Exhibit 99.1
Press Release | | 
|
| | 6714 Pointe Inverness Way, Suite 200 |
April 22, 2009 | | Fort Wayne, IN 46804-7932 |
| | 260.459.3553 Phone |
| | 260.969.3590 Fax |
| | www.steeldynamics.com |
Steel Dynamics Reports First Quarter 2009 Results
FORT WAYNE, INDIANA, April 22, 2009— Steel Dynamics, Inc. (NASDAQ-GS: STLD) today announced a first quarter 2009 loss of $88 million, or $0.48 per diluted share, compared to net income of $143 million in the first quarter of 2008. Net sales for the quarter were $815 million, 57 percent lower than the first quarter of 2008. Compared to the fourth quarter of 2008, net sales were down 33 percent from $1.2 billion.
The most significant component of our first quarter loss was a non-cash adjustment to raw-materials inventory values due principally to lower selling values for flat rolled steel. A charge of $83 million, or $0.27 per diluted share, related to both flat-roll and long-products steel operations, exceeded an earlier estimate of $70 million as a result of the continued weakening in steel prices during March. The company also recorded an additional amortization charge of approximately $5 million, related to the final valuation of the Recycle South acquisition. Excluding these adjustments, the first quarter loss would have been approximately $0.19 per diluted share, within the range forecast in March.
“The first quarter was obviously not a strong quarter for any of our operating units,” said Keith Busse, Chairman and CEO, “During the first quarter our steel mills operated at 46 percent of capacity, ferrous metals recycling at about 42 percent of processing capacity, and fabricating operations at about 45 percent. Unfortunately, we have still not seen clear signs of increasing demand, as our orders remain relatively steady month-to-month at these reduced rates.
“Our employees, who are now earning less because of shorter workweeks and lower production bonuses, have done an excellent job of controlling costs as we all recognize the realities of the current business environment. We continue to focus on actions to reduce costs, including options to delay capital spending and related expenses.
“The valuation adjustments to our scrap inventory at the end of the first quarter, principally at the Flat Roll Division, to current market prices positions us for improved profit margins for flat-roll steel shipments in the second quarter. On the long products side, profit margins remain healthy, but could contract somewhat in the second quarter because of lower selling values. In all of our operations, the key challenge in the coming quarters will be to increase throughput.”
The first quarter’s operating loss, inclusive of the $83-million inventory adjustment, was predominantly in steel operations. Without the inventory valuation adjustment, steel operations would have shown an operating profit of approximately $17 million, or $22 per ton shipped. The major factors impacting the quarter’s operational results were the continued deterioration in steel shipping volumes and the consumption of scrap valued at levels much higher than current market prices. First quarter steel shipments of 743,000 tons were 54 percent lower than first quarter 2008 shipments of 1.6 million tons, and were 21 percent lower than fourth quarter 2008 shipments of 942,000 tons. In addition, our average steel selling price declined $193 per ton, down to $720 in the first quarter from $913 in the fourth quarter of 2008.
In metals recycling, ferrous volumes continued to decline while nonferrous rebounded slightly. Ferrous shipments were 730,000 net tons, down 48 percent from the first quarter of 2008, and down 19 percent from the fourth quarter of 2008. Nonferrous shipments of 190 million pounds were down 20 percent compared to the first quarter of 2008, but they increased 7 percent from 177 million pounds in the fourth quarter of 2008.
During the first quarter, the company continued to increase its available liquidity largely through reductions in working capital and by cash generated from operations. Correspondingly, this allowed us to reduce outstanding debt obligations by $136 million. At March 31, 2009, the company had available funds of over $625 million. In light of the current economic environment, the company continuously monitors its capital investment plans, including those projects currently in process, and if necessary, will delay these projects to retain sufficient availability of cash resources.
“Second quarter results should improve from the first quarter, ranging from a small profit to a small loss,” Busse said. “As clarity for the quarter improves, we expect to provide quantitative guidance. In the second half of 2009, we should be profitable, inclusive of and factoring in lackluster demand throughout the year.
