Steel Dynamics Reports Third Quarter 2017 Results
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FORT WAYNE, Ind., Oct. 18, 2017 /PRNewswire/ -- Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced third quarter 2017 financial results.  The company reported third quarter 2017 net sales of $2.4 billion and net income of $153 million, or $0.64 per diluted share, which includes debt refinancing and repayment charges of $0.02 per diluted share.  Excluding these items, the company's third quarter 2017 adjusted net income was $158 million, or $0.66 per diluted share.   

Comparatively, prior year third quarter net sales were $2.1 billion, with net income of $157 million, or $0.64 per diluted share, which includes a litigation settlement charge of approximately $5 million (pretax).  Excluding this item, prior year third quarter adjusted net income was $160 million, or $0.65 per diluted share.  Sequential second quarter 2017 net sales were $2.4 billion, with net income of $154 million, or $0.63 per diluted share.

"The team delivered a solid performance for the third quarter 2017 despite the continued high levels of steel imports," said Mark D. Millett, President and Chief Executive Officer. "Our third quarter 2017 income from operations was $271 million, a sequential increase of $6 million, and trailing twelve month adjusted EBITDA remained strong at $1.4 billion.

"Elevated levels of steel imports persisted during the quarter, hindering the ability for domestic steel prices to keep pace with raw material costs.  Despite reported low levels of steel service center inventory, we believe steel traders built inventory at the ports ahead of potential domestic trade actions, which resulted in an overhang position for flat roll steel during recent months.  This oversupply resulted in periods of weaker customer orders.  The increase in our sequential earnings was principally the result of improved engineered bar, structural and merchant steel shipments.  Underlying demand from the construction sector appeared to remain strong, and the energy sector was stable.  Conversely, demand from the domestic automotive sector softened, but our steel operations continue to gain market share somewhat mitigating the impact.   

"Third quarter 2017 operating income from our metals recycling platform aligned with the strong first half 2017 performance, derived from steady shipments and ferrous metal spread expansion as increased scrap exports supported higher average quarterly selling values. Earnings from our fabrication operations also improved in the quarter.  The fabrication group achieved another quarter of record shipments, and maintains a strong order backlog.  We believe this is a solid indicator that the non-residential construction market is continuing a positive growth profile," concluded Millett.

Additional Third Quarter 2017 Comments

Third quarter 2017 operating income for the company's steel operations increased two percent, or $6 million, to $280 million sequentially, based on higher shipments from our long products divisions outpacing metal spread compression.  The third quarter 2017 average external selling price for the company's steel operations decreased $1 to $778 per ton.  The average ferrous scrap cost per ton melted increased $2 to $305 per ton. 

Third quarter 2017 operating income attributable to the company's flat roll products decreased three percent when compared to the sequential second quarter, based on slightly lower shipments and metal spread compression, as average scrap costs increased more than average selling values.  Operating income from long products increased 34 percent as a result of a six percent increase in shipments, notably for engineered bar, structural and merchant steel products.  However, structural and merchant steel volumes still remain under pressure from excess domestic production capability, coupled with elevated import levels.  The company's steel production utilization rate was 92 percent in the third quarter 2017, compared to 91 percent in the sequential second quarter and compared to the estimated third quarter domestic industry utilization rate of 75 percent.    

Third quarter 2017 operating income from the company's metals recycling operations was $21 million, compared to $20 million in the sequential second quarter, as a result of improved average quarterly ferrous sales price and somewhat steady shipments. 

The company's fabrication operations recorded third quarter 2017 operating income of $22 million, compared to sequential second quarter results of $20 million.  The platform achieved a third consecutive quarter of record shipments and average product pricing remained steady. 

During the third quarter 2017, the company issued $350 million of new 4.125% senior notes due 2025 to repay $350 million of its existing 6.375% senior notes due 2022.  At September 30, 2017, the company had repaid $183 million of the existing senior notes, and repaid the remaining amount of $167 million on October 13, 2017.  After giving effect to the October repayment, total debt of $2.4 billion remained consistent with the sequential second quarter and liquidity remained strong at $2.1 billion, with $935 million in cash and $1.2 billion of available funding under the revolving credit facility. These transactions extended the company's overall debt maturity profile, and will provide an estimated annual interest savings of approximately $8 million.

