Steel Dynamics (STLD) 8-K Steel Dynamics Reports Record Third Quarter 2018 Financial Results

Exhibit 99.1

Press Release
October 17, 2018

7575 W. Jefferson Blvd.

Fort Wayne, IN  46804

Steel Dynamics Reports Record Third Quarter 2018 Financial Results

FORT WAYNE, INDIANA, October 17, 2018 / PRNewswire / Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced third quarter 2018 financial results.  The company reported third quarter 2018 net sales of $3.2 billion and net income of $398 million, or $1.69 per diluted share, which includes charges of approximately $13 million (pretax), or $0.04 per diluted share, related to fair value purchase accounting adjustments associated with the recent Heartland acquisition, and a tax benefit of $10 million, or $0.04 per diluted share, associated with a change in tax accounting methodology.  Excluding these items, the company’s third quarter 2018 adjusted net income was $397 million, or $1.69 per diluted share.

Comparatively, prior year third quarter net sales were $2.4 billion, with net income of $153 million, or $0.64 per diluted share, which included debt refinancing and repayment charges of $0.02 per diluted share, and sequential second quarter 2018 net sales were $3.1 billion, with net income of $362 million, or $1.53 per diluted share.

“The team delivered a tremendous third quarter performance, once again attaining numerous operational and financial milestones,” said Mark D. Millett, President and Chief Executive Officer.  “Our third quarter 2018 income from operations of $532 million and adjusted EBITDA of $626 million were both record highs for the company.  Our strong financial performance was the result of record steel shipments, average steel selling price improvement, and resulting metal spread expansion across our steel operations.  Underlying domestic steel demand remained strong.  There was some temporary hesitancy in flat roll order activity based on customer sentiment and increased hot roll coil import levels. However, demand from major steel consuming sectors was steady, including construction, automotive, and energy.

“Earnings from our metals recycling platform declined in the quarter primarily as a result of our nonferrous operations, as shipments and commodity prices declined.  In addition, China’s decision to ban certain grades of recycled material has had a negative impact on nonferrous sales volume.

“Our steel fabrication platform achieved record shipments in the quarter, as nonresidential construction demand remained strong and customer sentiment positive.  The order backlog remained at near record highs entering October. Despite the positive demand environment, earnings from our steel fabrication operations slightly decreased by the continued rise in average steel input costs,” said Millett.

The company generated record quarterly cash flow from operations of $420 million during the third quarter 2018. As evidence of the confidence in the company’s outlook and sustainable long-term cash flow generation capability, the board of directors authorized an additional $750 million share repurchase program in September, following the completion of its $450 million authorization in August 2018.

Third Quarter 2018 Comments

Third quarter 2018 operating income for the company’s steel operations increased seven percent sequentially to a record $577 million, based on metal spread expansion across the platform, as average steel product pricing increased more than consumed raw material scrap costs.  The third quarter 2018 average product selling price for the company’s steel operations increased $56 to $988 per ton.  The average ferrous scrap cost per ton melted increased $4 to $352 per ton.

Third quarter 2018 operating income attributable to the company’s flat roll steel operations increased five percent sequentially, driven by metal spread expansion related to continued strong underlying demand and higher average selling values.  Operating income from the company’s long product steel operations increased 17 percent, as a result of higher average selling values and metal spread expansion.

Third quarter 2018 operating income from the company’s metals recycling operations was $18 million, compared to $26 million in the sequential second quarter.  Ferrous shipments decreased slightly and metal spread remained steady.  The primary driver for lower earnings was a nine percent decline in nonferrous shipments and a five percent decrease in associated metal spread, as commodity pricing fell in the quarter.

The company’s fabrication operations recorded third quarter 2018 operating income of $13 million, compared to sequential second quarter results of $14 million, as record high shipments and improved average selling values were offset by continued higher average steel input costs.

Year-to-Date September 30, 2018 Comparison

For the nine months ended September 30, 2018, net income was $988 million, or $4.17 per diluted share, with net sales of $8.9 billion, as compared to net income of $508 million, or $2.09 per diluted share, with net sales of $7.2 billion for the same period in 2017.  Year-to-date 2018 net sales increased across all operating platforms, with the 24 percent improvement driven by higher average steel product pricing and record steel shipments.  Year-to-date 2018 operating income increased 56 percent to a first nine month record of $1.4 billion, based on improved earnings from the company’s steel operations. The average year-to-date selling price for the company’s steel operations increased $149 to $916 per ton.  The average year-to-date ferrous scrap cost per ton melted increased $49 to $340 per ton.

During the nine months ended September 30, 2018, the company generated strong cash flow from operations of $924 million and maintained liquidity of $2.2 billion at September 30, 2018.  The company also repurchased $193 million of its common stock during the first nine months of 2018.