“As we have stated in the past, Steel Dynamics is poised to ramp up quickly as the economy recovers to meet renewed demand for our steel products and recycled metals, and we are poised to resume the company’s profitable growth.”
First Quarter 2009 Operating Segment Information
The following highlights first quarter 2009 results for each of SDI’s three primary operating segments.
Steel Operations. Steel Operations remain SDI’s largest segment, representing 59 percent of the company’s first quarter net sales. This segment includes five steel mills and related steel processing facilities, such as 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. Value-added steel finishing processes and testing are performed at our six finishing operations.
First quarter 2009 Steel Operations shipments were 743,000 tons on net sales of $535 million. Based on tons shipped, including steel shipments made by The Techs, flat-rolled products accounted for 57 percent of first quarter steel segment shipments, 17 percent was structural steel shipments, 10 percent was engineered bars, 10 percent was merchant bars, and 6 percent was Steel of West Virginia shipments. The first quarter operating loss for the steel segment was $66 million, or $88 per ton shipped, compared to operating income of $3 per ton in the fourth quarter. Without the effect of inventory adjustments, Steel Operations would have generated an operating profit of about $17 million, or $22 per ton. These figures exclude amortization related to the segment’s intangible assets and certain non-allocated corporate overhead expenses, such as profit-sharing costs.
The first quarter’s average selling price per ton for Steel Operations was $720, a decrease of $193 per ton from $913 in the fourth quarter of 2008 and a decrease of $62 per ton from the year-ago quarter. The average scrap cost per net ton charged decreased $78 compared to the fourth quarter. “This data speaks volumes about the cost reductions achieved in recent quarters,” Busse said.
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 first quarter 2009 were $296 million, representing 33 percent of SDI’s first quarter net sales. The operating loss for this segment was $12 million, excluding amortization related to the segment’s intangible assets and certain non-allocated corporate overhead expenses, such as profit-sharing costs.
For the first quarter, total ferrous scrap shipments, including shipments to SDI’s Steel Operations, were 730,000 tons, 48 percent lower than the year-ago-quarter (excluding Recycle South’s first quarter 2008 shipments prior to its acquisition by OmniSource) and 19 percent lower than the fourth quarter of 2008. Non-ferrous scrap shipments for the first quarter of 2009 were 190 million pounds, 20 percent lower than the year-ago quarter and 7 percent higher than fourth quarter 2008 shipments.
During the first quarter, the company’s scrap operations supplied 247,000 tons of ferrous scrap to SDI’s Steel Operations, or approximately 37 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. First quarter net sales were $61 million, or 7 percent of SDI’s first quarter net sales. Operating income for this segment was $3 million, or $70 per ton shipped, excluding amortization related to the segment’s intangible assets and certain non-allocated corporate overhead expenses, such as profit-sharing costs. Operating income in this segment has been steady despite dismal commercial construction activity. First quarter shipments totaled 45,000 tons at an average selling price of $1,343 per ton. First quarter shipments were 34 percent lower than the year-ago quarter, and 29 percent lower than the fourth quarter of 2008.
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, www.sec.gov, and on the Steel Dynamics Web site, 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 Thursday, April 23, 2009, at 9:30 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:
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.