Year-to-Date September 30, 2017 Comparison

For the nine months ended September 30, 2017, net income was $508 million, or $2.09 per diluted share, on net sales of $7.2 billion, as compared to net income of $362 million, or $1.48 per diluted share, on net sales of $5.9 billion for the same period in 2016.  Year-to-date 2017 net sales increased 23 percent.  Although all platforms experienced increased revenues, the overall improvement was driven by higher average steel product pricing and shipments.  Year-to-date 2017 operating income increased $199 million, or 30 percent, to $871 million, based on improved earnings of $183 million from the company's steel operations and $32 million from its metals recycling platform. The average year-to-date selling price for the company's steel operations increased $116 to $767 per ton.  The average year-to-date ferrous scrap cost per ton melted increased $71 to $291 per ton.  Additionally, the metals recycling operations continued to optimize administrative and operating costs, more than doubling operating income year-to-date 2017 compared to the same period in the prior year.

During the nine months ended September 30, 2017, the company generated strong cash flow from operations of $548 million and repurchased $237 million of its common stock.

Outlook   

"Despite a somewhat noisy market environment related to continued high levels of steel imports, we remain optimistic that macroeconomic and market conditions are in place to benefit domestic steel consumption in 2018," said Millett.  "Although U.S. automotive production has peaked, we believe North American automotive steel consumption will be steady, and that there will be continued additional growth in the energy and construction sectors, especially for larger, public sector infrastructure projects.

"We continue to reinvest in our existing facilities through equipment upgrades and further product diversification.  During the fourth quarter 2017, we plan to complete a $29 million replacement and upgrade of two ladle furnace cranes at our Butler Flat Roll Division, including a facility expansion to improve logistics.  We also plan to complete a $10 million upgrade of the hot strip mill at our Columbus Flat Roll Division, further diversifying our value-added flat roll steel product capabilities.  The planned upgrades require longer than typical outages, which will result in higher costs and lower shipments, reducing potential fourth quarter 2017 pretax earnings by an estimated $25 million.      

"Our financial position continues to strengthen 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 third quarter 2017 operating and financial results on Thursday, October 19, 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 October 24, 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


Nine Months Ended


Three Months


September 30,


September 30,


Ended


2017


2016


2017


2016


June 30, 2017
















Net sales

$

2,443,382


$

2,101,310


$

7,202,318


$

5,866,513


$

2,390,720

Costs of goods sold


2,046,864



1,692,807



5,941,128



4,841,591



1,998,202

      Gross profit


396,518



408,503



1,261,190



1,024,922



392,518
















Selling, general and administrative expenses


97,056



95,185



298,422



279,899



98,433

Profit sharing


21,175



22,255



69,714



51,722



21,308

Amortization of intangible assets


7,272



7,208



22,120



21,359



7,424

      Operating income


271,015



283,855



870,934



671,942



265,353
















Interest expense, net of capitalized interest


34,177



36,199



102,019



109,888



33,869

Other expense (income), net


2,526



4,351



(4,968)



741



(3,835)

      Income before income taxes


234,312



243,305



773,883



561,313



235,319
















Income tax expense


83,300



88,892



271,258



205,139



82,372

      Net income


151,012



154,413



502,625



356,174



152,947

Net loss attributable to noncontrolling interests


2,246



2,984



5,383



5,929



986

      Net income attributable to Steel Dynamics, Inc.

$

153,258


$

157,397


$

508,008


$

362,103


$

153,933































Basic earnings per share attributable to















   Steel Dynamics, Inc. stockholders

$

0.64


$

0.65


$

2.11


$

1.49


$

0.64
















Weighted average common shares outstanding


239,066



243,761



241,117



243,539



241,343
















Diluted earnings per share attributable to















   Steel Dynamics, Inc. stockholders, including the effect















   of assumed conversions when dilutive

$

0.64


$

0.64


$

2.09


$

1.48


$

0.63
















Weighted average common shares















   and share equivalents outstanding


240,880



245,682



242,816



245,227



243,021































Dividends declared per share

$

0.155


$

0.1400


$

0.465


$

0.4200


$

0.155


 

 

Steel Dynamics, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)









September 30,



December 31,

Assets

2017



2016


(unaudited)





