Steel Dynamics Reports Fourth Quarter and Annual 2020 Results

FORT WAYNE, Ind., Jan. 25, 2021 /PRNewswire/ --

Annual 2020 Performance Highlights:

Near-record steel shipments of 10.7 million tons and record steel fabrication shipments of 666,000 tons
Net sales of $9.6 billion
Operating income of $847 million and net income of $551 million, representing the company's fourth best year
Cash flow from operations of $987 million and adjusted EBITDA of $1.2 billion

Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced fourth quarter and annual 2020 financial results. The company reported fourth quarter 2020 net sales of $2.6 billion and net income of $188 million, or $0.89 per diluted share. Excluding the impact from the following items, the company's fourth quarter adjusted net income was $205 million, or $0.97 per diluted share:

Additional financing costs of $11 million, or $0.04 per diluted share, related to the company's October 2020 refinancing activities,
Costs of approximately $14 million, or $0.05 per diluted share (net of capitalized interest), associated with construction of the company's Sinton Texas Flat Roll Steel Mill growth investment,
Non-cash asset impairment charges of $17 million (net of non-controlling interest), or $0.06 per diluted share related to certain noncore oil and gas investments, and
A tax benefit of $13 million (net of non-controlling interest), or $0.06 per diluted share, related to the reduction of a valuation allowance.

Comparatively, the company's sequential third quarter 2020 earnings were $0.47 per diluted share, and adjusted earnings were $0.51 per diluted share, excluding the impact of construction costs related to the Texas steel mill of $0.04 per diluted share. Prior year fourth quarter earnings were $0.56 per diluted share, and adjusted earnings were $0.62 per diluted share, excluding refinancing costs of $0.01 per diluted share and lower earnings of approximately $0.05 per diluted share associated with planned maintenance outages at the company's two flat roll steel mills.

"The team delivered a tremendous operational and financial performance during 2020 within an unprecedented health and economic crisis, achieving strong net sales of $9.6 billion, operating income of $847 million, and adjusted EBITDA of $1.2 billion," said Mark D. Millett, President and Chief Executive Officer. "Numerous individual operating and financial records were also attained during the year — an amazing achievement during a period in which many steel consuming businesses were temporarily idled or severely impacted by the social and economic effects of the coronavirus pandemic. Their performance is truly a testament to the passion and commitment of our teams. Our operating, commercial, and financial groups achieved best-in-class performance, while keeping each other healthy and safe. I am humbled and proud to work alongside each of them. Based on their performance, we achieved cash flow from operations of $987 million in 2020, and ended the year with historically strong liquidity of over $2.5 billion, while at the same time meaningfully growing our business through significant organic and transactional 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.

"2020 was a period of shifting steel and raw material supply and demand dynamics," continued Millett. "While domestic steel demand and raw material supply were robust early in the year, the pandemic significantly reduced steel consumption and scrap generation during the second quarter 2020, as the automotive sector and its supply chain temporarily closed. As a result, a significant amount of higher-cost domestic steel production was idled. As many U.S. states lifted shelter-in-place restrictions and the broader manufacturing base restarted operations mid-year, steel demand quickly recovered. As demand improved in the second half of 2020, some domestic steel production remained idled. When coupled with extremely low steel inventory levels throughout the supply chain, flat roll steel index prices increased over $500 per ton from August through the end of the year.

"Despite the challenges of 2020, as a result of our market share gains and the symbiotic relationships between our three operating platforms, we achieved strong companywide performance," stated Millett. "Operating income from our steel operations was $906 million in 2020, compared to $1.0 billion in 2019. We were able to achieve annual steel shipments that were only one percent below our record high attained in 2019. Operating income from our metals recycling platform increased to $45 million in 2020, compared to $28 million in 2019. Finally, our steel fabrication operations achieved record operating income of $121 million and record shipments, as the construction market remained strong throughout the year," stated Millett.

Fourth Quarter 2020 Comments

Fourth quarter 2020 operating income for the company's steel operations was $298 million, more than double sequential third quarter results, based on significant flat roll steel metal spread expansion, as strong demand and tight supply dynamics propelled selling values. The fourth quarter 2020 average external product selling price for the company's total steel operations increased $80 sequentially to $814 per ton. The average ferrous scrap cost per ton melted at the company's steel mills only increased $20 sequentially to $279 per ton.

