Gerdau Ameristeel Corporation (NYSE: GNA; TSX: GNA) today reported net income of $316.9 million ($0.73 per share fully diluted) for the three months ended September 30, 2008, a 156.0% increase in comparison to net income of $123.8 million ($0.40 per share fully diluted) for the three months ended September 30, 2008.
For the nine months ended September 30, 2008, net income was $742.0 million ($1.71 per share fully diluted) an increase of 87.1% compared to net income of $396.5 million ($1.29 per share fully diluted) for the nine months ended September 30, 2007.
Net sales for the three months ended September 30, 2008 increased 78.6% to $2.5 billion from $1.4 billion for the three months ended September 30, 2007. For the three months ended September 30, 2008, finished steel shipments increased to 2.1 million tons, an increase of 305 thousand tons from the three months ended September 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 September 30, 2008 increased 60.1% over the level in this same period in 2007 and 19.6% over second quarter 2008 levels.
Net sales for the nine months ended September 30, 2008 increased 73.2% to $7.1 billion from $4.1 billion for the nine months ended September 30, 2007. For the nine months ended September 30, 2008, finished steel shipments increased to 7.0 million tons, an increase of 1.6 million tons from the nine months ended September 30, 2007, primarily as a result of the acquisition of Chaparral Steel. Additionally, average mill finished steel selling prices for the nine months ended September 30, 2008 increased 39.4% over the level in this same period in 2007.
For the three months ended September 30, 2008, metal spread, the difference between mill selling prices and scrap raw material costs, was $662 per ton, an increase of $222 per ton from the same period in 2007. The increase is partially attributable to the higher margin structural products from the addition of the Chaparral products. For the nine months ended September 30, 2008, metal spread was $530 per ton, an increase of $121 per ton from the same period in the prior year. Partially offsetting this increase in metal spread has been a significant cost increase in alloys, energy and other raw material consumables used in our production process.
Earnings before interest, taxes, depreciation and amortization was $581.4 million for the three months ended September 30, 2008, compared to EBITDA of $250.2 million for the three months ended September 30, 2007. For the nine months ended September 30, 2008, EBITDA was $1.5 billion compared to $735.1 million for the nine months ended September 30, 2007.
In prior years, the Company purchased investments that are comprised of variable rate debt obligations, known as auction rate securities. During the three and nine months ended September 30, 2008, the Company recorded a $7.0 million and $46.7 million charge to write down the carrying value of these investments to their fair market value of $47.2 million. The original investment in these securities was approximately $104.2 million. The impact to earnings per share of this writedown for the three and nine months ended September 30, 2008 was approximately $0.02 and $0.11 per share, respectively. The effective tax rate was unfavorably impacted by this writedown as no associated tax benefit was recorded for this item.
Included in selling and administrative expense for the three and nine months ended September 30, 2008 is a non-cash pretax expense reversal of $9.8 million and a non-cash pretax expense of $6.0 million, respectively, to mark-to-market outstanding stock appreciation rights and expenses associated with other executive compensation agreements compared to a non-cash pretax expense reversal of $2.2 million and a non-cash pretax expense of $16.0 million, respectively for the three and nine months ended September 30, 2007.
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 October 27, 2008, the Company acquired Metro Recycling, a scrap processor with two locations in Guelph and one in Mississauga, Ontario, Canada. On October 31, 2008, the Company acquired the operating assets of Sand Springs Metal Processors, a scrap processor located in Sand Springs, Oklahoma.
On November 4, 2008, the Board of Directors approved a quarterly cash dividend of $0.02 (two US$ cents) per common share, payable December 8, 2008 to shareholders of record at the close of business on November 20, 2008. -- www.cnxmarketlink.com
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