01—Abstract
Summary
Summary of the 10-K/A filed March 5, 2010. Cited figures are marked; the original filing is the authoritative source.
Steel Dynamics, Inc. (STLD) reported a challenging 2009.
Net sales fell to $3.96 billiona from $8.08 billion in 2008, and operating income dropped to $119.5 million from $846.4 million. The company posted a net loss attributable to Steel Dynamics, Inc. of $8.2 million, or $0.04 per diluted share, compared with net income of $463.4 million, or $2.38 per diluted share, in 2008. The first quarter of 2009 was the weakest, with a non-cash inventory valuation adjustment of $83.3 million, and gross margins improved in each later quarter.
Management describes the company as well-positioned to weather the downturn, with a focus on controlling costs, improving leverage and maintaining liquidity. The company strengthened its capital structure during 2009. In June it raised net proceeds of approximately $678.8 millionb from a common stock offering and 5.125% convertible senior notes, using them to prepay its $552.0 million Term A loan.
Total debt fell by $427.6 million to $2.2 billionc, and the total debt to capitalization ratio improved from 62% to 53%. Cash dividends paid were $68.7 million, and the quarterly dividend was reduced to $0.075 per share from $0.10. The company's first lien leverage was 0.49x at year end, and it reported compliance with its amended financial covenants.
Looking ahead to 2010, management remains cautious on demand but notes improving order logs in sheet, special bar quality and ferrous and nonferrous materials. It expects higher utilization in steel and metals recycling, does not anticipate material improvement in fabrication or structural steel, and plans capital investments of less than $150 milliond.
Mesabi Nugget, the iron-nugget facility, began initial production in January 2010 and is expected to be a drag on segment results in 2010 during its start-up phase. This amended filing is identical to the original February 22, 2010 10-K except for the renumbering of Items 5 through 15.
02—Key points
Key Highlights
- Net sales declined to $3.96 billion in 2009 from $8.08 billion in 2008, and operating income fell to $119.5 million from $846.4 million.
- Net loss attributable to Steel Dynamics, Inc. was $8.2 million, or $0.04 per diluted share, versus net income of $463.4 million, or $2.38 per diluted share, in 2008.
- Total debt was reduced by $427.6 million to $2.2 billion, and the total debt to capitalization ratio improved from 62% to 53%.
- June 2009 common stock and 5.125% convertible senior notes offerings raised net proceeds of approximately $678.8 million, used to prepay the $552.0 million Term A loan.
- Liquidity improved by $193.8 million during 2009, and the company was in compliance with its amended financial covenants at year end (interest coverage 2.64x, first lien leverage 0.49x).
- Capital investments of $373.9 million were made in 2009, including $223.8 million for the Mesabi Nugget iron-nugget facility, which began initial production in January 2010.
- The quarterly dividend was reduced to $0.075 per share from $0.10, and the company expects to maintain that level in 2010; 2010 capital investments are planned at less than $150 million.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2009, Steel Dynamics lost $0.00.
- Revenue$3.96B100.0%
- Cost of revenue−$3.56B89.9%
- Gross profit$399.1M10.1%
- Operating costs−$279.5M7.1%
- Operating income$119.5M3.0%
- Interest, other & tax−$127.7M3.2%
- Net income−$8.2M0.2%
Where FY2009 revenue went
$3.96B- Cost of revenue: $3.56B, 90% of revenue
- Operating income: $119.5M, 3.0% of revenue
- Operating costs: $279.5M, 7.1% of revenue
Kept 3.0% as operating incomeOperating income $119.5M · 3.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-K/AFY2009filed March 5, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $3.96B$8.08B | −51.0% |
| Cost of Revenue | $3.56B$6.85B | −48.0% |
| Gross Profit | $399.08M$1.23B | −67.6% |
| Operating Expenses | $279.55M— | — |
| Operating Income | $119.53M$846.37M | −85.9% |
| Interest Expense | $141.36M$144.57M | −2.2% |
| Net Income | -$8.18M$463.39M | −101.8% |
| EPS (Basic) | $-0.04$2.45 | −101.6% |
| EPS (Diluted) | $-0.04$2.38 | −101.7% |
| Shares Outstanding (Basic) | 200.70M189.14M | +6.1% |
| Shares Outstanding (Diluted) | 200.70M194.59M | +3.1% |
05—Questions
Frequently Asked Questions
Why did Steel Dynamics swing from a profit in 2008 to a loss in 2009?
Demand for steel and metals recycling fell sharply as non-residential construction, residential construction and automobile manufacturing declined. Net sales dropped 51% to $4.0 billion, gross margin fell from 15% to 10%, and a $83.3 million non-cash inventory valuation adjustment was recorded in the first quarter of 2009 due to falling sheet product prices.
How did the company strengthen its balance sheet in 2009?
In June 2009 it completed a common stock offering of 31,050,000 shares at $13.50 and issued $287.5 million of 5.125% convertible senior notes due 2014. Net proceeds of about $678.8 million were used to prepay the $552.0 million Term A loan and repay revolver borrowings. Total debt declined $427.6 million to $2.2 billion.
What is the outlook for 2010?
Management remains cautious about demand but sees improving order logs for sheet steel, special bar quality products, and ferrous and nonferrous materials. It anticipates increased utilization rates in steel and metals recycling, but does not expect material improvement in fabrication or structural steel operations in 2010.
What is the status of the Mesabi Nugget iron-nugget project?
Mesabi Nugget began commissioning in the fourth quarter of 2009 and produced its first nuggets on January 12, 2010. The company expects production to reach about 50% of its 500,000-tonne annual capacity by mid-2010, and does not expect it to have a positive impact on the metals recycling and ferrous resources segment's 2010 operating results due to start-up costs.
Is the company still paying dividends?
Yes. Cash dividends paid totaled $68.7 million in 2009. The quarterly dividend was reduced to $0.075 per share from $0.10 in the second quarter of 2009, and the company anticipates maintaining that current quarterly level during 2010, subject to board discretion and restrictions in its credit agreement and notes indenture.
06—Continue