PR Newswire | Jan 24, 2022 04:30PM EST

01/24 15:30 CST

Steel Dynamics Reports Record Fourth Quarter and Record Annual 2021 Results FORT WAYNE, Ind., Jan. 24, 2022

FORT WAYNE, Ind., Jan. 24, 2022 /PRNewswire/ --

Annual 2021 Performance Highlights:

* Record steel and steel fabrication shipments of 11.2 million tons and 789,000 tons, respectively * Record net sales of $18.4 billion * Record operating income of $4.3 billion and net income of $3.2 billion * Record steel, steel fabrication, and metals recycling segment earnings * Record cash flow from operations of $2.2 billion and adjusted EBITDA of $4.6 billion * Share repurchases of $1.1 billion of the company's common stock, representing eight percent of its outstanding shares * Contributions to the company's charitable foundation of $10 million

Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced fourth quarter and annual 2021 financial results. The company reported record fourth quarter 2021 net sales of $5.3 billion and net income of $1.1 billion, or $5.49 per diluted share. Excluding the impact from the following items, the company's fourth quarter adjusted net income was $1.1 billion, or $5.78 per diluted share:

* Additional performance-based companywide special compensation of approximately $21 million, or $0.08 per diluted share, awarded to all non-executive, eligible team members in recognition of the company's exceptional annual performance, * A fourth quarter contribution to the company's charitable foundation of $10 million, or $0.04 per diluted share, and * Costs of approximately $52 million, or $0.18 per diluted share (net of capitalized interest), associated with construction and startup of the company's Sinton Texas Flat Roll Steel Mill growth investment.

Comparatively, the company's sequential third quarter 2021 earnings were $4.85 per diluted share, and adjusted earnings were $4.96 per diluted share, excluding the impact of construction and startup costs related to the Texas steel mill of $0.11 per diluted share. Prior year fourth quarter earnings were $0.89 per diluted share and adjusted earnings were $0.97 per diluted share, excluding additional financing costs of $0.04 per diluted share, costs related to the construction of the company's Texas steel mill of $0.05 per diluted share, non-cash asset impairment charges of $0.06 per diluted share related to certain noncore oil and gas investments, and a tax benefit of $0.06 per diluted share, related to a valuation allowance reduction.

"The team delivered a tremendous operational and financial performance during 2021, achieving record net sales of $18.4 billion, operating income of $4.3 billion, and adjusted EBITDA of $4.6 billion," said Mark D. Millett, Chairman and Chief Executive Officer. "Numerous individual operating and financial records were attained during the year. Across the company, our teams achieved best-in-class performance, while keeping each other healthy and safe. I am proud to work alongside each of them. Based on their performance, we achieved record annual cash flow from operations of $2.2 billion and ended the year with strong liquidity of over $2.4 billion, while at the same time meaningfully growing our business through significant organic growth investments, maintaining a positive cash dividend profile, and executing on our share repurchase program. We have a firm foundation for our continued long-term, strategic growth, and ongoing value creation.

"Domestic steel demand was strong throughout the year supported most significantly by the construction, automotive, and industrial sectors," continued Millett. "Customer steel inventories also remained historically low, as steel supply was not sufficient to meet robust demand requirements during much of the year. This strong market environment drove significantly higher realized steel selling values, resulting in meaningful steel metal spread expansion. In combination with the symbiotic relationships among our three primary operating platforms, we achieved record annual financial and operational performance. Our steel operations achieved record annual 2021 shipments of 11.2 million tons and record operating income of $4.4 billion. Our metals recycling and steel fabrication operations also achieved record 2021 annual operating income of $195 million and $365 million, respectively."

Fourth Quarter 2021 Comments

Fourth quarter 2021 operating income for the company's steel operations was a record $1.4 billion, aligned with sequential third quarter results, due to meaningful metal spread expansion across the entire steel platform. Coupled with flat scrap input costs, record flat roll and strong long product steel selling values more than offset seasonally lower steel shipments. The fourth quarter 2021 average external product selling price for the company's steel operations increased $112 sequentially to $1,662 per ton. The average ferrous scrap cost per ton melted at the company's steel mills remained static at $490 per ton.

