Steel Dynamics Reports Strong Results for 2005 Fourth Quarter and Year25 January 2006
Today Steel Dynamics, Inc. (Nasdaq: STLD) announced net sales of $2.2 billion for the year 2005, a 2% increase over 2004 net sales of $2.1 billion. Net income was $222 million, or $4.35 per diluted share, compared to 2004 net income of $295 million or $5.27 per diluted share. For the fourth quarter of 2005 net income was $65 million, or $1.31 per diluted share, compared to $82 million or $1.47 per diluted share in the fourth quarter of 2004. Fourth quarter diluted earnings per share increased 42% from $.92 in the prior quarter. Net sales for the fourth quarter were $570 million, 5% lower than the fourth quarter of 2004.
In 2005 the company's operating income was $109 per ton shipped with an operating margin of 18%. After staffing new operations, employment in 2005 increased to 1,795 resulting in revenues per employee of $1.3 million.
Consolidated shipments for 2005 grew 5% to 3.6 million tons. Consolidated shipments in the fourth quarter were up 9% to 920,000 tons compared to 846,000 tons in the fourth quarter of 2004. Compared to the third quarter of 2005, fourth quarter consolidated shipments were essentially the same. The average consolidated selling price per ton shipped in the fourth quarter increased 15% to $619 from $540 in the third quarter, but was 13% lower than the $710 achieved in the fourth quarter of 2004. The cost of steel scrap per net ton charged increased $41 from the third quarter to the fourth quarter. Natural gas and electrical energy costs also increased substantially quarter over quarter.
The company's 2005 capital expenditures of $63 million were somewhat lower than initially planned as several projects were delayed. These and other contemplated growth opportunities will likely increase SDI's capital expenditures in 2006.
"2005 was a very strong year for Steel Dynamics," said Keith Busse, President and CEO. "Although steel demand fell off sharply in the first half of the year, steel shipments rebounded in the second half of the year with backlogs remaining strong as we move forward in 2006. Overall, though, we were able to maintain strong profit margins for the year in spite of selling prices and steel scrap costs fluctuating dramatically throughout the year."
In 2005 the Flat Roll Division continued to be the dominant contributor to SDI's results with shipments of 2.4 million tons of hot-rolled and finished steels, accounting for 67% of SDI's steel operations shipments. Increased sales of coated products, including light-gauge galvanized and painted flat- roll steel, resulted in a richer product mix, enhancing the division's profit margins. In addition, the division has made and is continuing to make modifications to operating procedures and equipment that will allow it to increase annual flat roll production capacity to approximately 2.7 million tons in 2006. Caster modifications planned for 2006 are expected to bring the Butler mill's annual production capacity to nearly 3.0 million tons, dependent upon mix, in 2007.
The Structural & Rail Division, in its third full year of operations, achieved record shipping volumes, revenues, and margins. Demand for wide- flange beams for non-residential construction improved during the middle of the year and has remained strong through the second half. Shipments of 827,000 tons in 2005 were 13% higher than 2004 shipments of 734,000 tons. The Columbia City mill operated at near-capacity in the second half and finished the year with an approximate three-month backlog. Limited amounts of rail were produced and shipped in 2005.
Growth in the second year of operations of the Bar Products Division in Pittsboro, Indiana proved to be more challenging than in its first year due to weaker markets for special-bar-quality (SBQ) products and the mill's continued role as a spot-market provider. Nevertheless, the Bar Products Division shipped 357,000 tons in 2005 compared to 318,000 tons in 2004, a 12% increase. Late in the year, plans were announced to add an SBQ finishing facility at Pittsboro, which is expected to be in operation by the end of the first quarter. This will allow the division to offer a variety of value-added processes and services to meet the needs of a growing list of SBQ clients. These new capabilities are expected to allow the Bar Products Division to secure a higher proportion of contract business for SBQ products in 2006. The division expects to achieve shipments of over 400,000 tons for 2006.
New Millennium Building Systems again achieved record shipments and operating income in 2005. The company's new production facility in Lake City, Florida, began joist production in March and became profitable in its fourth month. Market demand for New Millennium's products were strong at both its Indiana and Florida plants.
"Looking ahead to 2006, we are optimistic about the sustainability of favorable domestic steel market conditions, especially for construction steels and bar products," Busse said. "The U.S. economy remains strong which suggests steel demand should continue to be strong across most steel-consuming market sectors. Steel inventories appear to be in line now, if not low by historical standards, and consequently we expect SDI's steel shipments to continue to grow this year. SDI anticipates first quarter results to be relatively unchanged, if not up slightly, from the fourth quarter. Selling values could rise slightly, but it is too soon to make that call. We expect scrap prices on a linked-quarter basis will be relatively unchanged.
