225) (316) (15) External 35,159 75,975 80,422 144,308 45,263 Net sales Combined $37,026 $93,288 $97,833 $171,811 $60,807 Intra-company (556) (52) (578) (117) (22) External $36,470 $93,236 $97,255 $171,694 $60,785 Operating income (loss) before amortization of intangibles $(5) $4,444 $3,162 $8,171 $3,167 Amortization of intangibles (33) (83) (200) (166) (167) Operating income $(38) $4,361 $2,962 $8,005 $3,000 * Steel Operations include the company's five steelmaking divisions and The Techs three galvanizing plants. ** Metals Recycling and Ferrous Resources Operations include OmniSource and Recycle South metals recycling operations, as well as Iron Dynamics' (IDI) pig iron substitute production facility (all IDI shipments are consumed internally). Operating income (loss) also includes the expenses associated with the construction and start up of the company's Mesabi Nugget facilities. *** Steel Fabrication Operations include the company's joist and deck fabrication operations. Steel Dynamics, Inc. CONSOLIDATED BALANCE SHEETS (in thousands) June 30, December 31, 2009 2008 (unaudited) Assets Current assets Cash and equivalents $18,217 $16,233 Accounts receivable, net 364,736 502,932 Inventories 738,470 1,023,235 Deferred income taxes 32,179 23,562 Income taxes receivable 125,912 86,321 Other current assets 22,017 57,632 Total current assets 1,301,531 1,709,915 Property, plant and equipment, net 2,144,360 2,072,857 Restricted cash 13,932 18,515 Intangible assets, net 557,194 614,786 Goodwill 780,321 770,438 Other assets 84,474 67,066 Total assets $4,881,812 $5,253,577 Liabilities and Stockholders' Equity Current liabilities Accounts payable $227,446 $263,393 Income taxes payable 2,702 4,107 Accrued expenses 143,136 209,697 Accrued profit sharing 56 62,561 Senior secured revolving credit facility, matures 2012 114,000 366,000 Current maturities of long-term debt 1,049 65,223 Total current liabilities 488,389 970,981 Long-term debt Senior secured term A loan - 503,800 7 3/8% senior notes, due 2012 700,000 700,000 5.125% convertible senior notes, due 2014 287,500 - 6 3/4% senior notes, due 2015 500,000 500,000 7 3/4% senior notes, due 2016 500,000 500,000 Other long-term debt 42,392 15,361 Total long-term debt 2,029,892 2,219,161 Deferred income taxes 371,953 365,496 Other liabilities 67,095 65,626 Commitments and contingencies Stockholders' equity Common stock 626 545 Treasury stock, at cost (730,862) (737,319) Additional paid-in capital 958,558 541,686 Other accumulated comprehensive loss - (1,411) Retained earnings 1,682,208 1,820,385 Total Steel Dynamics, Inc. stockholders' equity 1,910,530 1,623,886 Non-controlling interests 13,953 8,427 Total stockholders' equity 1,924,483 1,632,313 Total liabilities and stockholders' equity $4,881,812 $5,253,577 Steel Dynamics, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) Three Months Six Months Ended Ended June 30, June 30, 2009 2008 2009 2008 Operating activities: Net income (loss) attributable to Steel Dynamics, Inc. $(15,991) $210,494 $(103,853) $353,051 Adjustments to reconcile net income (loss) attributable to Steel Dynamics, Inc. to net cash provided by operating activities: Depreciation and amortization 57,765 47,582 114,728 100,794 Equity-based compensation 3,313 2,754 11,892 6,683 Deferred income taxes 5,797 57,038 13,492 56,065 Non-controlling interests (530) 792 (2,442) 1,267 Changes in certain assets and liabilities: Accounts receivable (5,297) (211,411) 135,796 (397,204) Inventories 95,296 (227,270) 288,393 (217,695) Accounts payable (13,793) 249,665 (47,847) 364,180 Income taxes payable 2,702 (34,751) (1,405) 37,857 Other working capital (57,596) (39,602) (122,393) (36,111) Net cash provided by operating activities 71,666 55,291 286,361 268,887 Investing activities: Purchase of property, plant and equipment (73,166) (101,225) (147,504) (194,989) Acquisition of businesses, net of cash acquired - (271,247) - (271,158) Purchase of securities - - - (20,373) Other investing activities (7,290) 2,913 (10,513) 4,153 Net cash used in investing activities (80,456) (369,559) (158,017) (482,367) Financing activities: Issuance of current and long-term debt 471,685 786,900 708,744 1,004,900 Repayment of current and long-term debt (841,781) (401,941) (1,200,447) (635,155) Debt issuance costs (13,298) (5,568) (13,751) (7,514) Issuance of common stock (net of expenses) and proceeds from exercise of stock options, including related tax effect 412,547 10,277 410,489 17,454 Purchase of treasury stock - - - (46,128) Contribution from non-controlling investor - - 5,000 - Dividends paid (18,213) (18,884) (36,395) (33,158) Net cash provided by (used in) financing activities 10,940 370,784 (126,360) 300,399 Increase in cash and equivalents 2,150 56,516 1,984 86,919 Cash and equivalents at beginning of period 16,067 58,889 16,233 28,486 Cash and equivalents at end of period $18,217 $115,405 $18,217 $115,405 Supplemental disclosure of cash flow information: Cash paid for interest $67,450 $57,334 $79,433 $68,719 Cash paid for federal and state income taxes, net of refunds $1,656 $160,522 $(53,774) $161,909
Steel Dynamics, Inc.
CONTACT: Fred Warner, Investor Relations Manager, +1-260-969-3564, fax
+1-260-969-3590, f.warner@steeldynamics.com
Web Site: http://www.steeldynamics.com/