Fourth quarter operating income from the company's metals recycling operations remained strong at $44 million based on improved metal margins offsetting lower ferrous shipments. Many domestic steel mills had planned maintenance outages throughout the fourth quarter 2021, which lowered ferrous scrap demand. Ferrous scrap prices moderated in September and October, recovering to an extent in the later half of the fourth quarter resulting in modestly lower average realized selling values.

The company's steel fabrication operations reported record operating income of $238 million in the fourth quarter 2021, more than 2 times higher than sequential third quarter results. Supported by strong shipments, earnings meaningfully increased as realized pricing increased $986 per ton, more than offsetting the continued increased in average steel input costs. Sustained strong demand for steel joist and deck has resulted in a record backlog for the company's steel fabrication platform in terms of both forward-product pricing and volume. The company anticipates this momentum to continue through 2022 based on these dynamics.

Annual 2021 Comparison

Annual 2021 net income was a record $3.2 billion, or $15.56 per diluted share, with record net sales of $18.4 billion, as compared to net income of $551 million, or $2.59 per diluted share, with net sales of $9.6 billion in 2020. Excluding the impact from the following items, the company's 2021 adjusted net income was $3.3 billion, or $16.09 per diluted share:

* Additional performance-based companywide special compensation of approximately $21 million, or $0.07 per diluted share, awarded to all non-executive, eligible team members in recognition of the company's exceptional record annual performance, * A contribution to the company's charitable foundation of $10 million, or $0.03 per diluted share, and * Costs of approximately $125 million, or $0.43 per diluted share (net of capitalized interest), associated with construction and startup of the company's Sinton Texas Flat Roll Steel Mill growth investment.

Similarly, adjusting for the company's Texas steel mill construction costs, refinancing activities, non-cash impairment charges and a valuation allowance tax benefit, annual 2020 net income would have been $603 million, or $2.84 per diluted share.

Annual 2021 record net sales increased 92 percent and operating income increased more than four times to a record $4.3 billion, when compared to 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 operations. Compared to 2020, the average 2021 external product selling price for the company's steel operations increased $611 to $1,381 per ton. The average 2021 ferrous scrap cost per ton melted at the company's steel mills increased $179 to $447 per ton.

Based on the company's differentiated business model and highly variable cost structure, the company generated record cash flow from operations of $2.2 billion during 2021. The company also invested $1.0 billion in growth capital investments, contributed $10 million to the company's charitable foundation, paid cash dividends of $213 million to shareholders, and repurchased $1.1 billion of its outstanding common stock representing eight percent of its outstanding stock, while maintaining strong liquidity of over $2.4 billion as of December 31, 2021.

Outlook

"We believe the market dynamics are in place for domestic steel consumption to further increase in 2022 when compared to 2021," said Millett. "Based on domestic steel demand fundamentals and customer confidence, we believe North American steel consumption will experience steady growth, supported by the construction, automotive, and industrial sectors. Our Structural and Rail Division and steel fabrication operations provide us with more specific insight into the non-residential construction sector, which is the single largest domestic steel consuming sector. Based on our record steel fabrication order backlog extending through most of 2022, combined with the continued strength of order activity and broad customer optimism, we believe construction will remain strong in the coming year. In addition, we believe the more severe supply chain challenges within the North American automotive sector will abate during 2022, supporting stronger production for vehicles that are in high demand and short supply.

"Steel Dynamics is in a position of strength as we enter 2022. We are ramping up operations at our new state-of-the art electric-arc-furnace flat roll steel mill located in Texas. We had planned to be further along with commissioning the hot side of the steel mill, but supply-chain and COVID challenges delayed the project by several weeks. The team has done a great job with commissioning and operating other aspects of the steel mill, including the rolling mill and two value-added finishing lines, ahead of the melting and casting operations in preparation of full operations commencing before the end of February 2022. Based on our current forecast, we expect shipments to be around 2.0 million tons in 2022.