Outlook

“We remain confident that macroeconomic and market conditions are in place to benefit domestic steel consumption in 2019,” said Millett.  “Based on strong domestic steel demand fundamentals and customer optimism, we believe steel consumption will continue to be strong.  In combination with our expansion initiatives, we believe there are firm drivers for our continued growth.  We are excited about the potential benefits that the recent Heartland acquisition brings to us.  Integration of Heartland is going well, and the teams are on track to achieve our expectation to reach an annual run-rate of between 800,000 tons and 900,000 tons by mid-year 2019.

“We continue to strengthen our financial position through strong cash flow generation and the execution of our long-term strategy. We are well-positioned for growth, and remain focused on delivering shareholder value through organic and transactional growth opportunities,” concluded Millett.

Conference Call and Webcast

Steel Dynamics, Inc. will hold a conference call to discuss third quarter 2018 operating and financial results on Thursday, October 18, 2018, at 10:00 a.m. Eastern Time.  You may access the call and find dial-in information on the Investors section of the company’s website at www.steeldynamics.com.  A replay of the call will be available on our website until 11:59 p.m. Eastern Time on October 23, 2018.

About Steel Dynamics, Inc.

Steel Dynamics 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 facilities located throughout the United States, and in Mexico.  Steel Dynamics produces steel products, including hot roll, cold roll, and coated sheet steel, structural steel beams and shapes, rail, engineered special-bar-quality steel, cold finished steel, merchant bar products, specialty steel sections and steel joists and deck.  In addition, the company produces liquid pig iron and processes and sells ferrous and nonferrous scrap.

Note Regarding Non-GAAP Financial Measures

The company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). Management believes that Adjusted Net Income, Adjusted Diluted Earnings Per Share, EBITDA and Adjusted EBITDA, non-GAAP financial measures, provide additional meaningful information regarding the company’s performance and financial strength. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the company’s reported results prepared in accordance with GAAP.  In addition, because not all companies use identical calculations, EBITDA and Adjusted EBITDA included in this release may not be comparable to similarly titled measures of other companies.

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’ revenues, costs of purchased materials, future profitability and earnings, and the operation of new or existing facilities. These statements, which we generally precede or accompany by such typical conditional words as “anticipate”, “intend”, “believe”, “estimate”, “plan”, “seek”, “project”, or “expect”, or by the words “may”, “will”, or “should”, 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 uncertain economic conditions; (2) cyclical and changing industrial demand; (3) changes in conditions in any of the steel or scrap-consuming sectors of the economy which affect demand for our products, including the strength of the non-residential and residential construction, automotive, manufacturing, appliance, pipe and tube, and other steel-consuming industries; (4) fluctuation in the cost of key raw materials and supplies (including steel scrap, iron units, and energy costs) and our ability to pass on any cost increases; (5) the impact of domestic and foreign import price competition; (6) unanticipated difficulties in integrating or starting up new or acquired businesses; (7) risks and uncertainties involving product and/or technology development; and (8) occurrences of unexpected plant outages or equipment failures.

More specifically, we refer you to Steel Dynamics’ 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 under the headings Special Note Regarding Forward-Looking Statements and Risk Factors, 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: Investors: SEC Filings.

Contact:  Tricia Meyers, Investor Relations Manager— +1.260.969.3500

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)

	Three Months Ended					Nine Months Ended						Three Months
	September 30,					September 30,						Ended
	2018			2017		2018			2017			June 30, 2018
Net sales	$	3,223,547		$	2,443,382	$	8,917,947		$	7,202,318		$	3,090,525
Costs of goods sold	2,537,466			2,046,864		7,116,368			5,941,128			2,438,443
Gross profit	686,081			396,518		1,801,579			1,261,190			652,082
Selling, general and administrative expenses	102,614			97,056		310,076			298,422			101,031
Profit sharing	45,304			21,175		114,301			69,714			42,335
Amortization of intangible assets	6,591			7,272		20,346			22,120			6,829
Operating income	531,572			271,015		1,356,856			870,934			501,887
Interest expense, net of capitalized interest	31,560			34,177		94,968			102,019			31,512
Other expense (income), net	(7,103		)	2,526		(16,601		)	(4,968		)	(5,035		)
Income before income taxes	507,115			234,312		1,278,489			773,883			475,410
Income tax expense	109,209			83,300		292,536			271,258			112,838
Net income	397,906			151,012		985,953			502,625			362,572
Net (income) loss attributable to noncontrolling interests	469			2,246		2,422			5,383			(123		)
Net income attributable to Steel Dynamics, Inc.	$	398,375		$	153,258	$	988,375		$	508,008		$	362,449
Basic earnings per share attributable to Steel Dynamics, Inc. stockholders	$	1.70		$	0.64	$	4.20		$	2.11		$	1.54
Weighted average common shares outstanding	234,208			239,066		235,483			241,117			235,617
Diluted earnings per share attributable to Steel Dynamics, Inc. stockholders, including the effect of assumed conversions when dilutive	$	1.69		$	0.64	$	4.17		$	2.09		$	1.53
Weighted average common shares and share equivalents outstanding	235,649			240,880		236,772			242,816			236,945
Dividends declared per share	$	0.1875		$	0.1550	$	0.5625		$	0.4650		$	0.1875

