Steel Dynamics Reports Third Quarter 2016 Results

Mittwoch, 19.10.2016 18:00 von

PR Newswire

FORT WAYNE, Ind., Oct. 19, 2016 /PRNewswire/ -- Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced third quarter 2016 financial results.  Excluding a litigation settlement charge of approximately $5 million (pretax), third quarter 2016 adjusted net income was $160 million, or $0.65 per diluted share, on net sales of $2.1 billion.  Including this charge, the company reported GAAP net income of $157 million, or $0.64 per diluted share. 

The third quarter 2016 also included non-cash purchase accounting charges associated with the company's recent Vulcan acquisition of approximately $2 million (pretax).  Comparatively, prior year third quarter net income was $61 million, or $0.25 per diluted share, on net sales of $2.0 billion, and sequential second quarter 2016 net income was $142 million, or $0.58 per diluted share, on net sales of $2.0 billion.

"During the third quarter 2016, positive momentum in flat roll metal spread expansion resulted in improved sequential consolidated operating earnings, which increased 11 percent to $284 million," said Mark D. Millett, President and Chief Executive Officer. "Year-over-year flat roll steel import levels declined approximately 20 percent, while customer inventory levels remained low compared to historical averages.  The domestic steel demand outlook is relatively unchanged, with the heavy equipment, agricultural and energy markets remaining weak, while automotive continues to be strong and construction continues to improve.  However, late in the third quarter, customers were hesitant to make purchases ahead of an anticipated scrap price decrease and as a result September steel shipments were lower than anticipated. 

"Our metals recycling platform earnings decreased in third quarter 2016, as scrap prices declined in both August and September," continued Millett. "Ferrous scrap demand declined based on lower domestic steel mill utilization, resulting in lower ferrous shipments, while ferrous metal margin remained steady.  Earnings from our fabrication operations also declined in the quarter, due to increased steel input costs more than offsetting higher selling values.  However, our fabrication platform continues to experience steady demand from the non-residential construction sector.  Based on continued strong generation of cash flow from operations of $196 million in the third quarter 2016, we maintained record liquidity of over $2.2 billion at the end of September 2016, providing a firm foundation for growth."

Additional Third Quarter 2016 Comments

Third quarter 2016 operating income for the company's steel operations increased 13 percent to $311 million sequentially, based on meaningful metal spread improvement which more than offset a nine percent reduction in shipments across the platform.  The company's average steel product price increased more than consumed raw material scrap costs, resulting in steel metal spread expansion.  The third quarter 2016 average product selling price for the company's steel operations increased $100 to $740 per ton.  The average ferrous scrap cost per ton melted increased $24 to $251 per ton. 

Third quarter 2016 operating income attributable to the company's sheet products increased 29 percent when compared to the sequential second quarter, driven by metal spread expansion, which more than offset the nine percent decline in flat roll shipments.  The successful addition of Galvalume® coating capabilities to the company's Columbus Flat Roll Division product offerings, resulted in about 25,000 tons of lost July shipments due to the required down time on one of the galvanizing lines for equipment installation.  Operating income from long products decreased 34 percent, as lower shipments more than offset metal spread improvement related to increased average product pricing outpacing higher scrap costs in the quarter.  Aside from the construction sector, long product steel demand is generally challenged, and selling values are under pressure from excess domestic production capability.  The company's steel production utilization rate was 85 percent in the third quarter 2016, compared to 95 percent in the sequential quarter and compared to the domestic industry utilization rate of approximately 70 percent.    

Third quarter 2016 operating income from the company's metals recycling operations was $10 million, compared to $15 million in the sequential quarter.   Ferrous shipments decreased in the quarter, as domestic steel mill utilization rates declined and metal spread remained steady.

The company's fabrication operations recorded third quarter 2016 operating income of $18 million, compared to $24 million in the sequential second quarter.  Shipments were steady in the quarter; however, metal spread compression occurred as product pricing appreciation was more than offset by higher cost steel utilized in the third quarter 2016. 

The company also recorded a litigation charge in the third quarter 2016 related to the settlement of the Standard Iron Works v. Arcelor Mittal et al. direct purchaser class action lawsuit in the amount of approximately $5 million. The settlement requires preliminary and final approval by the Court, which the company anticipates it will receive.