"We are also investing approximately $500 million to build 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 onsite at our new Texas steel mill, providing our new Texas steel mill with the same diversification and higher-margin product capabilities as our two existing flat roll steel divisions. The other two lines will be placed at our Heartland Flat Roll Division located in Terre Haute, Indiana to support growing coated flat roll steel demand in the region and to further increase the diversification and cash generation capacity of our existing Midwest operations. Based on current plans, we believe these four lines will begin operating mid-2023.

"Our commitment is to the health and safety of our teams, families, communities and to meet the needs of our customers. Our culture and our business model continue to positively differentiate our performance from the rest of the industry. We are competitively positioned and focused to deliver 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 2021 operating and financial results on Tuesday, January 25, 2022, at 10:00 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 30, 2022.

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, 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 Year Ended Three Months

December 31, December 31, Ended

2021 2020 2021 2020 Sept. 30, 2021



Net sales $5,310,657$2,601,245$18,408,850$9,601,482$5,088,288

Costs of goods sold 3,548,820 2,158,992 13,046,426 8,166,754 3,487,659

Gross profit 1,761,837 442,253 5,362,424 1,434,728 1,600,629



Selling, general and administrative expenses 182,290 137,018 643,976 477,450 157,526

Profit sharing 143,243 19,404 388,111 61,728 113,880

Amortization of intangible assets 7,178 7,672 29,232 28,999 7,178

Asset impairment charges - 19,409 - 19,409 -

Operating income 1,429,126 258,750 4,301,105 847,142 1,322,045



Interest expense, net of capitalized interest 12,338 20,206 57,209 94,877 12,704

Other expense (income), net 7,940 17,727 34,826 46,787 6,776

Income before income taxes 1,408,848 220,817 4,209,070 705,478 1,302,565



Income tax expense 313,151 23,867 962,256 134,650 302,406

Net income 1,095,697 196,950 3,246,814 570,828 1,000,159

Net income attributable to noncontrolling interests (5,192) (9,107) (32,748) (20,006) (9,396)

Net income attributable to Steel Dynamics, Inc.$1,090,505$187,843 $3,214,066 $550,822 $990,763





Basic earnings per share attributable to

Steel Dynamics, Inc. stockholders $5.53 $0.89 $15.67 $2.61 $4.89



Weighted average common shares outstanding 197,346 210,599 205,115 211,140 202,450



Diluted earnings per share attributable to

Steel Dynamics, Inc. stockholders, including the

effect of assumed conversions when dilutive $5.49 $0.89 $15.56 $2.59 $4.85



Weighted average common shares

and share equivalents outstanding 198,794 212,052 206,615 212,345 204,167





Dividends declared per share $0.26 $0.25 $1.04 $1.00 $0.26

Steel Dynamics, Inc. CONSOLIDATED BALANCE SHEETS (in thousands)



December 31, December 31,

Assets 2021 2020

(unaudited)

Current assets

Cash and equivalents $1,243,868 $1,368,618

Accounts receivable, net 1,916,434 971,918

Inventories 3,531,130 1,843,548

Other current assets 209,591 74,363

Total current assets 6,901,023 4,258,447



Property, plant and equipment, net 4,751,430 4,105,569



Intangible assets, net 295,345 324,577



Goodwill 453,835 457,226



Other assets 129,601 119,743

Total assets $12,531,234 $9,265,562

Liabilities and Equity

Current liabilities

Accounts payable $1,280,555 $769,455

Income taxes payable 13,746 2,386

Accrued expenses 835,894 400,052

Current maturities of long-term debt 97,174 86,894

Total current liabilities 2,227,369 1,258,787



Long-term debt 3,008,702 3,015,782



Deferred income taxes 854,905 536,288



Other liabilities 120,087 106,479

Total liabilities 6,211,063 4,917,336



Commitments and contingencies



Redeemable noncontrolling interests 211,414 158,614



Equity

Common stock 649 648

Treasury stock, at cost (2,674,267) (1,623,747)

