PR Newswire | Jul 19, 2021 04:30PM EDT

07/19 15:30 CDT

Steel Dynamics Reports Record Second Quarter 2021 Results FORT WAYNE, Ind., July 19, 2021

FORT WAYNE, Ind., July 19, 2021 /PRNewswire/ --

Second Quarter 2021 Highlights:

* Record steel and fabrication shipments of 2.9 million tons and 189,000 tons, respectively * Record net sales of $4.5 billion * Record operating income of $956 million and record net income of $702 million * Record cash flow from operations of $587 million and record adjusted EBITDA of over $1.0 billion * Share repurchases of $393 million of the company's common stock, representing 3% of its outstanding shares * Announced new $1.0 billion share repurchase authorization * Announced greenhouse gas and renewable energy goals, including steel mill carbon neutrality by 2050

Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced second quarter 2021 financial results. The company reported record second quarter 2021 net sales of $4.5 billion and net income of $702 million, or $3.32 per diluted share. Excluding the impact from the following item, the company's second quarter 2021 adjusted net income was $719 million, or $3.40 per diluted share:

* Costs of approximately $23 million, or $0.08 per diluted share (net of capitalized interest), associated with construction of the company's Sinton Texas Flat Roll Steel Mill growth investment.

Comparatively, prior year second quarter net sales were $2.1 billion, with net income of $75 million, or $0.36 per diluted share, and adjusted earnings were $0.47 per diluted share, excluding the impact of the company's June 2020 refinancing activities of approximately $25 million, or $0.08 per diluted share, and costs associated with the construction of the company's Texas steel mill of $0.03 per diluted share. The company's sequential first quarter 2021 earnings were $2.03 per diluted share, and adjusted earnings were $2.10 per diluted share, also excluding the impact of construction costs related to the Texas steel mill of $0.07 per diluted share.

"The team performed exceptionally well, achieving record quarterly operational and financial results, including record sales, operating income, cash flow from operations, and adjusted EBITDA," said Mark D. Millett, Chairman and Chief Executive Officer. "Our second quarter 2021 operating income increased 61 percent sequentially to $956 million, with adjusted EBITDA of over $1.0 billion. We continue to achieve numerous individual operating and financial records -a truly amazing achievement and a testament to the passion and dedication of our team. Based on their second quarter 2021 performance, we generated record quarterly cash flow from operations of $587 million and maintained strong liquidity, while at the same time supporting increased working capital needs, significantly growing our business through organic growth investments, and returning capital to shareholders.

"During the second quarter, steel demand remained robust as shipments and product pricing continued their positive momentum across our entire steel platform. Higher steel selling values drove significant metal spread expansion across the entire platform and were most prominent within the flat roll steel operations, as continued demand strength and historically low customer inventories persisted throughout the supply chain and supported prices. Domestic steel consumption was strong from the automotive, construction, and industrial sectors, while the energy sector continued to show signs of rebounding.

"Our segment operating results were exceptional," continued Millett. "Second quarter operating income from our steel operations was a record $1.0 billion, and our metals recycling operations sustained strong earnings, as increased domestic steel mill utilization of 81% supported ferrous scrap demand and pricing. Our steel fabrication operations once again achieved record quarterly shipments and ended June with another record order backlog, as we are in the middle of the summer construction season."

Second Quarter 2021 Comments

Second quarter 2021 operating income for the company's steel operations was a record $1.0 billion, or 59 percent higher than sequential first quarter results, due to significant metal spread expansion and record quarterly steel shipments. Record flat roll and strong long product steel realized selling values, more than offset higher scrap input costs. The second quarter 2021 average external product selling price for the company's steel operations increased $251 sequentially to $1,292 per ton. The average ferrous scrap cost per ton melted at the company's steel mills increased $67 sequentially to $439 per ton.

Domestic steel production continued to increase in the quarter maintaining strong ferrous scrap demand and pricing. Ferrous prime scrap pricing indices increased about $60 to $70 per gross ton during the second quarter. As a result, second quarter 2021 operating income from the company's metals recycling operations remained strong at $51 million.

