~~Use of Estimates.~~ These financial statements are prepared in conformity with accounting principles generally accepted in the United States and, accordingly, include amounts that require management to make estimates and assumptions that affect the amounts reported in the financial statements and in the notes thereto. Significant items subject to such estimates and assumptions include the carrying value of property, plant and equipment; valuation allowances for trade receivables, inventories and deferred income tax assets; potential environmental liabilities, litigation claims and settlements. Actual results may differ from these estimates and assumptions.

In the opinion of management, these financial statements reflect all normal recurring adjustments necessary for a fair presentation of the interim period results. These financial statements and notes should be read in conjunction with the audited financial statements included in the company’s Annual Report on Form 10-K for the year ended December 31, 2003.

~~Stock-Based Compensation.~~ At June 30, 2004, the company had three incentive stock option plans and accounted for these plans under the recognition and measurement principles of Accounting Standards Board APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Under APB 25, no stock-based employee compensation cost related to the incentive stock option plans is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.

The following table illustrates the effect on net income and earnings per share if the company had applied the fair value recognition provisions of FAS 123 to its stock-based employee compensation for the three and six-month periods ended June 30 (in thousands, except per share data):

The company computes and presents earnings per common share in accordance with FASB Statement No. 128, “Earnings Per Share”. Basic earnings per share is based on the weighted average shares of common stock outstanding during the period. Diluted earnings per share assumes, in addition to the above, the weighted average dilutive effect of common share equivalents outstanding during the period. Common share equivalents represent dilutive stock options and dilutive shares related to the company’s convertible subordinated debt and are excluded from the computation in periods in which they have an anti-dilutive effect.

The following table presents a reconciliation of the numerators and the denominators of the company’s basic and diluted earnings per share computations for net income for the three and nine-month periods ended September 30 (in thousands, except per share data):

	Three Months Ended

	2004						2003

	Net Income (Numerator)		Shares (Denominator)		Per Share Amount		Net Income (Numerator)		Shares (Denominator)		Per Share Amount

Basic earnings per share	$	113,614		49,611	$	2.29	$	9,191		47,797	$	.19
Dilutive stock option effect		—		507				—		325
Convertible subordinated debt effect		671		6,763				—		—

Diluted earnings per share	$	114,285		56,881	$	2.01	$	9,191		48,122	$	.19

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Nine Months Ended

	2004						2003

	Net Income (Numerator)		Shares (Denominato)r		Per Share Amount		Net Income (Numerator)		Shares (Denominator)		Per Share Amount

Basic earnings per share	$	212,868		49,299	$	4.32	$	30,399		47,683	$	.64
Dilutive stock option effect		—		484				—		237
Convertible subordinated debt effect		1,998		6,763				—		—

Diluted earnings per share	$	214,866		56,546	$	3.80	$	30,399		47,920	$	.63

The following table presents the common share equivalents that were excluded from the company’s diluted earnings per share calculation because they were anti-dilutive or not convertible at September 30 (in thousands):

	2004		2003

Stock options		—		624
Convertible subordinated debt		—		6,763

Excluded common share equivalents		—		7,387

The following table presents a reconciliation of the numerators and the denominators of the company’s basic and diluted earnings per share computations for net income for the three and six-month periods ended June 30 (in thousands, except per share data):

Three Months Ended

2004
2003

Net Income Shares Per Share Net Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount

Basic earnings per share $ 67,292 $ 49,340 $ 1.36 $ 5,430 $ 47,650 $ 0.11
Dilutive stock option effect — 442 — 203
Convertible subordinated
debt effect 683 6,763 — —

Diluted earnings per share $ 67,975 $ 56,545 $ 1.20 $ 5,430 $ 47,853 $ 0.11

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~~STEEL DYNAMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Six Months Ended

2004 2003

Net Income Shares Per Share Net Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount

Basic earnings per share $ 99,254 $ 49,143 $ 2.02 $ 21,208 $ 47,625 $ .45
Dilutive stock option effect — 473 — 195
Convertible subordinated debt effect 1,328 6,763 — —

Diluted earnings per share $ 100,582 $ 56,379 $ 1.78 $ 21,208 $ 47,820 $ .44

The following table presents the common share equivalents that were excluded from the company’s diluted earnings per share calculation because they were anti-dilutive or not convertible at June 30 (in thousands):

2004 2003

Stock options 39 1,158
Convertible subordinated debt — 6,763

Excluded common share equivalents 39 7,921


Note 3. Comprehensive Income

~~The following table presents the company’s components of comprehensive income, net of related tax, for the three and six-months ended June 30 (in thousands):~~

The following table presents the company’s components of comprehensive income, net of related tax, for the three and nine-months ended September 30 (in thousands):

	Three Months Ended					Nine Months Ended

	2004			2003		2004			2003

Net income available to common shareholders	$	113,614		$	9,191	$	212,868		$	30,399
Unrealized gain on derivative instruments		873			957		2,696			1,932
Unrealized gain (loss) on available-for-sale securities		(17	)		195		(61	)		252

Comprehensive income	$	114,470		$	10,343	$	215,503		$	32,583

Hedge ineffectiveness gain	$	—		$	—	$	—		$	—

Three Months Ended Six Months Ended

2004 2003 2004 2003

Net income available to common shareholders $ 67,292 $ 5,430 $ 99,254 $ 21,208
Unrealized gain on derivative instruments 1,176 590 1,823 975
Unrealized gain (loss) on available-for-sale securities (345 ) 114 (45 ) 57

Comprehensive income $ 68,123 $ 6,134 $ 101,032 $ 22,240

Hedge ineffectiveness gain $ — $ 257 $ 275 $ —


Note 4. Inventories

~~Inventories are stated at lower of cost (principally standard cost which approximates actual cost on a first-in, first-out basis) or market. Inventory consisted of the following (in thousands):~~

Inventories are stated at lower of cost (principally standard cost which approximates actual cost on a first-in, first-out basis) or market. Inventory consisted of the following (in thousands):

	September 30, 2004		December 31, 2003

Raw materials	$	95,689	$	46,347
Supplies		70,989		60,420
Work-in-progress		42,472		15,996
Finished goods		76,640		61,733

Total inventories	$	285,790	$	184,496

June 30, December 31,
2004 2003

Raw materials $ 110,419 $ 46,347
Supplies 69,797 60,420
Work-in-progress 30,061 15,996
Finished goods 69,893 61,733

Total inventories $ 280,170 $ 184,496


Note 5. Segment Information

The company has two reportable segments: steel operations and steel scrap substitute operations. The steel operations segment includes the company’s Flat Roll Division, Structural and Rail Division, and Bar Products Division. The Flat Roll Division sells a broad range of hot-rolled, cold-rolled and coated steel products, including a large variety of specialty products such as thinner gauge hot-rolled products, galvanized products, and painted products. The Flat Roll Division sells directly to end-users and service centers located primarily in the Midwestern United States and these products are used in numerous industry sectors, including the automotive, construction and commercial industries.

The Structural and Rail Division produces and sells structural steel beams, pilings, and other steel components directly to end-users and steel service centers to be used primarily in the construction, transportation and industrial machinery markets. This facility is also designed to produce and sell a variety of standard and premium-grade rail for the railroad industry. The company has completed standard rail production trials and anticipates beginning rail shipments for evaluation before the end of 2004.

On December 29, 2003, the company’s Bar Products Division began commissioning and successfully produced certain SBQ and MBQ rounds. The company continues to increase its SBQ and MBQ product offerings and anticipates the addition of angles, flats and channels during the fourth quarter. The facility’s anticipated annual production capacity is between 500,000 and 600,000 tons. The Bar Products Division markets its products directly to end-users and to service centers for the construction, transportation and industrial machinery markets.

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Steel Scrap Substitute Operations. Steel scrap substitute operations include the revenues and expenses associated with the company’s wholly owned subsidiary, Iron Dynamics. From the time operations were halted in 2001 through the fourth quarter of 2002, the costs incurred at IDI were composed of those expenses required to maintain the facility and further evaluate the project and its related benefits. During the fourth quarter of 2002, IDI successfully completed certain operating trials utilizing a modified production process. This process reduced the per-unit cost of liquid pig iron production. Throughout 2003, the company invested $13.3 million for capital expenditures required to implement this modified production process, and Iron Dynamics restarted operations mid-November 2003. During the first nine months of 2004, IDI produced 123,000 tonnes of hot briquetted iron and after restarting the submerged arc furnace in June produced 19,200 tonnes of liquid pig iron during the third quarter.

Revenues included in the category “All Other” are from two subsidiary operations that are below the quantitative thresholds required for reportable segments. These revenues are from the fabrication of trusses, girders, steel joists and steel decking for the non-residential construction industry; from the further processing, or slitting, and sale of certain steel products; and from the resale of certain secondary and excess steel products. In addition, “All Other” also includes certain unallocated corporate accounts, such as the company’s senior secured credit facilities, senior unsecured notes, convertible subordinated notes and certain other investments.