Additional paid-in capital 1,218,933 1,207,392

Retained earnings 7,761,417 4,758,969

Accumulated other comprehensive income (loss) (2,091) 1,902

Total Steel Dynamics, Inc. equity 6,304,641 4,345,164

Noncontrolling interests (195,884) (155,552)

Total equity 6,108,757 4,189,612

Total liabilities and equity $12,531,234 $9,265,562

Steel Dynamics, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)



Three Months Ended Year Ended

December 31, December 31,

2021 2020 2021 2020



Operating activities:

Net income $1,095,697$196,950 $3,246,814 $570,828



Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization 86,280 85,057 347,653 325,789

Impairment charges - 19,409 - 19,409

Equity-based compensation 20,950 18,748 57,715 55,598

Deferred income taxes 133,533 16,859 322,007 47,808

Other adjustments (325) 9,273 (3,240) 30,974

Changes in certain assets and liabilities:

Accounts receivable (23,639) (53,929) (944,516) (111,920)

Inventories (633,359) (234,386) (1,685,834) (150,596)

Other assets 16,327 (7,249) (2,491) (1,547)

Accounts payable 85,173 60,745 557,735 182,509

Income taxes receivable/payable (192,712) (700) (105,921) 32,551

Accrued expenses 135,974 27,174 414,214 (14,371)

Net cash provided by operating activities 723,899 137,951 2,204,136 987,032



Investing activities:

Purchases of property, plant and equipment (204,541) (343,157) (1,006,239) (1,198,055)

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

Proceeds from maturities of short-term investments - - - 411,533

Acquisition of business, net of cash and restricted cash acquired - (1,000) - (60,012)

Other investing activities 3,546 933 6,819 2,634

Net cash used in investing activities (200,995) (343,224) (999,420) (993,259)



Financing activities:

Issuance of current and long-term debt 456,644 911,507 1,516,556 2,523,356

Repayment of current and long-term debt (426,664) (532,045) (1,522,002) (2,177,527)

Dividends paid (51,943) (52,591) (212,968) (209,248)

Purchase of treasury stock (329,818) - (1,060,632) (106,529)

Other financing activities (22,955) (20,598) (50,423) (37,100)

Net cash provided by (used in) financing activities (374,736) 306,273 (1,329,469) (7,048)



Increase (decrease) in cash, cash equivalents, and restricted cash 148,168 101,000 (124,753) (13,275)

Cash, cash equivalents, and restricted cash at beginning of period 1,101,201 1,273,122 1,374,122 1,387,397

Cash, cash equivalents, and restricted cash at end of period $1,249,369$1,374,122$1,249,369 $1,374,122





Supplemental disclosure information:

Cash paid for interest $41,158 $34,541 $103,374 $111,591

Cash paid for income taxes, net $366,322 $4,569 $737,157 $50,417

Steel Dynamics, Inc. SUPPLEMENTAL INFORMATION (dollars in thousands)

Fourth Quarter Year to Date

2021 2020 2021 2020 1Q 2021 2Q 2021 3Q 2021

External Net Sales

Steel $3,786,221$1,870,841$13,199,142$7,137,104 $2,510,684$3,234,519$3,667,718

Steel Fabrication 680,006 217,977 1,761,647 895,701 256,985 330,852 493,804

Metals Recycling 550,674 347,022 2,183,472 1,067,924 470,007 575,700 587,091

Other 293,756 165,405 1,264,589 500,753 306,921 324,237 339,675

Consolidated Net Sales $5,310,657$2,601,245$18,408,850$9,601,482 $3,544,597$4,465,308$5,088,288

Operating Income

Steel $1,366,880$297,682 $4,376,079 $906,396 $641,439 $1,017,024$1,350,736

Steel Fabrication 237,639 25,067 365,414 120,739 9,895 28,450 89,430

Metals Recycling 43,581 27,035 195,464 44,910 53,933 50,965 46,985

1,648,100 349,784 4,936,957 1,072,045 705,267 1,096,439 1,487,151



Non-cash amortization of intangible assets (7,178) (7,672) (29,232) (28,999) (7,438) (7,438) (7,178)

