TAMPA, FL, Aug. 6 /PRNewswire-FirstCall/ - Gerdau Ameristeel Corporation (NYSE: GNA; TSX: GNA) today reported net income of $262.1 million ($0.60 per share fully diluted) for the three months ended June 30, 2008, an 88.4% increase in comparison to net income of $139.1 million ($0.45 per share fully diluted) for the three months ended June 30, 2007.
For the six months ended June 30, 2008, net income was $425.1 million ($0.98 per share fully diluted), an increase of 55.9% compared to net income of $272.7 million ($0.89 per share fully diluted) for the six months ended June 30, 2007.
Net sales for the three months ended June 30, 2008 increased 92.3% to $2.5 billion from $1.3 billion for the three months ended June 30, 2007. For the three months ended June 30, 2008, finished steel shipments increased to 2.5 million tons, an increase of 805 thousand tons from the three months ended June 30, 2007, primarily as a result of the acquisition of Chaparral Steel in September 2007. Additionally, average mill finished steel selling prices for the three months ended June 30, 2008 increased 36.1% over the level in this same period in 2007 and 19.9% over first quarter 2008 levels. In comparison to the first quarter of 2008, shipment volume increased 5.1%.
For the three months ended June 30, 2008, metal spread, the difference between mill selling prices and scrap raw material costs, was $499 per ton, an increase of $83 per ton from the same period in 2007. The increase is primarily attributable to the higher margin structural products. For the six months ended June 30, 2008, metal spread was $478 per ton, an increase of $85 per ton from the same period in the prior year. Partially offsetting this increase in metal spread has been a significant increase in alloys, energy and other raw material consumables used in our production process.
Earnings before interest, taxes, depreciation and amortization ('EBITDA') was $521.1 million for the three months ended June 30, 2008, compared to EBITDA of $240.3 million for the three months ended June 30, 2007. For the six months ended June 30, 2008, EBITDA was $908.5 million compared to $484.9 million for the six months ended June 30, 2007.
In the prior year, the Company purchased investments that are comprised of variable rate debt obligations, known as auction rate securities. During the three and six months ended June 30, 2008, the Company recorded a $17.0 million and $39.7 million charge to writedown the carrying value of these investments to their fair market value of $54.2 million. The original investment in these securities was approximately $102.8 million. The impact to earnings per share of this writedown for the three and six months ended June 30, 2008 was approximately $0.04 and $0.09 per share, respectively. The effective tax rate was unfavorably impacted by this writedown as no associated tax benefit was recorded for this item.
On April 1, 2008, Pacific Coast Steel ('PCS'), a majority owned and consolidated joint venture of the Company, acquired substantially all the assets of Century Steel, Inc. ('CSI'), a reinforcing and structural steel contractor specializing in the fabrication and installation of structural steel and reinforcing steel products for $148.5 million. CSI, headquartered in Las Vegas, Nevada, operates reinforcing and structural steel contracting businesses in Nevada, California, Utah and New Mexico. Concurrently with the acquisition of CSI, the Company paid $82.0 million to increase its equity participation in PCS to approximately 84%.
In June 2008, the Company increased its Senior Secured Credit Facility from $650.0 million to $950.0 million. At June 30, 2008, there was nothing drawn against this facility which is secured by the Company's inventory and accounts receivable.
On July 14, 2008, the Company acquired substantially all of the assets of Hearon Steel Co., a rebar fabricator and epoxy coater with locations in Muskogee, Tulsa and Oklahoma City, Oklahoma.
On August 5, 2008, the Board of Directors approved a quarterly cash dividend of $0.02 (two US$ cents) per common share, payable September 4, 2008 to shareholders of record at the close of business on August 20, 2008.
CEO Comments
Mario Longhi, President and CEO of Gerdau Ameristeel, commented:
'We recorded the highest quarterly level of shipments, revenue and earnings in the history of Gerdau Ameristeel during the second quarter, attributable to the successful execution of our strategic plans over the past several years. The acquisition of Chaparral Steel diversified our product mix into high margin structural steel products while our acquisition of Century Steel expands our value added downstream fabrication and installation business in the western United States markets. Our expansive product offerings and large geographic footprint reduce our dependence on any one customer industry segment and help us produce these attractive results for our shareholders. In addition, our recycling facilities, which provide a captive source for approximately 40% of our scrap raw material requirements, have reduced the impact of the significant volatility that has been experienced in this market during 2008.
