EX-99.1 2 tm205878d1_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

 

Press Release
January 22, 2020

 

7575 W. Jefferson Blvd.

Fort Wayne, IN 46804

 

 

Steel Dynamics Reports Fourth Quarter and

Annual 2019 Results

 

FORT WAYNE, INDIANA, January 22, 2020 / PRNewswire /

 

Annual 2019 Performance:

 

§

Record steel shipments of 10.8 million tons and record steel fabrication shipments of 644,000 tons

§

Net sales of $10.5 billion, the company’s second-best performance

§

Operating income of $987 million and net income of $671 million, the company’s third-best performance

§

Cash flow from operations of $1.4 billion and EBITDA of $1.3 billion, the company’s second-best and third-best performances, respectively

§

Achieved Investment grade credit rating designation, and successfully executed inaugural notes offering

 

Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced fourth quarter and annual 2019 financial results. The company reported fourth quarter 2019 net sales of $2.4 billion and net income of $121 million, or $0.56 per diluted share. Excluding the impact from the following items, the company’s fourth quarter adjusted net income was $134 million, or $0.62 per diluted share:

 

§

Financing costs related to the company’s December 2019 refinancing activities of approximately $4 million, or $0.01 per diluted share, and

§

Lower earnings resulting from two planned annual maintenance outages at the company’s Butler and Columbus flat roll divisions, causing higher than normal maintenance and associated costs of approximately $15 million, or $0.05 per diluted share. The outages also reduced flat roll steel shipments by an estimated 70,000 tons to 80,000 tons, further reducing fourth quarter earnings.

 

Comparatively, prior year fourth quarter net sales were $2.9 billion, with net income of $270 million, or $1.17 per diluted share, which included lower earnings from planned facility outages of $0.10 per diluted share, and additional performance-based compensation of $0.04 per diluted share. Sequential third quarter 2019 net sales were $2.5 billion, with net income of $151 million, or $0.69 per diluted share.

 

“The team delivered a strong 2019 operational and financial performance in a challenging steel pricing environment, achieving our third-best annual earnings performance and numerous operational records, including record annual steel and fabrication shipments,” said Mark D. Millett, President and Chief Executive Officer. “We performed at the top of our industry throughout the year. We achieved operating income of $987 million with EBITDA of $1.3 billion. With near record 2019 cash flow generation of $1.4 billion, we achieved record liquidity of $2.8 billion, while at the same time growing our business through both organic and transactional growth investments, maintaining a positive cash dividend profile, and executing on our share repurchase program. In recognition of our growth, strong balance sheet profile and consistent free cash flow generation capability, we also achieved investment grade credit designations from three credit rating agencies. We have a firm foundation for our continued long-term, strategic growth and value creation.

 

“Even though 2019 was one of our best years, it was challenged with high customer steel inventories, as many customers purchased beyond normal demand levels in 2018,” continued Millett. “Domestic steel demand remained steady in 2019, but as customers began to destock inventories, steel prices declined throughout the year, and firmed in the fourth quarter, as destocking subsided and inventory levels were right-sized. As a result, operating income from our steel operations was $1.0 billion in 2019, compared to a record $1.9 billion in 2018. Ferrous scrap prices also declined in eight of the past twelve months during 2019, resulting in our metals recycling operations earning $28 million in 2019, compared to $88 million last year.

 

 

“Looking ahead, steel customer inventory levels have moderated, and underlying domestic steel demand remains intact for the primary steel consuming sectors, including automotive and construction. Customers have been positive concerning the business outlook for 2020. Additionally, our fabrication platform has an order backlog that is even stronger entering 2020 than it was at this time last year, and fabrication customer sentiment remains optimistic, a positive growth indication for non-residential construction projects. Our fabrication operations achieved record shipments in 2019, and operating income of $119 million, almost double last year’s performance,” stated Millett.