As domestic steel production continued to rise during the quarter, demand for recycled ferrous scrap and scrap selling values also increased. As a result, fourth quarter operating income from the company's metals recycling operations increased 75 percent to $27 million, compared to sequential third quarter.

The company's steel fabrication operations reported operating income of $25 million in the fourth quarter 2020, compared to the record high $39 million in the sequential third quarter. Earnings declined due to seasonally lower shipments and metal spread compression, as product pricing declined, while steel input costs increased. The steel fabrication platform's order backlog remains strong, and customers remain optimistic concerning construction activity.

In October, the company executed its third investment grade notes offering, issuing $350 million of 1.650% notes due 2027 and $400 million of 3.250% notes due 2050. These proceeds were used to repay $350 million of the company's 4.125% senior notes due 2025, and for other general corporate purposes. Since becoming investment grade rated in October 2019, the company's refinancing activities have reduced its effective interest rate from 5.4% to 3.5%.

Annual 2020 Comparison

Annual 2020 net income was $551 million, or $2.59 per diluted share, with net sales of $9.6 billion, as compared to 2019 net income of $671 million, or $3.04 per diluted share, with net sales of $10.5 billon. Excluding the impact from the following items, the company's 2020 adjusted net income was $603 million, or $2.84 per diluted share:

Additional financing costs of $36 million, or $0.12 per diluted share, related to the company's 2020 refinancing activities,
Costs of approximately $40 million, or $0.13 per diluted share (net of capitalized interest), associated with construction of the company's Sinton Texas Flat Roll Steel Mill growth investment,
Non-cash asset impairment charges of $17 million (net of non-controlling interest), or $0.06 per diluted share, related to certain noncore oil and gas investments, and
A tax benefit of $13 million (net of non-controlling interest), or $0.06 per diluted share, related to the reduction of a valuation allowance.

Annual 2020 net sales declined eight percent and operating income declined 14 percent to $847 million, when compared to 2019. Lower earnings were primarily the result of steel metal spread compression, as lower steel prices in the first half of 2020 caused overall average annual steel selling values to decline more than average ferrous scrap costs. Compared to 2019, the average 2020 external product selling price for the company's steel operations decreased $67 to $770 per ton. The average 2020 ferrous scrap cost per ton melted at the company's steel mills decreased $25 to $268 per ton. Based on the company's differentiated business model and highly variable cost structure, the company generated strong cash flow from operations of $987 million during 2020 and invested $1.2 billion in capital investments, most of which are growth oriented. The new Sinton Texas steel mill growth project alone represented $928 million. During 2020, the company also paid cash dividends of $209 million and repurchased $107 million of its outstanding common stock, while maintaining strong liquidity of over $2.5 billion as of December 31, 2020.

Outlook

"We entered 2020 in a position of strength with ample cash and available liquidity, and we remain in a position of strength as we head into 2021," stated Millett. "No one could have predicted the advent of the pandemic and its global social and economic impact. Our team's health and safety remain at the forefront of everything we do — each decision we make. I thank and applaud them for their support of our company, our customers, and our communities. Our differentiated business model and performance-driven culture allows us to generate strong cash flows during the most challenging environments, as evidenced in 2020. This model supported the continued construction of our new state-of-the art, electric-arc-furnace (EAF) flat roll steel mill during the year. We are excited about this transformational strategic 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 EAF flat roll steel producers, competing even more effectively with the integrated steel model and foreign competition, as well as providing a much more environmentally friendly steel production alternative for our customers. Construction is going well and remains within our expected project cost of $1.9 billion, with plans still in place to commence operations mid-year 2021.

"We have targeted specific regional steel consuming markets. Our facility is located and designed to have a meaningful competitive advantage in these regions and in the displacement of imports. We have signed long-term agreements with several customers to co-locate on our site, and we are still in discussions with others. We plan to have over 1 million tons of annual steel consuming and processing capability from on-site customers. In August, we also completed the acquisition of Zimmer, a Mexican metals recycling company, which is an important part of our raw material procurement strategy in the southwest and Mexico.