Year-to-Date September 30, 2016 Comparison

For the nine months ended September 30, 2016, net income was $362 million, or $1.48 per diluted share, on net sales of $5.9 billion, as compared to net income of $123 million, or $0.51 per diluted share, on net sales of $6.0 billion for the nine months ended September 30, 2015.  Year-to-date 2016 shipments meaningfully improved for the company's steel and fabrication operating platforms.  However, same period consolidated net sales decreased two percent, as a result of decreased steel and metals recycling selling values.  Year-to-date 2016 consolidated operating income increased $364 million, or 118 percent, based primarily on improved earnings from the company's steel operations. The average year-to-date selling price for the company's steel operations decreased $43 to $651 per ton.  The average year-to-date ferrous scrap cost per ton melted decreased $51 to $220 per ton. 

The company generated strong cash flow from operations of $643 million during the nine months ended September 30, 2016, with relatively flat working capital requirements.  Including its undrawn revolver and available cash of $1.1 billion, the company maintained record liquidity of over $2.2 billion at September 30, 2016.   

Outlook   

"Steel customer inventory levels remain lower than historical levels and year-over-year steel imports have declined approximately 20 percent," said Millett.  "However, there has been buyer hesitancy in anticipation of possible declines in scrap pricing, with an expectation that this might further pressure steel prices.  Additionally, we are heading into a seasonally lower demand environment and customers are hesitant to significantly increase inventories before the end of the year.  Due to these factors, we anticipate lower sequential volumes in our operating platforms, which is seasonally typical for the calendar fourth quarter and sequentially weaker realized steel pricing.  Although domestic automotive production may be coming off record levels, we believe 2017 automotive steel consumption will be steady with Mexico growing production, and that there will be additional growth in the construction sector, especially for larger, public sector infrastructure projects.  We could also see some improved activity within the energy sector next year.   

"We continue to see progress at our Columbus Flat Roll Division.  The successful market and product diversification that we achieved at Columbus during 2015 is one of our key differentiators for anticipated improved annual profitability in 2016.  Columbus achieved near record nine month production levels for 2016, while continuing to improve and diversify its value-added production capability.  The team successfully added the capability to produce value-added Galvalume® flat roll products during the third quarter 2016, and the $100 million paint line addition is on schedule to begin production in the first quarter 2017, adding 250,000 tons of value-added painting capability.    

"We continue to strengthen our financial position through strong cash flow generation and the execution of our long-term strategy.  We are pleased that due to our strong balance sheet and continued free cash flow generation, we are able to add the optionality of a share repurchase program to our capital allocation strategy.  We are well-positioned for growth, and remain focused on delivering shareholder value through organic and strategic growth opportunities."

 

Supplemental Information























Third Quarter



Year to Date










2016



2015



2016



2015



1Q 2016



2Q 2016

External Net Sales



(Dollars in thousands)

   Steel


$

1,557,502


$

1,351,387


$

4,241,382


$

4,112,483


$

1,217,176


$

1,466,704

   Fabrication



177,429



174,954



528,026



490,490



180,055



170,542

   Metals Recycling



306,092



345,572



886,559



1,162,378



269,407



311,060

   Other



60,287



79,010



210,546



238,014



74,663



75,596

Consolidated


$

2,101,310


$

1,950,923


$

5,866,513


$

6,003,365


$

1,741,301


$

2,023,902




















Operating Income



















   Steel


$

311,127


$

126,735


$

723,348


$

344,943


$

135,692


$

276,529

   Fabrication



17,814



36,733



73,401



85,754



32,075



23,512

   Metals Recycling



9,747



463



30,793



12,283



6,360



14,686

Operations



338,688



163,931



827,542



442,980



174,127



314,727




















Non-cash Amortization of Intangible Assets



(7,208)



(6,041)



(21,359)



(18,308)



(7,100)



(7,051)

Profit Sharing Expense



(22,255)



(9,008)



(51,722)



(18,637)



(9,291)



(20,176)

Non-segment Operations



(25,370)



(17,853)



(82,519)



(97,676)



(25,771)



(31,378)

Consolidated Operating Income



283,855



131,029



671,942



308,359



131,965



256,122

Minnesota Idle Charges (Including Noncontrolling



















   Interests)



-



-



-



33,167



-



-

Iron Dynamics Outage Impact



-



-



-



9,403



-



-

Adjusted Operating Income


$

283,855


$

131,029


$

671,942


$

350,929


$

131,965


$

256,122




















External Shipments



















   Steel (In tons)



2,104,219



2,031,096



6,517,253



5,926,152



2,121,872



2,291,162

Steel Shipped to Internal Locations



167,012



160,108



522,549



456,480



155,337



200,200




















   Fabrication (In tons)