The company's steel fabrication operations reported operating income of $28 million in the second quarter 2021, almost tripling the sequential first quarter results. Supported by record quarterly shipments, earnings significantly improved as realized pricing increased almost $350 per ton, more than offsetting higher average steel input costs. Steel joist and deck product pricing has strengthened significantly to record levels, due to the strong demand environment and higher steel input costs. Order activity remains extremely strong, and customers continue to be optimistic concerning projects. The company's steel fabrication order backlog is at a record level at the end of June.

Year-to-Date June 30, 2021 Comparison

For the six months ended June 30, 2021, net income was $1.1 billion, or $5.35 per diluted share, with net sales of $8.0 billion, as compared to net income of $263 million, or $1.24 per diluted share, with net sales of $4.7 billion for the same period in 2020. Excluding the impact from the following item, the company's first half 2021 adjusted net income was $1.2 billion, or $5.50 per diluted share:

* Costs of approximately $43 million, or $0.14 per diluted share (net of capitalized interest), associated with construction of the company's Sinton Texas Flat Roll Steel Mill growth investment

Similarly, adjusting for the company's Texas steel mill construction costs and a June 2020 refinancing, first half 2020 net income was $291 million, or $1.37 per diluted share.

First half 2021 net sales increased 72 percent and operating income increased 258 percent to over $1.5 billion, when compared to the same period in 2020. Higher earnings were primarily the result of steel metal spread expansion, as significantly higher average steel selling values, more than offset higher average ferrous scrap costs across the steel platform, especially within the company's flat roll steel operations. Compared to first half 2020, the average first half 2021 external selling price for the company's steel operations increased $403 to $1,169 per ton. The average first half 2021 ferrous scrap cost per ton melted at the company's steel mills increased $140 to $406 per ton.

Based on the company's differentiated business model and highly, variable cost structure, the company achieved cash flow from operations of $849 million in the first half 2021, representing a record first half performance. The company also invested $587 million in capital investments, paid cash dividends of $108 million, and repurchased $393 million of its common stock, while maintaining strong liquidity.

Outlook

"We remain confident that macroeconomic and market conditions are in place to support strong domestic steel demand in 2021 and beyond," said Millett. "We continue to see strong steel demand coupled with extremely low customer steel inventories throughout the supply chain. The automotive sector continues to be strong, despite the electronic chip shortage, and other sectors such as construction, equipment and transportation remain solid. Order entry activity continues to be robust across our businesses, and when coupled with low inventory, supports strong steel selling values. We believe this momentum will continue throughout the year and that our third quarter 2021 earnings could represent another record performance. Based on solid domestic steel fundamentals and customer confidence, we continue to be positive regarding North American steel market dynamics. This constructive environment coupled with our strategic growth initiatives provide firm drivers for our further growth in the coming years.

"We and our customers continue to be extremely excited about our Sinton Texas EAF Flat Roll Steel Mill investment. It represents transformational competitively-advantaged strategic growth, with associated long-term value creation for all of our stakeholders. We are currently hot-commissioning the value-added paint line, and we expect the galvanizing line to be operational next month. The entire Sinton team is doing a tremendous job. Due to the excessive heavy rains in Texas, actual steel production will be delayed and is now planned to start mid fourth quarter 2021. Based on current plans, we believe shipments from Sinton could be in the range of 100,000 tons during the remainder of 2021 and between 2.2 million tons to 2.4 million tons in 2022. Based on mid-cycle flat roll metal spreads, we currently believe through-cycle annual EBITDA for our Sinton Texas Flat Roll Steel Mill once fully operational with access to four value-added coating lines (estimated to be 2023) is likely in the range of $475 million to $525 million.

"We also plan to invest approximately $450 million to $500 million in four additional value-added flat roll steel coating lines comprised of two paint lines and two galvanizing lines with Galvalume(r) coating capability, a set of which will be located in the Southern U.S. to provide Sinton with the same diversification and higher-margin product capabilities as our two existing flat roll steel divisions. The other two lines will be located in the Midwest to support growing coated flat roll steel demand and to further increase the diversification and cash generation capacity of our existing Midwest operations. Based on current estimates, we believe these four lines will likely begin operating sometime in the second half of 2022.

