01—Abstract
Summary
Summary of the 10-K filed February 28, 2017. Cited figures are marked; the original filing is the authoritative source.
Steel Dynamics, Inc. (STLD) reported net sales of $7.78 billiona for 2016, up from $7.59 billion in 2015, and operating income of $727,966 thousand, compared with an operating loss of $(72,784) thousand in 2015.
Net income attributable to Steel Dynamics, Inc. was $382.1 millionb, or $1.56 per diluted share, versus a net loss of $(130.3) million in 2015. Results include $132.8 million of pretax non-cash asset impairment charges in 2016 (Minnesota ironmaking operations and OmniSource) and $428.5 million in 2015 (OmniSource goodwill and trade name). Excluding these charges, the company cites operating income of $860.8 million for 2016 compared with $355.7 million in 2015.
Management attributes the improvement to positive momentum in the sheet steel supply environment, with steel imports declining about 15% in 2016 after trade case duties, steel mill utilization rising to 87% from 79%, and metal spreads improving in the steel operations. The steel operations segment drove the results, with operating income rising to $926.95 millionc from $403.2 million and shipments up 11%. Metals recycling operations swung to operating income of $20.4 million from a loss of $448.1 million, while steel fabrication operating income fell 22% to $91.0 million on record shipments and compressed metal spreads.
Cash flow from operations was $852.8 milliond, capital expenditures were $198.2 million, and cash and equivalents ended the year at $841.5 million. Total debt declined by $237.8 million to $2.4 billion after a December 2016 refinancing that issued $400.0 million of 5.000% senior notes due 2026 and repaid the remaining $228.1 million senior term loan. The company also acquired Vulcan Threaded Products for $113.0 million on August 1, 2016, and declared dividends of $0.56 per share for 2016.
The filing highlights continued exposure to cyclical steel and scrap prices, global steel overcapacity and imports, environmental and climate regulation, and litigation, including antitrust settlements in the Standard Iron Works case totaling roughly $5.6 million paid into escrow in 2017. Liquidity remained strong, with $2.03 billion of total liquidity including $1.19 billion of Revolver availability, and the company was in compliance with its covenants at December 31, 2016.
02—Key points
Key Highlights
- Net sales rose to $7.78 billion in 2016 from $7.59 billion in 2015; net income attributable to Steel Dynamics, Inc. was $382.1 million, or $1.56 per diluted share, versus a $(130.3) million loss in 2015.
- Operating income was $727.97 million in 2016 including $132.8 million of pretax asset impairment charges; excluding those charges, the company reports operating income of $860.8 million versus $355.7 million in 2015.
- Steel operations operating income increased 130% to $926.95 million on 11% higher shipments, with mill utilization at 87% versus 79% in 2015.
- Metals recycling operations returned to operating income of $20.4 million from a $448.1 million loss in 2015, which included $428.5 million of impairments.
- Cash flow from operations was $852.8 million; capital expenditures were $198.2 million, and cash and equivalents reached $841.5 million at year-end.
- Total debt fell $237.8 million to $2.4 billion after issuing $400.0 million of 5.000% senior notes due 2026 and repaying the $228.1 million senior term loan; the interest coverage ratio was 8.32:1.00.
- Acquired Vulcan Threaded Products for $113.0 million in cash on August 1, 2016; dividends declared were $0.56 per share for 2016, up from $0.55.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Steel Dynamics kept $0.05.
- Revenue$7.78B100.0%
- Cost of revenue−$6.44B82.8%
- Gross profit$1.33B17.2%
- Operating costs−$606.9M7.8%
- Operating income$728.0M9.4%
- Interest, other & tax−$345.9M4.4%
- Net income$382.1M4.9%
Where FY2016 revenue went
$7.78B- Cost of revenue: $6.44B, 83% of revenue
- Net income: $382.1M, 4.9% of revenue
- SG&A: $474.1M, 6.1% of revenue
- Other operating costs: $132.8M, 1.7% of revenue
- Interest, other & tax: $345.9M, 4.4% of revenue
Kept 4.9% as net incomeNet income $382.1M · 4.9%Other operating costs $132.8M · 1.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 28, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $7.78B$7.59B | +2.4% |
| Cost of Revenue | $6.44B$6.86B | −6.1% |
| Gross Profit | $1.33B$731.72M | +82.4% |
| SG&A Expenses | $474.06M$376.00M | +26.1% |
| Operating Income | $727.97M-$72.78M | +1100.2% |
| Interest Expense | $146.04M$153.95M | −5.1% |
| Net Income | $382.12M-$130.31M | +393.2% |
| EPS (Basic) | $1.57$-0.54 | +390.7% |
| EPS (Diluted) | $1.56$-0.54 | +388.9% |
| Shares Outstanding (Basic) | 243.58M242.02M | +0.6% |
| Shares Outstanding (Diluted) | 245.30M242.02M | +1.4% |
05—Questions
Frequently Asked Questions
How did Steel Dynamics perform in 2016 compared with 2015?
Net sales increased to $7.78 billion from $7.59 billion, and the company returned to profitability with net income attributable to Steel Dynamics, Inc. of $382.1 million, or $1.56 per diluted share, compared with a net loss of $130.3 million in 2015. Both years include large non-cash impairment charges, $132.8 million in 2016 and $428.5 million in 2015.
What drove the improvement in the steel operations segment?
The filing attributes the gain to higher sheet steel shipments after duties levied under trade case rulings reduced imports, which declined about 15% in 2016. Steel shipments rose 11%, the mill utilization rate increased to 87% from 79%, and sheet steel metal spread expanded 15%, though average selling prices fell $15 per ton, or 2%.
What impairment charges did the company record, and why?
In 2016, the company recorded $127.3 million of non-cash impairment charges on Minnesota ironmaking fixed assets (Mining Resources and Mesabi Mining) and a $5.5 million OmniSource goodwill charge, totaling $132.8 million pretax. These followed a 2015 OmniSource goodwill and trade name impairment of $428.5 million and a 2014 Minnesota ironmaking impairment of $260.0 million.
How is the company's debt and liquidity position?
Total debt was $2.4 billion at year-end 2016, down $237.8 million. The company had total liquidity of $2.03 billion, including $841.5 million of cash and $1.19 billion of Revolver availability, and it was in compliance with its covenants, with a net debt leverage ratio of 1.58:1.00.
What are the main risks highlighted in the filing?
Key risks include cyclical steel and scrap prices, global steelmaking overcapacity and excess steel imports, volatile energy and raw material costs, environmental and climate change regulation, restrictive debt covenants, and litigation such as the Standard Iron Works antitrust case, with settlements totaling about $5.6 million paid into escrow in early 2017.
06—Continue