Steel Dynamics (STLD)

Q4 2011 Earnings Call

January 25, 2012 10:00 am ET

Executives

Barry Schneider - Vice President of Engineered Bar Products Division and General Manager of Engineered Bar Products Division

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Richard P. Teets - Co-Founder, Executive Vice President for Steelmaking, Executive Director, President of Steel Operations and Chief Operating Officer of Steel Operations

Theresa E. Wagler - Chief Financial Officer and Executive Vice President

Mark D. Millett - Co-Founder, President, Chief Operating Officer, Executive Vice President for Metals Recycling & Ferrous Resources, Executive Director, President of OmniSource Corporation, Chief Operating Officer of OmniSource Corporation and Director of Iron Dynamics

Russ Rinn - Executive Vice President of Metals Recycling, Chief Operating officer of Omnisource Corporation and President of Omnisource Corporation

Gary Heasley - Executive Vice President of Business Development and President of New Millennium Building Systems

Fred Warner - Manager of Investor Relations

Analysts

Timothy P. Hayes - Davenport & Company, LLC, Research Division

John Charles Tumazos - John Tumazos Very Independent Research, LLC

Brett Levy - Jefferies & Company, Inc., Research Division

Aldo Mazzaferro

Aldo J. Mazzaferro - Macquarie Research

Sohail Tharani - Goldman Sachs Group Inc., Research Division

Michael F. Gambardella - JP Morgan Chase & Co, Research Division

Kuni M. Chen - CRT Capital Group LLC, Research Division

Luke Folta - Jefferies & Company, Inc., Research Division

Mark L. Parr - KeyBanc Capital Markets Inc., Research Division

Timna Tanners - BofA Merrill Lynch, Research Division

David S. MacGregor - Longbow Research LLC

Evan L. Kurtz - Morgan Stanley, Research Division

David S. Martin - Deutsche Bank AG, Research Division

Shneur Z. Gershuni - UBS Investment Bank, Research Division

Presentation

Operator

Good day, everyone, and welcome to today's Steel Dynamics Fourth Quarter and Full Year 2011 Earnings Conference Call. Today's conference is being recorded. Joining us today are Mark Millett, President and Chief Operating Officer, Steel Dynamics Inc.; Richard Teets, Executive Vice President of Steel Dynamics Inc. and President and Chief Operating Officer, Steel Operations; Russell Rinn, President and Chief Operating Officer of OmniSource Corporation; Gary Heasley, Executive Vice President of Steel Dynamics Inc. and President of New Millennium Building Systems; Theresa Wagler, Executive Vice President and Chief Financial Officer, Steel Dynamics Inc.; and Fred Warner, Investor Relations Manager. For opening remarks, I will now turn the call over to Fred Warner. Please go ahead, sir.

Fred Warner

Good morning and welcome to today's Steel Dynamics conference call for the fourth quarter and full year 2011. This call is being webcast live on January 25, 2012, from Fort Wayne, Indiana. Later today, you'll be able to replay the call from our website or download the call as a podcast.

During today's call, our management will be making some statements that are forward-looking. All statements regarding anticipated future results or expectations are intended to be forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements, which by their nature are predictive and are not statements of historical fact, are often preceded by such words as believe, anticipate, estimate, expect or other conditional words. These statements are not intended as guarantees of future performance. We caution that actual future events and results may differ materially from such forward-looking statements or projections that may be made today.

Some factors that could cause actual results to differ include general economic conditions, governmental monetary and fiscal policy, industrial production levels, changes in market supply and demand for our products, foreign imports, conditions in the credit market, the price and availability of scrap and other raw materials, equipment performance or failures or litigation outcomes.

You may find additional information concerning a variety of factors and risks that could cause actual results to differ materially from today's forward-looking statements. Refer to sections entitled Forward-looking Statements and Risk Factors in our most recent annual report on Form 10-K and in our quarterly reports on Form 10-Q, as well as in other reports we file from time to time with the Securities and Exchange Commission. These reports are publicly available on the SEC website, www.sec.gov, and on our website, steeldynamics.com.

Now to begin today's discussion, I would like to introduce SDI's President and Chief Executive Officer, Mark Millett.

Mark D. Millett

Thank you, Frank -- Fred. I'm sorry. I didn't -- and I leave it there. I didn't realize I have been only on the job for 3 weeks and I was demoted already, but thanks for pointing out that I still am the CEO, Fred. Thank you.

Good morning, everyone. Thank you for taking the time to join us on our call to discuss SDI's fourth quarter and 2011 results. I will provide some commentary, which hopefully anticipate some of your thoughts and your questions, after which Theresa will present more financial color. We will then open up the call for our whole group here to answer your questions.

As virtually all of you know, this is my first earnings call in my new capacity as SDI's Chief Executive Officer. So before I begin my review, I then like to step back for a moment and just offer some initial thoughts.

The call obviously signifies a milestone in our history. Since Keith, Dick and I cofounded Steel Dynamics in 1993, our company has seen considerable growth and considerable success. We've grown from a fledgling company to the fifth-largest steel producer and a leading recycler of both ferrous and nonferrous materials. Keith has obviously been the principal architect of these accomplishments. He leaves an enviable legacy, a broad foundation upon which I and the team can further build. As the great leader he is, he has made the transition smooth and very, very seamless, relinquishing the leadership of the company -- the direct leadership of the company. He has been readily available for us to seek his wise counsel when needed. I would like to thank him sincerely for that. Our styles are invariably our own, but Keith and I share the same values, the same vision for our company. Transition will be an evolutionary one, building upon the past while recognizing and adapting to the changing markets and the changing business environments that we see today.

The company's in great shape. Each time I tour any of our facilities, I leave incredibly energized. We have a passionate team that strives to be the safest, lowest cost operators in the world. Those of you that have toured our facilities, I think, would agree. We have always had and will continue to have a very, very special culture. It's this culture and esprit de corps that generates that differentiates us from our competition. It's this culture that drives the positive results, even in difficult economic times such as we saw in 2011.

Returning to the subject at hand, looking at our performance for both the fourth quarter and 2011 as a whole compared to 2010, we showed strong revenue and bottom-line improvement. Sales growth for both the quarter and the year exceeded 20%. Annual pretax earnings almost doubled. Fourth quarter net income was $30 million or $0.14 per diluted share, on net sales of about $1.9 billion. And for the full year, net income increased a considerable 98% to $278 million, or $1.22 per diluted share on total sales of $8 billion. We believe this puts us in a position to maintain the leading operating margin position we established over our domestic peers during the first 3 quarters of this year.

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