"Our commitment to all aspects of sustainability is embedded in our founding principles - valuing the health and safety of our teams, our customers, our communities, and our environment. We recently announced greenhouse gas reduction and renewable energy goals, including a goal for our steel mills to be carbon neutral by 2050. Our goals expand on Steel Dynamics' existing strong sustainability focus. We have been a leader in the area for more than 25 years with our exclusive use of electric arc furnace technology, circular manufacturing model, and innovative teams creating solutions to increase efficiencies, reduce raw material usage, reuse secondary materials, and promote material conservation and recycling. We are starting from a position of strength yet plan to do more. We are competitively positioned and focused toward generating long-term sustainable growth for all of our stakeholders," concluded Millett.

Conference Call and Webcast

Steel Dynamics, Inc. will hold a conference call to discuss second quarter 2021 operating and financial results on Tuesday, July 20, 2021, at 10:00 a.m. Eastern Daylight 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 Daylight Time on July 26, 2021.

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, railroad 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, Adjusted Net Income, Adjusted Diluted Earnings Per Share, 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 marketplaces, 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 a guarantee 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) domestic and global economic factors; (2) global steelmaking overcapacity and steel imports, together with increased scrap prices; (3) pandemics, epidemics, widespread illness or other health issues, such as the COVID-19 pandemic; (4) the cyclical nature of the steel industry and the industries we serve; (5) volatility and major fluctuations in prices and availability of scrap metal, scrap substitutes, and our potential inability to pass higher costs on to our customers; (6) cost and availability of electricity, natural gas, oil, or other resources are subject to volatile market conditions; (7) compliance with and changes in environmental and remediation requirements; (8) increased regulation associated with the environment, climate change, greenhouse gas emissions and sustainability; (9) significant price and other forms of competition from other steel producers, scrap processors and alternative materials; (10) availability of an adequate source of supply for our metals recycling operations; (11) cybersecurity threats and risks to the security of our sensitive data and information technology; (12) the implementation of our growth strategy; (13) litigation and legal compliance, (14) unexpected equipment downtime or shutdowns; (15) governmental agencies may refuse to grant or renew some of our licenses and permits; (16) our senior unsecured credit facility contains, and any future financing agreements may contain, restrictive covenants that may limit our flexibility; and (17) the impacts of impairment.

More specifically, refer 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 file with the Securities and Exchange Commission. These are available publicly on the Securities and Exchange Commission website, www.sec.gov, and on the Steel Dynamics website, www.steeldynamics.com under "Investors - SEC Filings".

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)



Three Months Ended Six Months Ended Three Months

June 30, June 30, Ended

2021 2020 2021 2020 March 31, 2021



Net sales $4,465,308$2,094,305$8,009,905$4,669,405$3,544,597

Costs of goods sold 3,265,616 1,809,874 6,009,947 3,969,745 2,744,331

Gross profit 1,199,692 284,431 1,999,958 699,660 800,266



Selling, general and administrative expenses 154,379 109,299 304,160 222,197 149,781

Profit sharing 82,140 9,092 130,988 30,546 48,848

Amortization of intangible assets 7,438 7,190 14,876 14,381 7,438

Operating income 955,735 158,850 1,549,934 432,536 594,199



Interest expense, net of capitalized interest 14,898 27,702 32,167 55,721 17,269

Other expense (income), net 10,039 28,103 20,110 25,514 10,071

Income before income taxes 930,798 103,045 1,497,657 351,301 566,859



Income tax expense 218,595 24,280 346,699 81,700 128,104

Net income 712,203 78,765 1,150,958 269,601 438,755

Net income attributable to noncontrolling interests (9,912) (3,269) (18,160) (6,765) (8,248)

Net income attributable to Steel Dynamics, Inc.$702,291 $75,496 $1,132,798$262,836 $430,507





Basic earnings per share attributable to

Steel Dynamics, Inc. stockholders $3.35 $0.36 $5.39 $1.24 $2.04



Weighted average common shares outstanding 209,647 210,343 210,331 211,798 211,015