The company’s operations are primarily organized and managed by operating segment. Operating segment performance and resource allocations are primarily based on operating results before income taxes. The accounting policies of the reportable segments are consistent with those described in Note 1 to the financial statements. Intersegment sales and any related profits are eliminated in consolidation. The external net sales of the company’s steel operations include sales to non-U.S. companies of $30.3 million and $7.4 million for the three months ended September 30, 2004 and 2003, respectively, and $36.6 million and $60.1 million for the nine months ended September 30, 2004 and 2003, respectively. The company’s segment results for the three and nine months ended September 30 are as follows (in thousands):

	Three Months Ended						Nine Months Ended

		2004			2003			2004			2003

*Steel Operations*
Net sales
External	$	592,814		$	231,276		$	1,435,449		$	647,114
Other segments		28,837			14,374			72,103			37,179
Operating income		208,451			24,536			400,802			87,839
Assets		1,360,037			1,106,122			1,360,037			1,106,122
*Steel Scrap Substitute Operations*
Net sales
External	$	—		$	—		$	—		$	—
Other segments		10,745			9			27,294			11
Operating loss		(3,347	)		(2,951	)		(9,388	)		(7,339	)
Assets		166,288			157,486			166,288			157,486
*All Other*
Net sales
External	$	41,927		$	22,676		$	109,094		$	60,974
Other segments		192			252			836			508
Operating income (loss)		(10,537	)		1,655			(21,491	)		(6,458	)
Assets		1,739,791			182,289			1,739,791			182,289
*Eliminations*
Net sales
External	$	—		$	—		$	—		$	—
Other segments		(39,774	)		(14,635	)		(100,233	)		(37,698	)
Operating income (loss)		(1,307	)		(395	)		(3,007	)		589
Assets		(1,501,103	)		(105,581	)		(1,501,103	)		(105,581	)
*Consolidated*
Net sales	$	634,741		$	253,952		$	1,544,543		$	708,088
Operating income		193,260			22,845			366,916			74,631
Assets		1,765,013			1,340,316			1,765,013			1,340,316

The Structural and Rail Division produces and sells structural steel beams, pilings, and other steel components directly to end-users and steel service centers to be used primarily in the construction, transportation and industrial machinery markets. This facility is also designed to produce and sell a variety of standard and premium-grade rail for the railroad industry. The company completed standard rail production trials in the second quarter and anticipates beginning rail shipments during the second half of 2004.

On December 29, 2003, the company’s Bar Products Division began commissioning and successfully produced certain SBQ and MBQ rounds. The company continues to increase its SBQ and MBQ product offerings and anticipates the addition of angles, flats and channels during the third quarter. The facility’s anticipated annual production capacity is between 500,000 and 600,000 tons. The Bar Products Division markets its products directly to end-users and to service centers for the construction, transportation and industrial machinery markets.

~~Back to Contents~~

~~STEEL DYNAMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Steel Scrap Substitute Operations.~~ Steel scrap substitute operations include the revenues and expenses associated with the company’s wholly owned subsidiary, Iron Dynamics. From the time operations were halted in 2001 through the fourth quarter of 2002, the costs incurred at IDI were composed of those expenses required to maintain the facility and further evaluate the project and its related benefits. During the fourth quarter of 2002, IDI successfully completed certain operating trials utilizing a modified production process. This process may significantly reduce the eventual per-unit cost of liquid pig iron production. Throughout 2003, the company invested $13.3 million for capital expenditures required to implement this modified production process, and Iron Dynamics restarted operations mid-November 2003. Since restart, the Flat Roll Division has successfully used these iron briquettes as a part of its metallic raw material inputs. During the first half of 2004, IDI produced 83,700 tonnes of hot briquetted iron and after restarting the submerged arc furnace in the second quarter produced 6,400 tonnes of liquid pig iron.

Revenues included in the category “All Other” are from two subsidiary operations that are below the quantitative thresholds required for reportable segments. These revenues are from the fabrication of trusses, girders, steel joists and steel decking for the non-residential construction industry; from the further processing, or slitting, and sale of certain steel products; and from the resale of certain secondary and excess steel products. In addition, “All Other” also includes certain unallocated corporate accounts, such as the company’s senior secured credit facilities, senior unsecured notes, convertible subordinated notes and certain other investments.

The company’s operations are primarily organized and managed by operating segment. Operating segment performance and resource allocations are primarily based on operating results before income taxes. The accounting policies of the reportable segments are consistent with those described in Note 1 to the financial statements. Intersegment sales and any related profits are eliminated in consolidation. The external net sales of the company’s steel operations include sales to non-U.S. companies of $10.5 million and $12.4 million for the three months ended June 30, 2004 and 2003, respectively, and $21.4 million and $52.7 million for the six months ended June 30, 2004 and 2003, respectively. The company’s segment results for the three months ended March 31 are as follows (in thousands):

Three Months Ended Six Months Ended

2004 2003 2004 2003

Steel Operations

Net sales
External $ 489,853 $ 199,264 $ 842,636 $ 415,838
Other segments 22,980 10,375 43,265 22,804
Operating income 127,434 22,262 192,351 63,303
Assets 1,338,748 1,100,426 1,338,748 1,100,426

Steel Scrap Substitute Operations

Net sales
External $ — $ — $ — $ —
Other segments 9,656 — 16,549 2
Operating loss (3,357 ) (2,294 ) (6,041 ) (4,388)
Assets 161,102 152,114 161,102 152,114

All Other

Net sales
External $ 35,804 $ 19,368 $ 67,166 $ 38,298
Other segments 292 139 645 256
Operating loss (8,092 ) (3,372 ) (10,954 ) (8,113)
Assets 195,364 161,038 195,364 161,038

Eliminations

Net sales
External $ — $ — $ — $ —
Other segments (32,928 ) (10,514 ) (60,459 ) (23,062)
Operating income (loss) (869 ) 630 (1,700 ) 984
Assets (91,260 ) (102,448 ) (91,260 ) (102,448)

Consolidated

Net sales $ 525,657 $ 218,632 $ 909,802 $ 454,136
Operating income 115,116 17,226 173,656 51,786
Assets 1,603,954 1,311,130 1,603,954 1,311,130


Note 6. Short-Term Bond Transaction

During the first quarter of 2004, the company entered into a transaction relating to the short-sale of $66.0 million of U.S. Treasury Securities. The transaction was intended to address interest rate exposure and generate capital gains. As a result of this transaction, the company recorded short-term capital gains of $3.2 million, interest income of $175,000 and interest expense of $3.5 million during the six-months ended June 30, 2004. The company has an obligation to repurchase, on or before November 12, 2004, $66.0 million of U.S. Treasury Securities that had a market value of $68.4 million at June 30, 2004. The company has placed the proceeds of $73.0 million from the short sale into an interest-bearing collateral account to provide for this repurchase. At June 30, 2004, the net obligation of this transaction was $202,000, which included net accrued interest payable of $4.8 million.

During the first quarter of 2004, the company entered into a transaction relating to the short-sale of $66.0 million of U.S. Treasury Securities. The transaction was intended to address interest rate exposure and generate capital gains. As a result of this transaction, the company recorded short-term capital gains of $4.9 million, interest income of $333,000 and interest expense of $5.4 million during the nine-months ended September 30, 2004. The company has an obligation to repurchase, on or before November 12, 2004, $66.0 million of U.S. Treasury Securities that had a market value of $66.8 million at September 30, 2004. The company has placed the proceeds of $73.0 million from the short sale into an interest-bearing collateral account to provide for this repurchase. At September 30, 2004, the net obligation of this transaction was $195,000, which included net accrued interest payable of $6.7 million.

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~Back to Contents~~

~~STEEL DYNAMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Note 7. Condensed Consolidating Information

Certain 100%-owned subsidiaries of SDI have fully and unconditionally guaranteed all of the indebtedness relating to the issuance of $300.0 million of senior notes due March 2009. Following are condensed consolidating financial statements of the company, including the guarantors. The following condensed consolidating financial statements present the financial position, results of operations and cash flows of (i) SDI (in each case, reflecting investments in its consolidated subsidiaries under the equity method of accounting), (ii) the guarantor subsidiaries of SDI, (iii) the non-guarantor subsidiaries of SDI, and (iv) the eliminations necessary to arrive at the information for the company on a consolidated basis. The condensed consolidating financial statements should be read in conjunction with the accompanying consolidated financial statements of the company and the company’s Annual Report on Form 10-K for the year ended December 31, 2003.