 

Fourth Quarter 2019 Comments

 

Fourth quarter 2019 operating income for the company’s steel operations was $201 million, or 16 percent lower than sequential third quarter results, based on two planned steel mill outages, seasonally lower shipments and metal spread compression. The company completed significant planned maintenance outages at both its Butler and Columbus Flat Roll divisions, which increased costs by an estimated $15 million and reduced flat roll shipments during the fourth quarter. The fourth quarter 2019 average external product selling price for the company’s steel operations decreased $45 sequentially to $764 per ton. The average ferrous scrap cost per ton melted at the company’s steel mills decreased $32 sequentially to $243 per ton.

 

Monthly prime scrap indices declined approximately $35 per gross ton on average from October through December, compared to July through September 2019. In concert, the company’s metals recycling platform’s average ferrous scrap selling price declined $28 per gross ton and shipments were seasonally 6% lower sequentially, resulting in an operating loss of $5 million, compared to an operating profit of $3 million in the third quarter 2019.

 

Fourth quarter 2019 operating income from the company’s steel fabrication operations was $33 million, remaining steady with strong sequential earnings of $35 million. Record quarterly shipments substantially offset the impact of marginal average price declines. The steel fabrication platform’s order backlog remains strong, and customers remain optimistic concerning construction activity.

 

The company generated strong fourth quarter 2019 cash flow from operations of $409 million and executed its inaugural investment grade notes offering. The company issued $400 million of 2.800% notes due 2024 and $600 million of 3.450% notes due 2030, using the proceeds to repay $700 million of its existing 5.125% senior notes due 2021 and for other general corporate purposes. These transactions extended the company's overall debt maturity profile and will reduce annual interest costs.

 

Annual 2019 Comparison

 

Annual 2019 net income was $671 million representing the company’s third-best annual performance, or $3.04 per diluted share, with net sales of $10.5 billion, as compared to record 2018 net income of $1.3 billion, or $5.35 per diluted share, with net sales of $11.8 billon. Annual 2019 net sales declined 11 percent, while operating income of $987 million decreased 43 percent from record high 2018 results of $1.7 billion. The decline in revenues was primarily caused by declining steel prices related to customer inventory destocking that occurred throughout the year, and more than offset the benefit of the company’s 2019 record annual steel and fabrication shipments. The decline in earnings was driven by lower average flat roll steel selling values, as average 2019 annual prime hot roll coil price indices decreased approximately $229 per ton, or 28 percent when compared to 2018, resulting in significant metal margin compression.

 

Compared to 2018, the average 2019 external product selling price for the company’s overall steel operations decreased $83 to $839 per ton. The average 2019 ferrous scrap cost per ton melted at the company’s steel mills decreased $48 to $293 per ton.

 

During 2019, the company increased value-added shipments from its steel processing locations, representing 15 percent of the total steel shipments, compared to 10 percent in 2018. These locations use steel products as their primary raw material, and the associated steel procurement costs represented over 16 percent of the company’s steel operations cost of goods sold in 2019, compared to 12 percent in 2018.

 

The company generated its second-best annual cash flow from operations of $1.4 billion, paid cash dividends of $200 million, and repurchased $349 million, or five percent of its outstanding common stock during 2019.

 

 

Outlook

 

“Based on domestic steel demand fundamentals, we are constructive regarding North American steel market dynamics,” said Millett. “We believe North American steel consumption will experience modest growth and will be supported by further steel import reductions and the end of steel inventory destocking. We believe recent and possible trade actions could have a positive impact in further reducing unfairly traded steel imports into the United States, including coated flat roll steel, which could have a significant positive impact for Steel Dynamics, as we are the largest non-automotive flat roll steel coater in the United States.

 

“In combination with our existing and newly announced expansion initiatives, there are firm drivers in place for our continued growth. We are excited about our Sinton, Texas flat roll steel mill project, and the associated long-term value creation it will bring through geographic and value-added product diversification. This facility is designed to have product size and quality capabilities beyond that of existing electric-arc-furnace flat roll steel producers, competing even more effectively with the integrated steel model and foreign competition. We have targeted regional markets that represent over 27 million tons of relevant flat roll steel consumption, which includes the growing Mexican flat roll steel market. This facility is located and designed to have a meaningful competitive advantage in those regions. The team began site work in the second half of 2019, and we are excited to announce that we recently received the required environmental permitting to allow for full construction efforts to begin, with current plans to commence operations mid-year 2021.

