01—Abstract
Summary
Summary of the 10-K filed March 1, 2021. Cited figures are marked; the original filing is the authoritative source.
Steel Dynamics, Inc. (STLD) reported fiscal 2020 results in its 10-K filed March 1, 2021.
Net sales were $9.60 billiona, down from $10.46 billion in 2019, and operating income was $847.1 million versus $986.9 million. Net income attributable to Steel Dynamics, Inc. was $550.8 million, or $2.59 diluted earnings per share, compared with $3.04 in 2019. The filing states that operations were not closed or idled during 2020 due to COVID-19, and that steel demand rebounded meaningfully in the second half of the year, with flat roll index prices rising over $500 per ton from August through year-end.
Steel operations segment operating income declined 14% to $889.5 millionb as average steel selling prices fell 8%, while metals recycling operating income rose to $33.0 million and steel fabrication reached a record $120.6 million. The company's principal focus is the $1.9 billion Southwest-Sinton Flat Roll Division, an electric arc furnace flat roll mill under construction in Sinton, Texas, with planned start of operations in mid-year 2021. Capital expenditures were $1.2 billion in 2020, of which $927.7 million related to Sinton, and construction commitments totaled $561.1 million at year-end.
Liquidity was $2.56 billionc, including $1.37 billion of cash and equivalents and $1.19 billion of unsecured revolver availability. Long-term debt, including current maturities, rose to $3.10 billion, and the long-term debt to capitalization ratio was 41.6%. The company repurchased $106.5 million of stock in 2020 and declared dividends of $1.00 per share.
The filing describes operating cash flow of $987.0 milliond for 2020, compared with $1.40 billion in 2019. The company's interest coverage ratio under its credit facility was 10.71:1.00 against a 2.50:1.00 minimum, and it reported being in compliance with covenants at year-end.
02—Key points
Key Highlights
- Net sales of $9.60 billion in 2020, down from $10.46 billion in 2019; net income attributable to Steel Dynamics, Inc. of $550.8 million, or $2.59 diluted EPS, versus $3.04 in 2019.
- Steel operations operating income fell 14% to $889.5 million as average steel selling prices decreased 8%, while metals recycling operating income more than doubled to $33.0 million and steel fabrication set a record $120.6 million.
- Southwest-Sinton Flat Roll Division, a $1.9 billion EAF flat roll mill with 3.0 million tons of annual capacity, is under construction with planned operations in mid-year 2021; 2020 capital expenditures were $1.2 billion, including $927.7 million for Sinton.
- Liquidity of $2.56 billion at December 31, 2020, comprising $1.37 billion of cash and equivalents and $1.19 billion of unsecured revolver availability.
- Operating cash flow was $987.0 million in 2020 versus $1.40 billion in 2019, and the company issued $1.95 billion of senior notes in 2020 to refinance higher-coupon debt.
- Shareholder returns included $1.00 per share in declared dividends and $106.5 million of share repurchases in 2020, with $444.0 million remaining under the 2020 repurchase program.
- Operations were not closed or idled during 2020 due to COVID-19, with management stating steelmaking was deemed critical infrastructure and demand rebounded in the second half of the year.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Steel Dynamics kept $0.06.
- Revenue$9.60B100.0%
- Cost of revenue−$8.17B85.1%
- Gross profit$1.43B14.9%
- Operating costs−$587.6M6.1%
- Operating income$847.1M8.8%
- Interest, other & tax−$296.3M3.1%
- Net income$550.8M5.7%
Where FY2020 revenue went
$9.60B- Cost of revenue: $8.17B, 85% of revenue
- Net income: $550.8M, 5.7% of revenue
- Operating costs: $587.6M, 6.1% of revenue
- Interest, other & tax: $296.3M, 3.1% of revenue
Kept 5.7% as net incomeNet income $550.8M · 5.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed March 1, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $9.60B$10.46B | −8.3% |
| Cost of Revenue | $8.17B$8.93B | −8.6% |
| Gross Profit | $1.43B$1.53B | −6.3% |
| Operating Income | $847.14M$986.88M | −14.2% |
| Interest Expense | $94.88M$127.10M | −25.4% |
| Net Income | $550.82M$677.90M | −18.7% |
| EPS (Basic) | $2.61$3.06 | −14.7% |
| EPS (Diluted) | $2.59$3.04 | −14.8% |
| Shares Outstanding (Basic) | 211.14M219.64M | −3.9% |
| Shares Outstanding (Diluted) | 212.34M220.75M | −3.8% |
05—Questions
Frequently Asked Questions
How did Steel Dynamics perform financially in 2020 compared with 2019?
Net sales fell to $9.60 billion from $10.46 billion, and operating income declined to $847.1 million from $986.9 million. Net income attributable to Steel Dynamics, Inc. was $550.8 million, or $2.59 per diluted share, compared with $671.1 million, or $3.04 per diluted share, in 2019. The filing attributes the steel segment decline primarily to an 8% decrease in average steel selling prices, partly offset by a strong second-half demand recovery.
What is the status of the Southwest-Sinton Flat Roll Division?
The Southwest-Sinton Flat Roll Division is a $1.9 billion electric arc furnace flat roll steel mill under construction in Sinton, Texas, with an estimated 3.0 million tons of annual steel production capacity. The company plans to begin operations in mid-year 2021. Construction commitments of $561.1 million remained at December 31, 2020, and the filing notes that COVID-19 related equipment or personnel delays could push the start date back. Three customers have committed to locate on-site at the mill, representing over 1.0 million tons of annual processing and consumption capacity.
How strong is the company's liquidity and debt position?
At December 31, 2020, the company had total liquidity of $2.56 billion, including $1.37 billion of cash and equivalents and $1.19 billion of unsecured revolver availability, with no borrowings outstanding under the revolver. Long-term debt including current maturities was $3.10 billion, and the long-term debt to capitalization ratio was 41.6%, up from 40.2% a year earlier. The company reported an interest coverage ratio of 10.71:1.00 against a covenant minimum of 2.50:1.00.
How did the COVID-19 pandemic affect Steel Dynamics' operations in 2020?
The filing states that steelmaking is considered critical infrastructure and the company was deemed essential in all states where it operates, so none of its operations were closed or idled during 2020. Steel demand was negatively affected in the second quarter, but rebounded meaningfully in the third and fourth quarters, driving higher steel shipments and significantly higher scrap flows and profitability for the steel and metals recycling segments. Some domestic steel production remained idled in the second half of the year despite improving demand.
What are the company's capital return policies?
In 2020 the company increased its quarterly cash dividend by 4% to $0.25 per share, resulting in declared dividends of $210.5 million, or $1.00 per share. It repurchased 4.4 million shares for $106.5 million during the first quarter of 2020, fully using its 2018 authorization, and had $444.0 million remaining under its 2020 program, which has no expiration date. Dividend and repurchase decisions remain at the discretion of the board of directors.
06—Continue