Condensed Consolidating Balance Sheets (in thousands)

~~As of June 30, 2004~~

Parent Guarantors Combined
non-guarantors Consolidating
adjustments Total
consolidated

Cash $ 32,514 $ 577 $ 5,350 $ — $ 38,441
Accounts receivable 166,006 158,768 23,233 (148,853 ) 199,154
Inventories 222,819 36,417 21,203 (269 ) 280,170
Other current assets 28,876 864 1,117 (189 ) 30,668

Total current assets 450,215 196,626 50,903 (149,311 ) 548,433
Property, plant and equipment, net 735,678 131,887 150,558 (118 ) 1,018,005
Other assets 360,975 90,531 143 (414,133 ) 37,516

Total assets $ 1,546,868 $ 419,044 $ 201,604 $ (563,562 ) $ 1,603,954

Accounts payable $ 102,749 $ 21,534 $ 18,043 $ (21,365 ) $ 120,961
Accrued expenses 61,433 5,034 6,816 (699 ) 72,584
Current maturities of long-term debt 2,924 — 2,097 (21 ) 5,000

Total current liabilities 167,106 26,568 26,956 (22,085 ) 198,545
Other liabilities 104,845 142,206 10,949 (120,353 ) 137,647
Long-term debt 562,417 — 1,032 (162 ) 563,287
Minority interest — — — 1,823 1,823
Common stock 517 89,426 202,184 (291,610 ) 517
Treasury stock (28,908 ) — — — (28,908)
Additional paid in capital 376,945 116,868 — (116,868 ) 376,945
Retained earnings 366,373 43,976 (39,534 ) (14,307 ) 356,508
Other accumulated comprehensive loss (2,427 ) — 17 — (2,410)

Total stockholders’ equity 712,500 250,270 162,667 (422,785 ) 702,652

Total liabilities and stockholders’ equity $ 1,546,868 $ 419,044 $ 201,604 $ (563,562 ) $ 1,603,954

~~As of December 31, 2003~~

Parent Guarantors Combined
non-guarantors Consolidating
adjustments Total
consolidated

Cash $ 64,008 $ 496 $ 926 $ — $ 65,430
Accounts receivable 123,315 119,785 13,037 (130,114 ) 126,023
Inventories 164,024 2,579 18,397 (504 ) 184,496
Other current assets 32,938 68 168 (1,188 ) 31,986

Total current assets 384,285 122,928 32,528 (131,806 ) 407,935
Property, plant and equipment, net 755,707 96,757 148,769 (117 ) 1,001,116
Other assets 260,538 36,855 262 (258,267 ) 39,388

Total assets $ 1,400,530 $ 256,540 $ 181,559 $ (390,190 ) $ 1,448,439

Accounts payable $ 64,069 $ 15,618 $ 11,025 $ (11,386 ) $ 79,326
Accrued expenses 52,365 1,699 5,046 (1,120 ) 57,990
Current maturities of long-term debt 11,765 — 4,243 (20 ) 15,988

Total current liabilities 128,199 17,317 20,314 (12,526 ) 153,304
Other liabilities 108,680 73,310 (13,587 ) (52,700 ) 115,703
Long-term debt 575,608 — 24,826 (8,848 ) 591,586
Minority interest 28 — — 585 613
Common stock 509 46,482 189,735 (236,217 ) 509
Treasury stock (28,670 ) — — — (28,670)
Additional paid in capital 362,328 116,868 — (116,868 ) 362,328
Retained earnings 257,919 2,563 (39,612 ) 36,384 257,254
Other accumulated comprehensive loss (4,071 ) — (117 ) — (4,188)

Total stockholders’ equity 588,015 165,913 150,006 (316,701 ) 587,233

Total liabilities and stockholders’ equity $ 1,400,530 $ 256,540 $ 181,559 $ (390,190 ) $ 1,448,439

As of September 30, 2004	Parent			Guarantors		Combined non-guarantors			Consolidating adjustments			Total consolidated

Cash	$	154,460		$	595	$	4,619		$	—		$	159,674
Accounts receivable		190,347			162,967		26,905			(132,467	)		247,752
Inventories		207,039			51,946		27,693			(888	)		285,790
Other current assets		23,102			295		1,047			(178	)		24,266

Total current assets		574,948			215,803		60,264			(133,533	)		717,482
Property, plant and equipment, net		724,090			135,468		155,257			(117	)		1,014,698
Other assets		392,163			85,320		5			(444,655	)		32,833

Total assets	$	1,691,201		$	436,591	$	215,526		$	(578,305	)	$	1,765,013

Accounts payable	$	120,767		$	25,351	$	11,926		$	(12,563	)	$	145,481
Accrued expenses		66,396			6,503		8,504			(1,025	)		80,378
Current maturities of long-term debt		1,607			—		693			(23	)		2,277

Total current liabilities		188,770			31,854		21,123			(13,611	)		228,136
Other liabilities		125,721			164,261		29,666			(150,873	)		168,775
Long-term debt		547,896			—		982			(154	)		548,724
Minority interest		—			—		—			2,274			2,274
Common stock		520			89,426		202,184			(291,610	)		520
Treasury stock		(28,719	)		—		—			—			(28,719	)
Additional paid in capital		384,185			116,868		—			(116,868	)		384,185
Retained earnings		474,381			34,182		(38,429	)		(7,463	)		462,671
Other accumulated comprehensive loss		(1,553	)		—		—			—			(1,553	)

Total stockholders’ equity		828,814			240,476		163,755			(415,941	)		817,104

Total liabilities and stockholders’ equity	$	1,691,201		$	436,591	$	215,526		$	(578,306	)	$	1,765,013

As of December 31, 2003	Parent			Guarantors		Combined non-guarantors			Consolidating adjustments			Total consolidated

Cash	$	64,008		$	496	$	926		$	—		$	65,430
Accounts receivable		123,315			119,785		13,037			(130,114	)		126,023
Inventories		164,024			2,579		18,397			(504	)		184,496
Other current assets		32,938			68		168			(1,188	)		31,986

Total current assets		384,285			122,928		32,528			(131,806	)		407,935
Property, plant and equipment, net		755,707			96,757		148,769			(117	)		1,001,116
Other assets		260,538			36,855		262			(258,267	)		39,388

Total assets	$	1,400,530		$	256,540	$	181,559		$	(390,190	)	$	1,448,439

Accounts payable	$	64,069		$	15,618	$	11,025		$	(11,386	)	$	79,326
Accrued expenses		52,365			1,699		5,046			(1,120	)		57,990
Current maturities of long-term debt		11,765			—		4,243			(20	)		15,988

Total current liabilities		128,199			17,317		20,314			(12,526	)		153,304
Other liabilities		108,680			73,310		(13,587	)		(52,700	)		115,703
Long-term debt		575,608			—		24,826			(8,848	)		591,586
Minority interest		28			—		—			585			613
Common stock		509			46,482		189,735			(236,217	)		509
Treasury stock		(28,670	)		—		—			—			(28,670	)
Additional paid in capital		362,328			116,868		—			(116,868	)		362,328
Retained earnings		257,919			2,563		(39,612	)		36,384			257,254
Other accumulated comprehensive loss		(4,071	)		—		(117	)		—			(4,188	)

Total stockholders’ equity		588,015			165,913		150,006			(316,701	)		587,233

Total liabilities and stockholders’ equity	$	1,400,530		$	256,540	$	181,559		$	(390,190	)	$	1,448,439

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~Back to Contents~~

~~STEEL DYNAMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Condensed Consolidating Statements of Income (in thousands)

For the Three Months Ended, ~~June~~

September 30, 2004

Parent Guarantors Combined
non-guarantors Consolidating
adjustments Total
consolidated

Net sales $ 471,903 $ 512,833 $ 45,752 $ (504,831 ) $ 525,657
Cost of goods sold 337,053 500,539 42,413 (497,546 ) 382,459

Gross profit (loss) 134,850 12,294 3,339 (7,285 ) 143,198
Selling, general and administrative 21,547 3,806 2,840 (111 ) 28,082

Operating income (loss) 113,303 8,488 499 (7,174 ) 115,116
Interest expense 9,989 4 427 — 10,592
Other (income) expense 27,862 (30,865 ) — (140 ) (3,143)

Income (loss) before income taxes and equity in net loss of subsidiaries 75,452 39,349 72 (7,206 ) 107,667
Income taxes 29,062 14,004 27 (2,718 ) 40,375

46,390 25,345 45 (4,488 ) 67,292
Equity in net income of subsidiaries 25,390 — — (25,390 ) —

Net income (loss) $ 71,780 $ 25,345 $ 45 $ (29,878 ) $ 67,292

	Parent		Guarantors			Combined non-guarantors			Consolidating adjustments			Total consolidated

Net sales	$	552,976	$	621,651		$	52,865		$	(592,751	)	$	634,741
Cost of goods sold		353,881		608,348			47,666			(603,406	)		406,489

Gross profit		199,095		13,303			5,199			10,655			228,252
Selling, general and administrative		28,210		4,486			3,097			(801	)		34,992

Operating income		170,885		8,817			2,102			11,456			193,260
Interest expense		9,354		742			378			(5	)		10,469
Other (income) expense		37,153		(37,597	)		(58	)		44			(458	)

Income before income taxes and equity in net loss of subsidiaries		124,378		45,672			1,782			11,417			183,249
Income taxes		48,118		16,265			677			4,575			69,635

		76,260		29,407			1,105			6,842			113,614
Equity in net income of subsidiaries		30,511		—			—			(30,511	)		—

Net income (loss)	$	106,771	$	29,407		$	1,105		$	(23,669	)	$	113,614

For the Three Months Ended, ~~June~~

September 30, 2003

Parent Guarantors Combined
non-guarantors Consolidating
adjustments Total
consolidated