 

“Our differentiated business model and performance-driven culture clearly demonstrate our through-cycle earnings capability. We continue to strengthen our financial position through consistent strong cash flow generation and the execution of our long-term strategy. We are competitively positioned and remain focused on delivering long-term value creation for all of our stakeholders,” concluded Millett.

 

Conference Call and Webcast

 

Steel Dynamics, Inc. will hold a conference call to discuss fourth quarter and annual 2019 operating and financial results on Thursday, January 23, 2020, at 9:00 a.m. Eastern Time. You may access the call and find dial-in information on the Investors section of the company’s website at www.steeldynamics.com. A replay of the call will be available on our website until 11:59 p.m. Eastern Time on January 28, 2020.

 

About Steel Dynamics, Inc.

 

Steel Dynamics is one of the largest domestic steel producers and metals recyclers in the United States based on estimated annual steelmaking and metals recycling capability, with facilities located throughout the United States, and in Mexico. Steel Dynamics produces steel products, including hot roll, cold roll, and coated sheet steel, structural steel beams and shapes, rail, engineered special-bar-quality steel, cold finished steel, merchant bar products, specialty steel sections and steel joists and deck. In addition, the company produces liquid pig iron and processes and sells ferrous and nonferrous scrap. 

 

Note Regarding Non-GAAP Financial Measures

 

The company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). Management believes that Adjusted Net Income, Adjusted Diluted Earnings Per Share, EBITDA and Adjusted EBITDA, non-GAAP financial measures, provide additional meaningful information regarding the company’s performance and financial strength. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the company’s reported results prepared in accordance with GAAP. In addition, because not all companies use identical calculations, EBITDA and Adjusted EBITDA included in this release may not be comparable to similarly titled measures of other companies.

 

 

Forward-Looking Statements

 

This press release contains some predictive statements about future events, including statements related to conditions in domestic or global economies, conditions in steel and recycled metals market places, Steel Dynamics' revenues, costs of purchased materials, future profitability and earnings, and the operation of new, existing or planned facilities. These statements, which we generally precede or accompany by such typical conditional words as "anticipate", "intend", "believe", "estimate", "plan", "seek", "project", or "expect", or by the words "may", "will", or "should", are intended to be made as "forward-looking", subject to many risks and uncertainties, within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These statements speak only as of this date and are based upon information and assumptions, which we consider reasonable as of this date, concerning our businesses and the environments in which they operate. Such predictive statements are not guarantees of future performance, and we undertake no duty to update or revise any such statements. Some factors that could cause such forward-looking statements to turn out differently than anticipated include: (1) the effects of uncertain economic conditions; (2) cyclical and changing industrial demand; (3) changes in conditions in any of the steel or scrap-consuming sectors of the economy which affect demand for our products, including the strength of the non-residential and residential construction, automotive, manufacturing, appliance, pipe and tube, and other steel-consuming industries; (4) fluctuations in the cost of key raw materials and supplies (including steel scrap, iron units, zinc, graphite electrodes, and energy costs) and our ability to pass on any cost increases; (5) the impact of domestic and foreign imports, including trade policy, restrictions, or agreements; (6) unanticipated difficulties in integrating or starting up new, acquired or planned businesses or assets; (7) risks and uncertainties involving product and/or technology development; and (8) occurrences of unexpected plant outages or equipment failures.

 

More specifically, we refer you to Steel Dynamics' more detailed explanation of these and other factors and risks that may cause such predictive statements to turn out differently, as set forth in our most recent Annual Report on Form 10-K under the headings Special Note Regarding Forward-Looking Statements and Risk Factors, in our quarterly reports on Form 10-Q or in other reports which we from time to time file with the Securities and Exchange Commission. These are available publicly on the SEC website, www.sec.gov, and on the Steel Dynamics website, www.steeldynamics.com: Investors: SEC Filings.

