Steel Dynamics Reports Fourth Quarter 2012 Diluted Earnings Per Share of $0.27

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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.
Full-Year Review
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.
Steel Operations
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.


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