Oct. 19, 2006 — Steel Dynamics, Inc. announced record third quarter earnings of $119 million on record net sales of $912 million for the third quarter of 2006.

Third Quarter Results—The $119 million earnings ($2.17 per diluted share) reflect a 23% increase compared to $97 million in the second quarter of 2006 and a 161% compared to $45 million in the third quarter of 2005. Record net sales $912 million reflect an increase of 11% from the second quarter of 2006 and are 83% higher than the third quarter of 2005. Consolidated shipments of 1.2 million tons were 35% higher than the third quarter of 2005.

Nine-Month Results—Net income was $292 million ($5.49 per diluted share), 86% higher than the first nine months of 2005. Year-to-date consolidated shipments of 3.5 million tons were 32% higher than the first nine months of 2005.

Management Comments—“The third quarter was an excellent quarter, setting company records for revenue and earnings,” said Keith Busse, President and CEO of Steel Dynamics. “Three of our steelmaking divisions — Structural and Rail, Engineered Bar Products, and the Roanoke Bar division — set new tonnage shipping records in the third quarter. Overall, steel markets remained relatively strong with scrap costs increasing slightly during the quarter. Compared to the second quarter, our average consolidated selling price in the third quarter increased $61 per ton shipped, from $672 to $733 per ton. Average scrap costs were up $6 per net ton charged. Third quarter operating profit per ton shipped was $160.

“We are pleased that third quarter results came in comfortably above our most recent guidance and reiterate our previous guidance for an equally strong fourth quarter in a range of $2.10 to $2.20 per diluted share after considering the impact of third quarter share repurchases. We believe that fourth quarter shipping volumes may be somewhat lower than the third quarter, primarily due to planned maintenance outages. Flat-roll profit margins should remain relatively stable to down slightly as selling price softness should be offset by lower scrap costs. We expect bar and structural shipments and margins to remain very strong as these divisions experience strong market demand, record backlogs, and strong pricing trends. After the Roanoke merger, steel shipments are roughly balanced at 50% long products and 50% flat-rolled steels."

Segment Results—For the Flat Roll Division, third quarter shipments were somewhat lower due to the lower volume of production early in the quarter after the modification of one of the mill's two casters. The just-completed modification of the second caster in early October will result in somewhat reduced fourth quarter flat-roll production. Demand for flat-rolled steel remained steady in the third quarter, but market conditions recently have shown signs of an inventory correction due to the recent surge in imports coupled with lower fourth-quarter automotive requirements. Recently announced supply-side curtailments should make the correction brief in nature.

The Structural and Rail Division is performing very well in a period of high demand for wide-flange beams, producing and shipping at the mill's rated capacity of 1 million tons per year. The division's backlog currently extends into January 2007. Technical progress has been made in the rail certification process, but given the mill's current full utilization in structural steel production, volume shipments of rail are not likely for several quarters.

The Engineered Bar Products Division is experiencing a stronger business environment than in 2005 and is benefiting from the start-up of the SBQ finishing facility at Pittsboro, Ind. This operation allows SDI to perform a variety of value-added processes on the special-bar-quality steel it produces to better meet customer needs. The company's growth in the SBQ business has led management to evaluate options for the addition of a new rolling facility.

SDI says that demand remains strong for the merchant products and light structural steel produced by the Roanoke Bar Division and Steel of West Virginia. The Roanoke Bar Division achieved another record quarter in tons shipped coupled with historically high profit margins after initiating a new incentive compensation program patterned after SDI's. After a week-long work stoppage at Steel of West Virginia (SWVA), the United Steelworkers Union ratified a new three-year contract on September 3. Although production was curtailed, third quarter shipments by SWVA were comparable to the second quarter.

Miscellaneous—Under a program announced August 29, the company repurchased 3.1 million shares of its common stock during the third quarter. The program authorizes the purchase of up to 5 million shares on the open market. The company also announced during the quarter a doubling of the quarterly dividend to 20 cents per share, and the continuance of a special dividend of 10 cents per share through the end of 2006.

Investments—Complementing the above steps to increase shareholder value, the company has announced several growth initiatives that should have a long-term positive impact on revenues and earnings. In 2006 and 2007, a total of nearly $400 million in capital expenditures is planned, including $200 million in 2007 for the expansion of the Columbia City, Ind., structural and rail mill. This new rolling mill, expected to begin production late in the fourth quarter of 2007 or early 2008, will allow SDI to begin volume production of rail and to produce additional structural shapes. Other planned capital investments include a second paint line for processing flat-rolled sheet, and meltshop and rolling mill upgrades at the Roanoke, Va., bar mill.

"We believe structural changes in the domestic steel industry as well as SDI's stronger competitive position have set the stage for sustainable higher profit levels. Some of the initiatives that have strengthened our market position and profitability include a growing volume of shipments made possible by recently added production capacity and acquisitions, an increasing diversity of steel-product offerings serving new markets, and an improving mix of products with an emphasis on more value-added, finished steels," Busse said.