Steel Dynamics Reports Record Fourth Quarter and Record Annual 2021 Results

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Jan 24, 2022, 16:30 ET

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 2½ 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® 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