While we continue to experience significant inflation in our raw material costs, we have been able to increase selling prices to preserve our margins. North American demand remains solid across our main product lines including rebar, merchant and structural bars and wire rod. In addition, we have been able to supplement our North American shipments with strategic export opportunities to keep our facilities operating at near capacity levels.
Our customer base has shown resilience to the general weakening of the North American economy as our order backlog remains solid and new contract activity continues in our downstream business which is a leading indicator for our mill demand. This, combined with import levels which have moderated from historical highs, global steel demand remaining strong, and relatively low inventory levels throughout the North American system, gives us a positive outlook for the coming months.'
Forward-Looking Statements
In this press release, 'Gerdau Ameristeel' and 'Company' refer to Gerdau Ameristeel Corporation and its subsidiaries and 50%-owned joint ventures. Certain statements in this press release, including, without limitation, the section entitled 'CEO Comments' constitute forward-looking statements. Such statements describe the Company's assumptions, beliefs and expectations with respect to its operations, future financial results, business strategies and growth and expansion plans can often be identified by the words 'anticipates,' 'believes,' 'estimates,' 'expects,' 'intends,' 'plans,' and other words and terms of similar meaning. The Company cautions readers that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those currently projected by the Company. In addition to those noted in the statements themselves, any number of factors could affect actual results, including, without limitation:
Excess global steel industry capacity and the availability of competitive substitute materials; the cyclical nature of the steel industry and the industries served by the Company; increases in the cost of steel scrap, energy and other raw materials; steel imports and trade regulations; a change in China's steelmaking capacity or slowdown in China's steel consumption; the Company's participation in the consolidation of the steel industry; the substantial capital investment and similar expenditures required in the Company's business; unexpected equipment failures and plant interruptions or outages; the Company's level of indebtedness; the cost of compliance with environmental and occupational health and safety laws; the enactment of laws intended to reduce greenhouse gases and other air emissions; the Company's ability to fund its pension plans; the ability to renegotiate collective bargaining agreements and avoid labor disruptions; currency exchange rate fluctuations; actions or potential actions taken by the Company's principal stockholder, Gerdau S.A., the liquidity of the Company's short-term investments, including investments in auction rate securities, and the Company's reliance on its 50%-owned joint ventures that it does not control.
Any forward-looking statements in this press release are based on current information as of the date of this press release and the Company does not undertake any obligation to update any forward-looking statements to reflect new 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 third quarter conference call on Wednesday, August 6, 2008, at 3:00 pm EST. The call will be 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 cast attendees are welcome to listen to the conference in real-time or on-demand at your convenience.
About Gerdau Ameristeel
Gerdau Ameristeel is the second largest mini-mill steel producer in North America with an annual manufacturing capacity of approximately 12 million tons of mill finished steel products. Through its vertically integrated network of 19 mini-mills (including one 50%-owned joint venture mini-mill), 19 scrap recycling facilities and 68 downstream operations, Gerdau Ameristeel serves customers throughout the United States and Canada. The Company's products are generally sold to steel service centers, to steel fabricators, or directly to original equipment manufacturers ('OEMs') for use in a variety of industries, including non-residential, infrastructure, commercial, industrial and residential construction, metal building, manufacturing, automotive, mining, cellular and electrical transmission and equipment manufacturing. Gerdau Ameristeel's common shares are traded on the New York Stock Exchange and the Toronto Stock Exchange under the symbol GNA.
GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(US$ in thousands, except earnings per share data)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
----------------------- -----------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
NET SALES $2,545,810 $1,331,818 $4,577,472 $2,674,814
OPERATING EXPENSES
Cost of sales (exclusive
of depreciation
and amortization) 1,980,192 1,051,191 3,580,819 2,120,063
Selling and
administrative 74,829 52,148 129,405 102,811
Depreciation 51,984 29,051 104,504 57,143
Amortization of
intangibles 26,257 251 50,420 709
Other operating
income, net (340) (573) (890) (1,256)
----------- ----------- ----------- -----------
2,132,922 1,132,068 3,864,258 2,279,470
INCOME FROM OPERATIONS 412,888 199,750 713,214 395,344
INCOME FROM 50% OWNED
JOINT VENTURES 41,727 14,334 60,107 32,029
----------- ----------- ----------- -----------
INCOME BEFORE OTHER
EXPENSES AND INCOME TAXES 454,615 214,084 773,321 427,373
OTHER EXPENSES
Interest expense 35,564 8,965 87,403 19,268
Interest income (2,638) (3,004) (9,301) (5,356)
Foreign exchange (gain)
loss, net (451) (4,021) (4,329) (4,269)
Amortization of deferred
financing costs 2,691 691 5,382 1,376
Writedown of investments 17,004 - 39,671 -
Minority interest 3,543 5,274 7,938 9,886
----------- ----------- ----------- -----------
55,713 7,905 126,764 20,905
INCOME BEFORE INCOME TAXES 398,902 206,179 646,557 406,468
INCOME TAX EXPENSE 136,795 67,051 221,442 133,805
----------- ----------- ----------- -----------
NET INCOME $ 262,107 $ 139,128 $ 425,115 $ 272,663
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
EARNINGS PER COMMON
SHARE - BASIC $ 0.61 $ 0.46 $ 0.98 $ 0.89
EARNINGS PER COMMON
SHARE - DILUTED $ 0.60 $ 0.45 $ 0.98 $ 0.89
GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(US$ in thousands)
(Unaudited)
June 30, December 31,
2008 2007
-------------- --------------
ASSETS
Current Assets
Cash and cash equivalents $ 311,740 $ 547,362
Short-term investments - 94,591
Accounts receivable, net 1,134,949 705,929
Inventories 1,474,709 1,203,107
Deferred tax assets 38,082 21,779
Costs and estimated earnings in excess
of billings on uncompleted contracts 20,211 3,844
Income taxes receivable 5,144 23,986
Other current assets 29,982 25,880
-------------- --------------
Total Current Assets 3,014,817 2,626,478
Investments in 50% Owned Joint Ventures 180,502 161,168
Long-Term investments 54,220 -
Property, Plant and Equipment, net 1,873,165 1,908,617
Goodwill 3,182,190 3,050,906
Intangibles 567,281 598,528
Deferred Financing Costs 39,259 44,544
Deferred Tax Assets 1,718 12,433
Other Assets 69,534 25,846
-------------- --------------
TOTAL ASSETS $ 8,982,686 $ 8,428,520
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 604,454 $ 376,634
Accrued salaries, wages and employee
benefits 138,231 169,658
Accrued interest 50,408 40,631
Income taxes payable 50,461 28,143
Accrued sales, use and property taxes 14,298 11,970
Current portion of long-term
environmental reserve 4,528 3,704
Billings in excess of costs and estimated
earnings on uncompleted contracts 64,400 17,448
Other current liabilities 20,231 25,901
Current portion of long-term borrowings 15,527 15,589
-------------- --------------
Total Current Liabilities 962,538 689,678
Long-term Borrowings, Less Current Portion 3,054,185 3,055,431
Accrued Benefit Obligations 229,242 252,422
Long-term Environmental Reserve,
Less Current Portion 12,038 11,830
Other Liabilities 94,638 78,401
Deferred Tax Liabilities 428,792 433,822
Minority Interest 34,517 42,321
-------------- --------------
TOTAL LIABILITIES 4,815,950 4,563,905
-------------- --------------
Contingencies, commitments and guarantees
Shareholders' Equity
Capital stock 2,550,303 2,547,123
Retained earnings 1,553,001 1,253,196
Accumulated other comprehensive income 63,432 64,296
-------------- --------------
TOTAL SHAREHOLDERS' EQUITY 4,166,736 3,864,615
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,982,686 $ 8,428,520
-------------- --------------
-------------- --------------
GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(US$ in thousands)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
----------------------- -----------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
