TAMPA, FL, May 12 /PRNewswire-FirstCall/ - Gerdau Ameristeel Corporation(NYSE: GNA; TSX: GNA) today reported net income of $163.0 million ($0.38 pershare fully diluted) for the three months ended March 31, 2008, a 22.1%increase in comparison to net income of $133.5 million ($0.44 per share fullydiluted) for the three months ended March 31, 2007.
Net Sales for the three months ended March 31, 2008 increased 53.8% to$2.0 billion from $1.3 billion for the three months ended March 31, 2007. Forthe three months ended March 31, 2008, finished steel shipments increased to2.4 million tons, an increase of 488.2 thousand tons from the three monthsended March 31, 2007, primarily as a result of the acquisition of ChaparralSteel in September 2007. In comparison to the fourth quarter of 2007, whichincluded the Chaparral facilities, shipment volume increased 9.5%. Averagemill finished steel selling prices for the three months ended March 31, 2008increased 24.4% over the level in this same period in 2007 and 7% over thefourth quarter 2007 levels.
For the three months ended March 31, 2008, metal spread, the differencebetween mill selling prices and scrap raw material costs, was $458 per ton, anincrease of $84 per ton from the same period in 2007. The increase isprimarily attributable to the higher margin Chaparral products.
EBITDA was $387.4 million for the three months ended March 31, 2008,compared to EBITDA of $244.5 million for the three months ended March 31,2007.
Included in selling and administrative expense for the three months endedMarch 31, 2008 is a non-cash pretax expense of $3.8 million to mark to marketoutstanding stock appreciation rights and expenses associated with otherexecutive compensation agreements compared to a non-cash pretax expense of$8.8 million for the three months ended March 31, 2007.
From time to time, the Company invests excess cash in short-terminvestments that are comprised of variable rate debt obligations, known asauction rate securities. During the three months ended March 31, 2008, theCompany recorded a $22.7 million charge to writedown the carrying value ofauction rate securities to their fair market value of $71.9 million. Theimpact to earnings per share of this writedown was approximately $0.05. Theeffective tax rate for the three months ended March 31, 2008 was 34% and wasunfavorably impacted by this writedown as no associated tax benefit wasrecorded for this item.
On May 11, 2008, the Board of Directors approved a quarterly cash dividendof $0.02 (two US$ cents) per common share, payable June 13, 2008 toshareholders of record at the close of business on May 29, 2008.
On April 1, 2008, Pacific Coast Steel ('PCS'), a majority owned andconsolidated joint venture of the Company, acquired all the assets of CenturySteel, Inc. ('CSI'), a reinforcing and structural steel contractorspecializing in the fabrication and installation of structural steel andreinforcing steel products, for approximately $151.5 million. Concurrentlywith the acquisition of CSI, the Company paid approximately $68.0 million toincrease its equity participation in PCS to approximately 84%.
CEO Comments
Mario Longhi, President and CEO of Gerdau Ameristeel, commented:
'Gerdau Ameristeel delivered another quarterly earnings record as strongglobal demand for steel has driven selling prices higher and provided us theopportunity to export our product globally. We offer a well-balanced steelproduct mix of rebar, merchant and structural shapes, wire rod and flat rolledsheet which when combined with our expanding downstream business, has allowedus to deliver these attractive results.
Our balance sheet remains strong and we continue to seek opportunities toexpand our business and provide attractive returns to our shareholders. TheChaparral integration continues to exceed our expectations and we are nowraising the annualized synergy expectations to $100 million by the end of2008. We are also focused on the integration of the recent Century Steelfabrication business acquisition which continues to expand our market presencein the western United States.
Our outlook for the near term remains positive despite the unprecedentedlevel of volatility in raw material costs. Certain grades of scrap rawmaterial costs have increased over $200 per ton since the end of the firstquarter, however with our captive scrap operations which supply approximatelyone third of our scrap needs and announced selling price increases, we remainfocused on keeping metal spreads robust. Import levels remain lower thanhistorical highs, global steel demand and prices are creating exportopportunities, and inventory levels in North America appear to be at lowlevels throughout the system. In addition, our flat rolled joint venture,Gallatin Steel saw improving margins throughout the three months ended March31, 2008 and this trend is expected to continue into the next quarter'.