Net sales $ 209,640 $ — $ 19,506 $ (10,514 ) $ 218,632
Cost of goods sold 177,905 — 19,911 (11,092 ) 186,724

Gross profit (loss) 31,735 — (405 ) 578 31,908
Selling, general and administrative 11,480 949 2,305 (52 ) 14,682

Operating income (loss) 20,255 (949 ) (2,710 ) 630 17,226
Interest expense 8,981 (287 ) 430 (186 ) 8,938
Other (income) expense 12,353 (12,967 ) (1 ) 216 (399)

Income (loss) before income taxes and equity in net loss of subsidiaries (1,079 ) 12,305 (3,139 ) 600 8,687
Income taxes 130 4,304 (1,177 ) — 3,257

(1,209 ) 8,001 (1,962 ) 600 5,430
Equity in net income of subsidiaries 6,040 — — (6,040 ) —

Net income (loss) $ 4,831 $ 8,001 $ (1,962 ) $ (5,440 ) $ 5,430

	Parent		Guarantors			Combined non-guarantors			Consolidating adjustments			Total consolidated

Net sales	$	245,650	$	—		$	22,938		$	(14,636	)	$	253,952
Cost of good sold		206,871		—			22,600			(14,374	)		215,097

Gross profit (loss)		38,779		—			338			(262	)		38,855
Selling, general and administration		11,702		1,821			2,354			133			16,010

Operating income (loss)		27,077		(1,821	)		(2,016	)		(395	)		22,845
Interest expense		8,362		(333	)		395			(173	)		8,251
Other (income) expense		14,942		(15,237	)		(20	)		203			(112	)

Income (loss) before income taxes and equity in net loss of subsidiaries		3,773		13,749			(2,391	)		(425	)		14,706
Income taxes		1,621		4,790			(896	)		—			5,515

		2,152		8,959			(1,495	)		(425	)		9,191
Equity in net income of subsidiaries		7,464		—			—			(7,464	)		—

Net income (loss)	$	9,616	$	8,959		$	(1,495	)	$	(7,889	)	$	9,191

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended,

September 30, 2004

	Parent		Guarantor			Combined non-guarantors			Consolidating adjustments			Total consolidated

Net sales	$	1,388,980	$	1,507,552		$	137,225		$	(1,489,214	)	$	1,544,543
Cost of goods sold		974,114		1,476,862			125,329			(1,484,802	)		1,091,503

Gross profit (loss)		414,866		30,690			11,896			(4,412	)		453,040
Selling, general and administrative		66,640		11,754			8,799			(1,069	)		86,124

Operating income (loss)		348,226		18,936			3,097			(3,343	)		366,916
Interest expense		29,226		113			1,221			5			30,565
Other (income) expense		85,300		(91,041	)		(60	)		97			(5,704	)

Income (loss) before income taxes and Equity in net loss of subsidiaries		233,700		109,864			1,936			(3,445	)		342,055
Income taxes		90,495		39,044			735			(1,087	)		129,187

		143,205		70,820			1,201			(2,358	)		212,868
Equity in net income of subsidiaries		72,020		—			—			(72,020	)		—

Net income (loss)	$	215,225	$	70,820		$	1,201		$	(74,378	)	$	212,868

For the Nine Months Ended,

September 30, 2003

	Parent		Guarantor			Combined non-guarantors			Consolidating adjustments			Total consolidated

Net sales	$	684,293	$	—		$	61,493		$	(37,698	)	$	708,088
Cost of good sold		563,616		—			62,165			(37,991	)		587,790

Gross profit (loss)		120,677		—			(672	)		293			120,298
Selling, general and administration		35,917		3,276			6,770			(296	)		45,667

Operating income (loss)		84,760		(3,276	)		(7,442	)		589			74,631
Interest expense		26,430		(853	)		1,280			(502	)		26,355
Other (income) expense		41,294		(42,226	)		(22	)		592			(362	)

Income (loss) before income taxes and equity in net loss of subsidiaries		17,036		39,803			(8,700	)		499			48,638
Income taxes		7,587		13,914			(3,262	)		—			18,239

		9,449		25,889			(5,438	)		499			30,399
Equity in net income of subsidiaries		20,451		—			—			(20,451	)		—

Net income (loss)	$	29,900	$	25,889		$	(5,438	)	$	(19,952	)	$	30,399

Condensed Consolidating Statements of Cash Flows (in thousands)

For the Nine Months Ended,

September 30, 2004

	Parent			Guarantor			Combined non-guarantors			Total consolidated

Net cash provided by (used in) operations	$	235,589		$	(17,489	)	$	(10,996	)	$	207,104
Net cash used in investing activities		(18,367	)		(41,716	)		(12,734	)		(72,817	)
Net cash provided by (used in) in financing activities		(126,770	)		59,304			27,423			(40,043	)

Increase (decrease) in cash and equivalents		90,452			99			3,693			94,244
Cash and equivalents at beginning of year		64,008			496			926			65,430

Cash and equivalents at end of period	$	154,460		$	595		$	4,619		$	159,674

For the Nine Months Ended,

September 30, 2003

	Parent			Guarantor			Combined non-guarantors			Total consolidated

Net cash provided by (used in) operations	$	94,474		$	5,700		$	(2,377	)	$	97,797
Net cash used in investing activities		(69,865	)		(17,433	)		(10,973	)		(98,271	)
Net cash provided by (used in) financing activities		(26,222	)		11,778			12,284			(2,160	)

Increase (decrease) in cash and cash equivalents		(1,613	)		45			(1,066	)		(2,634	)
Cash and cash equivalents at beginning of year		22,530			282			1,406			24,218

Cash and cash equivalents at end of period	$	20,917		$	327		$	340		$	21,584

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~~Back to Contents~~

~~STEEL DYNAMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Six Months Ended,~~
~~June 30, 2004~~

Combined Consolidating Total
Parent Guarantor non-guarantors adjustments consolidated

Net sales $ 836,004 $ 885,901 $ 84,360 $ (896,463 ) $ 909,802
Cost of goods sold 620,233 868,514 77,663 (881,396 ) 685,014

Gross profit 215,771 17,387 6,697 (15,067 ) 224,788
Selling, general and administrative 38,430 7,268 5,702 (268 ) 51,132

Operating income (loss) 177,341 10,119 995 (14,799 ) 173,656
Interest expense 19,872 (629 ) 843 10 20,096
Other (income) expense 48,147 (53,444 ) (2 ) 53 (5,246 )

Income (loss) before income taxes and Equity in net loss of subsidiaries 109,322 64,192 154 (14,862 ) 158,806
Income taxes 42,377 22,779 58 (5,662 ) 59,552

66,945 41,413 96 (9,200 ) 99,254
Equity in net income of subsidiaries 41,509 — — (41,509 ) —

Net income (loss) $ 108,454 $ 41,413 $ 96 $ (50,709 ) $ 99,254

~~For the Six Months Ended,~~
~~June 30, 2003~~

Combined Consolidating Total
Parent Guarantor non-guarantors adjustments consolidated

Net sales $ 438,643 $ — $ 38,555 $ (23,062 ) $ 454,136
Cost of goods sold 356,745 — 39,565 (23,617 ) 372,693

Gross profit 81,898 — (1,010 ) 555 81,443
Selling, general and administrative 24,215 1,455 4,416 (429 ) 29,657

Operating income (loss) 57,683 (1,455 ) (5,426 ) 984 51,786
Interest expense 18,068 (520 ) 885 (329 ) 18,104
Other (income) expense 26,352 (26,989 ) (2 ) 389 (250 )

Income (loss) before income taxes and Equity in net loss of subsidiaries 13,263 26,054 (6,309 ) 924 33,932
Income taxes 5,966 9,124 (2,366 ) — 12,724

7,297 16,930 (3,943 ) 924 21,208
Equity in net income of subsidiaries 12,988 — — (12,988 ) —

Net income (loss) $ 20,285 $ 16,930 $ (3,943 ) $ (12,064 ) $ 21,208

~~Condensed Consolidating Statements of Cash Flows (in thousands)~~

~~For the Six Months Ended,~~
~~June 30, 2004~~

Combined Total
Parent Guarantors non-guarantors consolidated

Net cash provided by (used in) operations $ 112,333 $ (57,245 ) $ (1,006 ) $ 54,082
Net cash used in investing activities (12,677 ) (36,511 ) (5,472 ) (54,660 )
Net cash provided by (used in) in financing activities (131,150 ) 93,837 10,902 (26,411 )

Increase (decrease) in cash and equivalents (31,495 ) 82 4,424 (26,989 )
Cash and equivalents at beginning of year 64,008 496 926 65,430

Cash and equivalents at end of year $ 32,514 $ 577 $ 5,350 $ 38,441

~~For the Six Months Ended~~
~~June 30, 2003~~

Combined Total
Parent Guarantors non-guarantors consolidated

Net cash provided by (used in) operations $ 61,420 $ (720 ) $ (2,356 ) $ 58,344
Net cash used in investing activities (55,626 ) (8,463 ) (5,299 ) (69,388 )
Net cash provided by (used in) financing activities (17,789 ) 9,162 7,381 (1,246 )

Decrease in cash and equivalents (11,995 ) (21 ) (274 ) (12,290 )
Cash and equivalents at beginning of year 22,530 282 1,406 24,218

Cash and equivalents at end of year $ 10,535 $ 261 $ 1,132 $ 11,928

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Statements made in this report that are not statements of historical fact are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include, without limitation, any statements that may project, indicate or imply future results, events, performance or achievements. We refer you, however, to the section denominated “Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2003, which we incorporate herein by reference, for a more detailed discussion of some of the many factors, variables, risks and uncertainties that could cause actual results to differ materially from those we may have expected or anticipated. We caution that any forward-looking statement reflects only our reasonable belief at the time the statement is made.

