Steel Dynamics Reports Second Quarter 2017 Results
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FORT WAYNE, Ind., July 19, 2017 /PRNewswire/ -- Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced second quarter 2017 financial results.  The company reported second quarter 2017 net income of $154 million, or $0.63 per diluted share, with net sales of $2.4 billion.  Comparatively, prior year second quarter net income was $142 million, or $0.58 per diluted share, with net sales of $2.0 billion.  Sequential first quarter 2017 net income was $201 million, or $0.82 per diluted share, with net sales of $2.4 billion.

"The team delivered a solid performance for the second quarter 2017 despite hesitant customer order entry and significantly higher quarter-over-quarter steel imports," said Mark D. Millett, President and Chief Executive Officer. "Our second quarter 2017 income from operations was $265 million with a trailing twelve month adjusted EBITDA record of $1.4 billion.   The decrease in sequential quarterly earnings was principally driven by our flat roll operations, as increased average scrap costs outpaced average sales price growth.  As mentioned in our mid-quarter guidance, we had a planned galvanizing line upgrade at our Butler Flat Roll Division and also experienced some start-up issues at our new Columbus Flat Roll Division paint line, which increased expenses and decreased value-added flat roll shipments in the quarter. 

"We believe the customer order hesitancy was related to anticipated scrap price changes rather than any underlying softness in demand.  Additionally, customer inventory levels continued to be positioned at historically low levels.  Steel demand from the automotive sector remained steady, as the construction and energy sectors continued to improve," continued Millett.   

"Second quarter 2017 operating income from our metals recycling platform remained aligned with the strong first quarter performance, in spite of somewhat lower shipments and metal spread, as the team continued to optimize costs throughout the business," continued Millett. "The fabrication group achieved another quarter of record shipments, a solid indicator that the non-residential construction market is continuing a positive growth profile."

Additional Second Quarter 2017 Comments

Second quarter 2017 operating income for the company's steel operations decreased 22 percent, or $79 million, to $274 million sequentially, primarily related to two operational items within the flat roll operations and overall metal spread compression.  During the second quarter 2017, the company further modernized one of its galvanizing lines located at its Butler Flat Roll Division, while also expanding the line's annual value-added production capability by an additional 180,000 tons.  The upgrade required the line to be down for three weeks in May.  Additionally, the company experienced quality issues related to the start-up of its new Galvalume and paint line at its Columbus Flat Roll Division, resulting in line downtime.  Combined, these two items resulted in higher costs and lower value-added shipments, reducing potential second quarter 2017 pretax earnings by an estimated $30 million

The company's average steel product price increased less than consumed raw material scrap costs, resulting in steel metal spread compression.  The second quarter 2017 average product selling price for the company's steel operations increased $36 to $779 per ton.  The average ferrous scrap cost per ton melted increased $39 to $303 per ton.

Second quarter 2017 operating income attributable to the company's flat roll products decreased 22 percent when compared to the sequential first quarter.  Operating income from long products decreased 24 percent as a result of an eight percent decrease in shipments, most significantly from the company's Structural and Rail Division, despite record quarterly rail shipments.  Structural and merchant steel volumes remain under pressure from excess domestic production capability, coupled with elevated import levels.  The company's steel production utilization rate was 91 percent in the second quarter 2017, compared to 95 percent in the sequential first quarter and compared to the estimated second quarter domestic industry utilization rate of 74 percent.                              

Second quarter 2017 operating income from the company's metals recycling operations was $20 million, compared to $21 million in the sequential first quarter.  Higher average sales prices were offset by lower shipments, related in part to the company's sale of certain southeastern U.S. locations at the end of the first quarter 2017. 

The company's fabrication operations recorded second quarter 2017 operating income of $20 million, compared to sequential first quarter results of $24 million.  The platform achieved a second consecutive quarter of record shipments.  However, metal spread compression based on higher average steel input costs more than offset the improved volume.

Year-to-Date June 30, 2017 Comparison

For the six months ended June 30, 2017, net income was $355 million, or $1.46 per diluted share, on net sales of $4.8 billion, as compared to net income of $205 million, or $0.84 per diluted share, on net sales of $3.8 billion for the same period in 2016.  First half 2017 net sales increased 26 percent.  Although all platforms experienced improved revenues, the improvement was driven by higher average steel product pricing.  First half 2017 operating income increased $212 million, or 55 percent, to $600 million, based on improved earnings from the company's steel operations. The average year-to-date selling price for the company's steel operations increased $153 to $761 per ton.  The average year-to-date ferrous scrap cost per ton melted increased $77 to $283 per ton. 

During the first half of 2017, the company generated strong cash flow from operations of $321 million and maintained liquidity of $2.1 billion at June 30, 2017.  The company also repurchased $138 million of its common stock during the first half of 2017.

Outlook 

"We remain optimistic that macroeconomic and market conditions are in place to benefit domestic steel consumption in the coming years," said Millett.  "Although U.S. automotive production has peaked, we believe North American automotive steel consumption will be steady, and that there will be additional growth in the energy and construction sectors, especially for larger, public sector infrastructure projects. 

