How did Steel Dynamics' profitability change in 2005?

Net income was $221.8 million, or $4.35 per diluted share, in 2005, down from $295.3 million, or $5.27 per diluted share, in 2004. The company attributed the decline to lower product pricing, with the average consolidated selling price per ton shipped down $17, and to higher manufacturing and energy costs.

What is the status of the Roanoke Electric Steel acquisition?

On October 18, 2005, the company agreed to merge with Roanoke Electric Steel Corporation in a combination of stock and cash. A special meeting of Roanoke stockholders is scheduled for April 11, 2006, and the company expects to close shortly after approval. Completion is also subject to certain regulatory approvals and customary conditions, and a $7.5 million termination fee applies in certain circumstances.

How strong is the company's balance sheet and liquidity?

Total debt was $440.6 million at December 31, 2005, and the long-term debt to capitalization ratio was 33%. Cash and equivalents rose to $65.5 million, and operating cash flow was $310.8 million. The $350 million senior secured revolving credit facility had no outstanding borrowings, and the company stated it was in compliance with its covenants.

What are the main risks to the company's earnings?

The filing highlights steel price volatility driven by imports, excess global capacity and Chinese steel supply and demand; volatility in scrap and energy costs; cyclicality in the automotive and construction markets; and execution risk on the Iron Dynamics and Mesabi Nugget scrap substitute projects. It also cites risks from integrating acquisitions such as Roanoke and from debt covenant restrictions.

What is the company's dividend policy?

The company paid $.40 per share in cash dividends declared in 2005, consisting of a 10-cent quarterly dividend each quarter. For the first quarter of 2006, it announced a regular 10-cent dividend and a special 10-cent dividend, and it anticipated continuing comparable quarterly cash dividends during 2006. The filing notes that future dividends are at the board's discretion and that credit agreement and indenture terms restrict payments.

STLD 10-K FY2005 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 9, 2006. Cited figures are marked; the original filing is the authoritative source.

Steel Dynamics, Inc. reported net income of $221.8 million^a, or $4.35 per diluted share, for 2005, compared with $295.3 million, or $5.27 per diluted share, in 2004.

Net sales were $2.18 billion^b in 2005, essentially flat from $2.14 billion in 2004, while consolidated shipments rose 5% to 3.6 million tons. Gross profit fell to $485.1 million from $603.5 million, and the company stated that its gross margin percentage compressed 6%, reflecting lower product pricing and higher manufacturing and energy costs. The average consolidated selling price per ton shipped decreased $17 versus 2004.

The company operates three steel mini-mills (Flat Roll, Structural and Rail, and Bar Products) with an estimated combined capacity of 4.2 million tons, plus New Millennium Building Systems and the Iron Dynamics scrap substitute facility. Operating cash flow was $310.8 million^c in 2005, capital expenditures were $63.4 million, and the company repurchased 5.9 million shares for $186.8 million during the year. Total debt was $440.6 million at December 31, 2005, the long-term debt to capitalization ratio was 33%, and a new $350 million senior secured revolver had no outstanding borrowings.

The company also announced a definitive agreement to acquire Roanoke Electric Steel Corporation in a stock-and-cash merger, subject to Roanoke stockholder approval scheduled for April 11, 2006. The board declared cash dividends of $.40 per share in 2005, and the company announced a regular 10-cent dividend plus a special 10-cent dividend for the first quarter of 2006. Ernst & Young LLP issued an unqualified opinion on the financial statements and on the effectiveness of internal control over financial reporting as of December 31, 2005.

02—Key points

Key Highlights

Net income fell to $221.8 million ($4.35 diluted EPS) in 2005 from $295.3 million ($5.27 diluted EPS) in 2004, while net sales were roughly flat at $2.18 billion versus $2.14 billion.
Gross profit declined to $485.1 million from $603.5 million; the company cited a 6% compression in gross margin percentage from lower pricing and higher manufacturing and energy costs.
Consolidated shipments increased 5% to 3.6 million tons, driven by the Structural and Rail Division (up 93,000 tons) and the Bar Products Division (up 39,000 tons).
Metallic raw materials rose to 65% of total manufacturing costs in 2005 from 56% in 2004, and a scrap-indexed surcharge mechanism was used to pass some costs to customers.
The company repurchased 5.9 million shares for $186.8 million in 2005 and completed its 7.5 million share program by July 2005.
Total debt was $440.6 million at year-end 2005 with a 33% long-term debt to capitalization ratio; the new $350 million senior secured revolver had no borrowings outstanding.
A definitive agreement to acquire Roanoke Electric Steel Corporation provides Roanoke holders .400 Steel Dynamics shares plus $9.75 cash per share, with a Roanoke stockholder vote scheduled for April 11, 2006.

03—Questions

Frequently Asked Questions

How did Steel Dynamics' profitability change in 2005?
Net income was $221.8 million, or $4.35 per diluted share, in 2005, down from $295.3 million, or $5.27 per diluted share, in 2004. The company attributed the decline to lower product pricing, with the average consolidated selling price per ton shipped down $17, and to higher manufacturing and energy costs.
What is the status of the Roanoke Electric Steel acquisition?
On October 18, 2005, the company agreed to merge with Roanoke Electric Steel Corporation in a combination of stock and cash. A special meeting of Roanoke stockholders is scheduled for April 11, 2006, and the company expects to close shortly after approval. Completion is also subject to certain regulatory approvals and customary conditions, and a $7.5 million termination fee applies in certain circumstances.
How strong is the company's balance sheet and liquidity?
Total debt was $440.6 million at December 31, 2005, and the long-term debt to capitalization ratio was 33%. Cash and equivalents rose to $65.5 million, and operating cash flow was $310.8 million. The $350 million senior secured revolving credit facility had no outstanding borrowings, and the company stated it was in compliance with its covenants.
What are the main risks to the company's earnings?
The filing highlights steel price volatility driven by imports, excess global capacity and Chinese steel supply and demand; volatility in scrap and energy costs; cyclicality in the automotive and construction markets; and execution risk on the Iron Dynamics and Mesabi Nugget scrap substitute projects. It also cites risks from integrating acquisitions such as Roanoke and from debt covenant restrictions.
What is the company's dividend policy?
The company paid $.40 per share in cash dividends declared in 2005, consisting of a 10-cent quarterly dividend each quarter. For the first quarter of 2006, it announced a regular 10-cent dividend and a special 10-cent dividend, and it anticipated continuing comparable quarterly cash dividends during 2006. The filing notes that future dividends are at the board's discretion and that credit agreement and indenture terms restrict payments.

04—Continue

← View all 10-K filings