Income Statement Classifications

~~Net Sales.~~ Our total net sales are a factor of net tons shipped, product mix and related pricing. Our net sales are determined by subtracting product returns, sales discounts, return allowances and claims from total sales. We charge premium prices for certain grades of steel, dimensions of product, or certain smaller volumes, based on our cost of production. We also charge marginally higher prices for our value-added products from our cold mill. These products include hot-rolled and cold-rolled galvanized products, cold-rolled products, and painted products.

~~Cost of Goods Sold.~~ Our cost of goods sold represents all direct and indirect costs associated with the manufacture of our products. The principal elements of these costs are steel scrap and scrap substitutes, alloys, natural gas, argon, direct and indirect labor and related benefits, electricity, oxygen, electrodes, depreciation and freight. Our metallic raw materials, steel scrap and scrap substitutes, represent the most significant component of our cost of goods sold.

~~Selling, General and Administrative Expenses.~~ Selling, general and administrative expenses consist of all costs associated with our sales, finance and accounting, materials and transportation, and administrative departments. These costs include labor and benefits, professional services, financing cost amortization, property taxes, profit-sharing expense and start-up costs associated with new projects.

~~Interest Expense.~~ Interest expense consists of interest associated with our senior credit facilities and other debt agreements as described in the notes to our financial statements set forth in our most recent Annual Report on Form 10-K, net of capitalized interest costs that are related to construction expenditures during the construction period of capital projects.

~~Other (Income) Expense.~~ Other income consists of interest income earned on our cash balances and any other non-operating income activity, including gains on certain short-term investments. Other expense consists of any non-operating costs.

~~Second~~Net Sales. Our total net sales are a factor of net tons shipped, product mix and related pricing. Our net sales are determined by subtracting product returns, sales discounts, return allowances and claims from total sales. We charge premium prices for certain grades of steel, dimensions of product, or certain smaller volumes, based on our cost of production. We also charge marginally higher prices for our value-added products. These products include hot-rolled and cold-rolled galvanized products, cold-rolled products, and painted products from our Flat Roll Division and certain special bar quality products from our Bar Products Division.

Cost of Goods Sold. Our cost of goods sold represents all direct and indirect costs associated with the manufacture of our products. The principal elements of these costs are steel scrap and scrap substitutes, alloys, natural gas, argon, direct and indirect labor and related benefits, electricity, oxygen, electrodes, depreciation and freight. Our metallic raw materials, steel scrap and scrap substitutes, represent the most significant component of our cost of goods sold.

Selling, General and Administrative Expenses. Selling, general and administrative expenses consist of all costs associated with our sales, finance and accounting, materials and transportation, and administrative departments. These costs include labor and benefits, professional services, financing cost amortization, property taxes, profit-sharing expense and start-up costs associated with new projects.

Interest Expense. Interest expense consists of interest associated with our senior credit facilities and other debt agreements as described in the notes to our financial statements set forth in our most recent Annual Report on Form 10-K, net of capitalized interest costs that are related to construction expenditures during the construction period of capital projects.

Other (Income) Expense. Other income consists of interest income earned on our cash balances and any other non-operating income activity, including gains on certain short-term investments. Other expense consists of any non-operating costs.

Third Quarter 2004 vs. ~~Second~~Third Quarter 2003 Operating Results

Net income was $67.3 million or $1.20 per diluted share during the second quarter of 2004, compared with $5.4 million or $.11 per diluted share during the second quarter of 2003. This increase in our net income during 2004 was due to increased selling values and increased shipping volumes.

Net income was $113.6 million or $2.01 per diluted share during the third quarter of 2004, compared with $9.2 million or $.19 per diluted share during the third quarter of 2003. This increase in our net income during 2004 was due to increased selling values and increased shipping volumes.

Gross Profit. During the third quarter of 2004, our net sales increased $380.8 million, or 150%, to $634.7 million and our consolidated shipments increased 154,000 tons, or 21%, to 898,000 tons, compared with the third quarter of 2003. The increase in consolidated shipments was primarily due to increased shipments to external customers of 105,000 tons from our Bar Products Division, which started commercial operations during the first quarter of 2004. Our third quarter 2004 average consolidated selling price increased $365 per ton compared with the third quarter of 2003 and increased $115 per ton compared with the second quarter of 2004. We continue to see signs of a strengthening US economy and we experienced a related increase in demand and product base-pricing during the third quarter of 2004; however, our increase in selling values during that time was also due in part to the steel industry’s January 2004 initiation of a surcharge mechanism, derived from an indexed scrap number and designed to pass some of the increased costs associated with rising metallic prices through to its customers.

Our metallic raw material cost per net ton charged increased $23 during the third quarter of 2004 and increased $122 when compared to the same period of 2003. Our third quarter metallic raw material costs as a percentage of total cost of goods sold increased to 68%, a 16% increase compared to 2003. This increase in the cost of our primary raw material as a percentage of our total manufacturing costs necessitated the surcharge. We anticipate a further increase in our metallic raw material costs, specifically steel scrap, during the remainder of 2004. If these costs fall from historical highs, the surcharge will also decline and may eventually cease to be utilized in our product price determination.

We are also experiencing some softening in our product base-pricing, specifically within the flat-rolled markets. The fourth quarter market dynamics are traditionally weaker within the steel industry and our customer inventories are somewhat high for this end-of-year time-frame as well. The previously mentioned increase in raw material pricing coupled with a slight decrease in our product base-prices will somewhat decrease our fourth quarter margins when compared to the record margins achieved during the third quarter of 2004. As the US economy continues to strengthen and demand of steel products continues to increase, we believe this will result in a corresponding increase in our margins and, combined with an anticipated increase in our shipments due to the continued ramp-up of our Bar Products Division, would result in strong 2005 financial results.

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Selling, General and Administrative Expenses. Selling, general and administrative expenses were $35.0 million during the third quarter of 2004, as compared to $16.0 million during the same period in 2003, an increase of $19.0 million, or 119%. This increase was attributed to increased profit sharing expense of $10.8 million, which resulted from increased pretax earnings and an increase from 5% to 6% during the third quarter in the amount of pretax earnings allocated to our profit sharing pool. During the third quarter of both 2004 and 2003, selling, general and administrative expenses represented 6% of net sales.

Interest Expense. During the third quarter of 2004, gross interest expense increased 17% to $12.1 million and capitalized interest decreased $496,000 to $1.6 million, as compared to the same period in 2003. The interest capitalization that occurred during 2004 resulted from the interest required to be capitalized with respect to construction activities at our Bar Products Division and Structural and Rail Division. We anticipate gross interest expense and capitalized interest to continue to decrease through the end of the year.

Other (Income) Expense. Other income was $458,000 during the third quarter of 2004, as compared to $112,000 during 2003. During the first quarter of 2004 we entered into a short-term U.S. Treasury Bond transaction which is intended to address interest rate exposure and generate capital gains. During the third quarter of 2004, we recorded a $1.6 million gain as a result of this transaction.

Income Taxes. During the third quarter of 2004, our income tax provision was $69.6 million, as compared to $5.5 million during the same period in 2003. We increased our effective income tax rate from 37.5% to 38% during the third quarter of 2004. This increase was necessary due to an increase in state income tax rates created by our higher profitability during 2004.

~~Gross Profit.~~ During the second quarter of 2004, our net sales increased $307.0 million, or 140%, to $525.7 million and our consolidated shipments increased 236,000 tons, or 36%, to 889,000 tons, compared with the second quarter of 2003. The increase in shipments was primarily due to increased shipments of 101,000 tons from our Structural and Rail Division, which started commercial operations mid-2002 and shipments of 82,000 tons from our Bar Products Division, which started commercial operations during the first quarter of 2004. Our second quarter 2004 average consolidated selling price increased $256 per ton compared with the second quarter of 2003 and increased $110 per ton compared with the first quarter of 2004. We continue to see signs of a strengthening US economy and we are experiencing a related increase in demand and product base-pricing; however, our increase in selling values during the first half of 2004 was also due in part to the steel industry’s initiation of a surcharge mechanism, derived from an indexed scrap number, designed to pass some of the increased costs associated with rising metallic prices through to its customers.