Diluted earnings per share attributable to

Steel Dynamics, Inc. stockholders, including the

effect of assumed conversions when dilutive $3.32 $0.36 $5.35 $1.24 $2.03



Weighted average common shares

and share equivalents outstanding 211,246 211,378 211,750 212,701 212,254





Dividends declared per share $0.26 $0.25 $0.52 $0.50 $0.26

Steel Dynamics, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)



June 30, December 31,

Assets 2021 2020

(unaudited)

Current assets

Cash and equivalents $1,113,744 $1,368,618

Accounts receivable, net 1,571,024 971,918

Inventories 2,481,832 1,843,548

Other current assets 98,509 74,363

Total current assets 5,265,109 4,258,447



Property, plant and equipment, net 4,526,892 4,105,569



Intangible assets, net 309,700 324,577



Goodwill 455,530 457,226



Other assets 130,100 119,743

Total assets $10,687,331 $9,265,562

Liabilities and Equity

Current liabilities

Accounts payable $1,183,604 $769,455

Income taxes payable 80,520 2,386

Accrued expenses 494,616 400,052

Current maturities of long-term debt 93,505 86,894

Total current liabilities 1,852,245 1,258,787



Long-term debt 3,016,486 3,015,782



Deferred income taxes 652,059 536,288



Other liabilities 136,189 106,479

Total liabilities 5,656,979 4,917,336



Commitments and contingencies



Redeemable noncontrolling interests 176,414 158,614



Equity

Common stock 648 648

Treasury stock, at cost (2,006,895) (1,623,747)

Additional paid-in capital 1,210,833 1,207,392

Retained earnings 5,783,184 4,758,969

Accumulated other comprehensive income 32,344 1,902

Total Steel Dynamics, Inc. equity 5,020,114 4,345,164

Noncontrolling interests (166,176) (155,552)

Total equity 4,853,938 4,189,612

Total liabilities and equity $10,687,331 $9,265,562

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)



Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020



Operating activities:

Net income $712,203 $78,765 $1,150,958$269,601



Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization 87,047 78,721 173,966 158,980

Equity-based compensation 9,808 9,520 26,848 27,364

Deferred income taxes 50,722 14,634 117,466 20,561

Other adjustments (1,472) 4,728 (2,134) 4,464

Changes in certain assets and liabilities:

Accounts receivable (204,561) 154,352 (599,106) 280

Inventories (264,935) 77,521 (639,523) 122,026

Other assets (4,285) 11,137 1,543 9,596

Accounts payable 63,155 69,523 423,836 121,119

Income taxes receivable/payable 27,551 7,993 87,144 60,378

Accrued expenses 111,997 (20,884) 108,423 (97,078)

Net cash provided by operating activities 587,230 486,010 849,421 697,291



Investing activities:

Purchases of property, plant and equipment (277,206) (309,716) (587,069) (527,251)

Purchases of short-term investments - - - (149,359)

Proceeds from maturities of short-term investments - 149,648 - 341,988

Other investing activities 1,859 803 2,249 1,321

Net cash used in investing activities (275,347) (159,265) (584,820) (333,301)



Financing activities:

Issuance of current and long-term debt 419,464 1,099,774 716,905 1,316,035

Repayment of current and long-term debt (408,565) (1,103,814) (712,849) (1,339,571)

Dividends paid (54,916) (52,584) (107,645) (104,065)

Purchase of treasury stock (393,198) - (393,198) (106,529)

Other financing activities (6,094) (8,763) (22,692) (14,915)

Net cash used in financing activities (443,309) (65,387) (519,479) (249,045)



Increase (decrease) in cash, cash equivalents, and restricted cash (131,426) 261,358 (254,878) 114,945

Cash, cash equivalents, and restricted cash at beginning of period 1,250,670 1,240,984 1,374,122 1,387,397

Cash, cash equivalents, and restricted cash at end of period $1,119,244$1,502,342 $1,119,244$1,502,342





Supplemental disclosure information:

Cash paid for interest $41,727 $59,668 $53,042 $68,453

Cash paid for income taxes, net $146,002 $1,430 $148,144 $1,948

Steel Dynamics, Inc.