"We currently expect the previously announced merger of Roanoke Electric Steel with Steel Dynamics to close by the end of the first quarter of 2006. Roanoke posted excellent operating results in its fiscal year ended October 31. We believe that together, the two companies can achieve operating synergies and produce even greater returns which will be additive to SDI's growth. Combining Roanoke's capacity with SDI's recent capacity improvements, our overall steelmaking capability could approach 5 million tons in 2006."
Additional Information
In connection with the recently announced merger of Steel Dynamics, Inc. ("SDI") and Roanoke Electric Steel Corporation ("Roanoke"), SDI filed a registration statement on Form S-4 on January 18, 2006, including a related Roanoke/SDI proxy statement/prospectus, in connection with the merger transaction involving SDI and Roanoke. Investors and security holders are urged to read the registration statement on Form S-4 and the related proxy statement/prospectus because they contain important information about the merger transaction. Investors and security holders may obtain free copies of these documents and other documents filed with the SEC at the SEC's web site at http://www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by SDI by contacting SDI Investor Relations at (260) 459-3553. Investors and security holders may obtain free copies of the documents filed with the SEC by Roanoke by contacting Roanoke Investor Relations at (540) 342-1831.
Roanoke, SDI and their directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Roanoke in connection with the merger transaction. Information regarding the special interests of these directors and executive officers in the merger transaction is included in the registration statement of SDI and proxy statement/prospectus of SDI and Roanoke described above. Additional information regarding the directors and executive officers of SDI is also included in the SDI proxy statement for its 2005 Annual Meeting of Stockholders, which was filed with the SEC on April 4, 2005. Additional information regarding the directors and executive officers of Roanoke is also included in Roanoke's proxy statement for its 2005 Annual Meeting of Stockholders, which was filed with the SEC on December 21, 2004. These documents are available free of charge at the SEC's web site at http://www.sec.gov and from Investor Relations at SDI and Roanoke as described above.
Conference Call and Webcast
On Tuesday, January 24, 2006 at 9:00 a.m. EST, Steel Dynamics will host a conference call in which Steel Dynamics' management will discuss the fourth quarter and the year's results for 2005. You are invited to listen to the live audio broadcast of the conference call over the Internet, accessible from Steel Dynamics' Web site:
http://www.steeldynamics.com
Dial-in information to listen to the call is available on our Web site. Only analysts and other callers identified prior to the call may be included in queue for questions.
No telephone replay will be available. An audio replay of the Webcast will be available on the SDI Web site.
Contact: Fred Warner, Investor Relations Manager, (260) 969-3564
F.Warner@SteelDynamics.com
Forward Looking Statements
This press release contains some predictive statements about future events, including statements related to conditions in the steel marketplace, Steel Dynamics' revenue growth, costs of raw materials, future profitability, and the operation of new or existing facilities. These statements 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. Such predictive statements are not guarantees of future performance, and actual results could differ materially from our current expectations.
We refer you to SDI's detailed explanation of the many 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 and in other reports which we from time to time file with the Securities and Exchange Commission, available publicly on the SEC Web site, http://www.sec.gov, and on the Steel Dynamics Web site, http://www.steeldynamics.com.
Steel Dynamics, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
(unaudited) (unaudited)
Net Sales $569,645 $600,370 $2,184,866 $2,144,913
Costs of goods sold 429,689 430,914 1,699,717 1,541,423
Selling, general, and
administrative expenses 26,058 29,463 91,974 96,581
Operating Income 113,898 139,993 393,175 506,909
Interest expense 7,898 8,342 34,341 38,907
Other (income) expense, net 411 (1,327) (1,792) (7,031)
Income before income
taxes 105,589 132,978 360,626 475,033
Income taxes 40,652 50,532 138,841 179,719
Net income $64,937 $82,446 $221,785 $295,314
Basic earnings per share $1.51 $1.67 $4.97 $5.99
Weighted average common
shares outstanding 43,133 49,250 44,621 49,287
Diluted earnings per share,
including effect of assumed
conversions $1.31 $1.47 $4.35 $5.27
Weighted average common shares
and share equivalents
outstanding 50,132 56,468 51,642 56,527
Dividends declared
per share $.10 $.10 $.40 $.25
Steel Dynamics, Inc.