Current assets







   Cash and equivalents

$

1,101,964



$

841,483

   Accounts receivable, net


923,017




729,784

   Inventories


1,487,516




1,275,211

   Other current assets


59,648




83,197

      Total current assets


3,572,145




2,929,675








Property, plant and equipment, net


2,708,777




2,787,215








Restricted cash


17,092




18,060








Intangible assets, net


263,357




283,977








Goodwill


388,518




393,351








Other assets


10,848




11,454

      Total assets

$

6,960,737



$

6,423,732








Liabilities and Equity







Current liabilities







   Accounts payable

$

528,683



$

395,196

   Income taxes payable


5,596




5,593

   Accrued expenses


349,589




308,394

   Current maturities of long-term debt


182,661




3,632

      Total current liabilities


1,066,529




712,815








Long-term debt


2,351,483




2,353,194








Deferred income taxes


461,399




448,375








Other liabilities


20,305




20,649

      Total liabilities


3,899,716




3,535,033








Commitments and contingencies














Redeemable noncontrolling interests


111,240




111,240








Equity







   Common stock


641




641

   Treasury stock, at cost


(650,210)




(416,829)

   Additional paid-in capital


1,147,463




1,132,749

   Retained earnings


2,606,831




2,210,459

      Total Steel Dynamics, Inc. equity


3,104,725




2,927,020

   Noncontrolling interests


(154,944)




(149,561)

      Total equity


2,949,781




2,777,459

      Total liabilities and equity

$

6,960,737



$

6,423,732

 

 

 

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)














Three Months Ended


Nine Months Ended


September 30,


September 30,


2017


2016


2017


2016













Operating activities:












   Net income

$

151,012


$

154,413


$

502,625


$

356,174













   Adjustments to reconcile net income to net cash provided by












      operating activities:












      Depreciation and amortization


75,210



74,190



224,068



222,970

      Equity-based compensation


6,875



5,946



24,558



23,716

      Deferred income taxes


3,284



18,478



17,849



53,879

      Other adjustments


8,202



161



8,055



1,376

      Changes in certain assets and liabilities:












         Accounts receivable


(36,123)



29,384



(193,233)



(149,810)

         Inventories


(67,285)



(76,013)



(211,726)



(102,339)

         Other assets


(9,234)



694



(1,703)



11,855

         Accounts payable


44,887



(49,171)



133,251



117,220

         Income taxes receivable/payable


(12,929)



(7,421)



5,803



40,960

         Accrued expenses


62,249



45,701



38,058



69,361

      Net cash provided by operating activities


226,148



196,362



547,605



645,362













Investing activities:












   Purchases of property, plant and equipment


(42,795)



(59,774)



(127,746)



(123,168)

   Acquisition of businesses, net of cash acquired


(5,518)



(109,065)



(5,518)



(109,065)

   Other investing activities


1,081



1,507



30,386



5,767

      Net cash used in investing activities


(47,232)



(167,332)



(102,878)



(226,466)













Financing activities:












   Issuance of current and long-term debt


450,215



12,911



501,448



97,018

   Repayment of current and long-term debt


(294,913)



(9,999)



(331,339)



(95,253)

   Dividends paid


(37,180)



(34,124)



(108,837)



(101,639)

   Purchase of treasury stock


(99,085)



-



(237,154)



-

   Other financing activities


(4,832)



1,005



(8,364)



5,435

      Net cash provided by (used in) financing activities


14,205



(30,207)



(184,246)



(94,439)













Increase (decrease) in cash and equivalents


193,121



(1,177)



260,481



324,457

Cash and equivalents at beginning of period


908,843



1,052,666



841,483



727,032

Cash and equivalents at end of period

$

1,101,964


$

1,051,489


$

1,101,964


$

1,051,489

























Supplemental disclosure information:












   Cash paid for interest

$

13,530


$

26,225


$

80,155


$

97,605

   Cash paid for income taxes, net

$

93,123


$

75,860


$

246,793


$

104,124

 

 

Steel Dynamics, Inc.






