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Steel Dynamics Reports First Quarter 2019 Results

Apr 22, 2019

FORT WAYNE, Ind., April 22, 2019 /PRNewswire/ — Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced first quarter 2019 financial results.  The company reported first quarter 2019 net sales of $2.8 billion and net income of $204 million, or $0.91 per diluted share. 

Comparatively, prior year first quarter net income was $228 million, or $0.96 per diluted share, with net sales of $2.6 billion.  Sequential fourth quarter 2018 net income was $270 million, or $1.17 per diluted share, which included additional company-wide performance-based compensation of $0.04 per diluted share and lower earnings of $0.10 per diluted share, associated with planned maintenance outages at the company’s liquid pig iron production facility and its two flat roll steel mills.  Excluding these items, the company’s fourth quarter adjusted net income was $302 million, or $1.31 per diluted share. 

“The team delivered a strong first quarter performance in a somewhat challenging flat roll steel pricing environment,” said Mark D. Millett, President and Chief Executive Officer.  “A downward trend in flat roll steel prices began in the second half of 2018, and continued through mid-first quarter 2019, reaching an inflection point in February 2019.  The teams were able to increase shipments and offset some of the margin compression, resulting in first quarter 2019 consolidated operating income of $292 million and adjusted EBITDA of $382 million.  The continued stabilization and improvement in flat roll steel prices are having a positive impact, resulting in increased flat roll order activity and solid order backlogs.  We are seeing continued strength in the automotive, energy and industrial sectors, and as evidenced by strong steel fabrication backlogs, strength in non-residential construction.” 

The company generated cash flow from operations of $182 million during the first quarter 2019 and maintained liquidity of $2.2 billion at March 31, 2019.  On March 1, 2019, the company used available cash of $93 million to fund the purchase of a 75 percent controlling interest of United Steel Supply, a leading distributor of painted Galvalume® flat roll steel used for roofing and siding applications. 

As evidence of the confidence in the company’s sustainable long-term cash flow generation capability, the board of directors approved a 28 percent increase in the company’s first quarter 2019 cash dividend, reflecting the strength of the company’s capital foundation and liquidity profile.  The company also repurchased $84 million of its common stock during the first quarter of 2019.

2019 Comments

First quarter 2019 operating income for the company’s steel operations was $312 million, or 22 percent lower than sequential fourth quarter 2018 results.  The decline in earnings resulted from metal spread compression driven by lower flat roll steel pricing, which more than offset increased overall steel shipments.  The first quarter 2019 average product selling price for the company’s steel operations decreased $38 to $902 per ton.  The average ferrous scrap cost per ton melted only decreased $5 to $338 per ton.

First quarter 2019 operating income from the company’s metals recycling operations increased to $20 million, compared to $17 million in the sequential fourth quarter, based on improved recycled nonferrous shipments and average pricing.  Conversely, recycled ferrous shipments and metal spread declined modestly in the quarter.

First quarter 2019 operating income from the company’s steel fabrication operations was a strong $21 million, or 39 percent higher than sequential fourth quarter results.  Earnings improved as higher product pricing and lower raw material steel input costs, resulted in expanded profit margins which more than offset lower shipments related to inclement weather conditions that occurred during the first quarter.  The steel fabrication platform order backlog remains strong, and customers remain optimistic concerning non-residential construction projects heading into the summer season.  

Outlook   

“We believe the market dynamics are in place for domestic steel consumption to continue to increase this year,” said Millett.  “Based on domestic steel demand fundamentals and continued customer optimism, we believe North American steel consumption will experience steady growth.  In combination with our existing and newly announced expansion initiatives, we believe there are firm drivers for our continued growth.  We are excited about our planned flat roll steel mill, and the anticipated long-term value creation it will bring through geographic and value-added product diversification. We plan for the new steel mill to have product capabilities beyond existing EAF flat roll steel producers today, competing even more effectively with the integrated steel model and foreign competition.  We have targeted regional markets that represent over 27 million tons of relevant flat roll steel consumption, which includes the growing Mexican flat roll market.  This facility should have a meaningful competitive advantage in those regions.  

“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 long-term shareholder value through organic and transactional growth opportunities,” concluded Millett.

