Steel Dynamics(STLD) - 2020 Q4 - Annual Report

Steel Production Capacity and Operations - Steel Dynamics has an estimated steelmaking and coating capacity of approximately 13 million tons as of December 31, 2020[13] - The company's new Southwest-Sinton Flat Roll Division investment is a $1.9 billion electric arc furnace (EAF) flat roll steel mill with an estimated 3.0 million tons of annual steel production capacity[22] - The new steel mill will have a galvanizing line with planned annual coating capacity of 550,000 tons and a paint line with annual coating capacity of 250,000 tons[22] - The company has approximately 8.4 million tons of flat roll steel annual shipping capacity, with 6.4 million tons at Butler and Columbus Flat Roll Divisions[58] - The new Southwest-Sinton Flat Roll Division will increase total annual steel capacity by over 25$9,601,482, a decrease from $10,464,991 in 2019 and$11,821,839 in 2018[263] - Gross profit for 2020 was $1,434,728, down from$1,530,984 in 2019 and $2,322,814 in 2018[263] - Net income attributable to Steel Dynamics, Inc. for 2020 was$550,822, compared to $671,103 in 2019 and$1,258,379 in 2018[263] - Basic earnings per share for 2020 were $2.61, down from$3.06 in 2019 and $5.38 in 2018[263] - Dividends declared per share increased to$1.00 in 2020 from $0.96 in 2019 and$0.75 in 2018[263] - Comprehensive income attributable to Steel Dynamics, Inc. for 2020 was $552,731, compared to$670,795 in 2019 and $1,258,680 in 2018[266] - Net income for 2020 was$570.8 million, a decrease from $677.9 million in 2019 and$1.26 billion in 2018[272] - Total equity at December 31, 2020 was $4.19 billion, compared to$3.92 billion in 2019 and $3.78 billion in 2018[269] - Dividends declared in 2020 were$210.5 million, compared to $209.5 million in 2019 and$174.4 million in 2018[269] - Net cash provided by operating activities in 2020 was $987.0 million, compared to$1.40 billion in 2019 and $1.42 billion in 2018[272] - Purchases of property, plant and equipment in 2020 were$1.20 billion, compared to $451.9 million in 2019 and$239.4 million in 2018[272] - Depreciation and amortization in 2020 was $325.8 million, compared to$321.1 million in 2019 and $317.2 million in 2018[272] Employee Compensation and Retention - Over 60$1 million in aggregate as of December 31, 2020[152] Market and Competitive Landscape - Global steelmaking overcapacity and imports into the U.S. exert downward pressure on domestic steel prices, affecting the company's metal spreads[107] - Competition from foreign steel producers, particularly in China, Vietnam, and Europe, is strong and influenced by political and economic policies[108] - The company faces significant competition from other steel producers and alternative materials, which could adversely affect market share and pricing[130] - The steel industry's cyclical nature leads to significant fluctuations in production, sales, and earnings, influenced by demand in construction, automotive, and manufacturing sectors[115] COVID-19 Impact - The COVID-19 pandemic may adversely affect the company's business, results of operations, financial condition, cash flows, liquidity, and stock price[109] - COVID-19 pandemic has adversely affected the company's business, operations, financial condition, and stock price, with potential future impacts on demand and supply chain[110] - The company has been identified as a critical infrastructure industry, allowing continued operations under federal and state guidelines, with health and safety measures implemented to protect employees[111] - Prolonged COVID-19 pandemic could further reduce demand for the company's products, impacting productivity, operations, and financial condition, with potential delays in new project commissioning[112] Metals Recycling and Raw Materials - The company's metals recycling platform is the largest supplier of recycled ferrous scrap to its steel operations[27] - Ferrous metal shipments to the company's steel mills accounted for 69% of total ferrous metal shipments in 2020, up from 66% in 2019[75] - Metals recycling operations accounted for 11% of consolidated net sales in both 2020 and 2019[74] - Ferrous scrap comprises over 80% of the metallic melt mix in EAF steelmaking, compared to 25%-35% in integrated mill steelmaking[87] - Domestic ferrous scrap prices have a strong correlation with global pig iron pricing, and scrap demand increases with domestic steel demand[88] - In 2020, 2019, and 2018, the company consumed 10.4 million, 10.6 million, and 10.9 million tons of metallic materials, respectively, with iron units other than scrap representing 13%-14% of the total[89] - The company is exposed to commodity price fluctuations, particularly in raw materials such as electricity, natural gas, and zinc, with risk strategies focused on competitive pricing and supply-demand dynamics[228] - The company has fixed-price contracts for nonferrous and ferrous metals, with financial contracts aimed at protecting profit margins[231] Cybersecurity and Information Technology - The company maintains an information security risk insurance policy and did not incur any net expenses from information security breach penalties and settlements during 2020, 2019, or 2018[135] - The company faces risks related to cybersecurity breaches, which could lead to system interruptions, production delays, and operational disruptions, potentially affecting its reputation and financial results[134][135] Debt and Financial Commitments - Total debt outstanding as of December 31, 2020, is $3,075,960 thousand with a weighted-average interest rate of 3.2$4,570 thousand with an average interest rate of 5.5%[227] - Variable-rate debt principal for 2021 is $82,324 thousand with an average interest rate of 1.7$265,736 thousand, with total commitments reaching $624,809 thousand[230] - Cumulative unrealized loss associated with financial contracts for metals recycling and steel operations is$645,000, with settlement dates primarily in 2021[231] - The company's senior unsecured credit facility contains restrictive covenants that may limit its financial flexibility and ability to meet future capital needs[144][145] Growth Strategy and Risks - The company's growth strategy involves risks such as entering new markets, potential delays in construction, labor shortages, and difficulties in integrating new operations[136] - The company is developing alternative ironmaking technologies and expanding operations, such as the Southwest-Sinton Flat Roll Division[91] - The company's new Southwest-Sinton Flat Roll Division in Sinton, Texas, is under construction with a planned capital investment of approximately $1.9 billion and expected to commence operations in mid-2021[137] Operational Risks - The company's operations are subject to risks such as equipment downtime, which could adversely affect production costs and earnings[142] - The company may face impairment charges if the fair value of its assets falls below their carrying value, potentially affecting its results of operations[146][147] - Volatility in scrap metal prices and availability may constrain operating levels and reduce profit margins, with potential impacts from supply chain disruptions[116] - The company relies on third-party energy resources, and disruptions or price fluctuations in electricity, natural gas, and oil could adversely affect production and costs[120] Revenue Recognition - Revenue in the steel and metals recycling operations segments is recognized upon shipment or delivery, with variable considerations like product returns and customer claims based on historical experience[282] - Revenue from steel fabrication operations is recognized over time using an output method, representing completed fabricated tons as a percentage of total tons required for each contract[283] - The company does not exercise significant judgments in determining the timing of satisfaction of performance obligations or the transaction price in both steel and metals recycling and fabrication operations[282][283] Acquisitions and Goodwill - Zimmer, S.A. de C.V., acquired in 2020, constituted approximately 1$457 million, subject to annual impairment testing[255] Internal Controls and Financial Reporting - The company's internal control over financial reporting was deemed effective as of December 31, 2020, based on the COSO criteria[239] Interest Rate Exposure - The company is exposed to interest rate changes and may use interest rate swaps to manage net exposure, although it has not done so during 2020, 2019, or 2018[226]