UNAUDITED SUPPLEMENTAL OPERATING INFORMATION
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
Shipments and Production Data (tons)
Shipments
Steel Operations*
Flat Roll Division 623,156 581,797 2,375,469 2,371,326
Structural & Rail
Division 198,363 158,108 826,661 734,115
Bar Products Division 93,333 109,179 357,241 317,931
914,852 849,084 3,559,371 3,423,372
Other Operations** 124,391 95,778 460,448 359,410
Intercompany (119,665) (98,682) (426,087) (350,660)
Consolidated shipments 919,578 846,180 3,593,732 3,432,122
Steel Operations*
production 941,915 845,826 3,616,480 3,468,123
Average consolidated
selling price per ton $619 $710 $608 $625
* Steel Operations include the company's Flat Roll Division, Structural and Rail Division and Bar Products Division
** Other Operations include New Millennium Building Systems, Paragon Steel Trading and Iron Dynamics
First Second Third
Quarter Quarter Quarter
2005 2005 2005
Shipments and Production Data (tons)
Shipments
Steel Operations*
Flat Roll Division 569,556 569,867 612,890
Structural & Rail
Division 186,614 205,433 236,251
Bar Products Division 89,548 108,434 65,926
845,718 883,734 915,067
Other Operations** 97,241 99,424 139,392
Intercompany (89,816) (86,072) (130,534)
Consolidated shipments 853,143 897,086 923,925
Steel Operations*
production 882,311 893,559 898,695
Average consolidated
selling price per ton $669 $608 $540
* Steel Operations include the company's Flat Roll Division, Structural and Rail Division and Bar Products Division
** Other Operations include New Millennium Building Systems, Paragon Steel Trading and Iron Dynamics
Steel Dynamics, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, December 31,
2005 2004
(unaudited)
Assets
Current assets
Cash and equivalents $65,518 $16,334
Accounts receivable 241,708 253,861
Inventories 398,684 381,488
Deferred income taxes 6,516 6,856
Other current assets 13,307 18,980
Total current assets 725,733 677,519
Property, plant and equipment, net 999,969 1,024,044
Restricted cash 1,588 989
Other assets 30,397 31,067
Total assets $1,757,687 $1,733,619
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $115,542 $141,888
Accrued interest 8,952 8,796
Accrued expenses 80,527 75,750
Current portion of long-term debt 2,156 6,774
Total current liabilities 207,177 233,208
Long-term debt
Senior unsecured 9.5% notes 300,000 300,000
Subordinated convertible 4.0% notes 115,000 115,000
Other long-term debt 17,959 19,458
Unamortized bond premium 5,459 7,147
Total long-term debt 438,418 441,605
Deferred income taxes 231,106 209,215
Minority interest 1,118 2,469
Commitments and contingencies
Stockholders' equity
Common stock 529 523
Treasury stock, at cost (270,905) (84,141)
Additional paid-in capital 405,900 390,505
Retained earnings 744,344 540,235
Total stockholders' equity 879,868 847,122
Total liabilities and stockholders'
equity $1,757,687 $1,733,619
Steel Dynamics, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
(unaudited) (unaudited)
Operating activities:
Net income $64,937 $82,446 $221,785 $295,314
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 23,397 20,606 91,865 84,749
Deferred income taxes 8,365 40,533 22,231 107,404
Minority interest 174 195 (1,351) 1,856
Changes in certain assets
and liabilities:
Accounts receivable (23,083) (6,109) 12,153 (127,838)
Inventories (19,198 (95,698) (17,196) (196,992)
Accounts payable 4,954 (8,474) (25,746) 57,680
Other working capital 32,452 7,316 7,016 25,746
Net cash provided by
operating activities 91,998 40,815 310,757 247,919
Investing activities:
Purchases of property, plant
and equipment (18,031) (29,174) (63,386) (102,046)
Other investing activities - - 1,345 55
Net cash used in investing
activities (18,031) (29,174) (62,041) (101,991)
Financing activities:
Issuance of long-term debt - 24,008 268,706 188,292
Repayment of long-term debt (36,299) (126,630) (276,511) (347,487)
Issuance of common stock (net
of expenses) and proceeds and
tax benefits from exercise
of stock options 1,556 6,030 15,401 27,899
Purchase of treasury stock - (55,130) (186,764) (55,179)
Dividends paid (4,310) (3,733) (18,276) (7,452)
Debt issuance costs - 474 (2,088) (1,097)
Net cash used in financing
activities (39,053) (154,981) (199,532)(195,024)
Increase in cash and
equivalents 34,914 (143,340) 49,184 (49,096)
Cash and equivalents at
beginning of period 30,604 159,674 16,334 65,430
Cash and equivalents at end
of period $65,518 $16,334 $65,518 $16,334
Source: prnewswire
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