142,585



128,753



430,539



351,144



145,126



142,828




















   Metals Recycling



















      Nonferrous (In 000's of pounds)



254,922



261,072



744,974



755,925



242,560



247,492

      Ferrous (In gross tons)



468,498



551,076



1,511,532



1,819,420



503,787



539,247

Ferrous Scrap Shipped to Internal Steel Mills



774,779



803,263



2,383,223



2,125,675



801,367



807,077




















Other Operating Information



















   Steel



















      Average External Sales Price (Per ton shipped)


$

740


$

665


$

651


$

694


$

574


$

640

      Average Ferrous Cost (Per ton melted)


$

251


$

252


$

220


$

271


$

184


$

227

      Flat Roll Shipments



















         Butler Division



742,785



637,289



2,228,746



1,937,897



712,138



773,823

         Columbus Division



680,750



712,992



2,242,089



1,971,005



756,933



804,406

         The Techs



197,259



190,130



595,097



518,303



188,269



209,569

      Long Product Shipments



















         Structural and Rail Division-Structural



274,482



241,923



801,041



706,905



234,046



292,513

                                                       -Rail



56,212



64,150



179,245



205,770



58,942



64,091

         Engineered Bar Products Division



110,633



132,901



358,426



409,826



125,200



122,593

         Roanoke Bar Division



119,555



130,314



384,801



396,232



125,471



139,775

         Steel of West Virginia



75,080



81,505



235,882



236,694



76,209



84,593

Total Steel Shipments (In tons)



2,256,756



2,191,204



7,025,327



6,382,632



2,277,208



2,491,363




















         Steel Production (In tons)



2,341,659



2,252,412



7,266,265



6,546,570



2,363,252



2,561,354




















   Fabrication



















      Average External Sales Price (Per ton shipped)


$

1,253


$

1,359


$

1,232


$

1,397


$

1,241


$

1,202




















      Consolidated EBITDA



















         Earnings Before Taxes


$

243,305


$

93,705


$

561,313


$

175,805


$

96,714


$

221,294

         Net Interest Expense



34,867



36,739



106,396



116,503



36,150



35,379

         Depreciation



65,473



66,677



197,082



198,367



65,375



66,234

         Amortization of Intangible Assets



7,208



6,041



21,359



18,308



7,100



7,051

         Non-controlling Interest



2,984



1,750



5,929



11,782



1,419



1,526

 EBITDA



353,837



204,912



892,079



520,765



206,758



331,484

      Non-cash Adjustments



















         Unrealized Hedging (Gain) Loss



(880)



738



627



2,145



319



1,188

         Inventory Valuation


405



3,127



832



26,192



192



235

         Equity Based Compensation



5,895



5,333



20,161



18,888



6,979



7,287

         Financing Expenses



-



-



-



3,326



-



-

Adjusted EBITDA


$

359,257


$

214,110


$

913,699


$

571,316


$

214,248


$

340,194

 

Conference Call and Webcast

Steel Dynamics, Inc. will hold a conference call to discuss third quarter 2016 operating and financial results on Thursday, October 20, 2016, 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 25, 2016.

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.

 

 

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


2016


2015


2016


2015


June 30, 2016
















Net sales

$

2,101,310


$

1,950,923


$

5,866,513


$

6,003,365


$

2,023,902

Costs of goods sold


1,692,807



1,722,197



4,841,591



5,415,854



1,643,519

      Gross profit


408,503



228,726



1,024,922



587,511



380,383
















Selling, general and administrative expenses


95,185



82,648



279,899



242,207



97,034

Profit sharing


22,255



9,008



51,722



18,637



20,176

Amortization of intangible assets


7,208



6,041



21,359



18,308



7,051

      Operating income


283,855



131,029



671,942



308,359



256,122
















Interest expense, net of capitalized interest


36,199



37,084



109,888



117,334



36,646

Other expense (income), net


4,351



239



741



15,219



(1,818)

      Income before income taxes


243,305



93,706



561,313



175,806



221,294
















Income taxes


88,892



34,839



205,139



64,660



80,851

      Net income


154,413



58,867



356,174



111,146



140,443

Net loss attributable to noncontrolling interests


2,984



1,750



5,929



11,782



1,526

      Net income attributable to Steel Dynamics, Inc.