Profit sharing expense (143,243) (19,404) (388,111) (61,728) (48,848) (82,140) (113,880)

Non-segment operations (68,553) (44,549) (218,509) (114,767) (54,782) (51,126) (44,048)

Non-cash asset impairment charges - (19,409) - (19,409) - - -

Consolidated Operating Income $1,429,126$258,750 $4,301,105 $847,142 $594,199 $955,735 $1,322,045

Adjusted EBITDA

Net income $1,095,697$196,950 $3,246,814 $570,828 $438,755 $712,203 $1,000,159

Income taxes 313,151 23,867 962,256 134,650 128,104 218,595 302,406

Net interest expense 11,999 19,853 55,852 85,893 16,815 14,604 12,434

Depreciation 77,438 75,787 311,972 291,000 77,888 78,015 78,631

Amortization of intangible assets 7,178 7,672 29,232 28,999 7,438 7,438 7,178

Noncontrolling interest (a) (5,242) (2,352) (33,257) (13,251) (8,422) (9,665) (9,928)

EBITDA 1,500,221 321,777 4,572,869 1,098,119 660,578 1,021,190 1,390,880

Non-cash adjustments

Unrealized (gains) losses (2,856) 2,629 (2,048) 2,074 (6,852) 1,305 6,355

Inventory valuation 6,101 1,078 6,495 2,242 109 144 141

Equity-based compensation 20,948 18,746 50,883 48,564 10,210 9,808 9,917

Asset impairment charges - 17,060 - 17,060 - - -

Refinancing charges - 3,059 - 7,966 - - -

Adjusted EBITDA $1,524,414$364,349 $4,628,199 $1,176,025 $664,045 $1,032,447$1,407,293

Other Operating Information

Steel

Average external sales price (Per ton) (b) $1,662 $814 $1,381 $770 $1,041 $1,292 $1,550

Average ferrous cost (Per ton melted) (c) $490 $279 $447 $268 $372 $439 $489



Flat Roll shipments

Butler, Columbus, and Sinton 1,416,890 1,447,125 5,868,734 5,889,735 1,496,531 1,512,530 1,442,783

Steel Processing divisions (d) 404,733 413,756 1,653,433 1,699,428 422,850 410,596 415,254

Long Product shipments

Structural and Rail Division 460,651 435,364 1,933,433 1,663,915 478,687 497,079 497,016

Engineered Bar Products Division 199,546 164,735 809,808 630,870 200,628 205,205 204,429

Roanoke Bar Division 132,318 126,163 595,879 505,387 136,420 175,390 151,751

Steel of West Virginia 86,381 83,303 356,353 328,998 87,158 90,476 92,338

Total Shipments (Tons) 2,700,519 2,670,446 11,217,640 10,718,333 2,822,274 2,891,276 2,803,571



External Shipments (Tons) (b) 2,277,865 2,299,310 9,559,617 9,257,334 2,410,817 2,504,007 2,366,928



Steel Mill Production (Tons) (c) 2,395,437 2,273,273 9,844,170 9,260,807 2,476,939 2,443,314 2,528,480

Metals Recycling

Nonferrous shipments (000's of pounds) 274,479 271,552 1,093,472 977,882 280,809 266,859 271,325

Ferrous shipments (Gross tons) 1,275,062 1,341,316 5,442,478 4,591,881 1,395,843 1,400,447 1,371,126

External ferrous shipments (Gross tons) 434,335 446,233 1,867,810 1,407,430 437,182 520,726 475,567

Steel Fabrication

Average sales price (Per ton) $3,325 $1,351 $2,236 $1,362 $1,406 $1,753 $2,339

Shipments (Tons) 204,497 162,825 789,118 665,679 184,243 189,180 211,197



(a) 2021 periods and fourth quarter 2020 are net of income tax expense (benefit) on noncontrolling interests.

(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.