"While the domestic economy is still recovering from the shock of COVID-19, we are seeing a strong steel demand environment," continued Millett. "The automotive sector has experienced the strongest recovery, and the construction sector remains resilient. Customers are positive concerning the business outlook for 2021. We are seeing pent up demand, as steel service center and end-user inventories are still extremely low compared to historical norms. We also believe U.S. trade agreements and existing steel trade cases will continue to moderate steel imports. Based on strong domestic steel fundamentals, we are optimistic regarding the North American steel market dynamics and believe steel consumption will experience growth this year. We expect to see continued steel price strength and strong customer demand in 2021.

"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, and we are in a place of strength. 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 2020 operating and financial results on Tuesday, January 26, 2021, at 8:30 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 31, 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, 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 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 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) the effects of uncertain economic conditions; (2) the effects of pandemics or other health issues, such as the novel coronavirus outbreak (COVID-19); (3) cyclical and changing industrial demand; (4) 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, energy, and other steel-consuming industries; (5) 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; (6) the impact of domestic and foreign imports, including trade policy, restrictions, or agreements; (7) unanticipated difficulties in integrating or starting up new, acquired or planned businesses or assets; (8) risks and uncertainties involving product and/or technology development; and (9) 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 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
	2020		2019		2020		2019		Sept. 30, 2020

Net sales	$	2,601,245	$	2,350,196	$	9,601,482	$	10,464,991	$	2,330,832
Costs of goods sold		2,158,992		2,033,787		8,166,754		8,934,007		2,038,017
Gross profit		442,253		316,409		1,434,728		1,530,984		292,815

Selling, general and administrative expenses		137,018		111,968		477,450		436,498		118,235
Profit sharing		19,404		13,633		61,728		78,029		11,778
Amortization of intangible assets		7,672		8,847		28,999		29,577		6,946
Asset impairment charges		19,409		-		19,409		-		-
Operating income		258,750		181,961		847,142		986,880		155,856

Interest expense, net of capitalized interest		20,206		32,322		94,877		127,104		18,950
Other expense (income), net		17,727		(424)		46,787		(15,561)		3,546
Income before income taxes		220,817		150,063		705,478		875,337		133,360

Income tax expense		23,867		26,344		134,650		197,437		29,083
Net income		196,950		123,719		570,828		677,900		104,277
Net income attributable to noncontrolling interests		(9,107)		(2,294)		(20,006)		(6,797)		(4,134)
Net income attributable to Steel Dynamics, Inc.	$	187,843	$	121,425	$	550,822	$	671,103	$	100,143


Basic earnings per share attributable to
Steel Dynamics, Inc. stockholders	$	0.89	$	0.56	$	2.61	$	3.06	$	0.48

Weighted average common shares outstanding		210,599		215,119		211,140		219,639		210,366

Diluted earnings per share attributable to
Steel Dynamics, Inc. stockholders, including the
effect of assumed conversions when dilutive	$	0.89	$	0.56	$	2.59	$	3.04	$	0.47

Weighted average common shares
and share equivalents outstanding		212,052		216,402		212,345		220,748		211,926


Dividends declared per share	$	0.25	$	0.24	$	1.00	$	0.96	$	0.25

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

	December 31,		December 31,
Assets	2020		2019
	(unaudited)
Current assets
Cash and equivalents	$	1,368,618	$	1,381,460
Short-term investments		-		262,174
Accounts receivable, net		971,918		844,336
Inventories		1,843,548		1,689,043
Other current assets		74,363		76,012
Total current assets		4,258,447		4,253,025

Property, plant and equipment, net		4,105,569		3,135,886

Intangible assets, net		324,577		327,901

Goodwill		457,226		452,915

Other assets		119,743		106,038
Total assets	$	9,265,562	$	8,275,765
Liabilities and Equity
Current liabilities
Accounts payable	$	769,455	$	513,344
Income taxes payable		2,386		2,014
Accrued expenses		400,052		401,984
Current maturities of long-term debt		86,894		89,356
Total current liabilities		1,258,787		1,006,698

