01—Abstract
Summary
Summary of the 10-K filed February 27, 2012. Cited figures are marked; the original filing is the authoritative source.
Steel Dynamics, Inc. (STLD) reported a strong 2011 in its Form 10-K filed February 27, 2012.
Net sales rose to $7,997,500 thousanda ($8.0 billion) from $6,300,887 thousand in 2010, and operating income reached $584,820 thousand versus $364,753 thousand. Net income attributable to Steel Dynamics was $278,120 thousand, or $1.22 per diluted share, compared with $140.7 million, or $0.64 per diluted share, in 2010. Management attributed the improvement to higher steel shipments and pricing across segments, with the steel operations segment's operating income rising to $658.1 million.
Steel operations shipping volumes improved 9% and overall steel pricing increased 16% on a per-ton basis. The balance sheet and liquidity position improved during 2011. Total debt was $2.4 billionb at year-end, the long-term debt to capitalization ratio fell to 50.1% from 52.8%, and liquidity rose to almost $1.6 billion.
In September 2011 the company entered into a new five-year senior secured revolving credit facility providing up to $1.1 billionc of borrowing. In January 2012 it tendered for $279.7 million of its $700.0 million 7 3/8% senior notes due November 2012 and funded the tender with a $275.0 million term loan maturing in 2016. The company reported covenant compliance at December 31, 2011, with an interest coverage ratio of 4.92:1.00 and a net debt leverage ratio of 2.36:1.00.
The filing also lays out risks and outlook. Management cites non-residential construction demand at historically low levels and ongoing margin compression in metals recycling, where competition for feedstock remained strong. Losses from the Minnesota iron operations (Mesabi Nugget) reduced 2011 net income by approximately $34.0 milliond.
For 2012, management expects continued slow but steady U.S. economic growth and plans capital expenditures of between $225.0 and $250.0 million. The company also disclosed that it is a defendant, with eight other steel manufacturers, in a class action antitrust complaint, and it stated that it could not presently determine the outcome and did not believe there was a reasonably possible material impact.
02—Key points
Key Highlights
- Net sales of $7,997,500 thousand in 2011, up from $6,300,887 thousand in 2010, with gross profit of $931,518 thousand.
- Operating income of $584,820 thousand in 2011 versus $364,753 thousand in 2010; steel operations contributed $658,120 thousand of segment operating income.
- Net income attributable to Steel Dynamics, Inc. of $278,120 thousand, or $1.22 per diluted share, compared with $0.64 per diluted share in 2010.
- Steel operations shipping volumes rose 9% and overall steel pricing increased 16% per ton in 2011.
- Liquidity increased to almost $1.6 billion at year-end, supported by a new $1.1 billion senior secured revolver and a $275.0 million term loan issued in January 2012.
- Long-term debt to capitalization ratio improved to 50.1% from 52.8%; the company was in compliance with its financial covenants at December 31, 2011.
- Planned 2012 capital expenditures of between $225.0 and $250.0 million, with management citing an expected slow but steady economic recovery.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Steel Dynamics kept $0.03.
- Revenue$8.00B100.0%
- Cost of revenue−$7.07B88.4%
- Gross profit$931.5M11.6%
- Operating costs−$346.7M4.3%
- Operating income$584.8M7.3%
- Interest, other & tax−$306.7M3.8%
- Net income$278.1M3.5%
Where FY2011 revenue went
$8.00B- Cost of revenue: $7.07B, 88% of revenue
- Net income: $278.1M, 3.5% of revenue
- Operating costs: $346.7M, 4.3% of revenue
- Interest, other & tax: $306.7M, 3.8% of revenue
Kept 3.5% as net incomeNet income $278.1M · 3.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 27, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $8.00B$6.30B | +26.9% |
| Cost of Revenue | $7.07B$5.63B | +25.6% |
| Gross Profit | $931.52M$675.67M | +37.9% |
| Operating Expenses | $346.70M$310.91M | +11.5% |
| Operating Income | $584.82M$364.75M | +60.3% |
| Interest Expense | $176.98M$170.23M | +4.0% |
| Net Income | $278.12M$140.71M | +97.7% |
| EPS (Basic) | $1.27$0.65 | +95.4% |
| EPS (Diluted) | $1.22$0.64 | +90.6% |
| Shares Outstanding (Basic) | 218.47M216.76M | +0.8% |
| Shares Outstanding (Diluted) | 235.99M234.72M | +0.5% |
05—Questions
Frequently Asked Questions
How did Steel Dynamics perform financially in 2011 compared with 2010?
Net sales rose to $7,997,500 thousand from $6,300,887 thousand, and operating income increased to $584,820 thousand from $364,753 thousand. Net income attributable to Steel Dynamics was $278,120 thousand, or $1.22 per diluted share, versus $140,709 thousand, or $0.64 per diluted share, in 2010.
What drove the improvement in 2011 results?
The filing attributes the gains to increased order volumes and pricing across all operations, with the most impactful demand improvements in sheet and special bar-quality steel. Steel operations shipping volumes rose 9% and average steel pricing increased 16% per ton, while metals recycling benefited from record volumes, although margins were somewhat compressed.
How is the company's debt and liquidity position?
Total debt was $2.4 billion at December 31, 2011, and the long-term debt to capitalization ratio was 50.1%, down from 52.8%. Liquidity was almost $1.6 billion, and the company entered a new five-year $1.1 billion senior secured revolving credit facility in September 2011. In January 2012 it tendered for $279.7 million of its 7 3/8% senior notes due 2012, funded by a $275.0 million term loan maturing in 2016.
What risks and losses does the filing highlight for investors?
The filing highlights cyclical demand in steel and scrap markets, continued weakness in non-residential construction, and margin compression in metals recycling. Losses from the Minnesota iron operations reduced 2011 net income by approximately $34.0 million, and the company is a co-defendant in a class action antitrust complaint, which management said could not presently be determined and was not expected to have a reasonably possible material impact.
What is the company's outlook and capital spending plan for 2012?
Management is optimistic about continued slow but steady U.S. economic growth that could increase volumes across all operations, and believes residential and non-residential construction activity has likely reached its bottom. The estimated 2012 cash allocation plan includes capital expenditures of between $225.0 million and $250.0 million.
06—Continue