SUPPLEMENTAL INFORMATION






(dollars in thousands)





























Third Quarter



Year to Date











2017



2016



2017



2016



1Q 2017



2Q 2017


External Net Sales





   Steel


$

1,782,805


$

1,557,502


$

5,262,380


$

4,241,382


$

1,721,333


$

1,758,242


   Fabrication



211,305



177,429



603,267



528,026



194,096



197,866


   Metals Recycling



348,215



306,092



1,055,580



886,559



363,836



343,529


   Other



101,057



60,287



281,091



210,546



88,951



91,083


Consolidated


$

2,443,382


$

2,101,310


$

7,202,318


$

5,866,513


$

2,368,216


$

2,390,720






















Operating Income




















   Steel


$

280,285


$

311,127


$

906,526


$

723,348


$

352,423


$

273,818


   Fabrication



21,903



17,814



65,858



73,401



23,767



20,188


   Metals Recycling



21,118



9,747



62,447



30,793



21,341



19,988


Operations



323,306



338,688



1,034,831



827,542



397,531



313,994






















Non-cash Amortization of Intangible Assets



(7,272)



(7,208)



(22,120)



(21,359)



(7,424)



(7,424)


Profit Sharing Expense



(21,175)



(22,255)



(69,714)



(51,722)



(27,231)



(21,308)


Non-segment Operations



(23,844)



(25,370)



(72,063)



(82,519)



(28,310)



(19,909)


Consolidated Operating Income


$

271,015


$

283,855


$

870,934


$

671,942


$

334,566



265,353










































Adjusted EBITDA




















      Earnings Before Taxes


$

234,312


$

243,305


$

773,883


$

561,313


$

304,252


$

235,319


      Net Interest Expense



31,298



34,867



95,260



106,396



32,333



31,629


      Depreciation



66,574



65,473



197,857



197,082



66,269



65,014


      Amortization of Intangible Assets



7,272



7,208



22,120



21,359



7,424



7,424


      Non-controlling Interest



2,246



2,984



5,383



5,929



2,152



985


 EBITDA



341,702



353,837



1,094,503



892,079



412,430



340,371


      Non-cash Adjustments




















         Unrealized Hedging (Gain) Loss



(2,724)



(880)



(2,637)



627



(637)



724


         Inventory Valuation


236



405



2,757



832



162



2,359


         Equity-based Compensation



6,875



5,895



22,924



20,161



9,074



6,975


         Financing Expenses



1,393



-



1,393



-



-



-


Adjusted EBITDA


$

347,482


$

359,257


$

1,118,940


$

913,699


$

421,029


$

350,429










































Other Operating Information




















   Steel




















      Average External Sales Price (Per ton)


$

778


$

740


$

767


$

651


$

743


$

779


      Average Ferrous Cost (Per ton melted)


$

305


$

251


$

291


$

220


$

264


$

303






















      Flat Roll Shipments



1,733,006



1,620,794



5,206,364



5,065,932



1,735,954



1,737,404


      Long Product Shipments




















         Structural and Rail Division



337,985



330,694



999,961



980,286



350,555



311,421


         Engineered Bar Products Division



192,448



110,633



565,375



358,426



192,140



180,787


         Roanoke Bar Division



120,652



119,555



362,752



384,801



125,869



116,231


         Steel of West Virginia



74,901



75,080



228,184



235,882



77,229



76,054


Total Shipments (Tons)



2,458,992



2,256,756



7,362,636



7,025,327



2,481,747



2,421,897






















External Shipments (Tons)



2,279,229



2,104,219



6,830,878



6,517,253



2,305,080



2,246,569






















         Steel Production (Tons)



2,536,990



2,341,659



7,557,231



7,266,265



2,544,082



2,476,159






















   Metals Recycling




















      Total Nonferrous Shipments (000's of pounds)



261,716



280,107



815,763



828,715



283,603



270,444


      Total Ferrous Shipments (Gross tons)



1,219,582



1,243,277



3,780,958



3,894,755



1,338,599



1,222,777


External Ferrous Shipments (Gross tons)



462,683



468,498



1,414,603



1,511,532



485,414



466,506






















   Fabrication




















      Average External Sales Price (Per ton)


$

1,317


$

1,253


$

1,306


$

1,232


$

1,291


$

1,311


      Total Shipments (Tons)



160,482



142,585



461,936



430,539



150,402



151,052


 

 

 

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SOURCE Steel Dynamics, Inc.

10/18/2017 6:00:00 PM