$

157,397


$

60,617


$

362,103


$

122,928


$

141,969
















Basic earnings per share attributable to















   Steel Dynamics, Inc. stockholders

$

0.65


$

0.25


$

1.49


$

0.51


$

0.58
















Weighted average common shares outstanding


243,761



242,074



243,539



241,836



243,655
















Diluted earnings per share attributable to















   Steel Dynamics, Inc. stockholders, including the effect















   of assumed conversions when dilutive

$

0.64


$

0.25


$

1.48


$

0.51


$

0.58
















Weighted average common shares















   and share equivalents outstanding


245,682



243,822



245,227



243,393



245,392
















Dividends declared per share

$

0.1400


$

0.1375


$

0.4200


$

0.4125


$

0.1400

 

 


Steel Dynamics, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)









September 30,



December 31,

Assets

2016



2015


(unaudited)





Current assets







   Cash and equivalents

$

1,051,489



$

727,032

   Accounts receivable, net


779,459




613,605

   Inventories


1,275,575




1,149,390

   Other current assets


30,121




47,914

      Total current assets


3,136,644




2,537,941








Property, plant and equipment, net


2,928,226




2,951,210








Restricted cash


19,571




19,565








Intangible assets, net


291,814




278,960








Goodwill


399,867




397,470








Other assets


11,440




16,936

      Total assets

$

6,787,562



$

6,202,082

Liabilities and Equity







Current liabilities







   Accounts payable

$

437,836



$

283,355

   Income taxes payable


35,733




2,023

   Accrued expenses


304,389




233,232

   Current maturities of long-term debt


16,155




16,680

      Total current liabilities


794,113




535,290








Long-term debt


2,570,837




2,577,976








Deferred income taxes


450,159




400,770








Other liabilities


20,751




16,595








Commitments and contingencies














Redeemable noncontrolling interests


126,340




126,340








Equity







   Common stock


640




638

   Treasury stock, at cost


(392,051)




(396,455)

   Additional paid-in capital


1,132,365




1,110,253

   Retained earnings


2,224,963




1,965,291

      Total Steel Dynamics, Inc. equity


2,965,917




2,679,727

   Noncontrolling interests


(140,555)




(134,616)

      Total equity


2,825,362




2,545,111

      Total liabilities and equity

$

6,787,562



$

6,202,082

 

 

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)














Three Months Ended


Nine Months Ended


September 30,


September 30,


2016


2015


2016


2015













Operating activities:












   Net income

$

154,413


$

58,867


$

356,174


$

111,146













   Adjustments to reconcile net income to net cash provided by












      operating activities:












      Depreciation and amortization


74,190



74,211



222,970



221,306

      Equity-based compensation


5,924



5,332



21,565



20,232

      Deferred income taxes


18,478



13,130



53,879



46,214

      Changes in certain assets and liabilities:












         Accounts receivable


29,384



36,361



(149,810)



122,296

         Inventories


(76,013)



(8,763)



(102,339)



317,410

         Accounts payable


(49,171)



(62,757)



117,220



(127,075)

         Income taxes receivable/payable


(7,421)



19,888



40,960



29,309

         Other assets and liabilities


46,556



28,109



82,592



(32,541)

      Net cash provided by operating activities


196,340



164,378



643,211



708,297













Investing activities:












   Purchases of property, plant and equipment


(59,774)



(30,286)



(123,168)



(86,458)

   Acquisition of business, net of cash acquired


(109,065)



(45,000)



(109,065)



(45,000)

   Other investing activities


1,507



3,715



5,767



6,184

      Net cash used in investing activities


(167,332)



(71,571)



(226,466)



(125,274)













Financing activities:












   Issuance of current and long-term debt


12,911



67,999



97,018



179,033

   Repayment of current and long-term debt


(9,999)



(73,420)



(95,253)



(561,428)

   Dividends paid


(34,124)



(33,282)



(101,639)



(94,281)

   Stock option exercise proceeds, including related tax effect


1,028



302



7,603



7,261

   Other financing activities


(1)



(17)



(17)



(1,181)

      Net cash used in financing activities


(30,185)



(38,418)



(92,288)



(470,596)













Increase (decrease) in cash and equivalents


(1,177)



54,389



324,457



112,427

Cash and equivalents at beginning of period


1,052,666



419,401



727,032



361,363

Cash and equivalents at end of period

$

1,051,489


$

473,790


$

1,051,489


$

473,790

























Supplemental disclosure information:












   Cash paid for interest

$

26,225


$

26,701


$

97,605


$

115,345

   Cash paid (received) for federal and state income taxes, net

$

75,860


$

1,172


$

104,124


$

(10,321)

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/steel-dynamics-reports-third-quarter-2016-results-300347912.html

SOURCE Steel Dynamics, Inc.