Steel Dynamics Reports Fourth Quarter 2012 Diluted Earnings Per Share of $0.27
FORT WAYNE, INDIANA, January 28, 2013 / PRNewswire / Steel Dynamics, Inc. (NASDAQ/GS: STLD) today
announced fourth quarter 2012 net income of $61 million, or $0.27 per diluted share, on net sales of $1.7
billion. By comparison, prior year fourth quarter net income was $30 million, or $0.14 per diluted share, on
net sales of $1.9 billion, and sequential third quarter 2012 net income was $13 million, or $0.06 per diluted
share, on net sales of $1.7 billion. Full-year 2012 net income was $164 million, or $0.73 per diluted share, on
net sales of $7.3 billion, compared to prior year net income of $278 million, or $1.22 per diluted share, on net
sales of $8.0 billion.
Fourth quarter 2012 results included certain positive tax adjustments of $16 million, or $0.07 per diluted
share, which was slightly higher than the company’s previous estimate for the adjustments of $0.06 per
diluted share. Excluding these adjustments the company’s fourth quarter effective tax rate was 39.5 percent.
“Similar to the rest of 2012, the fourth quarter was challenging on a number of fronts,” said President and
Chief Executive Officer, Mark Millett, “but the team did a great job. We are pleased our fourth quarter
financial performance was stronger than originally anticipated. On a sequential quarterly basis our operating
income increased 31 percent to $95 million, primarily driven by improvements in our metals recycling and
sheet steel operations.
“In our December guidance, we suggested that metals recycling was expected to deliver a stronger financial
performance in the fourth quarter, and the team’s execution was even better than anticipated,” stated
Millett. “Sequential quarterly operating income increased 56 percent to $26 million, as meaningful
improvements in both ferrous and nonferrous metal spreads more than offset decreased volumes. Increased
copper margins provided the most notable improvement, as global copper prices increased based in part on
improved demand from China. We also took advantage of a strong December ferrous market environment,
increasing our expected shipments, as it appeared the typical market strength of January was being
“Our steel operations also showed improvement with an increase in operating income of seven percent to
$117 million, as improvements in sheet steel volumes more than offset weaker long product shipments and
lower overall steel metal spreads. Automotive and manufacturing provided improved sheet demand, while
nonresidential construction remained weak. Despite the challenging construction market, we are also
pleased that our fabrication business reported its third consecutive profitable quarter, as the changes the
team implemented earlier in the year have continued to provide greater efficiencies and improved
“The company’s solid performance in a difficult market environment is driven by our ongoing commitment to
provide exceptional value to our customers, while taking advantage of our innovative, low-cost operating
culture. We remain committed to leveraging the full complement of our competitive strengths to sustain and
grow shareholder value,” Millett concluded.
Fourth Quarter Review
Fourth quarter shipments were mixed across the company’s operating segments when compared to the
prior-year fourth quarter and the third quarter of 2012. However, with the exception of fabrication, pretax
earnings improved for each business platform. The company’s operating income increased 15 percent over
prior-year performance and 31 percent in comparison to the third quarter of 2012. The increase in
sequential quarterly operating income was primarily the result of increased volume coupled with reduced
costs in sheet operations, and increased nonferrous margins coupled with reduced direct costs in metals
The company’s steel mill capacity utilization improved to 80 percent in the fourth quarter from 78 percent in
the third quarter, while shipments increased four percent. Improved overall volume and product mix more
than offset decreased steel margins, resulting in increased operating income of $8 million in the quarter. The
average selling price per ton shipped decreased $25 to $784 in the fourth quarter, and the average ferrous
scrap cost per ton melted decreased $9 per ton. Operating income attributable to the company’s sheet
operations increased 15 percent when compared to the sequential quarter, while earnings from long product
operations decreased three percent.
Despite lower volumes, profitability from the company’s metals recycling operations improved as ferrous
metal spreads expanded ten percent and nonferrous metal spreads improved 24 percent when compared to
the third quarter of 2012.
The impact of losses from the company’s Minnesota operations on fourth quarter 2012 consolidated net
income was approximately $10 million, or $0.04 per diluted share. This compares to losses of $11 million, or
approximately $0.05 per diluted share in the third quarter of 2012. As previously indicated, a six week
outage of the nugget facility began in mid-September 2012 to complete the groundwork necessary for the
implementation of improvements expected to be made in the first half of 2013. These modifications are
expected to improve both volume and product quality. As planned, operations resumed in November, and
the restart has gone well with significant improvements to product quality already achieved.
Operations began at the company’s iron concentrate facility in September 2012 and production has gone
well. As the primary raw material for the company’s iron nugget facility, this is a pivotal achievement in
lowering the raw material input cost of iron nuggets, as the cost of internally-sourced iron concentrate is less
than $50 per metric ton compared to current market priced iron concentrate in excess of $140 per metric
ton. If pig iron prices remain steady, losses associated with the Minnesota operations for the first quarter of
2013 are anticipated to be similar to those recorded in the fourth quarter, as the plant depletes existing
higher priced third-party iron concentrate in inventory.
The company’s liquidity position remains strong with $1.5 billion in unrestricted cash, short term commercial
paper, and available funding under the revolving credit facility at December 31, 2012. Total debt decreased
$178 million during 2012, and the company’s debt to equity capitalization rate improved from 50 percent at
the end of 2011 to 47 percent at December 31, 2012.
The company’s 2012 net sales decreased nine percent when compared to 2011, while operating income
decreased 33 percent. Decreased operating income was primarily driven by reduced operating margins in
the company’s sheet operations during the first half of 2012, as compared to the record metal spreads
achieved in the first half of 2011. The average annual selling price per ton shipped for the company’s steel
operations in 2012 was $831, a decrease of $66 per ton compared to 2011. The 2012 average scrap cost per
ton melted decreased $32. Operating income from the company’s metals recycling operations also
decreased 23 percent during 2012, as both volumes and metal margins compressed.
Charges associated with the company’s 2012 refinancing initiatives resulted in decreased pretax earnings of
approximately $38 million, or approximately $0.10 per diluted share. These initiatives significantly reduced
the company’s cost of debt, while extending the company’s long term debt maturity profile.
“We remain optimistic that the organic growth projects we identified in 2012 will position us to continue to
build a strong enterprise,” Millett said. “We believe there is potential for certain market sectors, such as
automotive and manufacturing, to build momentum in 2013. Recent housing start data suggests potential
improvements in residential construction, and there are areas across the U.S. indicating signs of
strengthening in the nonresidential construction sector, although levels remain historically low. We look
forward to executing our strategic growth plans. Demand for high-quality steel products has not abated, and
we believe our current capital projects will deliver products that exceed customers’ expectations. We remain
confident that with our exceptional team, coupled with our superior, low-cost operating culture, we are
uniquely prepared to capitalize on the opportunities ahead.”
Summary Fourth Quarter and Full-Year 2012 Operating Segment Information
The following tables highlight operating results for each of the company’s primary operating platforms. References to operating income in the following paragraphs exclude profit-sharing expenses and amortization pertaining to intangible assets. Dollar amounts are in thousands, excluding per ton data.
This segment includes five electric-arc-furnace steel mills and related steel finishing and processing facilities,
including The Techs. The company’s steel operations produce flat-rolled steel, structural steel, merchant bars, special-bar-quality steel, rebar, rail, and specialty shapes.