Our metallic raw material cost per net ton charged increased $82 during the first half of 2004, of which $16 per ton occurred during the second quarter. When compared to the first half of 2003, our metallic raw material cost per net ton charged increased $98, or 81%. Our metallic raw material costs as a percentage of total cost of goods sold increased to 62%, a 12% increase from the first half of 2003. This increase in the cost of our primary raw material as a percentage of our total manufacturing costs necessitated the surcharge. We anticipate a further increase in our metallic raw material costs, specifically steel scrap, during the remainder of 2004. If these costs fall from historical highs, the surcharge will also decline and may eventually cease to be utilized in our product price determination.

We also expect to realize an increase in our product base-prices during the third quarter of 2004 as the US economy continues to strengthen and demand of steel products continues to increase. We believe this will result in a corresponding increase in our margins and, combined with an anticipated increase in our shipments due to the continued ramp-up of our Structural and Rail Division and the continued start-up of our Bar Products Division, would result in increased operating income.

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~~Selling, General and Administrative Expenses.~~ Selling, general and administrative expenses were $28.1 million during the second quarter of 2004, as compared to $14.7 million during the same period in 2003, an increase of $13.4 million, or 91%. This increase was attributed to increased profit sharing expense of $5.3 million, due to our increased income before taxes and to our June 2004 refinancing which resulted in a write-off of previously capitalized financing costs in the amount of $3.1 million. During the second quarter of 2004 and 2003, selling, general and administrative expenses represented approximately 5% and 7% of net sales, respectively.

~~Interest Expense.~~ During the second quarter of 2004, gross interest expense increased 13% to $12.0 million and capitalized interest decreased $254,000 to $1.4 million, as compared to the same period in 2003. Gross interest expense remained relatively flat during the first half of 2004. The interest capitalization that occurred during 2004 resulted from the interest required to be capitalized with respect to construction activities at our Bar Products Division and Structural and Rail Division. We anticipate gross interest expense and capitalized interest to continue to decrease slightly through the end of the year.

~~Other (Income) Expense.~~ Other income was $3.1 million during the second quarter of 2004, as compared to $400,000 during 2003. During the first quarter of 2004 we entered into a short-term U.S. Treasury Bond transaction which is intended to address interest rate exposure and generate capital gains. During the second quarter of 2004, we recorded a $1.9 million gain as a result of this transaction. We also recorded a $1.0 million gain from the early extinguishment of certain debt associated with our Structural and Rail Division.

~~Income Taxes.~~ During the second quarter of 2004, our income tax provision was $40.4 million, as compared to $3.3 million during the same period in 2003. Our effective income tax rate was 37.5% for both periods; however, if our profitability is sustained or increases during the second half of 2004, we may increase our effective income tax rate to 38%. This increase would be necessary due to an increase in state income taxes created by higher profitability.

First ~~Half~~Nine Months 2004 vs. First ~~Half~~Nine Months 2003 Operating Results

Net income was $99.3 million or $1.78 per diluted share during the first half of 2004, compared with $21.2 million or $.44 per diluted share during the first half of 2003. This increase in our net income during 2004 was due to increased selling values and increased shipping volumes.

Net income was $212.9 million or $3.80 per diluted share during the first nine months of 2004, compared with $30.4 million or $.63 per diluted share during the first nine months of 2003. This increase in our net income during 2004 was due to increased selling values and increased shipping volumes.

Gross Profit. During the first nine months of 2004, our net sales increased $836.5 million, or 118%, to $1.5 billion and our consolidated shipments increased 541,000 tons, or 26%, to 2.6 million tons, compared with the first nine months of 2003. The increase in consolidated shipments was primarily due to increased shipments to external customers of 284,000 tons from our Structural and Rail Division, which started commercial operations mid-2002 and 207,000 tons from our Bar Products Division, which started commercial operations during the first quarter of 2004. Our first nine months 2004 average consolidated selling price increased $251 per ton, or 73%, compared with the first nine months of 2003. This is due in part to the previously discussed increase in base-prices resulting from strong demand, the surcharge mechanism and our shipping product mix becoming higher-value added with the addition of the Flat Roll Division’s painted products and the continued ramp-up of our Bar Products Division.

Our metallic raw material cost per net ton charged increased $107 during the first nine months of 2004 when compared to the same period of 2003. Our first nine months metallic raw material costs as a percentage of total cost of goods sold increased to 66%, a 14% increase compared to the same period in 2003.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $86.1 million during the first nine months of 2004, as compared to $45.7 million during the same period in 2003, an increase of $40.4 million, or 89%. This increase was attributed to increased revenues, increased profit sharing expense of $17.2 million and to our June 2004 refinancing which resulted in a write-off of previously capitalized financing costs in the amount of $3.1 million. During the first nine months of both 2004 and 2003, selling, general and administrative expenses represented 6% of net sales.

Interest Expense. Interest expense increased 16% to $30.6 million during the first nine months of 2004, as compared to $26.4 million during the same period in 2003. During the first nine months of 2004, gross interest expense increased 14% to $36.0 million and capitalized interest increased $140,000 to $5.4 million, as compared to the same period in 2003. The interest capitalization that occurred during 2004 resulted from the interest required to be capitalized with respect to construction activities at our Bar Products Division and Structural and Rail Division.

Other (Income) Expense. Other income was $5.7 million during the first nine months of 2004, as compared to $362,000 during the first nine months of 2003. During the first quarter of 2004 we entered into a short-term U.S. Treasury Bond transaction which is intended to address interest rate exposure and generate capital gains. During the first nine months of 2004, we recorded gains of $4.9 million as a result of this transaction. We also recorded a $1.0 million gain from the early extinguishment of certain debt associated with our Structural and Rail Division during the second quarter.

Income Taxes. During the first nine months of 2004, our income tax provision was $129.2 million, as compared to $18.2 million during the same period in 2003. Our effective income tax rate was 37.5% throughout 2003 and for the first half of 2004. We increased our rate to 38% effective July 1, 2004 due to increased profitability in 2004.

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~~Gross Profit.~~ During the first half of 2004, our net sales increased $455.7 million, or 100%, to $909.8 million and our consolidated shipments increased 387,000 tons, or 30%, to 1.7 million tons, compared with the first half of 2003. The increase in shipments was primarily due to increased shipments of 232,000 tons from our Structural and Rail Division, which started commercial operations mid-2002 and shipments of 102,000 tons from our Bar Products Division, which started commercial operations during the first quarter of 2004. Our first half 2004 average consolidated selling price increased $190 per ton, or 54%, compared with the first half of 2003. This is due in part to the previously discussed increase in base-prices resulting from strong demand, the surcharge mechanism and our shipping product mix becoming higher-value added with the addition of the Flat Roll Division’s painted products and the continued ramp-up of our Bar Products Division.

~~Selling, General and Administrative Expenses.~~ Selling, general and administrative expenses were $51.1 million during the first half of 2004, as compared to $29.7 million during the same period in 2003, an increase of $21.5 million, or 72%. This increase was attributed to increased profit sharing expense of $6.4 million, due to our increased income before taxes and to our June 2004 refinancing which resulted in a write-off of previously capitalized financing costs in the amount of $3.1 million. During the first half of 2004 and 2003, selling, general and administrative expenses represented approximately 6% and 7% of net sales, respectively.

~~Interest Expense.~~ Interest expense remained relatively flat at $20.1 million during the first half of 2004, as compared to $18.1 million during the first half of 2003. During the first half of 2004, gross interest expense increased 12% to $23.9 million and capitalized interest increased $636,000 to $3.8 million, as compared to the same period in 2003. The interest capitalization that occurred during the first half of 2004 resulted from the interest required to be capitalized with respect to construction activities at our Bar Products Division and Structural and Rail Division.

~~Other (Income) Expense.~~ Other income was $5.2 million during the first half of 2004, as compared to $250,000 during the first half of 2003. During the first quarter of 2004 we entered into a short-term U.S. Treasury Bond transaction which is intended to address interest rate exposure and generate capital gains. During the first half of 2004, we recorded a $3.3 million gain as a result of this transaction. We also recorded a $1.0 million gain from the early extinguishment of certain debt associated with our Structural and Rail Division during the second quarter.

~~Income Taxes.~~ ~~During the first half of 2004, our income tax provision was $59.6 million, as compared to $12.7 million during the same period in 2003. Our effective tax rate was 37.5% for both periods.~~

Liquidity and Capital Resources

Our business is capital intensive and requires substantial expenditures for, among other things, the purchase and maintenance of equipment used in our steelmaking and finishing operations and to remain in compliance with environmental laws. Our short-term and long-term liquidity needs arise primarily from capital expenditures, working capital requirements and principal and interest payments related to our outstanding indebtedness. We have met these liquidity requirements with cash provided by operations, equity, long-term borrowings, state and local grants and capital cost reimbursements.

