Industry Press Releases

Steel Dynamics Reports First Quarter 2017 Results

Thursday, Apr 20, 2017

Steel Dynamics, Inc. today announced first quarter 2017 financial results.  The company reported first quarter 2017 net income of $201 million, or $0.82 per diluted share, with net sales of $2.4 billion.  Comparatively, prior year first quarter net income was $63 million, or $0.26 per diluted share, with net sales of $1.7 billion.  Sequential fourth quarter 2016 net income was $20 million, or $0.08 per diluted share, which included non-cash goodwill and asset impairment charges of $0.31 per diluted share and debt refinancing and repayment charges of $0.04 per diluted share.  Excluding these items, the company's adjusted fourth quarter 2016 net income was $106 million, or $0.43 per diluted share.

"The team executed well and delivered a strong first quarter performance with all of our operating platforms improving profitability," said Mark D. Millett, President and Chief Executive Officer. "Our first quarter 2017 income from operations increased over 75 percent sequentially to $335 million with adjusted EBITDA of $421 million.  The increase in our earnings was principally driven by our flat roll operations, as demand was strong and customer inventory levels continued to be positioned at historically low levels.  We also experienced increased shipments from our long product steel divisions.  Steel demand from the automotive sector remained steady and construction continued to improve.  Additionally, specific to our Engineered Bar Products Division, there was an overall general demand improvement, supported by positive movement in the heavy equipment and energy sectors.               

"Operating income from our metals recycling platform more than doubled in the first quarter 2017, as domestic steel mill utilization increased, strengthening both ferrous scrap shipments and metal spread," continued Millett. "Additionally, in what is typically a seasonally lower demand timeframe for our fabrication operations, the team achieved record quarterly shipments and improved earnings, a strong indicator that the non-residential construction market is continuing a positive growth profile."

The company generated strong cash flow from operations of $240 million during the first quarter 2017. As evidence of the confidence in the company's sustainable long-term cash flow generation capability, the board of directors approved an 11 percent increase in the company's first quarter 2017 cash dividend, reflecting the strength of the company's capital structure and liquidity profile, and the continued optimism and confidence in its future prospects.

Additional First Quarter 2017 Comments

First quarter 2017 operating income for the company's steel operations increased 62 percent to $352 million sequentially, based on a 12 percent increase in shipments and metal spread expansion.  The company's average steel product price increased more than consumed raw material scrap costs, resulting in steel metal spread expansion.  The first quarter 2017 average product selling price for the company's steel operations increased $63 to $743 per ton.  The average ferrous scrap cost per ton melted increased $44 to $264 per ton.

First quarter 2017 operating income attributable to the company's flat roll products increased 67 percent when compared to the sequential fourth quarter, driven by an 11 percent increase in shipments combined with metal spread expansion. Operating income from long products increased 39 percent as a result of a 16 percent improvement in shipments, primarily from the company's Engineered Bar Products and Structural and Rail divisions.  Long product steel selling values remain under pressure from excess domestic production capability, coupled with elevated import levels.  The company's steel production utilization rate was 95 percent in the first quarter 2017, compared to 81 percent in the sequential fourth quarter and compared to the domestic industry utilization rate of 75 percent.    

First quarter 2017 operating income from the metals recycling operations was $21 million, compared to $10 million in the sequential fourth quarter (excluding a non-cash goodwill impairment charge of $5.5 million).  Both ferrous scrap demand and pricing increased as domestic steel mill utilization improved.

The company's fabrication operations recorded first quarter 2017 operating income of $24 million, compared to sequential fourth quarter results of $18 million.  Despite what is typically a lower demand season, the platform achieved record quarterly shipments, which more than offset moderate margin compression as product pricing declined slightly more than steel input costs.

Outlook   

"The company believes that current and anticipated macroeconomic and market conditions are in place to benefit the domestic steel industry in the coming year," said Millett.  "Although domestic automotive production may be coming off record levels, we believe 2017 North American automotive steel consumption will be steady, and that there will be additional growth in the construction sector, especially for larger, public sector infrastructure projects.  Additionally, the energy sector has begun to strengthen.

"We continue to see progress at our Columbus Flat Roll Division.  The successful market and product diversification achieved at Columbus will continue to benefit the coming years as we have accessed numerous new customers and end markets. The Columbus team completed construction of a $100 million paint line in the fourth quarter 2016, adding 250,000 tons of value-added painting capability. Start-up is going well, with painted shipments of just under 13,000 tons in the first quarter.

"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 strategic growth opportunities," concluded Millett.

Conference Call and Webcast

Steel Dynamics, Inc. will hold a conference call to discuss first quarter 2017 operating and financial results on Thursday, April 20, 2017, 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 April 25, 2017.

About Steel Dynamics, Inc.