Long-term debt		3,015,782		2,644,988

Deferred income taxes		536,288		484,169

Other liabilities		106,479		75,055
Total liabilities		4,917,336		4,210,910

Commitments and contingencies

Redeemable noncontrolling interests		158,614		143,614

Equity
Common stock		648		646
Treasury stock, at cost		(1,623,747)		(1,525,113)
Additional paid-in capital		1,207,392		1,181,012
Retained earnings		4,758,969		4,419,296
Accumulated other comprehensive income (loss)		1,902		(7)
Total Steel Dynamics, Inc. equity		4,345,164		4,075,834
Noncontrolling interests		(155,552)		(154,593)
Total equity		4,189,612		3,921,241
Total liabilities and equity	$	9,265,562	$	8,275,765

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

	Three Months Ended				Year Ended
	December 31,				December 31,
	2020		2019		2020		2019

Operating activities:
Net income	$	196,950	$	123,719	$	570,828	$	677,900

Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization		85,057		80,527		325,789		321,082
Impairment charges		19,409		-		19,409		-
Equity-based compensation		18,748		14,402		55,598		47,631
Deferred income taxes		16,859		16,769		47,808		51,721
Other adjustments		9,273		2,365		30,974		1,413
Changes in certain assets and liabilities:
Accounts receivable		(53,929)		142,610		(111,920)		237,805
Inventories		(234,386)		77,977		(150,596)		217,866
Other assets		(7,249)		6,103		(1,547)		13,735
Accounts payable		60,745		(32,278)		182,509		(86,445)
Income taxes receivable/payable		(700)		(31,810)		32,551		(12,095)
Accrued expenses		27,174		8,678		(14,371)		(74,323)
Net cash provided by operating activities		137,951		409,062		987,032		1,396,290

Investing activities:
Purchases of property, plant and equipment		(343,157)		(158,258)		(1,198,055)		(451,945)
Purchases of short-term investments		-		(262,133)		(149,359)		(396,159)
Proceeds from maturities of short-term investments		-		69,489		411,533		362,768
Acquisition of business, net of cash and restricted cash acquired		(1,000)		-		(60,012)		(97,106)
Other investing activities		933		1,733		2,634		5,756
Net cash used in investing activities		(343,224)		(349,169)		(993,259)		(576,686)

Financing activities:
Issuance of current and long-term debt		911,507		1,199,276		2,523,356		1,573,962
Repayment of current and long-term debt		(532,045)		(895,018)		(2,177,527)		(1,264,152)
Dividends paid		(52,591)		(51,778)		(209,248)		(200,271)
Purchase of treasury stock		-		(56,214)		(106,529)		(348,608)
Other financing activities		(20,598)		(20,302)		(37,100)		(27,561)
Net cash provided by (used in) financing activities		306,273		175,964		(7,048)		(266,630)

Increase (decrease) in cash, cash equivalents, and restricted cash		101,000		235,857		(13,275)		552,974
Cash, cash equivalents, and restricted cash at beginning of period		1,273,122		1,151,540		1,387,397		834,423
Cash, cash equivalents, and restricted cash at end of period	$	1,374,122	$	1,387,397	$	1,374,122	$	1,387,397


Supplemental disclosure information:
Cash paid for interest	$	34,541	$	62,848	$	111,591	$	134,550
Cash paid for income taxes, net	$	4,569	$	39,376	$	50,417	$	155,525

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

	Fourth Quarter					Year Ended
		2020		2019		2020		2019		1Q 2020		2Q 2020		3Q 2020
*External Net Sales*
Steel	$	1,870,841	$	1,751,104	$	7,137,104	$	7,904,551	$	1,941,706	$	1,628,027	$	1,696,530
Steel Fabrication		217,977		246,171		895,701		962,154		220,936		215,250		241,538
Metals Recycling		347,022		242,862		1,067,924		1,198,007		291,856		156,583		272,463
Other		165,405		110,059		500,753		400,279		120,602		94,445		120,301
Consolidated Net Sales	$	2,601,245	$	2,350,196	$	9,601,482	$	10,464,991	$	2,575,100	$	2,094,305	$	2,330,832
*Operating Income*
Steel	$	297,682	$	201,266	$	906,396	$	1,048,059	$	292,746	$	172,395	$	143,573
Steel Fabrication		25,067		32,573		120,739		119,263		29,204		27,196		39,272
Metals Recycling		27,035		(5,251)		44,910		28,215		8,326		(5,918)		15,467
		349,784		228,588		1,072,045		1,195,537		330,276		193,673		198,312