 

Contact:  Tricia Meyers, Investor Relations Manager— +1.260.969.3500

 

 

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)

 

		Three Months Ended								Year Ended								Three Months
		December 31,								December 31,								Ended
		2019				2018				2019				2018				September 30, 2019
Net sales		$	2,370,491			$	2,903,892			$	10,485,286			$	11,821,839			$	2,526,845
Costs of goods sold			2,054,082				2,382,657				8,954,302				9,499,025				2,167,006
Gross profit			316,409				521,235				1,530,984				2,322,814				359,839
Selling, general and administrative expenses			111,968				106,564				436,498				416,640				107,242
Profit sharing			13,633				41,684				78,029				155,985				17,848
Amortization of intangible assets			8,847				7,434				29,577				27,780				6,704
Operating income			181,961				365,553				986,880				1,722,409				228,045
Interest expense, net of capitalized interest			32,322				31,652				127,104				126,620				31,339
Other income, net			(424	)			(7,384	)			(15,561	)			(23,985	)			(4,545	)
Income before income taxes			150,063				341,285				875,337				1,619,774				201,251
Income tax expense			26,344				71,433				197,437				363,969				48,643
Net income			123,719				269,852				677,900				1,255,805				152,608
Net (income) loss attributable to noncontrolling interests			(2,294	)			152				(6,797	)			2,574				(1,560	)
Net income attributable to Steel Dynamics, Inc.		$	121,425			$	270,004			$	671,103			$	1,258,379			$	151,048
Basic earnings per share attributable to Steel Dynamics, Inc. stockholders		$	0.56			$	1.18			$	3.06			$	5.38			$	0.69
Weighted average common shares outstanding			215,119				229,245				219,639				233,923				217,873
Diluted earnings per share attributable to Steel Dynamics, Inc. stockholders, including the effect of assumed conversions when dilutive		$	0.56			$	1.17			$	3.04			$	5.35			$	0.69
Weighted average common shares and share equivalents outstanding			216,402				230,455				220,748				235,193				219,109
Dividends declared per share		$	0.2400			$	0.1875			$	0.9600			$	0.7500			$	0.2400

 

 

Steel Dynamics, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

		December 31,				December 31,
		2019				2018
			(unaudited)
Assets
Current assets
Cash and equivalents		$	1,381,460			$	828,220
Short term investments			262,174				228,783
Accounts receivable, net			844,336				1,043,756
Inventories			1,689,043				1,859,168
Other current assets			76,012				72,730
Total current assets			4,253,025				4,032,657
Property, plant and equipment, net			3,135,886				2,945,767
Intangible assets, net			327,901				270,328
Goodwill			452,915				429,645
Other assets			106,038				25,166
Total assets		$	8,275,765			$	7,703,563
Liabilities and Equity
Current liabilities
Accounts payable		$	513,344			$	550,754
Income taxes payable			2,014				7,468
Accrued expenses			401,984				436,681
Current maturities of long-term debt			89,356				24,234
Total current liabilities			1,006,698				1,019,137
Long-term debt			2,644,988				2,352,489
Deferred income taxes			484,169				435,838
Other liabilities			75,055				8,870
Total liabilities			4,210,910				3,816,334
Commitments and contingencies
Redeemable noncontrolling interests			143,614				111,240
Equity
Common stock			646				645
Treasury stock, at cost			(1,525,113	)			(1,184,243	)
Additional paid-in capital			1,181,012				1,160,048
Retained earnings			4,419,296				3,958,320
Accumulated other comprehensive income			(7	)			301
Total Steel Dynamics, Inc. equity			4,075,834				3,935,071
Noncontrolling interests			(154,593	)			(159,082	)
Total equity			3,921,241				3,775,989
Total liabilities and equity		$	8,275,765			$	7,703,563

 

 