OPERATING ACTIVITIES
Net income $ 262,107 $ 139,128 $ 425,115 $ 272,663
Adjustment to reconcile
net income to net cash
provided by operating
activities:
Minority interest 3,543 5,274 7,938 9,886
Depreciation 51,984 29,051 104,504 57,143
Amortization of
intangibles 26,257 251 50,420 709
Amortization of deferred
financing costs 2,691 691 5,382 1,376
Deferred income taxes (14,134) 3,583 (15,968) 10,256
Loss (gain) on
disposition of property,
plant and equipment 254 (13) (269) 291
Income from 50% owned
joint ventures (41,727) (14,334) (60,107) (32,029)
Distributions from 50%
owned joint ventures 30,000 11,250 40,404 31,654
Compensation cost from
share-based awards 12,611 8,223 15,799 17,005
Excess tax benefits from
share-based payment
arrangements (469) (463) (1,133) (989)
Realized loss on writedown
of investments 17,004 - 39,671 -
Facility closure expenses - - 990 -
Changes in operating
assets and liabilities,
net of acquisitions:
Accounts receivable (228,495) 6,427 (357,691) (164,268)
Inventories (225,035) (31,484) (271,958) (9,322)
Other assets (1,951) (1,363) (3,085) 22,843
Liabilities 97,082 (88,045) 182,976 (17,427)
----------- ----------- ----------- -----------
NET CASH (USED IN) PROVIDED
BY OPERATING ACTIVITIES (8,278) 68,176 162,988 199,791
INVESTING ACTIVITIES
Additions to property,
plant and equipment (35,004) (38,672) (65,710) (92,786)
Proceeds received from
the disposition of
property, plant and
equipment 312 409 1,614 1,165
Acquisitions (203,500) (4,988) (203,500) (4,988)
Change in restricted
cash - - - (6)
Purchases of short-term
investments - (243,969) - (461,658)
Sales of short-term
investments 700 257,835 700 457,630
----------- ----------- ----------- -----------
NET CASH USED IN
INVESTING ACTIVITIES (237,492) (29,385) (266,896) (100,643)
FINANCING ACTIVITIES
Proceeds from issuance
of debt 1 19,508 499 19,508
Payments on term
borrowings (4,234) (92) (4,259) (154)
Additions to deferred
financing costs (108) (521) (108) (521)
Cash dividends (8,645) (6,106) (125,310) (94,617)
Distributions to
subsidiary's minority
shareholder - (3,944) (3,065) (5,165)
Proceeds from exercise of
employee stock options 630 322 1,124 617
Excess tax benefits from
share-based payment
arrangements 469 463 1,133 989
----------- ----------- ----------- -----------
NET CASH (USED IN) PROVIDED
BY FINANCING ACTIVITIES (11,887) 9,630 (129,986) (79,343)
Effect of exchange rate
changes on cash and
cash equivalents 452 533 (1,728) 564
----------- ----------- ----------- -----------
(DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (257,205) 48,954 (235,622) 20,369
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 568,945 80,651 547,362 109,236
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 311,740 $ 129,605 $ 311,740 $ 129,605
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Supplemental Information:
Cash payments for
income taxes $ 176,998 $ 89,665 $ 195,045 $ 97,963
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Cash payments for
interest $ 4,029 $ 275 $ 78,113 $ 21,673
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
EBITDA (EBITDA is calculated by adding earnings before interest and other
expense on debt, taxes, depreciation, amortization, writedown of
short-term investments, foreign exchange gain/loss, net, minority
interest and cash distributions from 50% owned joint ventures, and
deducting interest income and earnings from 50% owned joint ventures) is
a non-GAAP measure that management believes is a useful supplemental
measure of cash available prior to debt service, capital expenditures and
income tax. Investors are cautioned that EBITDA should not be construed
as an alternative to net income determined in accordance with GAAP as an
indicator of the Company's performance or to cash flows from operations
as a measure of liquidity and cash flows. EBITDA does not have a
standardized meaning prescribed by GAAP. The Company's method of
calculating EBITDA may differ from the methods used by other companies
and, accordingly, it may not be comparable to similarly titled measures
used by other companies. Reconciliation of EBITDA to net income is shown
below:
For the Three Months
Ended - Unaudited
