Exhibit 99.1
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Press Release |
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July 23, 2007 |
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6714 Pointe Inverness Way, Suite 200 |
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Fort Wayne, IN 46804-7932 |
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260.459.3553 Phone 260.969.3590 Fax |
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Steel Dynamics Reports Second Quarter Results
FORT WAYNE, INDIANA, July 23, 2007– Steel Dynamics, Inc. (NASDAQ-GS: STLD) today announced second quarter earnings of $94 million, or $0.95 per diluted share, an increase of 7 percent when compared to $0.89 per diluted share in the second quarter of 2006. Diluted earnings per share decreased 6 percent from the first quarter of 2007, principally due to bond refinancing costs. Revenues increased to $911 million, 11 percent higher than the year-ago quarter and 5 percent higher than the first quarter of 2007. Second quarter consolidated shipments of 1.2 million tons were approximately the same as shipments in the second quarter of 2006 and slightly less than the first quarter of 2007.
SDI’s second quarter diluted earnings per share of $0.95 were consistent with May’s guidance that earnings could be at the low end of a range of $0.95 to $1.00 per diluted share provided earlier. As disclosed previously, the second quarter’s earnings per diluted share were reduced approximately $0.07 by the redemption of the company’s 9½% Senior Unsecured Notes and the termination of a related fixed-to-floating interest-rate swap. Excluding the impact of these expenses, second quarter earnings per diluted share would have been comparable to the company’s first quarter earnings of $1.01 per diluted share.
In the first half of 2007, SDI’s net income increased 13 percent to $196 million, compared to $173 million in last year’s first half. First half net sales increased to $1.8 billion, 19 percent higher than the first half of 2006. Consolidated shipments of 2.5 million tons for the first half of 2007 were 9 percent higher than last year’s first half. Average sales price per ton for consolidated sales increased to $714 per ton for the first half, an increase of 9 percent compared to last year’s first half. SDI’s first-half cost for steel scrap increased 10 percent per net ton charged from the first half of 2006.
“Second quarter operating income was relatively flat versus the first quarter due to lower shipping volumes for flat-rolled and bar steels.” said Keith Busse, Chairman and CEO of Steel Dynamics. “Our Structural & Rail Division achieved record shipments and record operating profit during the second quarter. Despite lower shipping volumes, our bar mills achieved strong operating results. Demand for flat-rolled steel turned out to be weaker than initially expected, reducing our shipping volume for sheet steels and resulting in more moderate price increases than anticipated for flat-rolled products.”
Higher priced scrap purchased in the latter part of the first quarter and melted in the second quarter resulted in higher second quarter costs, as SDI uses the FIFO method of inventory accounting. The second quarter’s average scrap cost per net ton charged increased $44 compared to the first quarter. Declining prices for steel scrap purchased during the second quarter helped to improve margins toward the end of the quarter, and are expected to have a stronger positive effect on third quarter profit margins.
Operating margin for the second quarter was 18 percent, compared to 20 percent in the first quarter of 2007. Second quarter operating profit per ton shipped was $136, unchanged from the first quarter of 2007. The second quarter’s average consolidated selling price increased to $739 per ton shipped, compared to $689 in the first quarter. The increase in average selling price was principally due to the strength in long-products pricing.
“During the second quarter, Steel Dynamics continued its growth plans by announcing two strategic acquisitions,” Busse said. “In June we announced the acquisition of The Techs, a respected, well-run flat-roll steel galvanizing company in Pittsburgh, PA, which expands our presence in the flat-roll-steel coating business. That acquisition closed on July 2. Also, in April we purchased a privately owned company that operates two metal-processing scrap yards in eastern Tennessee. The acquisition of these yards, which will provide an increased internal supply of steel scrap to our steel mill at Roanoke, Virginia, is part of our strategy to increase the proportion of ferrous resources we are able to self-supply to our mills. An additional scrap collection and processing facility is under development in Indianapolis, Indiana, and is scheduled to open in the second half of 2007.