SUPPLEMENTAL INFORMATION

(dollars in thousands)



Second Quarter Year to Date

2021 2020 2021 2020 1Q 2021

External Net Sales

Steel $3,234,519 $1,628,027 $5,745,203 $3,569,733 $2,510,684

Steel Fabrication 330,852 215,250 587,837 436,186 256,985

Metals Recycling 575,700 156,583 1,045,707 448,439 470,007

Other 324,237 94,445 631,158 215,047 306,921

Consolidated Net Sales $4,465,308 $2,094,305 $8,009,905 $4,669,405 $3,544,597

Operating Income

Steel $1,017,024 $172,395 $1,658,463 $465,141 $641,439

Steel Fabrication 28,450 27,196 38,345 56,400 9,895

Metals Recycling 50,965 (5,918) 104,898 2,408 53,933

1,096,439 193,673 1,801,706 523,949 705,267



Non-cash amortization of intangible assets (7,438) (7,190) (14,876) (14,381) (7,438)

Profit sharing expense (82,140) (9,092) (130,988) (30,546) (48,848)

Non-segment operations (51,126) (18,541) (105,908) (46,486) (54,782)

Consolidated Operating Income $955,735 $158,850 $1,549,934 $432,536 $594,199



Adjusted EBITDA

Net income $712,203 $78,765 $1,150,958 $269,601 $438,755

Income taxes 218,595 24,280 346,699 81,700 128,104

Net interest expense 14,604 25,849 31,419 47,639 16,815

Depreciation 78,015 70,116 155,903 141,849 77,888

Amortization of intangible assets 7,438 7,190 14,876 14,381 7,438

Noncontrolling interest (a) (9,665) (3,270) (18,087) (6,766) (8,422)

EBITDA 1,021,190 202,930 1,681,768 548,404 660,578

Non-cash adjustments

Unrealized (gains) losses 1,305 (208) (5,547) (1,470) (6,852)

Inventory valuation 144 258 253 1,117 109

Equity-based compensation 9,808 9,519 20,018 20,331 10,210

Refinancing charges - 4,907 - 4,907 -

Adjusted EBITDA $1,032,447 $217,406 $1,696,492 $573,289 $664,045

Other Operating Information

Steel

Average external sales price (Per ton) (b) $1,292 $755 $1,169 $766 $1,041

Average ferrous cost (Per ton melted) (c) $439 $266 $406 $266 $372



Flat Roll shipments

Butler and Columbus Flat Roll divisions 1,512,530 1,358,473 3,009,061 2,942,737 1,496,531

Steel Processing divisions (d) 410,596 418,837 833,446 824,818 422,850

Long Product shipments

Structural and Rail Division 497,079 400,150 975,766 835,032 478,687

Engineered Bar Products Division 205,205 137,386 405,833 327,187 200,628

Roanoke Bar Division 175,390 125,104 311,810 265,326 136,420

Steel of West Virginia 90,476 78,069 177,634 170,101 87,158

Total Shipments (Tons) 2,891,276 2,518,019 5,713,550 5,365,201 2,822,274



External Shipments (Tons) (b) 2,504,007 2,152,856 4,914,824 4,648,020 2,410,817



Steel Mill Production (Tons) 2,443,314 2,132,167 4,920,253 4,667,400 2,476,939

Metals Recycling

Nonferrous shipments (000's of pounds) 266,859 166,914 547,668 438,992 280,809

Ferrous shipments (Gross tons) 1,400,447 802,070 2,796,290 1,994,214 1,395,843

External ferrous shipments (Gross tons) 520,726 197,970 957,908 591,621 437,182

Steel Fabrication

Average sales price (Per ton) $1,753 $1,364 $1,582 $1,360 $1,406

Shipments (Tons) 189,180 160,168 373,424 323,480 184,243



(a) Quarter ended June 30, 2021, and YTD ended June 30, 2021, net of income tax benefits of ($246) and ($72), respectively

(b) Represents all steel operations

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

(d) Includes Heartland, The Techs, and United Steel Supply operations

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SOURCE Steel Dynamics, Inc.