Steel Dynamics, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)

	September 30,			December 31,
	2018			2017
	(unaudited)
Assets
Current assets
Cash and equivalents	$	884,315		$	1,028,649
Short term investments	115,000			—
Accounts receivable, net	1,228,190			868,837
Inventories	1,853,862			1,519,347
Other current assets	50,110			91,509
Total current assets	4,131,477			3,508,342
Property, plant and equipment, net	2,901,658			2,675,904
Intangible assets, net	236,563			256,909
Goodwill	502,900			386,893
Other assets	25,770			27,684
Total assets	$	7,798,368		$	6,855,732
Liabilities and Equity
Current liabilities
Accounts payable	$	611,028		$	489,448
Income taxes payable	10,872			3,696
Accrued expenses	412,989			346,580
Current maturities of long-term debt	14,776			28,795
Total current liabilities	1,049,665			868,519
Long-term debt	2,351,979			2,353,145
Deferred income taxes	398,814			305,949
Other liabilities	11,833			21,811
Total liabilities	3,812,291			3,549,424
Commitments and contingencies
Redeemable noncontrolling interests	111,240			111,240
Equity
Common stock	644			644
Treasury stock, at cost	(854,052		)	(665,297		)
Additional paid-in capital	1,156,556			1,141,534
Retained earnings	3,730,662			2,874,693
Accumulated other comprehensive loss	(42		)	—
Total Steel Dynamics, Inc. equity	4,033,768			3,351,574
Noncontrolling interests	(158,931		)	(156,506		)
Total equity	3,874,837			3,195,068
Total liabilities and equity	$	7,798,368		$	6,855,732

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Operating activities:
Net income	$	397,906		$	151,012		$	985,953		$	502,625
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization	81,383			75,210			236,638			224,068
Equity-based compensation	7,978			6,875			28,860			24,558
Deferred income taxes	23,899			3,284			45,437			17,849
Other adjustments	312			8,202			197			8,055
Changes in certain assets and liabilities:
Accounts receivable	(48,024		)	(36,123		)	(330,307		)	(193,233		)
Inventories	(69,885		)	(67,285		)	(240,908		)	(211,726		)
Other assets	(6,429		)	(9,528		)	(7,164		)	(2,014		)
Accounts payable	(14,883		)	44,887			100,368			133,251
Income taxes receivable/payable	(31,127		)	(12,929		)	55,414			5,803
Accrued expenses	79,310			62,249			49,920			38,058
Net cash provided by operating activities	420,440			225,854			924,408			547,294
Investing activities:
Purchases of property, plant and equipment	(70,668		)	(42,795		)	(176,477		)	(127,746		)
Purchases of short term investments	(35,000		)	—			(125,000		)	—
Proceeds from maturities of short term investments	10,000			—			10,000			—
Acquisition of business, net of cash and restricted cash acquired	(37,589		)	(5,518		)	(433,998		)	(5,518		)
Other investing activities	576			1,081			1,462			30,386
Net cash used in investing activities	(132,681		)	(47,232		)	(724,013		)	(102,878		)
Financing activities:
Issuance of current and long-term debt	110,041			450,215			327,670			501,448
Repayment of current and long-term debt	(115,039		)	(294,913		)	(346,162		)	(331,339		)
Dividends paid	(44,081		)	(37,180		)	(125,146		)	(108,837		)
Purchase of treasury stock	(74,965		)	(99,085		)	(193,379		)	(237,154		)
Other financing activities	—			(4,832		)	(8,324		)	(8,364		)
Net cash provided by (used in) financing activities	(124,044		)	14,205			(345,341		)	(184,246		)
Increase (decrease) in cash, cash equivalents, and restricted cash	163,715			192,827			(144,946		)	260,170
Cash, cash equivalents, and restricted cash at beginning of period	726,424			915,448			1,035,085			848,105
Cash, cash equivalents, and restricted cash at end of period	$	890,139		$	1,108,275		$	890,139		$	1,108,275
Supplemental disclosure information:
Cash paid for interest	$	8,643		$	13,530		$	70,498		$	80,155
Cash paid for income taxes, net	$	119,802		$	93,123		$	198,752		$	246,793

Steel Dynamics, Inc.