“Our outlook for the third quarter is very positive,” Busse said. “The cost of ferrous resources for delivery mid-to-late second quarter has trended down and third-quarter scrap prices appear to be stable. We expect selling prices to remain relatively steady or improve somewhat, setting the stage for an expected improvement in profit margins for the third quarter. All of SDI’s long products divisions are experiencing solid order books, strong shipping rates, and strong selling values. For the first half of 2007, our long products mills accounted for 53 percent of the company’s steel shipments.
“We expect market demand for flat-rolled steel to improve in the third quarter, following several months of inventory liquidation, which would provide the possibility of a higher third-quarter volume of shipments and improved profit margins for sheet products. Combined with continued strong results for long products, we expect higher third-quarter earnings in the range of $1.10 to $1.15 per diluted share, subject to certain purchase accounting adjustments related to our acquisition of The Techs. We are in the process of determining purchase price allocations and cannot yet ascertain the impact to third quarter earnings. We expect to have a better assessment by the end of August and, we will determine the necessity of updating our third quarter guidance at that time,” Busse said.
During the third quarter of 2007, the company anticipates signing an operating agreement with its Mesabi Nugget project partners, subject to the resolution of certain remaining issues. The agreements contemplate the commercialization of the first ITmK3® nugget manufacturing facility. In connection with the plant construction, the company also anticipates purchasing and/or leasing land on the Minnesota iron-range for the purpose of mining its own iron ore concentrate for use at the nugget facility.
During the second quarter Steel Dynamics repurchased 2.9 million shares of its common stock for approximately $132.4 million. At June 30, 2007, the company had approximately 92 million shares of common stock outstanding. In June, the company’s Board of Directors authorized the repurchase of an additional 5 million shares.
Forward-Looking Statements
This press release contains some predictive statements about future events, including statements related to conditions in the steel marketplace, Steel Dynamics’ revenue growth, costs of raw 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 Tuesday, July 24, 2007 at 10:00 am EDT, Steel Dynamics will host a conference call in which Steel Dynamics’ management will discuss second quarter 2007 results. You are invited to listen to the live audio broadcast of the conference call over the Internet, accessible from Steel Dynamics’ Web site: www.steeldynamics.com
Dial-in information is available on our Web site. No telephone replay will be available. An audio replay of the Webcast will be available from the SDI Web site.
Contact: Fred Warner, Investor Relations Manager, (260) 969-3564 or fax (260) 969-3590
f.warner@steeldynamics.com
Steel Dynamics, Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
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Three Months Ended |
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Six Months Ended |
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||||||||
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June 30, |
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June 30, |
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||||||||
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2007 |
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2006 |
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2007 |
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2006 |
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Net Sales |
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$ |
911,248 |
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$ |
821,247 |
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$ |
1,776,922 |
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$ |
1,487,125 |
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Costs of goods sold |
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694,666 |
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624,692 |
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1,343,937 |
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1,131,083 |
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Selling, general, and administrative expenses |
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48,922 |
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42,407 |
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94,015 |
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70,782 |
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Operating Income |
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167,660 |
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154,148 |
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338,970 |
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285,260 |
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Interest expense |
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7,198 |
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8,025 |
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14,444 |
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16,161 |
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Other (income) expense, net |
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11,523 |
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(1,275 |
) |
10,807 |
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(1,956 |
) |
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Income before income taxes |
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148,939 |
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147,398 |
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313,719 |
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271,055 |
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||||
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Income taxes |
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54,997 |
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50,529 |
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117,613 |
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98,137 |
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Net income |
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$ |
93,942 |
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$ |
96,869 |
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$ |
196,106 |
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$ |
172,918 |
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Basic earnings per share |
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$ |
1.01 |
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$ |
1.00 |
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$ |
2.07 |
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$ |
1.88 |
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Weighted average common shares outstanding |
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93,429 |
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96,461 |
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94,873 |
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91,747 |
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Diluted earnings per share, |
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$ |
.95 |
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$ |
.89 |
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$ |
1.96 |
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$ |
1.66 |
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Weighted average common shares and share equivalents outstanding |
|
98,781 |
|
109,766 |
|
100,209 |
|
105,218 |
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Dividends declared per share |
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$ |
.15 |
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$ |
.10 |
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$ |
.30 |
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$ |
.20 |
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Note: All prior period share data has been adjusted to include the company’s two-for-one stock split effective November 20, 2006.