Conference Call and Webcast

Steel Dynamics, Inc. will hold a conference call to discuss first quarter 2019 operating and financial results on Monday, April 22, 2019, at 10:00 a.m. Eastern Daylight 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 Daylight Time on April 27, 2019.

About Steel Dynamics, Inc.

Steel Dynamics 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 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 and Adjusted 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, manufacturing, appliance, pipe and tube, and other steel-consuming industries; (4) fluctuations in the cost of key raw materials and supplies (including steel scrap, iron units, zinc, graphite electrodes, 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 or assets; (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

Three Months Ended

Ended

March 31,

December 31,

2019

2018

2018

Net sales

$

2,817,435

$

2,603,875

$

2,903,892

Costs of goods sold

2,383,865

2,140,459

2,382,657

      Gross profit

433,570

463,416

521,235

Selling, general and administrative expenses

111,038

106,431

106,564

Profit sharing

23,677

26,662

41,684

Amortization of intangible assets

7,013

6,926

7,434

      Operating income

291,842

323,397

365,553

Interest expense, net of capitalized interest

31,122

31,896

31,652

Other expense (income), net

(6,343)

(4,463)

(7,384)

      Income before income taxes

267,063

295,964

341,285

Income tax expense

62,236

70,489

71,433

      Net income

204,827

225,475

269,852

Net (income) loss attributable to noncontrolling interests

(499)

2,076

152

      Net income attributable to Steel Dynamics, Inc.

$

204,328

$

227,551

$

270,004

Basic earnings per share attributable to

   Steel Dynamics, Inc. stockholders

$

0.91

$

0.96

$

1.18

Weighted average common shares outstanding

224,058

236,623

229,245

Diluted earnings per share attributable to

   Steel Dynamics, Inc. stockholders, including the effect

   of assumed conversions when dilutive

$

0.91

$

0.96

$

1.17

Weighted average common shares

   and share equivalents outstanding

224,962

237,723

230,455

Dividends declared per share

$

0.2400

$

0.1875

$

0.1875

 

 

Steel Dynamics, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)

March 31,

December 31,

Assets

2019

2018

(unaudited)

Current assets

   Cash and equivalents

$

791,444

$

828,220

   Short-term investments

173,723

228,783

   Accounts receivable, net

1,143,395

1,043,756

   Inventories

1,867,700

1,859,168

   Other current assets

52,628

72,730

      Total current assets

4,028,890

4,032,657

Property, plant and equipment, net

2,936,893

2,945,767

Intangible assets, net

263,315

270,328

Goodwill

530,716

429,645

Other assets

97,419

25,166

      Total assets

$

7,857,233

$

7,703,563

Liabilities and Equity

Current liabilities

   Accounts payable

$

591,467

$

550,754

   Income taxes payable

26,896

7,468

   Accrued expenses

303,769

436,681

   Current maturities of long-term debt

80,958

24,234

      Total current liabilities

1,003,090

1,019,137

Long-term debt

2,354,427

2,352,489

Deferred income taxes

447,087

435,838

Other liabilities

63,171

8,870

      Total liabilities

3,867,775

3,816,334

Commitments and contingencies

Redeemable noncontrolling interests

139,930

111,240

Equity

   Common stock

645

645

   Treasury stock, at cost

(1,261,837)

(1,184,243)

   Additional paid-in capital

1,160,139

1,160,048

   Retained earnings

4,109,034

3,958,320

   Accumulated other comprehensive income

130

301

      Total Steel Dynamics, Inc. equity

4,008,111

3,935,071

   Noncontrolling interests

(158,583)

(159,082)

      Total equity

3,849,528

3,775,989

      Total liabilities and equity

$

7,857,233

$

7,703,563

 

 

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Three Months Ended

March 31,

2019

2018

Operating activities:

   Net income

$

204,827

$

225,475

   Adjustments to reconcile net income to net cash provided by

      operating activities:

      Depreciation and amortization

80,174

76,135

      Equity-based compensation

15,308

12,841

      Deferred income taxes

12,091

9,545

      Other adjustments

728

30

      Changes in certain assets and liabilities:

         Accounts receivable

(61,062)

(118,818)

         Inventories

39,469

(80,711)

         Other assets

301

(105)

         Accounts payable

3,206

66,332

         Income taxes payable, net

49,850

63,962

         Accrued expenses

(163,339)

(76,751)