Contact: Fred Warner, Investor Relations Manager, (260) 969-3564 or fax (260) 969-3590
f.warner@steeldynamics.com
Steel Dynamics, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
| | Three Months Ended | | Three Months Ended | |
| | March 31, | | December 31, | |
| | 2009 | | 2008 | | 2008 | |
| | | | | | | |
Net sales | | $ | 814,650 | | $ | 1,902,205 | | $ | 1,210,434 | |
Costs of goods sold | | 855,277 | | 1,554,896 | | 1,251,344 | |
Gross profit (loss) | | (40,627 | ) | 347,309 | | (40,910 | ) |
| | | | | | | |
Selling, general, and administrative expenses | | 57,320 | | 64,865 | | 51,370 | |
Profit sharing | | (42 | ) | 18,507 | | (9,207 | ) |
Amortization of intangible assets | | 15,698 | | 11,530 | | 10,919 | |
Operating income (loss) | | (113,603 | ) | 252,407 | | (93,992 | ) |
| | | | | | | |
Interest expense, net capitalized interest | | 36,251 | | 29,807 | | 41,845 | |
Other (income) expense, net | | (748 | ) | (7,806 | ) | (99 | ) |
Income (loss) before income taxes | | (149,106 | ) | 230,406 | | (135,738 | ) |
| | | | | | | |
Income taxes | | (59,332 | ) | 87,374 | | (50,029 | ) |
Net income (loss) | | (89,774 | ) | 143,032 | | (85,709 | ) |
Net income (loss) attributable to non-controlling interest | | (1,912 | ) | 475 | | (3,036 | ) |
Net income (loss) attributable to Steel Dynamics, Inc. | | $ | (87,862 | ) | $ | 142,557 | | $ | (82,673 | ) |
| | | | | | | |
Basic earnings (loss) per share attributable to Steel Dynamics, Inc. shareholders | | $ | (.48 | ) | $ | .75 | | $ | (.45 | ) |
| | | | | | | |
Weighted average common shares outstanding | | 182,000 | | 189,039 | | 181,825 | |
| | | | | | | |
Diluted earnings (loss) per share attributable to Steel Dynamics, Inc. shareholders, including the Effect of assumed conversions when dilutive | | $ | (.48 | ) | $ | .72 | | $ | (.45 | ) |
| | | | | | | |
Weighted average common shares and equivalents outstanding | | 182,000 | | 199,317 | | 181,825 | |
| | | | | | | |
Dividends declared per share | | $ | .10 | | $ | .10 | | $ | .10 | |
Steel Dynamics, Inc.
UNAUDITED SUPPLEMENTAL OPERATING INFORMATION
(dollars in thousands / volume data in actual net tons, except non-ferrous data)
| | Three Months Ended | | Three Months Ended | |
| | March 31, | | December 31, | |
| | 2009 | | 2008 | | 2008 | |
Steel Operations* | | | | | | | |
Shipments | | | | | | | |
Flat Roll Division | | 303,938 | | 685,320 | | 361,145 | |
Structural and Rail Division | | 129,555 | | 299,687 | | 228,132 | |
Engineered Bar Products Division | | 71,540 | | 147,948 | | 123,449 | |
Roanoke Bar Division | | 76,610 | | 151,368 | | 94,374 | |
Steel of West Virginia | | 43,124 | | 75,724 | | 45,788 | |
The Techs | | 118,359 | | 262,011 | | 89,551 | |
Combined | | 743,126 | | 1,622,058 | | 942,439 | |
Intra-company | | (52,012 | ) | (130,685 | ) | (51,803 | ) |
External | | 691,114 | | 1,491,373 | | 890,636 | |
| | | | | | | |
Production (excluding The Techs) | | 697,806 | | 1,372,364 | | 760,307 | |
| | | | | | | |
Net sales | | | | | | | |
Combined | | $ | 535,184 | | $ | 1,268,389 | | $ | 860,242 | |
Intra-company | | (30,142 | ) | (85,060 | ) | (38,189 | ) |
External | | $ | 505,042 | | $ | 1,183,329 | | $ | 822,053 | |
| | | | | | | |
Operating income (loss) before amortization of intangibles | | $ | (65,486 | ) | $ | 240,342 | | $ | 3,164 | |