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

		Three Months Ended								Year Ended
		December 31,								December 31,
		2019				2018				2019				2018
Operating activities:
Net income		$	123,719			$	269,852			$	677,900			$	1,255,805
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			80,527				80,560				321,082				317,198
Equity-based compensation			14,402				14,457				47,631				43,317
Deferred income taxes			16,769				16,390				51,721				61,827
Other adjustments			2,365				(1,442	)			1,413				(1,245	)
Changes in certain assets and liabilities:
Accounts receivable			142,610				184,434				237,805				(145,873	)
Inventories			77,977				(5,305	)			217,866				(246,213	)
Other assets			6,103				3,689				13,735				(3,475	)
Accounts payable			(32,278	)			(62,464	)			(86,445	)			37,904
Income taxes receivable/payable			(31,810	)			(28,943	)			(12,095	)			26,471
Accrued expenses			8,678				19,833				(74,323	)			69,753
Net cash provided by operating activities			409,062				491,061				1,396,290				1,415,469
Investing activities:
Purchases of property, plant and equipment			(158,258	)			(62,913	)			(451,945	)			(239,390	)
Purchases of short term investments			(262,133	)			(143,783	)			(396,159	)			(268,783	)
Proceeds from maturities of short term investments			69,489				30,000				362,768				40,000
Acquisition of business, net of cash and restricted cash acquired			-				-				(97,106	)			(433,998	)
Other investing activities			1,733				5,445				5,756				6,907
Net cash used in investing activities			(349,169	)			(171,251	)			(576,686	)			(895,264	)
Financing activities:
Issuance of current and long-term debt			1,199,276				117,937				1,573,962				445,607
Repayment of current and long-term debt			(895,018	)			(109,329	)			(1,264,152	)			(455,491	)
Dividends paid			(51,778	)			(43,767	)			(200,271	)			(168,913	)
Purchase of treasury stock			(56,214	)			(330,190	)			(348,608	)			(523,569	)
Other financing activities			(20,302	)			(10,177	)			(27,561	)			(18,501	)
Net cash provided by (used in) financing activities			175,964				(375,526	)			(266,630	)			(720,867	)
Increase (decrease) in cash, cash equivalents, and restricted cash			235,857				(55,716	)			552,974				(200,662	)
Cash, cash equivalents, and restricted cash at beginning of period			1,151,540				890,139				834,423				1,035,085
Cash, cash equivalents, and restricted cash at end of period		$	1,387,397			$	834,423			$	1,387,397			$	834,423
Supplemental disclosure information:
Cash paid for interest		$	62,848			$	53,536			$	134,550			$	124,034
Cash paid for income taxes, net		$	39,376			$	89,677			$	155,525			$	288,429

 

 

Steel Dynamics, Inc.

SUPPLEMENTAL INFORMATION

(dollars in thousands)

 