Forward Looking Statements
In this press release, 'Gerdau Ameristeel' and 'Company' refer to GerdauAmeristeel Corporation and its subsidiaries and 50%-owned joint ventures.Certain statements in this press release, including, without limitation, thesection entitled 'CEO Comments' constitute forward-looking statements. Suchstatements describe the Company's assumptions, beliefs and expectations withrespect to its operations, future financial results, business strategies andgrowth and expansion plans can often be identified by the words 'anticipates,''believes,' 'estimates,' 'expects,' 'intends,' 'plans,' and other words andterms of similar meaning. The Company cautions readers that forward-lookingstatements involve risks and uncertainties that could cause actual results todiffer materially from those currently projected by the Company. In additionto those noted in the statements themselves, any number of factors couldaffect actual results, including, without limitation:
Excess global steel industry capacity and the availability of competitivesubstitute materials; the cyclical nature of the steel industry and theindustries served by the Company; increases in the cost of steel scrap, energyand other raw materials; steel imports and trade regulations; a change inChina's steelmaking capacity or slowdown in China's steel consumption; theability to integrate newly-acquired businesses such as Chaparral Steel Companyand achieve synergies; the Company's participation in consolidation of thesteel industry; the substantial capital investment and similar expendituresrequired in the Company's business; unexpected equipment failures and plantinterruptions or outages; the Company's level of indebtedness; the cost ofcompliance with environmental and occupational health and safety laws; theenactment of laws intended to reduce greenhouse gases and other air emissions;competitors' relief of debt burdens and legacy costs by seeking protectionunder the bankruptcy laws; the Company's ability to fund its pension plans;the ability to renegotiate collective bargaining agreements and avoid labordisruptions; interest rate risk; currency exchange rate fluctuations; theaccuracy of estimates used in the preparation of the Company's financialstatements; the loss of key employees; actions or potential actions taken byour principal stockholder, Gerdau S.A.; the liquidity of the Company's shortterm investments, including in auction rate securities; and the Company'sreliance on joint ventures that it does not control.
Any forward-looking statements in this press release are based on currentinformation as of the date of this press release and the Company does notundertake any obligation to update any forward-looking statements to reflectnew information, future developments or events, except as required by law.
Notice of Conference Call
Gerdau Ameristeel invites you to listen to a live broadcast of its thirdquarter conference call on Monday, May 12, 2008, at 9:00 am EST. The call willbe hosted by Mario Longhi, President and CEO, and Barbara Smith, VP and CFO,and can be accessed via our Web site at www.gerdauameristeel.com. Web castattendees are welcome to listen to the conference in real-time or on-demand atyour convenience.
About Gerdau Ameristeel
Gerdau Ameristeel is the second largest mini-mill steel producer in NorthAmerica with an annual manufacturing capacity of approximately 12 million tonsof mill finished steel products. Through its vertically integrated network of19 mini-mills (including one 50%-owned joint venture mini-mill), 19 scraprecycling facilities and 65 downstream operations, Gerdau Ameristeel servescustomers throughout the United States and Canada. The Company's products aregenerally sold to steel service centers, to steel fabricators, or directly tooriginal equipment manufacturers ('OEMs') for use in a variety of industries,including non-residential, infrastructure, commercial, industrial andresidential construction, metal building, manufacturing, automotive, mining,cellular and electrical transmission and equipment manufacturing. GerdauAmeristeel's common shares are traded on the New York Stock Exchange and theToronto Stock Exchange under the symbol GNA.
GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (US$ in thousands) (Unaudited)
March 31, December 31, 2008 2007 ------------ ------------ ASSETS
Current Assets Cash and cash equivalents $ 568,945 $ 547,362 Short-term investments 71,924 94,591 Accounts receivable, net 830,865 705,929 Inventories 1,240,900 1,203,107 Deferred tax assets 24,317 21,779 Costs and estimated earnings in excess of billings on uncompleted contracts 4,803 3,844 Income taxes receivable 3,076 23,986 Other current assets 32,487 25,880 ------------ ------------ Total Current Assets 2,777,317 2,626,478
Investments in 50% Owned Joint Ventures 168,669 161,168 Property, Plant and Equipment, net 1,872,323 1,908,617 Goodwill 3,052,061 3,050,906 Intangibles 574,365 598,528 Deferred Financing Costs 41,839 44,544 Deferred Tax Assets 9,420 12,433 Other Assets 23,364 25,846 ------------ ------------ TOTAL ASSETS $ 8,519,358 $ 8,428,520 ------------ ------------ ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities Accounts payable and accrued liabilities $ 452,325 $ 376,634 Accrued salaries, wages and employee benefits 140,280 169,658 Accrued interest 15,095 40,631 Income taxes payable 84,645 28,143 Accrued sales, use and property taxes 9,769 11,970 Current portion of long-term environmental reserve 2,176 3,704 Billings in excess of costs and estimated earnings on uncompleted contracts 12,591 17,448 Other current liabilities 32,803 25,901 Current portion of long-term borrowings 19,758 15,589 ------------ ------------ Total Current Liabilities 769,442 689,678
Long-term Borrowings, Less Current Portion 3,056,567 3,055,431 Accrued Benefit Obligations 255,100 252,422 Long-term Environmental Reserve, Less Current Portion 12,925 11,830 Other Liabilities 77,965 78,401 Deferred Tax Liabilities 422,824 433,822 Minority Interest 43,652 42,321 ------------ ------------ TOTAL LIABILITIES 4,638,475 4,563,905
Contingencies, commitments and guarantees
Shareholders' Equity Capital stock 2,548,984 2,547,123 Retained earnings 1,299,539 1,253,196 Accumulated other comprehensive income 32,360 64,296 ------------ ------------
TOTAL SHAREHOLDERS' EQUITY 3,880,883 3,864,615 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,519,358 $ 8,428,520 ------------ ------------
GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (US$ in thousands, except earnings per share data) (Unaudited)
Three Months Ended March 31, March 31, 2008 2007 ------------ ------------
NET SALES $ 2,031,662 $ 1,342,996
OPERATING EXPENSES Cost of sales (exclusive of depreciation and amortization) 1,600,627 1,068,872 Selling and administrative 54,576 50,663 Depreciation 52,520 28,092 Amortization 24,163 458 Other operating income, net (550) (683) ------------ ------------ 1,731,336 1,147,402
INCOME FROM OPERATIONS 300,326 195,594
INCOME FROM 50% OWNED JOINT VENTURES 18,380 17,695 ------------ ------------
INCOME BEFORE OTHER EXPENSES AND INCOME TAXES 318,706 213,289
OTHER EXPENSES Interest expense 51,839 10,303 Interest income (6,663) (2,352) Foreign exchange (gain) loss, net (3,878) (248) Amortization of deferred financing costs 2,691 685 Writedown of short-term investments 22,667 - Minority interest 4,395 4,612 ------------ ------------ 71,051 13,000
INCOME BEFORE INCOME TAXES 247,655 200,289
INCOME TAX EXPENSE 84,647 66,754 ------------ ------------ NET INCOME $ 163,008 $ 133,535 ------------ ------------ ------------ ------------ EARNINGS PER COMMON SHARE - BASIC $ 0.38 $ 0.44 EARNINGS PER COMMON SHARE - DILUTED $ 0.38 $ 0.44
GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (US$ in thousands) (Unaudited)
Three Months Ended March 31, March 31, 2008 2007 ------------ ------------ OPERATING ACTIVITIES
Net income $ 163,008 $ 133,535 Adjustment to reconcile net income to net cash provided by operating activities: Minority interest 4,395 4,612 Depreciation 52,520 28,092 Amortization 24,163 458 Amortization of deferred financing costs 2,691 685 Deferred income taxes (1,834) 6,673 (Gain) loss on disposition of property, plant and equipment (523) 304 Income from 50% owned joint ventures (18,380) (17,695) Distributions from 50% owned joint ventures 10,404 20,404 Compensation cost from share-based awards 3,188 8,782 Writedown of short-term investments 22,667 - Excess tax benefits from share-based payment arrangements (664) (526) Facility closure expenses 990 -
Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (129,196) (170,695) Inventories (46,923) 22,162 Other assets (1,134) 24,206 Liabilities 85,894 70,618 ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 171,266 131,615