"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 second quarter 2017 operating and financial results on Thursday, July 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 July 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.

 

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)


















Three Months Ended


Six Months Ended


Three Months


June 30,


June 30,


Ended


2017


2016


2017


2016


March 31, 2017
















Net sales

$

2,390,720


$

2,023,902


$

4,758,936


$

3,765,203


$

2,368,216

Costs of goods sold


1,998,202



1,643,519



3,894,264



3,148,784



1,896,062

      Gross profit


392,518



380,383



864,672



616,419



472,154
















Selling, general and administrative expenses


98,433



96,853



201,366



184,383



102,933

Profit sharing


21,308



20,176



48,539



29,467



27,231

Amortization of intangible assets


7,424



7,232



14,848



14,482



7,424

      Operating income


265,353



256,122



599,919



388,087



334,566
















Interest expense, net of capitalized interest


33,869



36,646



67,842



73,689



33,973

Other expense (income), net


(3,835)



(1,818)



(7,494)



(3,610)



(3,659)

      Income before income taxes


235,319



221,294



539,571



318,008



304,252
















Income tax expense


82,372



80,851



187,958



116,247



105,586

      Net income


152,947



140,443



351,613



201,761



198,666

Net loss attributable to noncontrolling interests


986



1,526



3,137



2,945



2,151

      Net income attributable to Steel Dynamics, Inc.

$

153,933


$

141,969


$

354,750


$

204,706


$

200,817































Basic earnings per share attributable to















   Steel Dynamics, Inc. stockholders

$

0.64


$

0.58


$

1.47


$

0.84


$

0.83
















Weighted average common shares outstanding


241,343



243,655



242,143



243,429



242,943
















Diluted earnings per share attributable to















   Steel Dynamics, Inc. stockholders, including the effect















   of assumed conversions when dilutive

$

0.63


$

0.58


$

1.46


$

0.84


$

0.82
















Weighted average common shares















   and share equivalents outstanding


243,021



245,392



243,784



245,000



244,546































Dividends declared per share

$

0.155


$

0.140


$

0.310


$

0.280


$

0.155


 

 

Steel Dynamics, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)










June 30,



December 31,

Assets

2017



2016


(unaudited)





Current assets







   Cash and equivalents

$

908,843



$

841,483

   Accounts receivable, net


886,894




729,784

   Inventories


1,418,732




1,275,211

   Other current assets


37,188




83,197

      Total current assets


3,251,657




2,929,675








Property, plant and equipment, net


2,729,721




2,787,215








Restricted cash


17,373




18,060








Intangible assets, net


269,129




283,977








Goodwill


390,129




393,351








Other assets


12,121




11,454

      Total assets

$

6,670,130



$

6,423,732

Liabilities and Equity







Current liabilities







   Accounts payable

$

484,003



$

395,196

   Income taxes payable


5,589




5,593

   Accrued expenses


286,329




308,394

   Current maturities of long-term debt


19,971




3,632

      Total current liabilities


795,892




712,815








Long-term debt


2,354,337




2,353,194








Deferred income taxes


459,639




448,375








Other liabilities


20,781




20,649

      Total liabilities


3,630,649




3,535,033








Commitments and contingencies














Redeemable noncontrolling interests


111,240




111,240








Equity







   Common stock


641




641

   Treasury stock, at cost


(551,125)




(416,829)

   Additional paid-in capital


1,141,050




1,132,749

   Retained earnings


2,490,373




2,210,459

      Total Steel Dynamics, Inc. equity


3,080,939




2,927,020

   Noncontrolling interests


(152,698)




(149,561)

      Total equity


2,928,241




2,777,459

      Total liabilities and equity

$

6,670,130



$

6,423,732

 

 

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


























Three Months Ended


Six Months Ended


June 30,


June 30,


2017


2016


2017


2016













Operating activities:












   Net income

$

152,947


$

140,443


$

351,613


$

201,761













   Adjustments to reconcile net income to net cash provided by












      operating activities:












      Depreciation and amortization


73,801



74,795



148,858



148,780

      Equity-based compensation


6,380



7,236



17,683



17,770

      Deferred income taxes


6,849



18,314



14,565



35,401

      Other adjustments


(43)



1,035



(147)



1,215

      Changes in certain assets and liabilities:












         Accounts receivable


(3,746)



(103,598)



(157,110)



(179,194)

         Inventories


(57,622)



(108,893)



(144,441)



(26,326)

         Other assets


5,418



10,613



7,531



11,161

         Accounts payable


(45,445)



53,732



88,364



166,391

         Income taxes receivable/payable


(77,587)



34,388



18,732



48,381

         Accrued expenses


20,056



29,907



(24,191)



23,660

      Net cash provided by operating activities


81,008



157,972



321,457



449,000













Investing activities:












   Purchases of property, plant and equipment


(43,274)



(35,686)



(84,951)