Steel Dynamics, Inc.
UNAUDITED SUPPLEMENTAL OPERATING INFORMATION
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Three Months Ended |
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Six Months Ended |
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First |
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June 30, |
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June 30, |
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Quarter |
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2007 |
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2006 |
|
2007 |
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2006 |
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2007 |
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Shipments and Production Data (tons) |
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Shipments |
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Steel Operations* |
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|||||
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Flat Roll Division |
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579,490 |
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653,075 |
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1,191,599 |
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1,316,120 |
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612,109 |
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|||||
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Structural & Rail Division |
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309,601 |
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242,627 |
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593,477 |
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489,760 |
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283,876 |
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|||||
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Engineered Bar Division |
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131,976 |
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124,132 |
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274,335 |
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249,482 |
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142,359 |
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|||||
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Roanoke Bar Division |
|
140,399 |
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146,260 |
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311,010 |
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146,260 |
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170,611 |
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|||||
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Steel of West Virginia |
|
70,946 |
|
80,412 |
|
145,433 |
|
80,412 |
|
74,487 |
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|||||
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|
|
1,232,412 |
|
1,246,506 |
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2,515,854 |
|
2,282,034 |
|
1,283,442 |
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|||||
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|||||
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Steel Fabrication Operations** |
|
68,864 |
|
60,862 |
|
135,371 |
|
101,551 |
|
66,507 |
|
|||||
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Steel Scrap and Scrap Substitute Operations*** |
|
176,846 |
|
98,340 |
|
275,080 |
|
141,643 |
|
98,234 |
|
|||||
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Other Operations**** |
|
26,356 |
|
24,255 |
|
59,469 |
|
54,148 |
|
33,113 |
|
|||||
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Intercompany |
|
(271,951 |
) |
(208,388 |
) |
(497,046 |
) |
(302,049 |
) |
(225,095 |
) |
|||||
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Consolidated shipments |
|
1,232,527 |
|
1,221,575 |
|
2,488,728 |
|
2,277,327 |
|
1,256,201 |
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|||||
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|
|
|
|
|
|
|
|
|
|
|
|
|||||
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Steel Operations* production |
|
1,246,238 |
|
1,305,996 |
|
2,496,625 |
|
2,366,881 |
|
1,250,387 |
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|||||
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|
|||||
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Average Selling Price Per Ton |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Steel Operations* |
|
$ |
696 |
|
$ |
639 |
|
$ |
671 |
|
$ |
626 |
|
$ |
646 |
|
|
Consolidated |
|
739 |
|
672 |
|
714 |
|
653 |
|
689 |
|
|||||
* Steel Operations include the company’s Flat Roll Division, Structural and Rail Division, Engineered Bar Products Division, Roanoke Bar Division and Steel of West Virginia operations.
** Steel Fabrication Operations include the company’s five joist and deck fabrication plants located in Indiana, Florida, Ohio, Virginia, and South Carolina.
*** Steel Scrap and Scrap Substitute Operations include Iron Dynamics and the company’s existing scrap processing facilities, of which two were purchased April 1, 2007.