Amortization of intangibles | | (3,428 | ) | (5,785 | ) | (3,428 | ) |
Operating income (loss) | | $ | (68,914 | ) | $ | 234,557 | | $ | (264 | ) |
| | | | | | | |
Metals Recycling and Ferrous Resources** | | | | | | | |
Ferrous metals shipments | | | | | | | |
Combined | | 729,869 | | 1,391,382 | | 897,922 | |
Intra-company | | (246,728 | ) | (463,893 | ) | (438,532 | ) |
External | | 483,141 | | 927,489 | | 459,390 | |
| | | | | | | |
Non-ferrous metals shipments (thousands of pounds) | | 190,394 | | 238,788 | | 177,246 | |
Iron Dynamics shipments | | | | | | | |
Liquid pig iron | | 41,226 | | 45,443 | | 21,171 | |
Hot briquetted iron | | 20,326 | | 19,741 | | 27,005 | |
Other | | 674 | | 2,809 | | 3,834 | |
Intra-company | | 62,226 | | 67,993 | | 52,010 | |
| | | | | | | |
Net sales | | | | | | | |
Combined | | $ | 296,408 | | $ | 803,765 | | $ | 388,858 | |
Intra-company | | (58,702 | ) | (197,005 | ) | (123,080 | ) |
External | | $ | 237,706 | | $ | 606,760 | | $ | 265,778 | |
| | | | | | | |
Operating income (loss) before amortization of intangibles | | $ | (12,422 | ) | $ | 52,778 | | $ | (118,603 | ) |
Amortization of intangibles | | (12,044 | ) | (5,602 | ) | (7,214 | ) |
Operating income (loss) | | $ | (24,466 | ) | $ | 47,176 | | $ | (125,817 | ) |
| | | | | | | |
Steel Fabrication*** | | | | | | | |
Shipments | | | | | | | |
Combined | | 45,278 | | 68,606 | | 63,783 | |
Intra-company | | (15 | ) | (273 | ) | (101 | ) |
External | | 45,263 | | 68,333 | | 63,682 | |
| | | | | | | |
Net sales | | | | | | | |
Combined | | $ | 60,807 | | $ | 78,522 | | $ | 93,195 | |
Intra-company | | (22 | ) | (66 | ) | (221 | ) |
External | | $ | 60,785 | | $ | 78,456 | | $ | 92,974 | |
| | | | | | | |
Operating income before amortization of intangibles | | $ | 3,167 | | $ | 3,727 | | $ | 5,368 | |
Amortization of intangibles | | (167 | ) | (83 | ) | (217 | ) |
Operating income | | $ | 3,000 | | $ | 3,644 | | $ | 5,151 | |
* | 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)
| | March 31,
2009 | | December 31,
2008 | |
| | (unaudited) | | | |
Assets | | | | | |
Current assets | | | | | |
Cash and equivalents | | $ | 16,067 | | $ | 16,233 | |
Accounts receivable, net | | 361,839 | | 502,932 | |
Inventories, net | | 833,074 | | 1,023,235 | |
Deferred income taxes | | 26,631 | | 23,562 | |
Tax refunds receivable | | 93,475 | | 86,321 | |
Other current assets | | 35,725 | | 57,632 | |
Total current assets | | 1,366,811 | | 1,709,915 | |
| | | | | |
Property, plant and equipment, net | | 2,108,657 | | 2,072,857 | |
| | | | | |
Restricted cash | | 16,217 | | 18,515 | |
| | | | | |
Intangible assets, net | | 551,489 | | 614,786 | |
| | | | | |
Goodwill | | 812,161 | | 770,438 | |
| | | | | |
Other assets | | 70,744 | | 67,066 | |
Total assets | | $ | 4,926,079 | | $ | 5,253,577 | |
| | | | | |
Liabilities and Stockholders’ Equity | | | | | |
Current liabilities | | | | | |
Accounts payable | | $ | 243,914 | | $ | 263,393 | |
Income taxes payable | | — | | 4,107 | |
Accrued expenses | | 189,230 | | 209,697 | |
Accrued profit sharing | | 56 | | 62,561 | |
Senior secured revolving credit facility, matures 2012 | | 231,000 | | 366,000 | |
Other current maturities of long-term debt | | 65,450 | | 65,223 | |
Total current liabilities | | 729,650 | | 970,981 | |
| | | | | |
Long-term debt | | | | | |
Senior secured term A loan | | 487,700 | | 503,800 | |