Steel Dynamics, Inc. 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 Operating Income, 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 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, appliance, pipe and tube, and other steel-consuming industries; (4) fluctuations in the cost of key raw materials (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

 

Three Months

 

March 31,

 

Ended

 

2017

 

2016

 

December 31, 2016

                 

Net sales

$

2,368,216

 

$

1,741,301

 

$

1,910,596

Costs of goods sold

 

1,896,062

   

1,505,265

   

1,600,654

      Gross profit

 

472,154

   

236,036

   

309,942

                 

Selling, general and administrative expenses

 

102,933

   

87,530

   

94,110

Profit sharing

 

27,231

   

9,291

   

19,563

Amortization of intangible assets

 

7,424

   

7,250

   

7,406

Asset impairment charges

 

-

   

-

   

132,839

      Operating income

 

334,566

   

131,965

   

56,024

                 

Interest expense, net of capitalized interest

 

33,973

   

37,043

   

36,149

Other expense (income), net

 

(3,659)

   

(1,792)

   

17,055

      Income before income taxes

 

304,252

   

96,714

   

2,820

                 

Income tax expense (benefit)

 

105,586

   

35,396

   

(1,012)

      Net income

 

198,666

   

61,318

   

3,832

Net loss attributable to noncontrolling interests

 

2,151

   

1,419

   

16,180

      Net income attributable to Steel Dynamics, Inc.

$

200,817

 

$

62,737

 

$

20,012

                 
                 

Basic earnings per share attributable to

               

   Steel Dynamics, Inc. stockholders

$

0.83

 

$

0.26

 

$

0.08

                 

Weighted average common shares outstanding

 

242,943

   

243,202

   

243,687

                 

Diluted earnings per share attributable to

               

   Steel Dynamics, Inc. stockholders, including the effect

               

   of assumed conversions when dilutive

$

0.82

 

$

0.26

 

$

0.08

                 

Weighted average common shares

               

   and share equivalents outstanding

 

244,546

   

244,608

   

245,511

                 
                 

Dividends declared per share

$

0.155

 

$

0.140

 

$

0.140

 

Steel Dynamics, Inc.

 

CONSOLIDATED BALANCE SHEETS

(in thousands)

             
             
 

March 31,

   

December 31,

 

2017

   

2016

               Assets

(unaudited)

       

Current assets

           

   Cash and equivalents

$

966,826

   

$

841,483

   Accounts receivable, net

 

883,147

     

729,784

   Inventories

 

1,361,550

     

1,275,211

   Other current assets

 

33,442

     

83,197

      Total current assets

 

3,244,965

     

2,929,675

             

Property, plant and equipment, net

 

2,760,544

     

2,787,215

             

Restricted cash

 

17,846

     

18,060

             

Intangible assets, net

 

276,553

     

283,977

             

Goodwill

 

391,740

     

393,351

             

Other assets

 

12,387

     

11,454

      Total assets

$

6,704,035

   

$

6,423,732

Liabilities and Equity

           

Current liabilities

           

   Accounts payable

$

530,958

   

$

395,196

   Income taxes payable

 

80,741

     

5,593

   Accrued expenses

 

266,783

     

308,394

   Current maturities of long-term debt

 

2,965

     

3,632

      Total current liabilities

 

881,447

     

712,815

             

Long-term debt

 

2,353,744

     

2,353,194

             

Deferred income taxes

 

454,426

     

448,375

             

Other liabilities

 

19,711

     

20,649

      Total liabilities

 

3,709,328

     

3,535,033

             

Commitments and contingencies

           
             

Redeemable noncontrolling interests

 

111,240

     

111,240

             

Equity

           

   Common stock

 

641

     

641

   Treasury stock, at cost

 

(475,072)

     

(416,829)

   Additional paid-in capital

 

1,135,892

     

1,132,749

   Retained earnings

 

2,373,718

     

2,210,459

      Total Steel Dynamics, Inc. equity

 

3,035,179

     

2,927,020

   Noncontrolling interests

 

(151,712)

     

(149,561)

      Total equity

 

2,883,467

     

2,777,459

      Total liabilities and equity

$

6,704,035

   

$

6,423,732

 

Steel Dynamics, Inc.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

           
           
 

Three Months Ended

 

March 31,

 

2017

 

2016

           

Operating activities:

         

   Net income

$

198,666

 

$

61,318

           

   Adjustments to reconcile net income to net cash provided by

         

      operating activities:

         

      Depreciation and amortization

 

75,057

   

73,985

      Equity-based compensation

 

11,303

   

10,534

      Deferred income taxes

 

7,716

   

17,087

      Other adjustments

 

(104)

   

180

      Changes in certain assets and liabilities:

         

         Accounts receivable

 

(153,364)

   

(75,596)

         Inventories

 

(86,819)

   

82,567

         Other assets

 

2,113

   

548

         Accounts payable

 

133,809

   

112,659

         Income taxes receivable/payable

 

96,319

   

13,993

         Accrued expenses

 

(44,247)

   

(6,247)

      Net cash provided by operating activities

 

240,449

   

291,028

           

Investing activities:

         

   Purchases of property, plant and equipment

 

(41,677)

   

(27,708)

   Other investing activities

 

26,918

   

3,054

      Net cash used in investing activities

 