SUPPLEMENTAL INFORMATION

(dollars in thousands)

	Third Quarter						Year to Date
	2018			2017			2018			2017			1Q 2018			2Q 2018
External Net Sales
Steel	$	2,475,044		$	1,782,805		$	6,722,260		$	5,262,380		$	1,921,790		2,325,426
Fabrication	250,625			211,305			669,556			603,267			201,492			217,439
Metals Recycling	387,219			348,215			1,200,045			1,055,580			388,122			424,704
Other	110,659			101,057			326,086			281,091			92,471			122,956
Consolidated	$	3,223,547		$	2,443,382		$	8,917,947		$	7,202,318		$	2,603,875		$	3,090,525
Operating Income
Steel	$	577,308		$	280,285		$	1,452,857		$	906,526		$	338,357		537,192
Fabrication	13,145			21,903			47,162			65,858			19,832			14,185
Metals Recycling	17,764			21,118			71,297			62,447			27,805			25,728
Operations	608,217			323,306			1,571,316			1,034,831			385,994			577,105
Non-cash Amortization of Intangible Assets	(6,591		)	(7,272		)	(20,346		)	(22,120		)	(6,926		)	(6,829		)
Profit Sharing Expense	(45,304		)	(21,175		)	(114,301		)	(69,714		)	(26,662		)	(42,335		)
Non-segment Operations	(24,750		)	(23,844		)	(79,813		)	(72,063		)	(29,009		)	(26,054		)
Consolidated Operating Income	$	531,572		$	271,015		$	1,356,856		$	870,934		$	323,397		501,887
Adjusted EBITDA
Earnings Before Taxes	$	507,115		$	234,312		$	1,278,489		$	773,883		$	295,964		475,410
Net Interest Expense	25,894			31,298			79,304			95,260			27,482			25,928
Depreciation	73,431			66,574			212,125			197,857			67,823			70,871
Amortization of Intangible Assets	6,591			7,272			20,346			22,120			6,926			6,829
Non-controlling Interest	469			2,246			2,422			5,383			2,077			(124		)
EBITDA	613,500			341,702			1,592,686			1,094,503			400,272			578,914
Non-cash Adjustments
Unrealized Hedging (Gain) Loss	3,030			(2,724		)	(4,090		)	(2,637		)	(9,956		)	2,836
Inventory Valuation	1,017			236			1,482			2,757			200			265
Equity-based Compensation	7,978			6,875			25,933			22,924			9,580			8,375
Financing Expenses	—			1,393			—			1,393			—			—
Adjusted EBITDA	$	625,525		$	347,482		$	1,616,011		1,118,940			$	400,096		$	590,390
Other Operating Information							��
Steel
Average External Sales Price (Per ton) *	$	988		$	778		$	916		$	767		$	822		932
Average Ferrous Cost (Per ton melted) #	$	352		$	305		$	340		$	291		$	321		348
Flat Roll Shipments
Butler and Columbus Flat Roll Divisions	1,562,813			1,537,600			4,713,125			4,610,101			1,548,814			1,601,498
Techs and Heartland Divisions	294,559			195,406			711,624			596,263			194,762			222,303
Long Product Shipments
Structural and Rail Division	431,326			337,985			1,241,128			999,961			368,783			441,019
Engineered Bar Products Division	239,951			192,448			705,193			565,375			215,150			250,092
Roanoke Bar Division	145,648			120,652			409,194			362,752			123,403			140,143
Steel of West Virginia	82,623			74,901			245,236			228,184			83,732			78,881
Total Shipments (Tons)	2,756,920			2,458,992			8,025,500			7,362,636			2,534,644			2,733,936
External Shipments (Tons)	2,489,133			2,279,229			7,296,871			6,830,878			2,327,515			2,480,223
Steel Production (Tons)	2,852,451			2,536,990			8,222,163			7,557,231			2,601,200			2,768,512
Metals Recycling
Nonferrous Shipments (000’s of pounds)	277,332			261,716			852,994			815,763			271,628			304,034
Ferrous Shipments (Gross tons)	1,304,164			1,219,582			3,908,079			3,780,958			1,256,899			1,347,016
External Ferrous Shipments (Gross tons)	459,362			462,683			1,362,477			1,414,603			436,990			466,125
Fabrication
Average External Sales Price (Per ton)	$	1,461		$	1,317		$	1,398		$	1,306		$	1,345		1,380
Shipments (Tons)	171,578			160,482			479,406			461,936			149,926			157,902

*  Includes all steel operations

#  Includes ferrous cost per ton melted at our Steel Mills