**** Other Operations include Paragon Steel Enterprises.
Steel Dynamics, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands)
|
|
|
|
|
December |
|
||
|
|
|
June 30, |
|
31, |
|
||
|
|
|
2007 |
|
2006 |
|
||
|
|
|
(unaudited) |
|
|
|
||
|
Assets |
|
|
|
|
|
||
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Current assets |
|
|
|
|
|
||
|
Cash and equivalents |
|
$ |
12,212 |
|
$ |
29,373 |
|
|
Accounts receivable |
|
442,124 |
|
408,376 |
|
||
|
Inventories |
|
726,236 |
|
569,317 |
|
||
|
Deferred income taxes |
|
14,488 |
|
13,964 |
|
||
|
Other current assets |
|
31,493 |
|
15,167 |
|
||
|
Total current assets |
|
1,226,553 |
|
1,036,197 |
|
||
|
|
|
|
|
|
|
||
|
Property, plant and equipment, net |
|
1,249,178 |
|
1,136,703 |
|
||
|
|
|
|
|
|
|
||
|
Restricted cash |
|
6,592 |
|
5,702 |
|
||
|
|
|
|
|
|
|
||
|
Intangible assets |
|
14,110 |
|
12,226 |
|
||
|
|
|
|
|
|
|
||
|
Goodwill |
|
48,490 |
|
30,966 |
|
||
|
|
|
|
|
|
|
||
|
Other assets |
|
30,963 |
|
25,223 |
|
||
|
Total assets |
|
$ |
2,575,886 |
|
$ |
2,247,017 |
|
|
|
|
|
|
|
|
||
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Liabilities and Stockholders’ Equity |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
Current liabilities |
|
|
|
|
|
||
|
Accounts payable |
|
$ |
218,318 |
|
$ |
147,942 |
|
|
Income taxes payable |
|
26,365 |
|
30,497 |
|
||
|
Accrued expenses |
|
92,401 |
|
94,024 |
|
||
|
Accrued profit sharing |
|
27,619 |
|
46,341 |
|
||
|
Current portion of long-term debt |
|
215,699 |
|
80,686 |
|
||
|
Total current liabilities |
|
580,402 |
|
399,490 |
|
||
|
|
|
|
|
|
|
||
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Long-term debt |
|
|
|
|
|
||
|
9½% senior unsecured notes due 2009 |
|
— |
|
300,000 |
|
||
|
6¾% senior unsecured notes due 2015 |
|
500,000 |
|
— |
|
||
|
Convertible subordinated 4.0% notes due 2012 |
|
37,500 |
|
37,500 |
|
||
|
Other long-term debt |
|
16,750 |
|
16,920 |
|
||
|
Unamortized bond premium |
|
— |
|
3,772 |
|
||
|
Total long-term debt |
|
554,250 |
|
358,192 |
|
||
|
|
|
|
|
|
|
||
|
Deferred income taxes |
|
256,210 |
|
256,803 |
|
||
|
|
|
|
|
|
|
||
|
Minority interest |
|
869 |
|
1,424 |
|
||
|
|
|
|
|
|
|
||
|
Commitments and contingencies |
|
|
|
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|
||
|
|
|
|
|
|
|
||
|
Stockholders’ equity |
|
|
|
|
|
||
|
Common stock |
|
540 |
|
537 |
|
||
|
Treasury stock, at cost |
|
(464,405 |
) |
(230,472 |
) |
||
|
Additional paid-in capital |
|
386,935 |
|
367,772 |
|
||
|
Retained earnings |
|
1,261,085 |
|
1,093,271 |
|
||
|
Total stockholders’ equity |
|
1,184,155 |
|
1,231,108 |
|
||
|
Total liabilities and stockholders’ equity |
|
$ |
2,575,886 |
|
$ |
2,247,017 |
|
Steel Dynamics, Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||
|
|
|
June 30, |
|
June 30, |
|
||||||||
|
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Operating activities: |
|
|
|
|
|
|
|
|
|
||||
|
Net income |
|
$ |
93,942 |
|
$ |
96,869 |
|
$ |
196,106 |
|
$ |
172,918 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Adjustments to reconcile net income to net cash provided by / (used in) operating activities: |