(14,759)

   

(24,654)

           

Financing activities:

         

   Issuance of current and long-term debt

 

-

   

20,452

   Repayment of current and long-term debt

 

(1,429)

   

(4,232)

   Dividends paid

 

(34,130)

   

(33,425)

   Purchase of treasury stock

 

(61,256)

   

-

   Other financing activities

 

(3,532)

   

750

      Net cash used in financing activities

 

(100,347)

   

(16,455)

           

Increase in cash and equivalents

 

125,343

   

249,919

Cash and equivalents at beginning of period

 

841,483

   

727,032

Cash and equivalents at end of period

$

966,826

 

$

976,951

           

Supplemental disclosure information:

         

   Cash paid for interest

$

12,649

 

$

26,286

   Cash paid for income taxes, net

$

1,554

 

$

699

 

Supplemental Information (dollars in thousands)

 
                     
                     
     

First Quarter

       
     

2017

   

2016

   

4Q 2016

 

External Net Sales

         

   Steel

 

$

1,721,333

 

$

1,217,176

 

$

1,393,329

 

   Fabrication

   

194,096

   

180,055

   

173,015

 

   Metals Recycling

   

363,836

   

269,407

   

282,783

 

   Other

   

88,951

   

74,663

   

61,469

 

Consolidated

 

$

2,368,216

 

$

1,741,301

 

$

1,910,596

 
                     

Operating Income

                   

   Steel

 

$

352,423

 

$

135,692

 

$

217,778

 

   Fabrication

   

23,767

   

32,075

   

17,766

 

   Metals Recycling

   

21,341

   

6,360

   

9,511

 

       Metals Recycling Impairment

   

-

   

-

   

(5,500)

 

Operations

   

397,531

   

174,127

   

239,555

 
                     

Non-cash Amortization of Intangible Assets

   

(7,424)

   

(7,100)

   

(7,406)

 

Profit Sharing Expense

   

(27,231)

   

(9,291)

   

(19,563)

 

Non-segment Operations

   

(28,310)

   

(25,771)

   

(29,223)

 

    Minnesota Impairment Charges

   

-

   

-

   

(127,339)

 

Consolidated Operating Income

   

334,566

   

131,965

   

56,024

 
                     

Non-cash Impairment Charges

   

-

   

-

   

132,839

 

Adjusted Operating Income

 

$

334,566

 

$

131,965

 

$

188,863

 
                     
                     

Adjusted EBITDA

                   

      Earnings Before Taxes

 

$

304,252

 

$

96,714

 

$

2,820

 

      Net Interest Expense

   

32,333

   

36,150

   

34,752

 

      Depreciation

   

66,269

   

65,375

   

64,199

 

      Amortization of Intangible Assets

   

7,424

   

7,100

   

7,406

 

      Non-controlling Interest

   

2,152

   

1,419

   

16,180

 

 EBITDA

   

412,430

   

206,758

   

125,357

 

      Non-cash Adjustments

                   

         Unrealized Hedging (Gain) Loss

   

(637)

   

319

   

(143)

 

         Inventory Valuation

 

162

   

192

   

154

 

         Asset Impairment Charges

   

-

   

-

   

119,764

 

         Equity-based Compensation

   

9,074

   

6,979

   

10,069

 

         Financing Expenses

   

-

   

-

   

3,104

 

Adjusted EBITDA

 

$

421,029

 

$

214,248

 

$

258,305

 
                     
                     

Other Operating Information

                   

   Steel

                   

      Average External Sales Price (Per ton)

 

$

743

 

$

574

 

$

680

 

      Average Ferrous Cost (Per ton melted)

 

$

264

 

$

184

 

$

220

 
                     

      Flat Roll Shipments

   

1,735,954

   

1,657,341

   

1,565,157

 

      Long Product Shipments

                   

         Structural and Rail Division

   

350,555

   

292,988

   

319,265

 

         Engineered Bar Products Division

   

192,140

   

125,200

   

134,262

 

         Roanoke Bar Division

   

125,869

   

125,471

   

112,007

 

         Steel of West Virginia

   

77,229

   

76,209

   

75,453

 

Total Shipments (In tons)

   

2,481,747

   

2,277,209

   

2,206,144

 
                     

External Shipments (In tons)

   

2,305,080

   

2,121,872

   

2,041,078

 
                     

         Steel Production (In tons)

   

2,544,082

   

2,363,252

   

2,237,200

 
                     

   Metals Recycling

                   

      Total Nonferrous Shipments (In 000's of pounds)

   

283,603

   

270,410

   

274,790

 

      Total Ferrous Shipments (In gross tons)

   

1,338,599

   

1,305,154

   

1,175,625

 

External Ferrous Shipments (In gross tons)

   

485,414

   

503,787

   

446,232

 
                     

   Fabrication

                   

      Average External Sales Price (Per ton)

 

$

1,291

 

$

1,241

 

$

1,310

 

      Total Shipments (In tons)

   

150,402

   

145,126

   

132,186

 

Source:prnewswire.com

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