01—Abstract
Summary
Summary of the 10-K filed March 3, 2014. Cited figures are marked; the original filing is the authoritative source.
Steel Dynamics, Inc. (STLD) reported net sales of $7.37 billiona in 2013, up from $7.29 billion in 2012, while operating income was $386.5 million compared with $391.2 million a year earlier.
Net income attributable to Steel Dynamics, Inc. was $189.3 millionb, or $0.83 per diluted share, versus $163.6 million, or $0.73 per diluted share, in 2012. The company attributed the earnings improvement largely to interest cost savings of $30.9 million and lower refinancing costs of $37.7 million, offsetting compressed metal margins in the steel and metals recycling businesses. Steel operations reached record shipments of 6.1 million tons, but average steel prices per ton declined $41.
The metals recycling and ferrous resources segment swung to an operating loss of $52.5 millionc, driven in part by losses from the Minnesota iron operations of approximately $42 million, or $0.18 per diluted share. Management said it expects to assess toward the end of the first quarter of 2014 whether further process improvements at the Mesabi Nugget facility are justifiable. Steel fabrication operating income rose to $7.0 million on a 24% increase in selling volumes.
Balance sheet and cash flow data show cash and equivalents of $395.2 milliond, total long-term debt of $2.11 billion, and cash flow from operations of $312.2 million, with capital expenditures of $186.8 million. The company's long-term debt to capitalization ratio was 44.7%, and it was in compliance with its credit facility covenants. A class action antitrust complaint involving steel manufacturers remains pending, with a class certification hearing scheduled for March 5-7, 2014, and the company has not determined a dollar estimate of exposure.
02—Key points
Key Highlights
- Net sales of $7.37 billion in 2013 versus $7.29 billion in 2012; record steel shipments of 6.1 million tons.
- Net income attributable to Steel Dynamics, Inc. of $189.3 million, or $0.83 per diluted share, compared with $163.6 million, or $0.73 per diluted share, in 2012.
- Operating income of $386.5 million, roughly unchanged from $391.2 million in 2012, as metal margins declined for steel and metals recycling operations.
- Metals recycling and ferrous resources segment posted an operating loss of $52.5 million, including Minnesota iron operations losses of approximately $42 million.
- Interest expense fell as gross interest expense decreased $27.7 million to $132.3 million, and the effective overall interest rate was reduced to less than 5.6% from almost 7.0%.
- Cash flow from operations of $312.2 million and capital expenditures of $186.8 million; cash and equivalents of $395.2 million and $1.1 billion of revolver availability at year-end.
- Pending class action antitrust litigation with eight other steel manufacturers; class certification hearing scheduled for March 5-7, 2014, with no dollar estimate of exposure.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Steel Dynamics kept $0.03.
- Revenue$7.37B100.0%
- Cost of revenue−$6.65B90.2%
- Gross profit$719.1M9.8%
- Operating costs−$332.6M4.5%
- Operating income$386.5M5.2%
- Interest, other & tax−$197.2M2.7%
- Net income$189.3M2.6%
Where FY2013 revenue went
$7.37B- Cost of revenue: $6.65B, 90% of revenue
- Net income: $189.3M, 2.6% of revenue
- SG&A: $332.6M, 4.5% of revenue
- Interest, other & tax: $197.2M, 2.7% of revenue
Kept 2.6% as net incomeNet income $189.3M · 2.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed March 3, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $7.37B$7.29B | +1.1% |
| Cost of Revenue | $6.65B$6.57B | +1.3% |
| Gross Profit | $719.14M$719.90M | −0.1% |
| SG&A Expenses | $332.62M$328.73M | +1.2% |
| Operating Expenses | $332.62M$328.73M | +1.2% |
| Operating Income | $386.52M$391.17M | −1.2% |
| Interest Expense | $127.73M$158.59M | −19.5% |
| Net Income | $189.31M$163.55M | +15.8% |
| EPS (Basic) | $0.86$0.75 | +14.7% |
| EPS (Diluted) | $0.83$0.73 | +13.7% |
| Shares Outstanding (Basic) | 220.92M219.16M | +0.8% |
| Shares Outstanding (Diluted) | 239.00M236.62M | +1.0% |
05—Questions
Frequently Asked Questions
How did Steel Dynamics perform financially in 2013?
Net sales rose slightly to $7.37 billion from $7.29 billion, and net income attributable to Steel Dynamics, Inc. increased to $189.3 million, or $0.83 per diluted share, from $163.6 million, or $0.73 per diluted share, in 2012. Operating income was essentially flat at $386.5 million versus $391.2 million.
What drove the increase in pretax income in 2013?
The filing states that 2013 consolidated pretax income increased $58.8 million, or 29%, reflecting interest cost savings of $30.9 million and a $37.7 million reduction in refinancing costs tied to 2012 and early 2013 financing activities.
What challenges did the company face in 2013?
Compressed metal margins reduced profitability: average 2013 steel prices per ton shipped declined $41 while average ferrous scrap consumed declined only $25 per ton. The metals recycling and ferrous resources segment recorded an operating loss of $52.5 million, and the Minnesota iron operations, including the Mesabi Nugget facility, continued to experience operational and cost challenges.
What is the status of the Mesabi Nugget ironmaking project?
The company said it focused in the fourth quarter of 2013 on reducing production costs and improving product yield, with adjunct trials continuing into 2014 showing some encouraging results. Toward the end of the first quarter of 2014, management expects to assess whether, or to what extent, further process improvements are justifiable. Losses from the Minnesota iron operations were approximately $42 million, or $0.18 per diluted share, in 2013.
What is the company's financial position and debt profile?
At December 31, 2013, cash and equivalents were $395.2 million, and total debt was $2.11 billion. The long-term debt to capitalization ratio was 44.7%, down from 47.1% a year earlier. The company had $1.1 billion of revolver availability and was in compliance with its credit facility covenants, with an interest coverage ratio of 5.30:1.00 and a net debt leverage ratio of 2.60:1.00.
06—Continue