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. |
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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 |
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# Includes ferrous cost per ton melted at our six electric-arc furnace steel mills |
SOURCE Steel Dynamics, Inc.
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