(63,394)

   Other investing activities


2,387



1,206



29,305



4,260

      Net cash used in investing activities


(40,887)



(34,480)



(55,646)



(59,134)













Financing activities:












   Issuance of current and long-term debt


51,233



63,655



51,233



84,107

   Repayment of current and long-term debt


(34,997)



(81,022)



(36,426)



(85,254)

   Dividends paid


(37,527)



(34,090)



(71,657)



(67,515)

   Purchase of treasury stock


(76,813)



-



(138,069)



-

   Other financing activities


-



3,680



(3,532)



4,430

      Net cash used in financing activities


(98,104)



(47,777)



(198,451)



(64,232)













Increase (decrease) in cash and equivalents


(57,983)



75,715



67,360



325,634

Cash and equivalents at beginning of period


966,826



976,951



841,483



727,032

Cash and equivalents at end of period

$

908,843


$

1,052,666


$

908,843


$

1,052,666

























Supplemental disclosure information:












   Cash paid for interest

$

53,976


$

45,094


$

66,625


$

71,380

   Cash paid for income taxes, net

$

152,116


$

27,565


$

153,670


$

28,264

 

 

Steel Dynamics, Inc.

SUPPLEMENTAL INFORMATION

(dollars in thousands)






















Second Quarter



Year to Date








2017



2016



2017



2016



1Q 2017


External Net Sales





   Steel


$

1,758,242


$

1,466,704


$

3,479,575


$

2,683,880


$

1,721,333


   Fabrication



197,866



170,542



391,962



350,597



194,096


   Metals Recycling



343,529



311,060



707,365



580,467



363,836


   Other



91,083



75,596



180,034



150,259



88,951


Consolidated


$

2,390,720


$

2,023,902


$

4,758,936


$

3,765,203


$

2,368,216



















Operating Income

















   Steel


$

273,818


$

276,529


$

626,241


$

412,221


$

352,423


   Fabrication



20,188



23,512



43,955



55,587



23,767


   Metals Recycling



19,988



14,686



41,329



21,046



21,341


Operations



313,994



314,727



711,525



488,854



397,531



















Non-cash Amortization of Intangible Assets



(7,424)



(7,051)



(14,848)



(14,151)



(7,424)


Profit Sharing Expense



(21,308)



(20,176)



(48,539)



(29,467)



(27,231)


Non-segment Operations



(19,909)



(31,378)



(48,219)



(57,149)



(28,310)


Consolidated Operating Income


$

265,353


$

256,122


$

599,919


$

388,087


$

334,566




































Adjusted EBITDA

















      Earnings Before Taxes


$

235,319


$

221,294


$

539,571


$

318,008


$

304,252


      Net Interest Expense



31,629



35,379



63,962



71,529



32,333


      Depreciation



65,014



66,234



131,283



131,609



66,269


      Amortization of Intangible Assets



7,424



7,051



14,848



14,151



7,424


      Non-controlling Interest



985



1,526



3,137



2,945



2,152


EBITDA



340,371



331,484



752,801



538,242



412,430


      Non-cash Adjustments

















         Unrealized Hedging (Gain) Loss



724



1,188



87



1,507



(637)


         Inventory Valuation


2,359



235



2,521



427



162


         Equity-based Compensation



6,975



7,287



16,049



14,266



9,074


Adjusted EBITDA


$

350,429


$

340,194


$

771,458


$

554,442


$

421,029




































Other Operating Information

















   Steel

















      Average External Sales Price (Per ton)


$

779


$

640


$

761


$

608


$

743


      Average Ferrous Cost (Per ton melted)


$

303


$

227


$

283


$

206


$

264



















      Flat Roll Shipments



1,737,404



1,787,797



3,473,358



3,445,138



1,735,954


      Long Product Shipments

















         Structural and Rail Division



311,421



356,604



661,976



649,592



350,555


         Engineered Bar Products Division



180,787



122,593



372,927



247,793



192,140


         Roanoke Bar Division



116,231



139,775



242,100



265,246



125,869


         Steel of West Virginia



76,054



84,593



153,283



160,802



77,229


Total Shipments (Tons)



2,421,897



2,491,362



4,903,644



4,768,571



2,481,747



















External Shipments (Tons)



2,246,569



2,291,162



4,551,649



4,413,034



2,305,080



















   Metals Recycling

















      Total Nonferrous Shipments (000's of pounds)



270,444



278,198



554,047



548,608



283,603


      Total Ferrous Shipments (Gross tons)



1,222,777



1,346,324



2,561,376



2,651,478



1,338,599


 External Ferrous Shipments (Gross tons)



466,506



539,247



951,920



1,043,034



485,414



















   Fabrication

















      Average External Sales Price (Per ton)


$

1,311


$

1,202


$

1,301


$

1,222


$

1,291


      Total Shipments (Tons)



151,052



142,828



301,454



287,954



150,402


 

 

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SOURCE Steel Dynamics, Inc.

7/19/2017 6:00:00 PM