|
|
|
|
|
|
|
|
|
||||
|
Depreciation and amortization |
|
32,978 |
|
32,603 |
|
62,244 |
|
57,520 |
|
||||
|
Unamortized bond premium |
|
(3,350 |
) |
— |
|
(3,350 |
) |
— |
|
||||
|
Equity-based compensation |
|
2,132 |
|
1,744 |
|
4,401 |
|
3,157 |
|
||||
|
Deferred income taxes |
|
(796 |
) |
(5,862 |
) |
(1,118 |
) |
(5,734 |
) |
||||
|
Minority interest |
|
(173 |
) |
389 |
|
(555 |
) |
628 |
|
||||
|
Changes in certain assets and liabilities: |
|
|
|
|
|
|
|
|
|
||||
|
Accounts receivable |
|
(20,146 |
) |
(10,797 |
) |
(33,748 |
) |
(29,984 |
) |
||||
|
Inventories |
|
(96,824 |
) |
(30,993 |
) |
(153,726 |
) |
(13,814 |
) |
||||
|
Accounts payable |
|
(6,532 |
) |
(29,447 |
) |
70,810 |
|
(7,383 |
) |
||||
|
Income taxes payable |
|
(58,982 |
) |
(30,852 |
) |
(4,132 |
) |
7,163 |
|
||||
|
Other working capital |
|
7,484 |
|
194 |
|
(38,764 |
) |
(23,178 |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net cash provided by / (used in) operating activities |
|
(50,267 |
) |
23,848 |
|
98,168 |
|
161,293 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Investing activities: |
|
|
|
|
|
|
|
|
|
||||
|
Purchase of property, plant and equipment |
|
(101,981 |
) |
(33,882 |
) |
(155,910 |
) |
(48,467 |
) |
||||
|
Acquisition of business, net of cash acquired |
|
(38,219 |
) |
(89,106 |
) |
(38,219 |
) |
(89,106 |
) |
||||
|
Purchase of short-term investments |
|
— |
|
— |
|
— |
|
(14,075 |
) |
||||
|
Maturities of short-term investments |
|
— |
|
4,700 |
|
— |
|
14,075 |
|
||||
|
Other investing activities |
|
61 |
|
— |
|
(162 |
) |
— |
|
||||
|
Net cash used in investing activities |
|
(140,139 |
) |
(118,288 |
) |
(194,291 |
) |
(137,573 |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Financing activities: |
|
|
|
|
|
|
|
|
|
||||
|
Issuance of long-term debt |
|
852,000 |
|
— |
|
997,000 |
|
— |
|
||||
|
Repayment of long-term debt |
|
(532,079 |
) |
(45,488 |
) |
(662,157 |
) |
(47,146 |
) |
||||
|
Issuance of common stock (net of expenses) and proceeds and tax benefits from exercise of stock options |
|
8,960 |
|
6,790 |
|
16,146 |
|
24,199 |
|
||||
|
Issuance (purchase) of treasury stock |
|
(132,429 |
) |
193 |
|
(235,314 |
) |
788 |
|
||||
|
Dividends paid |
|
(14,178 |
) |
(8,812 |
) |
(28,725 |
) |
(13,131 |
) |
||||
|
Debt issuance costs |
|
(7,988 |
) |
— |
|
(7,988 |
) |
— |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net cash provided by / (used in) financing activities |
|
174,286 |
|
(47,317 |
) |
78,962 |
|
(35,290 |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Decrease in cash and equivalents |
|
(16,120 |
) |
(141,757 |
) |
(17,161 |
) |
(11,570 |
) |
||||
|
Cash and equivalents at beginning of period |
|
28,332 |
|
195,705 |
|
29,373 |
|
65,518 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Cash and equivalents at end of period |
|
$ |
12,212 |
|
$ |
53,948 |
|
$ |
12,212 |
|
$ |
53,948 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
||||
|
Cash paid for interest |
|
$ |
2,019 |
|
$ |
2,171 |
|
$ |
18,358 |
|
$ |
16,439 |
|
|
Cash paid for federal and state income taxes |
|
$ |
131,817 |
|
$ |
94,365 |
|
$ |
132,285 |
|
$ |
95,541 |
|