      Net cash provided by operating activities

181,553

177,935

Investing activities:

   Purchases of property, plant and equipment

(54,436)

(50,606)

   Purchases of short-term investments

(49,677)

(40,000)

   Proceeds from maturities of short-term investments

104,737

   Acquisition of business, net of cash and restricted cash acquired

(93,412)

   Other investing activities

364

229

      Net cash used in investing activities

(92,424)

(90,377)

Financing activities:

   Issuance of current and long-term debt

121,234

93,058

   Repayment of current and long-term debt

(115,271)

(113,034)

   Dividends paid

(42,239)

(36,797)

   Purchase of treasury stock

(84,308)

(69,269)

   Other financing activities

(5,720)

(5,180)

      Net cash used in financing activities

(126,304)

(131,222)

Decrease in cash, cash equivalents, and restricted cash

(37,175)

(43,664)

Cash, cash equivalents, and restricted cash at beginning of period

834,423

1,035,085

Cash, cash equivalents, and restricted cash at end of period

$

797,248

$

991,421

Supplemental disclosure information:

   Cash paid for interest

$

8,606

$

8,629

   Cash paid (received) for income taxes, net

$

1,839

$

(1,045)

 

 

 

Steel Dynamics, Inc.

SUPPLEMENTAL INFORMATION

(dollars in thousands)

First Quarter

2019

2018

4Q 2018

External Net Sales

   Steel

$

2,124,570

$

1,921,790

$

2,198,459

   Fabrication

228,480

201,492

251,592

   Metals Recycling

351,137

388,122

352,555

   Other

113,248

92,471

101,286

Consolidated

$

2,817,435

$

2,603,875

$

2,903,892

Operating Income

   Steel

$

312,437

$

338,357

$

402,252

   Fabrication

20,663

19,832

14,902

   Metals Recycling

19,958

27,805

16,954

      Operations

353,058

385,994

434,108

   Non-cash amortization of intangible assets

(7,013)

(6,926)

(7,434)

   Profit sharing expense

(23,677)

(26,662)

(41,684)

   Non-segment operations

(30,526)

(29,009)

(19,437)

Consolidated Operating Income

$

291,842

$

323,397

$

365,553

Adjusted EBITDA

      Net income

$

62,236

$

70,489

$

71,433

      Income taxes

204,827

225,475

269,852

      Net interest expense

24,017

27,482

24,738

      Depreciation

71,846

67,823

71,765

      Amortization of intangible assets

7,013

6,926

7,434

      Non-controlling interest

(499)

2,077

151

EBITDA

369,440

400,272

445,373

      Non-cash adjustments

         Unrealized hedging (gain) loss

1,742

(9,956)

(2,510)

         Inventory valuation

241

200

666

         Equity-based compensation

10,619

9,580

14,457

Adjusted EBITDA

$

382,042

$

400,096

$

457,986

Other Operating Information

   Steel

      Average external sales price (Per ton) *

$

902

$

822

$

940

      Average ferrous cost (Per ton melted) #

$

338

$

321

$

343

      Flat Roll shipments

         Butler and Columbus Flat Roll Divisions

1,526,851

1,548,814

1,493,894

         Techs, Heartland, and USS Divisions

330,775

194,762

262,642

      Long Product shipments

         Structural and Rail Division

376,263

368,783

389,107

         Engineered Bar Products Division

206,874

215,150

217,646

         Roanoke Bar Division

152,400

123,403

150,607

         Steel of West Virginia

91,248

83,732

70,367

Total shipments (Tons)

2,684,411

2,534,644

2,584,263

External shipments (Tons) *

2,347,209

2,327,515

2,328,420

Steel production (Tons) *

2,745,128

2,601,200

2,677,613

   Metals Recycling

      Nonferrous shipments (000’s of pounds)

292,038

271,628

278,418

      Ferrous shipments (Gross tons)

1,171,361

1,256,899

1,215,474

            External ferrous shipments (Gross tons)

382,841

436,990

414,941

   Fabrication

      Average external sales price (Per ton)

$

1,575

$

1,345

$

1,550

      Shipments (Tons)

145,222

149,926

162,292

*  Includes all steel operations

#  Includes ferrous cost per ton melted at our six electric-arc furnace steel mills

 

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SOURCE Steel Dynamics, Inc.