Non-cash amortization of intangible assets		(7,672)		(8,847)		(28,999)		(29,577)		(7,191)		(7,190)		(6,946)
Profit sharing expense		(19,404)		(13,633)		(61,728)		(78,029)		(21,454)		(9,092)		(11,778)
Non-segment operations		(44,549)		(24,147)		(114,767)		(101,051)		(27,945)		(18,541)		(23,732)
Non-cash asset impairment charges		(19,409)		-		(19,409)		-		-		-		-
Consolidated Operating Income	$	258,750	$	181,961	$	847,142	$	986,880	$	273,686	$	158,850	$	155,856
*Adjusted EBITDA*
Net income	$	196,950	$	123,719	$	570,828	$	677,900	$	190,836	$	78,765	$	104,277
Income taxes		23,867		26,344		134,650		197,437		57,420		24,280		29,083
Net interest expense		19,853		25,355		85,893		99,077		21,790		25,849		18,401
Depreciation		75,787		70,314		291,000		286,201		71,733		70,116		73,364
Amortization of intangible assets		7,672		8,847		28,999		29,577		7,191		7,190		6,946
Noncontrolling interest (d)		(2,352)		(2,294)		(13,251)		(6,797)		(3,496)		(3,270)		(4,133)
EBITDA		321,777		252,285		1,098,119		1,283,395		345,474		202,930		227,938
Non-cash adjustments
Unrealized (gains) losses		2,629		589		2,074		2,309		(1,262)		(208)		915
Inventory valuation		1,078		352		2,242		1,222		859		258		47
Equity-based compensation		18,746		14,400		48,564		42,941		10,812		9,519		9,487
Asset impairment charges		19,409		-		19,409		-		-		-		-
Refinancing charges		3,059		2,780		7,966		2,780		-		4,907		-
Adjusted EBITDA	$	366,698	$	270,406	$	1,178,374	$	1,332,647	$	355,883	$	217,406	$	238,387
*Other Operating Information*
Steel
Average external sales price (Per ton) (a)	$	814	$	763	$	770	$	837	$	774	$	755	$	734
Average ferrous cost (Per ton melted) (b)	$	279	$	243	$	268	$	293	$	267	$	266	$	259

Flat Roll shipments
Butler and Columbus Flat Roll divisions		1,447,125		1,512,003		5,889,735		6,140,547		1,584,264		1,358,473		1,499,873
Steel Processing divisions (c)		413,756		404,388		1,699,428		1,585,657		405,981		418,837		460,854
Long Product shipments
Structural and Rail Division		435,364		374,774		1,663,915		1,469,356		434,882		400,150		393,519
Engineered Bar Products Division		164,735		153,692		630,870		732,774		189,801		137,386		138,948
Roanoke Bar Division		126,163		125,125		505,387		529,480		140,222		125,104		113,898
Steel of West Virginia		83,303		80,981		328,998		358,827		92,032		78,069		75,594
Total Shipments (Tons)		2,670,446		2,650,963		10,718,333		10,816,641		2,847,182		2,518,019		2,682,686

External Shipments (Tons) (a)		2,299,310		2,305,633		9,257,334		9,402,608		2,495,164		2,152,856		2,310,004

Steel Mill Production (Tons)		2,273,273		2,285,077		9,260,807		9,466,955		2,535,233		2,132,167		2,320,134
Metals Recycling
Nonferrous shipments (000's of pounds)		271,552		252,861		977,882		1,068,208		272,078		166,914		267,338
Ferrous shipments (Gross tons)		1,341,316		1,096,211		4,591,881		4,627,214		1,192,144		802,070		1,256,351
External ferrous shipments (Gross tons)		446,233		361,504		1,407,430		1,565,957		393,651		197,970		369,576
Steel Fabrication
Average sales price (Per ton)	$	1,351	$	1,419	$	1,362	$	1,495	$	1,356	$	1,364	$	1,375
Shipments (Tons)		162,825		173,635		665,679		644,411		163,312		160,168		179,375

(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
(d) Year and quarter ended December 31, 2020, net of income tax effect of $6,755