• Fourth Quarter 2014 Records
  • Steel shipments of 2.3 million tons
  • Steel fabrication operating income of US$22 million
• Full-Year 2014 Records
• Consolidated revenues of US$8.8 billion
• Liquidity of US$1.6 billion
• Steel shipments of 7.4 million tons, with individual records from Butler Flat Roll, Columbus Flat Roll, Engineered Bar Products, and Structural and Rail Divisions
• Steel fabrication shipments of 481,000 tons
• Steel fabrication operating income of US$52 million

Excluding non-cash fixed asset impairment charges related to the company's Minnesota Operations of US$0.55per diluted share, and post-acquisition purchase accounting and lower of cost or market inventory adjustments of US$0.04 per diluted share, the company's adjusted fourth quarter 2014 net income was US$97 million, or US$0.40per diluted share, on net sales of US$2.5 billion. Including these charges, the company reported a fourth quarter 2014 net loss of US$45 million, or US$0.19 per diluted share. 
 
The operating performance of the company's Minnesota operations was steady in the fourth quarter 2014, indicating a consistency of production capability and the ability to utilize lower-cost raw materials.  Based on the associated information, as indicated in the company's 17 December 2014 guidance, the company assessed the carrying value of the operation's fixed assets during the fourth quarter, and determined that the future estimated cash flows did not support the values in place. Therefore, the company recorded a pre-tax, non-cash asset impairment charge of US$260 million, and based on the company's joint venture ownership percentage, reduced consolidated results by US$213 million.    
 
Comparatively, prior year fourth quarter net income was US$55 million, or US$0.24 per diluted share, on net sales ofUS$1.9 billion, and sequential third quarter 2014 net income was US$91 million, or US$0.38 per diluted share, which included the reduction of approximately US$0.09 per diluted share related to acquisition costs, financing fees, and the effect of purchase accounting adjustments for the Columbus acquisition that occurred mid-September 2014.
 
"We continue to perform at the top of our industry, both financially and operationally," said CEO Mark Millett. "We achieved record annual revenues, and excluding the previously mentioned charges, our annual 2014 consolidated net income improved 70% and operating income increased 58%.  We also achieved record 2014 shipments in steel, even before recording the results from our recent Columbus steel mill acquisition.  The Butler Flat Roll, Columbus Flat Roll, Structural and Rail and Engineered Bar Products Divisions all attained individual annual shipping records.  However, as expected, the fourth quarter 2014 steel shipments declined sequentially due to typical seasonal declines and the continuation of elevated import levels.  While underlying steel demand from automotive, manufacturing and construction markets remained sound, overall average pricing weakened to a greater degree than raw material prices. 
 
"Of particular note, our fabrication operations achieved record annual shipments with increased volumes of 31%, reaching 481,000 tons. Annual operating income improved to US$52 million, well over seven times 2013 results.  The team's performance was top-of-class.  They leveraged the improving nonresidential construction market, achieving improved metal spread and meaningfully higher volume, driven by overall market growth and increased market share.  Despite a seasonal fourth quarter shipment decline, pricing improved, margins expanded and operating income increased over traditionally stronger third quarter results.  This is evidence of the continued recovery in construction demand," stated Millett.
 
For the company's metals recycling operations, annual 2014 operating income decreased 31% to US$44 million, as the decrease in ferrous metal spread more than offset the increase in overall shipments.  The ongoing overcapacity of recycled shredding locations throughout the United States, particularly in the Southeast, continues to constrain profitability and remains a broad industry challenge.

Fourth Quarter Review
Seasonal trends and elevated steel imports negatively impacted shipments across the company's operating platforms.  Excluding Columbus purchase accounting adjustments, operating income for the company's steel operations increased 4% to US$224 million, based on increased shipments.  Increased flat roll shipments from both Butler and Columbus, more than offset the declines in the company's long product divisions.  Steel metal spread contracted in the fourth quarter primarily as a function of decreased selling values from additional import pressure and seasonally lower demand.  The average product selling price for the company's steel operations decreased US$34 to US$806 per ton.  The average ferrous scrap cost per ton melted decreased US$10 toUS$346 per ton.
 
Fourth quarter operating income attributable to the company's sheet products increased 29% when compared to the sequential quarter, as a result of the Columbus acquisition. Operating income from long products decreased 21%, as structural steel and bar pricing declined in the quarter. The production utilization rate for the company's steel operations was 84% in the fourth quarter 2014, compared to 90% in the prior quarter.
 
Fourth quarter operating income from the company's metals recycling operations decreased to US$3 million, compared to US$13 million for the third quarter 2014.  Overall shipments and ferrous metal spread decreased, as a result of weaker scrap exports, which increased domestic scrap supply.
 
The company's fabrication operations continued its strong performance.  Operating income increased 11%, to US$22 million, as a result of overall market growth and increased market share.  Higher average selling values more than offset a five% seasonal decrease in sequential shipments.  Order inquiries and bookings for our fabrication operations remain strong, confirming the positive trend in the nonresidential construction market.
 
During the fourth quarter, the company amended, restated and expanded its senior secured revolving credit facility and entered into a new term loan facility.  The company expanded its revolving credit facility from US$1.1 billion to US$1.2 billion and renewed it for another five year period, and also entered into a new five year US$250 million term loan facility.  Subject to certain conditions, the company also has the ability to increase the combined facility size by a minimum of an additional US$750 million.  "We are pleased with this transaction and the continued strong support from our financial institutions," stated Theresa Wagler, CFO. "The combination of the new facilities, plus our strong cash flow generation in the fourth quarter and throughout 2014, has resulted in record liquidity levels, further enhancing the strength and flexibility of our capital structure to not only support our current operations, but to readily promote growth." 
 