-----------------------------
June 30, 2008 June 30, 2007
-------------- --------------
($000s)
Net income $ 262,107 $ 139,128
Income tax expense 136,795 67,051
Interest and other expense on debt 35,564 8,965
Interest income (2,638) (3,004)
Depreciation 51,984 29,051
Amortization of intangibles 26,257 251
Amortization of deferred financings costs 2,691 691
Earnings from 50% owned joint ventures (41,727) (14,334)
Cash distribution from 50% owned
joint ventures 30,000 11,250
Foreign exchange (gain) loss, net (451) (4,021)
Writedown of investments 17,004 -
Minority interest 3,543 5,274
-------------- --------------
EBITDA $ 521,129 $ 240,301
-------------- --------------
-------------- --------------
For the Six Months
Ended - Unaudited
-----------------------------
June 30, 2008 June 30, 2007
-------------- --------------
($000s)
Net income $ 425,115 $ 272,663
Income tax expense 221,442 133,805
Interest and other expense on debt 87,403 19,268
Interest income (9,301) (5,356)
Depreciation 104,504 57,143
Amortization of intangibles 50,420 709
Amortization of deferred financings costs 5,382 1,376
Earnings from 50% owned joint ventures (60,107) (32,029)
Cash distribution from 50% owned
joint ventures 40,404 31,654
Foreign exchange (gain) loss, net (4,329) (4,269)
Writedown of investments 39,671 -
Minority interest 7,938 9,886
-------------- --------------
EBITDA $ 908,542 $ 484,850
-------------- --------------
-------------- --------------
SUPPLEMENTAL OPERATING AND FINANCIAL INFORMATION - UNAUDITED
THE INFORMATION IN THIS TABLE EXCLUDES 50% OWNED JOINT VENTURES
For the Three Months Ended
June 30, 2008 June 30, 2007
---------------------- ----------------------
Tons Tons
----------- -----------
Production
Melt Shops 2,504,088 1,799,841
Rolling Mills 2,406,082 1,749,515
Tons % Tons %
----------- --------- ----------- ---------
Finished Steel Shipments
Rebar 489,694 20% 396,770 23%
Merchant/Special
Sections/Structurals 1,423,274 57% 754,135 45%
Rod 193,421 7% 181,832 11%
Fabricated Steel 393,696 16% 362,275 21%
----------- --------- ----------- ---------
Total Shipments 2,500,085 100% 1,695,012 100%
$/Ton $/Ton
----------- -----------
Selling Prices
Mill external shipments $ 882 $ 648
Fabricated steel
shipments 1,098 878
Scrap Charged 383 232
Metal Spread (Selling
price less scrap)
Mill external shipments 499 416
Fabricated steel
shipments 715 646
Mill manufacturing cost 332 255
Operating Income 165 118
EBITDA 208 142
SUPPLEMENTAL OPERATING AND FINANCIAL INFORMATION - UNAUDITED
THE INFORMATION IN THIS TABLE EXCLUDES 50% OWNED JOINT VENTURES
For the Six Months Ended
June 30, 2008 June 30, 2007
---------------------- ----------------------
Tons Tons
----------- -----------
Production
Melt Shops 4,931,262 3,526,961
Rolling Mills 4,708,986 3,482,856
Tons % Tons %
----------- --------- ----------- ---------
Finished Steel Shipments
Rebar 994,941 20% 873,453 24%
Merchant/Special
Sections/Structurals 2,775,125 57% 1,630,467 45%
Rod 392,727 8% 378,595 11%
Fabricated Steel 715,896 15% 702,912 20%
----------- --------- ----------- ---------
Total Shipments 4,878,689 100% 3,585,427 100%
$/Ton $/Ton
----------- -----------
Selling Prices
Mill external shipments $ 809 $ 617
Fabricated steel
shipments 1,036 870
Scrap Charged 331 224
Metal Spread (Selling
price less scrap)
Mill external shipments 478 393
Fabricated steel
shipments 705 646
Mill manufacturing cost 319 253
Operating Income 146 110
EBITDA 186 135
50% Owned Joint Venture Results
The following table summarizes the results of the Company's portion of
its 50% owned joint ventures, primarily Gallatin Steel, a flat rolled
mill joint venture.
Three Months Ended - Six Months Ended -
Unaudited Unaudited
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
----------- ----------- ----------- -----------
Tons Shipped 217,651 200,817 433,853 400,802
Operating Income $ 41,869 $ 14,981 $ 60,449 $ 33,101
Net Income 41,724 14,334 60,101 32,029
EBITDA 44,694 17,458 66,182 38,279
$/Ton $/Ton $/Ton $/Ton
----- ----- ----- -----
Average Selling Price 879 554 753 542
Scrap Charged 474 273 401 261
Metal Spread 405 281 352 281
Operating Income 192 75 139 83
EBITDA 205 87 153 96
SOURCE Gerdau Ameristeel Corporation