Working Capital. During the first nine months of 2004, our operational working capital position, representing our cash invested in trade receivables and inventories less trade payables and accruals increased $134.5 million to $307.7 million compared to December 31, 2003. Due to higher selling prices and increased sales volume, trade receivables increased $121.7 million during the first nine months to $247.8 million, of which $250.9 million, or 99%, were less than 60 days past due. Our largest customer is an affiliated company, Heidtman Steel, which represented 18% and 20% of our outstanding trade receivables at September 30, 2004 and December 31, 2003, respectively. During the first nine months our inventories increased $101.3 million to $285.8 million, due primarily to the increased cost and volume of our metallic raw materials on-hand and to the start-up production of our Bar Products Division. Our trade payables increased $66.2 million during the first nine months, a significant portion of which was associated with the amount we owed various vendors for metallic raw material purchases.

Capital Expenditures. We invested $72.9 million in property, plant and equipment during the first nine months of 2004 related to our new divisions and improvement projects in our existing facilities. Approximately 57% of our capital investments were related to the continued conversion of our Bar Products Division. We believe these capital investments will increase our net sales and related cash flows as each project continues to develop.

Capital Resources. On June 30, 2004, we completed a refinancing of our senior secured credit facilities and entered into a new 4-year $230 million senior secured revolving credit facility. At September 30, 2004 we had $100.0 million outstanding under this credit facility; however, we repaid the $100.0 million during October and the facility is currently undrawn. Due to increasing interest rates, on October 6, 2004 we entered into a forward rate agreement to fix the LIBOR margin from September 15, 2004 to March 15, 2005 associated with our $200.0 million fixed to floating interest rate swap associated with our senior unsecured 9½% notes. Our ability to draw down the revolver is dependent upon our continued compliance with the financial covenants and other covenants contained in our senior secured credit agreement. We were in compliance with these covenants at September 30, 2004, and expect to remain in compliance during the next twelve months.

Our new senior secured credit agreement allows us to pay cash dividends dependent upon our continued compliance with the financial covenants and other covenants within the agreement. During September our Board of Directors declared our second cash dividend. The dividend of $.075 (seven and one-half cents) per common share was paid on October 12, 2004 to shareholders of record at the close of business on September 30, 2004. The aggregate dividend payment was $3.7 million. On October 26, 2004 we announced an increase in our dividend per common share from $.075 to $.10 for shareholders of record on December 31, 2004. We estimate this payment to be approximately $5.0 million. On October 26, 2004 we also announced our Board of Directors approved the repurchase of up to 5 million shares of our common stock to be made from time to time based upon the market price of our stock, the nature of other investment opportunities present, our cash flows from operations, and general economic conditions. We terminated our existing share repurchase plan and amended our senior secured credit facility as a result of this approval.

Our ability to meet our debt service obligations and reduce our total debt will depend upon our future performance, which in turn, will depend upon general economic, financial and business conditions, along with competition, legislation and regulation factors that are largely beyond our control. In addition, we cannot assure you that our operating results, cash flow and capital resources will be sufficient for repayment of our indebtedness in the future. We believe that based upon current levels of operations and anticipated growth, cash flow from operations, together with other available sources of funds, including additional borrowings under our senior secured credit agreement, will be adequate for the next twelve months for making required payments of principal and interest on our indebtedness and for funding anticipated capital expenditures and working capital requirements.

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~~Working Capital.~~ During the first half of 2004, our operational working capital position, representing our cash invested in trade receivables and inventories less trade payables and accruals increased $112.6 million to $285.8 million compared to December 31, 2003. Due to higher selling prices and increased sales volume, trade receivables increased $73.1 million during the first half to $199.2 million, of which $197.1 million, or 99%, were less than 60 days past due. Our largest customer is an affiliated company, Heidtman Steel, which represented 14% and 20% of our outstanding trade receivables at June 30, 2004 and December 31, 2003, respectively. During the first half our inventories increased $95.7 million to $280.2 million, due primarily to the increased cost and volume of our metallic raw materials on-hand and to the start-up production of our Bar Products Division. Our trade payables increased $41.6 million during the first half, a significant portion of which was associated with the amount we owed various vendors for metallic raw material purchases.

~~Capital Expenditures.~~ We invested $54.7 million in property, plant and equipment during the first half of 2004 related to our new divisions and improvement projects in our existing facilities. Approximately 67% of our capital investments were related to the continued conversion of our Bar Products Division. We believe these capital investments will increase our net sales and related cash flows as each project continues to develop.

~~Capital Resources.~~ On June 30, 2004, we completed a refinancing of our senior secured credit facilities and entered into a new 4-year $230 million senior secured revolving credit facility. A portion of the proceeds from the new revolver and cash on hand were used to prepay certain existing senior secured debt, including our term loan B facility of $108 million. At June 30, 2004, with the completion of the refinancing, we increased our credit facility liquidity from approximately $75 million to $130 million. The proceeds from the revolver will be available for working capital and other general corporate purposes. As a result of this refinancing we wrote-off $3.1 million of previously capitalized financing costs associated with the refinanced debt. Our ability to draw down the revolver is dependent upon our continued compliance with the financial covenants and other covenants contained in our senior secured credit agreement. We were in compliance with these covenants at June 30, 2004, and expect to remain in compliance during the next twelve months.

Our new senior secured credit agreement allows us to pay cash dividends dependent upon our continued compliance with the financial covenants and other covenants within the agreement. On July 14, 2004, our Board of Directors declared our first cash dividend. The dividend of $0.075 (seven and one-half cents) per common share is payable August 13, 2004 to shareholders of record at the close of business on July 26, 2004. We estimate the aggregate dividend payment will be $3.7 million.

Our ability to meet our debt service obligations and reduce our total debt will depend upon our future performance, which in turn, will depend upon general economic, financial and business conditions, along with competition, legislation and regulation factors that are largely beyond our control. In addition, we cannot assure you that our operating results, cash flow and capital resources will be sufficient for repayment of our indebtedness in the future. We believe that based upon current levels of operations and anticipated growth, cash flow from operations, together with other available sources of funds, including additional borrowings under our senior secured credit agreement, will be adequate for the next twelve months for making required payments of principal and interest on our indebtedness and for funding anticipated capital expenditures and working capital requirements.

Other Matters

~~Inflation.~~ ~~We believe that inflation has not had a material effect on our results of operations.~~

Inflation. We believe that inflation has not had a material effect on our results of operations.

Environmental and Other Contingencies. We have incurred, and in the future will continue to incur, capital expenditures and operating expenses for matters relating to environmental control, remediation, monitoring and compliance. We believe, apart from our dependence on environmental construction and operating permits for our existing and proposed manufacturing facilities, that compliance with current environmental laws and regulations is not likely to have a material adverse effect on our financial condition, results of operations or liquidity; however, environmental laws and regulations have changed rapidly in recent years and we may become subject to more stringent environmental laws and regulations in the future.

~~Environmental and Other Contingencies.~~ We have incurred, and in the future will continue to incur, capital expenditures and operating expenses for matters relating to environmental control, remediation, monitoring and compliance. We believe, apart from our dependence on environmental construction and operating permits for our existing and proposed manufacturing facilities, that compliance with current environmental laws and regulations is not likely to have a material adverse effect on our financial condition, results of operations or liquidity; however, environmental laws and regulations have changed rapidly in recent years and we may become subject to more stringent environmental laws and regulations in the future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk. In the normal course of business we are exposed to interest rate changes. Our objectives in managing exposure to interest rate changes are to limit the impact of these rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we primarily use interest rate swaps to manage net exposure to interest rate changes related to our portfolio of borrowings. We generally maintain fixed rate debt as a percentage of our net debt between a minimum and maximum percentage. A portion of our debt has

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~~Market Risk.~~ In the normal course of business we are exposed to interest rate changes. Our objectives in managing exposure to interest rate changes are to limit the impact of these rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we primarily use interest rate swaps to manage net exposure to interest rate changes related to our portfolio of borrowings. We generally maintain fixed rate debt as a percentage of our net debt between a minimum and maximum percentage. A portion of our debt has an interest component that resets on a periodic basis to reflect current market conditions. At June 30, 2004, no material changes had occurred related to our interest rate risk from the information disclosed in our Annual Report on Form 10-K for the year ended December 31, 2003.

an interest component that resets on a periodic basis to reflect current market conditions. At September 30, 2004, no material changes had occurred related to our interest rate risk from the information disclosed in our Annual Report on Form 10-K for the year ended December 31, 2003.

Commodity Risk.In the normal course of business we are exposed to the market risk and price fluctuations related to the sale of steel products and to the purchase of commodities used in our production process, such as metallic raw materials, electricity, natural gas and alloys. Our risk strategy associated with product sales has generally been to obtain competitive prices for our products and to allow operating results to reflect market price movements dictated by supply and demand. Our risk strategy associated with the purchase of commodities utilized within our production process has generally been to make certain commitments with suppliers relating to future expected requirements for such commodities. Certain of these commitments contain provisions which require us to “take or pay” for specified quantities without regard to actual usage for periods of up to 3 years. We believe that our production requirements will be such that consumption of the products or services purchased under these commitments will occur in the normal production process. At September 30, 2004, no material changes had occurred related to these commodity risks from the information disclosed in our Annual Report on Form 10-K for the year ended December 31, 2003.