7 3/8% senior notes, due 2012 | | 700,000 | | 700,000 | |
6 ¾% senior notes, due 2015 | | 500,000 | | 500,000 | |
7 ¾% senior notes, due 2016 | | 500,000 | | 500,000 | |
Other long-term debt | | 30,314 | | 15,361 | |
Total long-term debt | | 2,218,014 | | 2,219,161 | |
| | | | | |
Deferred income taxes | | 373,712 | | 365,496 | |
| | | | | |
Other liabilities | | 65,759 | | 65,626 | |
| | | | | |
Commitments and contingencies | | | | | |
| | | | | |
Stockholders’ equity | | | | | |
Common stock | | 545 | | 545 | |
Treasury stock, at cost | | (734,083 | ) | (737,319 | ) |
Additional paid-in capital | | 544,971 | | 541,686 | |
Other accumulated comprehensive loss | | (1,073 | ) | (1,411 | ) |
Retained earnings | | 1,714,310 | | 1,820,385 | |
Total Steel Dynamics, Inc. stockholders’ equity | | 1,524,670 | | 1,623,886 | |
Non-controlling interest | | 14,274 | | 8,427 | |
Total stockholders’ equity | | 1,538,944 | | 1,632,313 | |
Total liabilities and stockholders’ equity | | $ | 4,926,079 | | $ | 5,253,577 | |
Steel Dynamics, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
| | Three Months Ended | |
| | March 31, | |
| | 2009 | | 2008 | |
| | | | | |
Operating activities | | | | | |
Net income (loss) attributable to Steel Dynamics, Inc. | | $ | (87,862 | ) | $ | 142,557 | |
| | | | | |
Adjustments to reconcile net income (loss) attributable to Steel Dynamics, Inc. to net cash provided by operating activities: | | | | | |
Depreciation and amortization | | 56,963 | | 53,212 | |
Equity-based compensation | | 5,343 | | 3,929 | |
Deferred income taxes | | 7,695 | | (973 | ) |
Non-controlling interest | | (1,912 | ) | 475 | |
Changes in certain assets and liabilities: | | | | | |
Accounts receivable | | 141,093 | | (185,793 | ) |
Inventories | | 193,097 | | 9,575 | |
Accounts payable | | (34,054 | ) | 114,515 | |
Income taxes payable | | (4,107 | ) | 72,608 | |
Other working capital | | (61,839 | ) | 3,491 | |
Net cash provided by operating activities | | 214,417 | | 213,596 | |
| | | | | |
Investing activities | | | | | |
Purchases of property, plant and equipment | | (74,338 | ) | (93,764 | ) |
Purchases of securities | | — | | (20,373 | ) |
Other investing activities | | (3,223 | ) | 1,329 | |
Net cash used in investing activities | | (77,561 | ) | (112,808 | ) |
| | | | | |
Financing activities | | | | | |
Issuance of current and long-term debt | | 237,059 | | 218,000 | |
Repayment of current and long-term debt | | (358,666 | ) | (233,214 | ) |
Debt issuance costs | | (453 | ) | (1,946 | ) |
Issuance of common stock (net of expenses) and proceeds from exercise of stock options, including related tax effect | | (1,780 | ) | 7,177 | |
Purchase of treasury stock | | — | | (46,128 | ) |
Contribution from non-controlling investor | | 5,000 | | — | |
Dividends paid | | (18,182 | ) | (14,274 | ) |
Net cash used in financing activities | | (137,022 | ) | (70,385 | ) |
| | | | | |
Increase (decrease) in cash and equivalents | | (166 | ) | 30,403 | |
Cash and equivalents at beginning of period | | 16,233 | | 28,486 | |
Cash and equivalents at end of period | | $ | 16,067 | | $ | 58,889 | |
| | | | | |
Supplemental disclosure information | | | | | |
Cash paid for interest | | $ | 11,984 | | $ | 11,385 | |
Cash paid (refunded) for federal and state income taxes | | $ | (55,430 | ) | $ | 1,387 | |
