01—Abstract
Summary
Summary of the 10-K filed March 2, 2015. Cited figures are marked; the original filing is the authoritative source.
Steel Dynamics, Inc. (STLD) reported 2014 net sales of $8.76 billiona, up 19% from $7.37 billion in 2013, driven by increased shipments in all segments, higher average selling prices in steel and fabrication, and the September 16, 2014 acquisition of Severstal Columbus, LLC for a purchase price of $1.625 billion.
Columbus contributed $638.3 millionb of revenue from its acquisition date through year-end. Net income attributable to Steel Dynamics, Inc. fell to $157.0 million, or $0.67 per diluted share, from $189.3 million, or $0.83 per diluted share, in 2013, because of a $260.0 million non-cash impairment charge on the Minnesota ironmaking operations. Excluding that charge, net income rose to $289.6 million, or $1.22 per diluted share, and operating income rose to $580.3 million.
The balance sheet grew substantially. Total assets reached $7.31 billionc and total long-term debt, including current maturities, reached $3.02 billion, up from $2.11 billion, following the issuance of $1.2 billion in senior notes. The company stated it was in compliance with its financial covenants at December 31, 2014, with an interest coverage ratio of 6.05:1.00 against a minimum of 2.50:1.00.
Cash flow from operations was $617.6 milliond, and capital expenditures were $111.8 million. The company declared a quarterly dividend of $0.115 per share, up 5%. The filing also flags ongoing risks.
The Minnesota ironmaking operations will be warm-idled for six to eight weeks beginning in mid-February 2015. Steel imports reached record levels in 2014, and the company is party to class action antitrust litigation in Chicago that it describes as not presently expected to have a material impact. The company also announced a call of its $350.0 million 7 5/8% senior notes due 2020, with an estimated $16.7 million of related expenses in the first quarter of 2015.
02—Key points
Key Highlights
- Net sales of $8.76 billion in 2014, up 19% from $7.37 billion in 2013, with record steel and fabrication shipments.
- Net income attributable to Steel Dynamics, Inc. of $157.0 million, or $0.67 per diluted share, after a $260.0 million non-cash impairment charge on Minnesota ironmaking operations; excluding the charge, net income was $289.6 million, or $1.22 per diluted share.
- Acquisition of Severstal Columbus, LLC on September 16, 2014 for $1.625 billion, adding 3.4 million tons of hot roll steel capacity; Columbus contributed $638.3 million of revenue from the acquisition date to year-end.
- Total long-term debt including current maturities rose to $3.02 billion from $2.11 billion, after issuing $1.2 billion of senior notes to fund the Columbus acquisition.
- Operating cash flow was $617.6 million and capital expenditures were $111.8 million; the 2015 capital expenditure plan is $150 million to $175 million.
- Quarterly cash dividend increased 5% to $0.115 per share; declared dividends totaled $108.6 million in 2014.
- Minnesota ironmaking operations will be warm-idled for six to eight weeks beginning mid-February 2015 due to excess nugget inventory and higher costs from reduced iron recovery rates.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Steel Dynamics kept $0.02.
- Revenue$8.76B100.0%
- Cost of revenue−$7.79B89.0%
- Gross profit$966.2M11.0%
- Operating costs−$645.9M7.4%
- Operating income$320.3M3.7%
- Interest, other & tax−$163.3M1.9%
- Net income$157.0M1.8%
Where FY2014 revenue went
$8.76B- Cost of revenue: $7.79B, 89% of revenue
- Net income: $157.0M, 1.8% of revenue
- SG&A: $385.9M, 4.4% of revenue
- Other operating costs: $260.0M, 3.0% of revenue
- Interest, other & tax: $163.3M, 1.9% of revenue
Kept 1.8% as net incomeNet income $157.0M · 1.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed March 2, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $8.76B$7.37B | +18.8% |
| Cost of Revenue | $7.79B$6.65B | +17.1% |
| Gross Profit | $966.21M$719.14M | +34.4% |
| SG&A Expenses | $385.89M$332.62M | +16.0% |
| Operating Income | $320.32M$386.52M | −17.1% |
| Interest Expense | $137.26M$127.73M | +7.5% |
| Net Income | $157.02M$189.31M | −17.1% |
| EPS (Basic) | $0.68$0.86 | −20.9% |
| EPS (Diluted) | $0.67$0.83 | −19.3% |
| Shares Outstanding (Basic) | 232.55M220.92M | +5.3% |
| Shares Outstanding (Diluted) | 242.08M239.00M | +1.3% |
05—Questions
Frequently Asked Questions
What drove the decline in reported net income in 2014?
Reported net income attributable to Steel Dynamics, Inc. fell to $157.0 million from $189.3 million, primarily due to a $260.0 million non-cash impairment charge on the Minnesota ironmaking operations, which reduced net income attributable to the company by $132.6 million. Excluding the charge, net income increased to $289.6 million.
What was the impact of the Columbus acquisition on 2014 results?
Columbus, acquired September 16, 2014 for $1.625 billion plus $44.4 million in working capital adjustments, reported revenues of $638.3 million and pretax income of $29.8 million from the acquisition date to year-end, after $26.4 million of purchase accounting cost of goods sold and $25.2 million of acquisition-related costs.
How did the company's debt and liquidity change?
Total debt rose to $3.02 billion at December 31, 2014, from $2.11 billion, following $1.2 billion of senior notes issued in September 2014. Cash and equivalents were $361.4 million, and total liquidity including Revolver availability of $1.19 billion was $1.55 billion. The company was in compliance with its financial covenants at year-end.
What are the main risks the filing highlights for the company's business?
The filing highlights cyclical demand and pricing in the steel and scrap markets, record steel imports in 2014 exerting downward pressure on U.S. prices, volatile scrap and energy costs, the risk of a recession, and the start-up and operating risks of the Mesabi Nugget ironmaking project. It also cites pending class action antitrust litigation in Chicago, which the company does not presently expect to have a material impact.
What did the company say about its dividend and capital returns?
The board increased the quarterly cash dividend by 5% to $0.115 per share in 2014, from $0.110 per share in 2013, with declared dividends of $108.6 million in 2014. The company did not repurchase any shares during 2012 through 2014 and had authorization to repurchase approximately 3.6 million additional shares.
06—Continue