INVESTING ACTIVITIES
Additions to property, plant and equipment (30,706) (54,114) Proceeds received from the disposition of property, plant and equipment 1,302 756 Change in restricted cash - (6) Purchases of short-term investments - (217,689) Sales of short-term investments - 199,795 ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (29,404) (71,258)
FINANCING ACTIVITIES
Proceeds from issuance of debt 498 - Payments on term borrowings (25) (62) Cash dividends (116,665) (88,511) Distributions to subsidiary's minority shareholder (3,065) (1,221) Proceeds from exercise of employee stock options 494 295 Excess tax benefits from share-based payment arrangements 664 526 ------------ ------------ NET CASH USED IN FINANCING ACTIVITIES (118,099) (88,973)
Effect of exchange rate changes on cash and cash equivalents (2,180) 31 ------------ ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 21,583 (28,585)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 547,362 109,236 ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 568,945 $ 80,651 ------------ ------------ ------------ ------------
EBITDA (EBITDA is calculated by adding earnings before interest and otherexpense on debt, taxes, depreciation, amortization, writedown of short-terminvestments, foreign exchange gain/loss, net, minority interest and cashdistributions from 50% owned joint ventures, and deducting interest income andearnings from 50% owned joint ventures) is a non-GAAP measure that managementbelieves is a useful supplemental measure of cash available prior to debtservice, capital expenditures and income tax. Investors are cautioned thatEBITDA should not be construed as an alternative to net income determined inaccordance with GAAP as an indicator of the Company's performance or to cashflows from operations as a measure of liquidity and cash flows. EBITDA doesnot have a standardized meaning prescribed by GAAP. The Company's method ofcalculating EBITDA may differ from the methods used by other companies and,accordingly, it may not be comparable to similarly titled measures used byother companies. Reconciliation of EBITDA to net income is shown below:
For the Three Months Ended - Unaudited
March 31, 2008 March 31, 2007 ------------- ------------- ($000s) Net income $ 163,008 $ 133,535 Income tax expense 84,647 66,754 Interest and other expense on debt 51,839 10,303 Interest income (6,663) (2,352) Depreciation 52,520 28,092 Amortization, including deferred financings costs 26,854 1,143 Earnings from 50% owned joint ventures (18,380) (17,695) Cash distribution from 50% owned joint ventures 10,404 20,404 Foreign exchange (gain) loss, net (3,878) (248) Writedown of short-term investments 22,667 - Minority interest 4,395 4,612 ------------- ------------- EBITDA $ 387,413 $ 244,548 ------------- -------------
SUPPLEMENTAL OPERATING AND FINANCIAL INFORMATION - UNAUDITED
THE INFORMATION IN THIS TABLE EXCLUDES 50% OWNED JOINT VENTURES
For the Three Months Ended March 31, 2008 March 31, 2007 ---------------------- ----------------------- Tons Tons ----------- ---------- ----------- ----------- Production Melt Shops 2,427,174 1,727,120 Rolling Mills 2,302,904 1,733,341
Tons % Tons % ----------- ---------- ----------- ----------- Finished Steel Shipments Rebar 505,247 21% 476,683 25% Merchant/Special Sections 1,351,851 57% 876,332 47% Rod 199,306 8% 196,763 10% Fabricated Steel 322,200 14% 340,637 18% ----------- ---------- ------------ ---------- Total Shipments 2,378,604 100% 1,890,415 100%
$/Ton $/Ton ----------- ----------- Selling Prices Mill external shipments 735 591 Fabricated steel shipments 960 861
Scrap Charged 277 216
Metal Spread (Selling price less scrap) Mill external shipments 458 374 Fabricated steel shipments 683 645
Mill manufacturing cost 298 251
Operating Income 126 103
EBITDA 163 129
50% Owned Joint Venture Results
The following table summarizes the results of the Company's portion of its50% owned joint ventures, primarily Gallatin Steel, a flat rolled mill jointventure.
Three Months Ended - Unaudited March 31, March 31, 2008 2007 ------------ ------------ Tons Shipped 216,202 199,985
Operating Income $ 18,580 $ 18,120 Net Income 18,377 17,695 EBITDA 21,488 20,821
$/Ton $/Ton ------- ------- Average Selling Price 627 530 Scrap Charged 328 251
Metal Spread 299 280
Operating Income 86 91 EBITDA 99 104
SOURCE Gerdau Ameristeel Corporation
