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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,611,424 – 15.08% × 8,550,168 = 2,322,108
Item | Description | The company |
---|---|---|
Economic profit | Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. | Steel Dynamics Inc. economic profit decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level. |
Net Operating Profit after Taxes (NOPAT)
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances for credit losses.
3 Addition of increase (decrease) in equity equivalents to net income attributable to Steel Dynamics, Inc..
4 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 100,074 × 3.60% = 3,603
5 2021 Calculation
Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= 60,812 × 21.00% = 12,770
6 Addition of after taxes interest expense to net income attributable to Steel Dynamics, Inc..
Item | Description | The company |
---|---|---|
NOPAT | Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. | Steel Dynamics Inc. NOPAT decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level. |
Cash Operating Taxes
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
Item | Description | The company |
---|---|---|
Cash operating taxes | Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. | Steel Dynamics Inc. cash operating taxes decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level. |
Invested Capital
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of equity equivalents to total Steel Dynamics, Inc. equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of trading securities.
Item | Description | The company |
---|---|---|
Invested capital | Capital is an approximation of the economic book value of all cash invested in going-concern business activities. | Steel Dynamics Inc. invested capital increased from 2019 to 2020 and from 2020 to 2021. |
Cost of Capital
Steel Dynamics Inc., cost of capital calculations
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 13,501,895) | 13,501,895) | ÷ | 16,901,969) | = | 0.80 | 0.80 | × | 18.25% | = | 14.58% | ||
Long-term debt, including current maturities3 | 3,300,000) | 3,300,000) | ÷ | 16,901,969) | = | 0.20 | 0.20 | × | 3.12% × (1 – 21.00%) | = | 0.48% | ||
Operating lease liability4 | 100,074) | 100,074) | ÷ | 16,901,969) | = | 0.01 | 0.01 | × | 3.60% × (1 – 21.00%) | = | 0.02% | ||
Total: | 16,901,969) | 1.00 | 15.08% |
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 9,286,334) | 9,286,334) | ÷ | 12,776,650) | = | 0.73 | 0.73 | × | 18.25% | = | 13.27% | ||
Long-term debt, including current maturities3 | 3,400,000) | 3,400,000) | ÷ | 12,776,650) | = | 0.27 | 0.27 | × | 3.14% × (1 – 21.00%) | = | 0.66% | ||
Operating lease liability4 | 90,316) | 90,316) | ÷ | 12,776,650) | = | 0.01 | 0.01 | × | 3.84% × (1 – 21.00%) | = | 0.02% | ||
Total: | 12,776,650) | 1.00 | 13.95% |
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 5,742,479) | 5,742,479) | ÷ | 8,617,908) | = | 0.67 | 0.67 | × | 18.25% | = | 12.16% | ||
Long-term debt, including current maturities3 | 2,800,000) | 2,800,000) | ÷ | 8,617,908) | = | 0.32 | 0.32 | × | 4.31% × (1 – 21.00%) | = | 1.11% | ||
Operating lease liability4 | 75,429) | 75,429) | ÷ | 8,617,908) | = | 0.01 | 0.01 | × | 3.96% × (1 – 21.00%) | = | 0.03% | ||
Total: | 8,617,908) | 1.00 | 13.30% |
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 8,504,794) | 8,504,794) | ÷ | 10,977,855) | = | 0.77 | 0.77 | × | 18.25% | = | 14.14% | ||
Long-term debt, including current maturities3 | 2,400,000) | 2,400,000) | ÷ | 10,977,855) | = | 0.22 | 0.22 | × | 5.06% × (1 – 21.00%) | = | 0.87% | ||
Operating lease liability4 | 73,061) | 73,061) | ÷ | 10,977,855) | = | 0.01 | 0.01 | × | 5.06% × (1 – 21.00%) | = | 0.03% | ||
Total: | 10,977,855) | 1.00 | 15.04% |
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 11,215,751) | 11,215,751) | ÷ | 13,762,850) | = | 0.81 | 0.81 | × | 18.25% | = | 14.88% | ||
Long-term debt, including current maturities3 | 2,500,000) | 2,500,000) | ÷ | 13,762,850) | = | 0.18 | 0.18 | × | 5.04% × (1 – 35.00%) | = | 0.60% | ||
Operating lease liability4 | 47,100) | 47,100) | ÷ | 13,762,850) | = | 0.00 | 0.00 | × | 5.04% × (1 – 35.00%) | = | 0.01% | ||
Total: | 13,762,850) | 1.00 | 15.48% |
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in thousands) | ||||||
Economic profit1 | 2,322,108) | (249,780) | (66,397) | 457,316) | (168,077) | |
Invested capital2 | 8,550,168) | 6,781,124) | 6,721,821) | 6,403,131) | 5,964,900) | |
Performance Ratio | ||||||
Economic spread ratio3 | 27.16% | -3.68% | -0.99% | 7.14% | -2.82% | |
Benchmarks | ||||||
Economic Spread Ratio, Competitors4 | ||||||
Freeport-McMoRan Inc. | -2.97% | -14.50% | -14.98% | — | — |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 2,322,108 ÷ 8,550,168 = 27.16%
4 Click competitor name to see calculations.
Performance ratio | Description | The company |
---|---|---|
Economic spread ratio | The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. | Steel Dynamics Inc. economic spread ratio deteriorated from 2019 to 2020 but then improved from 2020 to 2021 exceeding 2019 level. |
Economic Profit Margin
Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in thousands) | ||||||
Economic profit1 | 2,322,108) | (249,780) | (66,397) | 457,316) | (168,077) | |
Net sales | 18,408,850) | 9,601,482) | 10,464,991) | 11,821,839) | 9,538,797) | |
Performance Ratio | ||||||
Economic profit margin2 | 12.61% | -2.60% | -0.63% | 3.87% | -1.76% | |
Benchmarks | ||||||
Economic Profit Margin, Competitors3 | ||||||
Freeport-McMoRan Inc. | -4.53% | -32.74% | -29.29% | — | — |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 2,322,108 ÷ 18,408,850 = 12.61%
3 Click competitor name to see calculations.
Performance ratio | Description | The company |
---|---|---|
Economic profit margin | The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. | Steel Dynamics Inc. economic profit margin deteriorated from 2019 to 2020 but then improved from 2020 to 2021 exceeding 2019 level. |