01—Abstract
Summary
Summary of the 10-K filed February 26, 2016. Cited figures are marked; the original filing is the authoritative source.
Steel Dynamics, Inc. (STLD) reported net sales of $7.59 billiona in 2015, down from $8.76 billion in 2014, and swung to a net loss attributable to Steel Dynamics, Inc. of $(130.3) million, or $(0.54) per basic share, compared with net income of $157.0 million in 2014.
The result was driven mainly by $428.5 millionb in pretax non-cash asset impairment charges tied to OmniSource, its metals recycling operations, recorded in the fourth quarter. Operating income was a loss of $(72.8) million versus $320.3 million in 2014. Excluding the impairment charges, the company reported consolidated operating income of $355.7 million and net income of $138.3 million, or $0.57 per diluted share.
Steel operations were the largest segment at $5.42 billionc of net sales, and the segment's operating income fell to $403.2 million from $683.6 million. The filing attributes the weakness to record steel imports, customer destocking, and sharply falling steel and scrap prices, with average steel selling prices down $149 per ton (18%) despite a 14% rise in steel shipments. Steel fabrication operating income rose to $115.9 million from $51.9 million, while the company also idled its Minnesota ironmaking operations in May 2015 after a $260.0 million impairment in 2014.
On the balance sheet, cash and equivalents rose to $727.0 milliond from $361.4 million, and total debt fell to $2.63 billion in total debt outstanding, with $1.2 billion of revolver availability. Operating cash flow was $1.04 billion, and the company declared dividends of $0.55 per share. Management stated that the company was in compliance with its financial covenants at December 31, 2015, with an interest coverage ratio of 4.76:1.00 and a net debt leverage ratio of 2.99:1.00.
02—Key points
Key Highlights
- Net sales were $7.59 billion in 2015, down from $8.76 billion in 2014, with steel operations contributing $5.42 billion.
- Net loss attributable to Steel Dynamics, Inc. was $(130.3) million, or $(0.54) per basic share, including $428.5 million of pretax non-cash impairment charges at OmniSource.
- Excluding impairment charges, 2015 net income was $138.3 million, or $0.57 per diluted share, versus $289.6 million, or $1.22 per diluted share, in 2014 excluding the Minnesota impairment.
- Steel operations operating income fell 41% to $403.2 million as average selling prices dropped $149 per ton (18%) amid record steel imports.
- Cash and equivalents increased to $727.0 million, and operating cash flow was $1.04 billion for 2015.
- Total debt decreased to $2.63 billion after the March 2015 call of $350.0 million of 7 5/8% senior notes; the company was in covenant compliance at year-end.
- The Minnesota ironmaking operations were indefinitely idled in May 2015, and the 2015 annual dividend was $0.55 per share, up from $0.46.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2015, Steel Dynamics lost $0.02.
- Revenue$7.59B100.0%
- Cost of revenue−$6.86B90.4%
- Gross profit$731.7M9.6%
- Operating costs−$804.5M10.6%
- Operating income−$72.8M1.0%
- Interest, other & tax−$57.5M0.8%
- Net income−$130.3M1.7%
04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 26, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $7.59B$8.76B | −13.3% |
| Cost of Revenue | $6.86B$7.79B | −11.9% |
| Gross Profit | $731.72M$966.21M | −24.3% |
| SG&A Expenses | $376.00M$385.89M | −2.6% |
| Operating Income | -$72.78M$320.32M | −122.7% |
| Interest Expense | $153.95M$137.26M | +12.2% |
| Net Income | -$130.31M$157.02M | −183.0% |
| EPS (Basic) | $-0.54$0.68 | −179.4% |
| EPS (Diluted) | $-0.54$0.67 | −180.6% |
| Shares Outstanding (Basic) | 242.02M232.55M | +4.1% |
| Shares Outstanding (Diluted) | 242.02M242.08M | 0.0% |
05—Questions
Frequently Asked Questions
Why did Steel Dynamics report a net loss in 2015?
The net loss was driven primarily by $428.5 million in pretax non-cash asset impairment charges related to goodwill, trade name and other assets of OmniSource, the company's metals recycling operations, recorded in the fourth quarter of 2015 due to a weak global scrap commodity outlook. Excluding these charges, the company reported net income of $138.3 million.
What drove the decline in steel operations profitability?
Steel operations net sales fell 7% and operating income fell 41% to $403.2 million, as average selling prices declined $149 per ton (18%) due to elevated steel imports and sharp reductions in scrap costs. Steel shipments rose 14%, partly due to the full-year inclusion of Columbus Flat Roll Division, but metal spreads contracted significantly.
How did the company's balance sheet and liquidity change in 2015?
Cash and equivalents increased to $727.0 million from $361.4 million, and total liquidity was $1.91 billion including $1.19 billion of revolver availability. Total outstanding debt decreased by $387.2 million to $2.6 billion, mainly due to the March 2015 repayment of $350.0 million of 7 5/8% senior notes.
What are the company's plans for capital expenditures and dividends?
Management's 2016 cash allocation plan includes $250 million to $300 million of capital expenditures. The quarterly dividend was increased 20% to $0.1375 per share in 2015, with declared dividends of $133.2 million for the year, and the board determines future payments at its discretion subject to debt agreement restrictions.
Are there material legal proceedings facing the company?
The company is one of three remaining defendants in a class action antitrust suit in federal court in Chicago alleging a conspiracy to fix steel prices between 2005 and 2007. The class was certified only on the issue of the alleged conspiracy, and the company has determined there is not a reasonable possibility of a material impact, though it may accrue a loss in the future.
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