01—Abstract
Summary
Summary of the 10-K filed February 27, 2020. Cited figures are marked; the original filing is the authoritative source.
Steel Dynamics, Inc. (STLD) reported fiscal 2019 results that declined from the record 2018 year, as customer destocking, falling steel selling prices and weaker scrap prices compressed margins.
Net sales were $10.46 billiona versus $11.82 billion in 2018, and operating income was $986.9 million versus $1.72 billion. Net income attributable to Steel Dynamics, Inc. was $671.1 million, or $3.04 per diluted share, compared with $5.35 per diluted share in 2018. Management described consolidated net sales of $10.5 billion and cash flow from operations of $1.4 billion as the second-best performance in company history.
Segment results were mixed. Steel operations operating income fell to $1.03 billionb from $1.84 billion, while steel fabrication operating income rose to a record $119.1 million on record shipments of 644,000 tons. Metals recycling operating income dropped to $16.3 million from $75.9 million as ferrous scrap prices declined.
The company acquired 75% of United Steel Supply, LLC in March 2019, and it is building a $1.9 billionc electric arc furnace flat roll mill in Sinton, Texas, with planned operations beginning mid-2021. Balance sheet and capital allocation activity was active. Cash and equivalents plus short-term investments totaled $1.64 billion at year-end, and total liquidity was $2.80 billion.
Long-term debt rose to $2.73 billiond after December 2019 senior note issuances, and the company repurchased 11.3 million shares for $348.6 million. Capital expenditures were $451.9 million, and the company declared dividends of $0.96 per share. The corporate credit rating was upgraded to investment grade in October 2019.
02—Key points
Key Highlights
- Net sales of $10.46 billion in 2019, down from $11.82 billion in 2018; operating income of $986.9 million versus $1.72 billion.
- Diluted EPS of $3.04 in 2019 compared with $5.35 in 2018; net income attributable to Steel Dynamics, Inc. of $671.1 million.
- Steel operations operating income declined 44% to $1.03 billion, while steel fabrication operating income rose 92% to a record $119.1 million.
- Metals recycling operating income fell 79% to $16.3 million as ferrous and nonferrous scrap prices declined.
- Total liquidity of $2.80 billion at December 31, 2019, including $1.38 billion of cash and equivalents and $1.16 billion of unsecured revolver availability; corporate credit rating upgraded to investment grade in October 2019.
- Capital expenditures of $451.9 million, primarily for the $1.9 billion Southwest-Sinton Flat Roll Division, with planned operations beginning mid-2021.
- Repurchased 11.3 million shares for $348.6 million in 2019; declared dividends of $0.96 per share and $209.5 million in total.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Steel Dynamics kept $0.06.
- Revenue$10.46B100.0%
- Cost of revenue−$8.93B85.4%
- Gross profit$1.53B14.6%
- Operating costs−$544.1M5.2%
- Operating income$986.9M9.4%
- Interest, other & tax−$309.0M3.0%
- Net income$677.9M6.5%
Where FY2019 revenue went
$10.46B- Cost of revenue: $8.93B, 85% of revenue
- Net income: $677.9M, 6.5% of revenue
- Operating costs: $544.1M, 5.2% of revenue
- Interest, other & tax: $309.0M, 3.0% of revenue
Kept 6.5% as net incomeNet income $677.9M · 6.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 27, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $10.46B$11.82B | −11.5% |
| Cost of Revenue | $8.93B$9.50B | −5.9% |
| Gross Profit | $1.53B$2.32B | −34.1% |
| Operating Income | $986.88M$1.72B | −42.7% |
| Interest Expense | $127.10M$126.62M | +0.4% |
| Net Income | $677.90M$1.26B | −46.0% |
| EPS (Basic) | $3.06$5.38 | −43.1% |
| EPS (Diluted) | $3.04$5.35 | −43.2% |
| Shares Outstanding (Basic) | 219.64M233.92M | −6.1% |
| Shares Outstanding (Diluted) | 220.75M235.19M | −6.1% |
05—Questions
Frequently Asked Questions
Why did Steel Dynamics' earnings decline in 2019?
Management attributed the decline to high customer steel inventories built in late 2018, which led customers to destock in 2019. Steel selling prices fell throughout the year alongside weakening scrap prices, and the steel operations' metal spread contracted 10% compared with the record 2018 level. Metals recycling was also hurt by falling ferrous and nonferrous scrap prices.
How is the company's debt and liquidity position at year-end 2019?
Long-term debt including current maturities was $2.73 billion at December 31, 2019. In December 2019 the company issued $400.0 million of 2.800% notes due 2024 and $600.0 million of 3.450% notes due 2030 to redeem its $700.0 million 5.125% notes due 2021. It also entered into a $1.2 billion unsecured revolving credit facility maturing in December 2024, with no borrowings outstanding at year-end. The interest coverage ratio was 10.72:1.00 against a required minimum of 2.50:1.00.
What is the status of the new Southwest-Sinton Flat Roll Division?
The company is building a $1.9 billion electric arc furnace flat roll steel mill in Sinton, Texas, with an estimated 3.0 million tons of annual steel production capacity. Planned operations begin in mid-2021. Construction commitments totaled $820.4 million at December 31, 2019, of which $734.0 million are expected to be paid in 2020.
How much did the company return to shareholders in 2019?
The company repurchased 11.3 million shares for $348.6 million in 2019 and paid cash dividends of $200.3 million. Dividends declared per share were $0.96, up from $0.75 in 2018, after a 28% increase in the quarterly dividend to $0.2400 per share in the first quarter of 2019. $50.5 million remained available under the $750 million share repurchase program at December 31, 2019.
06—Continue