		Fourth Quarter								Year to Date
		2019				2018				2019				2018				1Q 2019				2Q 2019				3Q 2019
External Net Sales
Steel		$	1,771,398			$	2,198,459			$	7,924,846			$	8,920,719			$	2,124,570			$	2,106,350			$	1,922,528
Fabrication			246,173				251,592				962,155				921,148				228,480				241,424				246,078
Metals Recycling			242,862				352,555				1,198,007				1,552,600				351,137				323,100				280,908
Other			110,058				101,286				400,278				427,372				113,248				99,641				77,331
Consolidated Net Sales		$	2,370,491			$	2,903,892			$	10,485,286			$	11,821,839			$	2,817,435			$	2,770,515			$	2,526,845
Operating Income
Steel		$	201,266			$	402,252			$	1,048,059			$	1,855,109			$	312,437			$	294,769			$	239,587
Fabrication			32,573				14,902				119,263				62,064				20,663				30,706				35,321
Metals Recycling			(5,251	)			16,954				28,215				88,251				19,958				10,614				2,894
Operations			228,588				434,108				1,195,537				2,005,424				353,058				336,089				277,802
Non-cash amortization of intangible assets			(8,847	)			(7,434	)			(29,577	)			(27,780	)			(7,013	)			(7,013	)			(6,704	)
Profit sharing expense			(13,633	)			(41,684	)			(78,029	)			(155,985	)			(23,677	)			(22,871	)			(17,848	)
Non-segment operations			(24,147	)			(19,437	)			(101,051	)			(99,250	)			(30,526	)			(21,173	)			(25,205	)
Consolidated Operating Income		$	181,961			$	365,553			$	986,880			$	1,722,409			$	291,842			$	285,032			$	228,045
Adjusted EBITDA
Net income		$	123,719			$	269,852			$	677,900			$	1,255,805			$	204,827			$	196,746			$	152,608
Income taxes			26,344				71,433				197,437				363,969				62,236				60,214				48,643
Net interest expense			25,355				24,738				99,077				104,042				24,017				25,598				24,107
Depreciation			70,314				71,765				286,201				283,890				71,846				72,585				71,456
Amortization of intangible assets			8,847				7,434				29,577				27,780				7,013				7,013				6,704
Noncontrolling interest			(2,294	)			151				(6,797	)			2,573				(499	)			(2,444	)			(1,560	)
EBITDA			252,285				445,373				1,283,395				2,038,059				369,440				359,712				301,958
Non-cash adjustments
Unrealized hedging (gain) loss			589				(2,510	)			2,309				(6,600	)			1,742				(3,719	)			3,697
Inventory valuation			352				666				1,222				2,148				241				351				278
Equity-based compensation			14,400				14,457				42,941				40,390				10,619				9,080				8,842
Financing expenses			2,780				-				2,780				-				-				-				-
Adjusted EBITDA		$	270,406			$	457,986			$	1,332,647			$	2,073,997			$	382,042			$	365,424			$	314,775
Other Operating Information
Steel
Average external sales price (Per ton) (a)		$	764			$	940			$	839			$	922			$	902			$	879			$	809
Average ferrous cost (Per ton melted) (b)		$	243			$	343			$	293			$	341			$	338			$	316			$	275
Flat Roll shipments
Butler and Columbus Flat Roll divisions			1,512,003				1,493,894				6,140,547				6,207,019				1,526,851				1,574,463				1,527,230
Steel Processing divisions (c)			404,388				262,642				1,585,657				974,266				330,775				422,849				427,645
Long Product shipments
Structural and Rail Division			374,774				389,107				1,469,356				1,630,235				376,263				352,013				366,306
Engineered Bar Products Division			153,692				217,646				732,774				922,839				206,874				195,644				176,564
Roanoke Bar Division			125,125				150,607				529,480				559,801				152,400				128,460				123,495
Steel of West Virginia			80,981				70,367				358,827				315,603				91,248				95,929				90,669
Total Shipments (Tons)			2,650,963				2,584,263				10,816,641				10,609,763				2,684,411				2,769,358				2,711,909
External Shipments (Tons) (a)			2,305,633				2,328,420				9,402,608				9,625,291				2,347,209				2,386,851				2,362,915
Steel Production (Tons) (a)			2,647,400				2,677,613				10,898,744				10,899,776				2,745,128				2,769,910				2,736,306
Metals Recycling
Nonferrous shipments (000's of pounds)			252,861				278,418				1,068,208				1,131,412				292,038				266,222				257,087
Ferrous shipments (Gross tons)			1,096,211				1,215,474				4,627,214				5,123,553				1,171,361				1,189,679				1,169,963
External ferrous shipments (Gross tons)			361,504				414,941				1,565,957				1,777,418				382,841				425,477				396,135
Fabrication
Average sales price (Per ton)		$	1,419			$	1,550			$	1,495			$	1,437			$	1,575			$	1,538			$	1,464
Shipments (Tons)			173,635				162,292				644,411				641,698				145,222				156,983				168,571

 

(a)   Represents all steel operations

(b)   Represents ferrous cost per ton melted at our six electric arc furnace steel mills

(c)   Includes Heartland, The Techs and United Steel Supply locations