Full-Year Review
Annual 2014 net income was US$157 million, or US$0.67 per diluted share.  Excluding charges related to fixed asset impairment, purchase accounting, acquisition-related expenses, and lower of cost or market adjustments, the company had adjusted net income of US$323 million, or US$1.35 per diluted share.  When compared to prior year results, annual 2014 shipments and average product pricing increased across all of the company's operating platforms.  Consolidated net sales increased 19% to US$8.8 billion, attaining a new annual record.  On an adjusted basis, excluding the previously mentioned charges, consolidated 2014 operating income would have improved 58% to US$612 million, primarily as a result of year-over-year improvement in steel shipments and metal spread. The average annual 2014 selling price for the company's steel operations increased US$34 to US$827per ton, compared to 2013.  The average annual 2014 ferrous cost per ton melted increased US$7 to US$360 per ton, compared to prior year.
 
Outlook
"As we enter 2015, we remain optimistic that the broader U.S. economy will continue to improve," said Millett. "However, we are facing a challenging first quarter.  The instability of global growth and continued decline in global oil prices weigh on general sentiment.  The combination of high import levels and a seasonally slow December resulted in higher levels of customer inventories, and consequently has resulted in decreased selling values.  We believe this overhang can be resolved during the first quarter of 2015.  The U.S. economy continues to improve, and there continues to be strength in several key steel-consuming end markets, including automotive, manufacturing and nonresidential construction. The non-service sector portion of U.S. GDP will continue to strengthen, and is capable of growing at a higher rate than overall U.S. GDP, which is a positive for steel consumption in 2015 and the out years.  
 
"The recent acquisition of the Columbus Flat Roll Division broadened our geographic reach and accelerated our product diversification.  In addition, our organic growth projects in SBQ and rail also bring product diversification and growth opportunities in the coming years.  Our focus on our customers, coupled with our market diversification and low-cost operating platforms support our ability to maintain our best-in-class performance. We believe we are poised to capitalize on meaningful growth opportunities, both near-term and in the future, that will benefit employees, customers and shareholders," concluded Millett.
 
Summary Fourth Quarter 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 six electric-arc-furnace steel mills and related steel finishing and processing facilities, with the results of the Columbus Flat Roll Division included from the date of acquisition on 16 September 2014.  The company's steel operations produce flat roll, structural, merchant bars, engineered special-bar-quality bars, rebar, rail, and specialty shapes steels.
 

		Fourth Quarter				Full Year				Sequential
		2014		2013		2014		2013		3Q 2014
Total Sales		US$      1,843,864		US$      1,222,907		US$      5,968,904		US$      4,768,004		US$ 1,564,112
External Sales		1,707,829		1,146,701		5,541,743		4,461,457		1,451,211
Operating Income		212,267		155,107		680,210		513,227		202,084
Total Shipments (tons)		2,329,825		1,542,289		7,358,366		6,119,884		1,900,043
External Shipments (tons)		2,119,236		1,423,953		6,704,714		5,628,632		1,728,023
Production (tons)		2,263,540		1,588,392		7,376,657		6,266,507		1,885,299
Average External Sales Price Per Ton		US$                806		US$                805		US$                827		US$                793		US$           840
Average Ferrous Scrap Cost Per Ton		US$                346		US$                356		US$                360		US$                353		US$           356

Metals Recycling and Ferrous Resources Operations
This segment includes the company's metals recycling and iron resources operations.

		Fourth Quarter				Full Year				Sequential
		2014		2013		2014		2013		3Q 2014
Metals Recycling & Ferrous Resources
Total Sales		US$         972,759		US$         907,668		US$      4,091,725		US$      3,663,486		US$ 1,111,300
External Sales		593,582		572,840		2,486,969		2,384,841		672,397
Operating Loss		(17,547)		(13,020)		(30,843)		(30,835)		(798)
Impairment Charges		(260,000)		-		(260,000)		-		-
		(277,547)		(13,020)		(290,843)		(30,835)		(798)
Unrealized Hedging Gain (Loss), Net		635		(2,626)		5,327		(4,943)		3,125
Metals Recycling Standalone
Total Sales		US$         813,478		US$         797,034		US$      3,539,206		US$      3,274,866		US$    953,483
External Sales		525,546		535,549		2,226,827		2,277,550		597,648
Operating Income		2,933		11,677		43,901		63,582		13,021
Unrealized Hedging Gain (Loss), Net		1,151		(1,707)		4,174		(3,990)		2,664
Ferrous Shipments (gross tons)		1,325,337		1,356,258		5,566,238		5,505,995		1,453,671
% Shipments to SDI Steel Mills		48%		47%		48%		44%		46%
Nonferrous Shipments (pounds 000's)		289,124		254,876		1,173,771		1,052,494		325,436

Steel Fabrication Operations
Steel fabrication operations include New Millennium Building Systems, which fabricates steel joists, trusses, and decking used in the construction of nonresidential buildings. 
 

		Fourth Quarter				Full Year				Sequential
		2014		2013		2014		2013		3Q 2014
Total Sales		US$         191,059		US$         121,853		US$         631,808		US$         439,655		US$    190,036
Operating Income (Loss)		21,704		(122)		51,894		7,003		19,474
Total Shipments (tons)		136,917		101,132		480,509		366,676		143,737
Average Sales Price Per Ton		US$             1,395		US$             1,205		US$             1,315		US$             1,199		US$        1,322