~~Commodity Risk.~~ In the normal course of business we are exposed to the market risk and price fluctuations related to the sale of steel products and to the purchase of commodities used in our production process, such as metallic raw materials, electricity, natural gas and alloys. Our risk strategy associated with product sales has generally been to obtain competitive prices for our products and to allow operating results to reflect market price movements dictated by supply and demand. Our risk strategy associated with the purchase of commodities utilized within our production process has generally been to make certain commitments with suppliers relating to future expected requirements for such commodities. Certain of these commitments contain provisions which require us to “take or pay” for specified quantities without regard to actual usage for periods of up to 3 years. We believe that our production requirements will be such that consumption of the products or services purchased under these commitments will occur in the normal production process. At March 31, 2004, no material changes had occurred related to these commodity risks from the information disclosed in our Annual Report on Form 10-K for the year ended December 31, 2003.

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ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. An evaluation was performed under the supervision and with the participation of registrant’s management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of registrant’s disclosure controls and procedures, as of the end of the period covered by this report. Based upon their evaluation, registrant’s principal executive officer and principal financial officer have concluded that registrant’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective to ensure that information required to be disclosed by registrant in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

~~(a)~~ ~~Evaluation of Disclosure Controls and Procedures.~~ An evaluation was performed under the supervision and with the participation of registrant’s management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of registrant’s disclosure controls and procedures, as of the end of the period covered by this report. Based upon their evaluation, registrant’s principal executive officer and principal financial officer have concluded that registrant’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective to ensure that information required to be disclosed by registrant in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

(b) Changes in Internal Control Over Financial Reporting. During our most recent fiscal quarter, there was no change in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

~~(b)~~ ~~Changes in Internal Controls.~~ There have been no significant changes in registrant’s internal controls or in other factors that could significantly affect internal controls subsequent to their evaluation. There were no significant deficiencies or material weaknesses, and, therefore, there were no corrective actions taken.

~~PART II~~

~~OTHER INFORMATION~~

ITEM 1. LEGAL PROCEEDINGS

On August 4, 2004 the Oakland County (Michigan) Circuit Court granted Steel Dynamics’ motion to dismiss General Motors Corporation’s complaint for breach of an alleged steel supply contract, which GM had filed on March 18, 2004 and which Steel Dynamics described in its March 25, 2004 press release and Form 8-K filed on the same date. The Court dismissed the complaint, with prejudice, for failure to state any legally sufficient claim, finding that a January 22, 2003 GM drafted letter to Steel Dynamics, upon which GM had relied in asserting the existence of a multi-year supply contract, lacked mutuality of obligation and did not constitute an enforceable agreement. General Motors has appealed this decision.

ITEM 6. EXHIBITS

10.01

Credit Agreement relating to our $230 million senior secured revolving credit facility, dated June 30, 2004 among Steel Dynamics, Inc. as Borrower, certain designated “Initial Lenders,” General Electric Capital Corporation as Collateral and Administrative Agent, Morgan Stanley Senior Funding, Inc., as Lead Arranger and Syndication Agent, and Harris Trust and Savings Bank and National City Bank as Documentation Agents, and others.

On August 4, 2004 the Oakland County (Michigan) Circuit Court granted Steel Dynamics’ motion to dismiss General Motors Corporation’s complaint for breach of an alleged steel supply contract, which GM had filed on March 18, 2004 and which Steel Dynamics described in its March 25, 2004 press release and Form 8-K filed on the same date. The Court dismissed the complaint, with prejudice, for failure to state any legally sufficient claim, finding that a January 22, 2003 GM drafted letter to Steel Dynamics, upon which GM had relied in asserting the existence of a multi-year supply contract, lacked mutuality of obligation and did not constitute an enforceable agreement.

~~ITEM 4.~~ ~~SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS~~

The Annual Meeting of Shareholders was held May 20, 2004. Proxies were solicited for the Annual Meeting in accordance with the requirements of The Securities Exchange Act 1935. At the Annual Meeting, the following occurred:

	•	~~With respect to Item 1 in our Proxy Statement (Election of Directors):~~
	10.01a	First Amendment to Credit Agreement dated October 26, 2004, relating to the Credit Agreement described at Exhibit 10.01.

Director
Shares Voted For Shares Voted
Against or Withheld

Keith E. Busse 45,252,340 2,102,563
Mark D. Millett 43,908,275 3,446,628
Richard P. Teets, Jr. 43,907,264 3,447,639
John C. Bates 44,362,433 2,992,470
Paul B. Edgerley 45,093,684 2,261,219
Richard J. Freeland 30,518,867 16,836,036
Naoki Hidaka 45,380,465 1,974,438
James E. Kelley 45,248,975 2,105,928
Dr. Jürgen Kolb 45,252,340 2,102,563
Joseph D. Ruffolo 45,250,537 2,104,366


	•	~~With respect to Item 2 in our Proxy Statement (Ratification of the Appointment of Independent Auditors), Ernst & Young LLP was approved as our independent auditors for the year 2004:~~


~~Shares Voted For~~		~~44,804,733~~
~~Shares Voted Against~~		~~2,471,584~~
~~Abstentions~~		~~78,585~~


	•	~~With respect to Item 3 in our Proxy Statement (Approval of Employee Stock Purchase Plan), the Employee Stock Purchase Plan was approved:~~


~~Shares Voted For~~		~~36,633,960~~
~~Shares Voted Against~~		~~5,624,672~~
~~Abstentions~~		~~13,798~~

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~~ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K~~


		~~(a)~~	~~Exhibits:~~


			31.1	Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Principal Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Chief Executive Officer Certification pursuant to 18 U.S.C. § 1350

32.2

Principal Financial Officer Certification pursuant to 18 U.S.C. § 1350

Items 2, through 5 of Part II are not applicable for this reporting period and have been omitted.

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SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of Securities Exchange Act of 1934, Steel Dynamics, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

March 9, 2005	STEEL DYNAMICS, INC.
		~~(b)~~	~~Reports on Form 8-K:~~


			~~We filed the following reports on Form 8-K during the three months ended June 30, 2004.~~

~~Date of Filing~~	~~Description~~	~~Reported~~

~~April 15, 2004~~	~~Item 12” Disclosure of Results of~~ ~~Operations and Financial Condition”~~	~~Earnings press release for the quarter~~ ~~ended March 31, 2004~~

~~April 6, 2004~~	~~Item 9 “Regulation FD Disclosure”~~	~~Press release titled “Steel Dynamics~~ ~~Forecasts Strong 2004 Performance”~~

~~May 7, 2004~~	~~Item 9 “Regulation FD Disclosure”~~	~~Press release titled “Steel Dynamics’ Bar~~ ~~Bar Products Mill Achieves Profitability in April”~~

~~May 10, 2004~~	~~Item 5 “Other events and~~ ~~Regulation FD Disclosure”~~	~~Press release to disclose the limitation of~~ ~~share issuances for the Employee Stock~~ ~~Purchase Plan~~

~~May 20, 2004~~	~~Item 9 “Regulation FD Disclosure”~~	~~Press release titled “Steel Dynamics Updates 2004 Outlook”~~

~~Items 2, 3 and 5 of Part II are not applicable for this reporting period and have been omitted.~~

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~~SIGNATURE~~
	By:	/s/ GARY E. HEASLEY

Pursuant to the requirements of Section 13 or 15(d) of Securities Exchange Act of 1934, Steel Dynamics, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

~~August 9, 2004~~

Gary E. Heasley
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)

	~~STEEL DYNAMICS, INC.~~

~~By:~~	~~/s/~~	~~TRACY L. SHELLABARGER~~
		~~Tracy L. Shellabarger~~
		~~Vice President and Chief Financial Officer~~
		~~(Principal Financial and Accounting Officer and Duly Authorized Officer)~~

15

14

Indiana		35-1929476
(State or other jurisdiction of incorporation or organization)		~~35-1929476~~ (I.R.S. Employer Identification No.)

6714 Pointe Inverness Way, Suite 200, Fort Wayne, IN		46804
(Address of principal executive offices)		~~46804~~ (Zip Code)

Registrant’s telephone number, including area code: (260) 459-3553

PART I. Financial Information

		Page

Item 11.	Consolidated Financial Information:

	Consolidated Balance Sheets as of September 30, 2004 (unaudited) and December 31, 2003	1

	Consolidated Statements of Income for the three and nine month periods ended September 30, 2004 and 2003 (unaudited)	2

	Consolidated Statements of Cash Flows for the three and nine month periods ended September 30, 2004 and 2003 (unaudited)	3

	Notes to Consolidated Financial Statements	4

			~~Page~~

	~~Consolidated Balance Sheets as of June 30, 2004 (unaudited) and December 31, 2003~~		1

	~~Consolidated Statements of Income for the three and six month periods ended June 30, 2004 and 2003 (unaudited)~~		2

	~~Consolidated Statements of Cash Flows for the three and six month periods ended June 30, 2004 and 2003 (unaudited)~~		3

	~~Notes to Consolidated Financial Statements~~		4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		10

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		12

Item 4.	Controls and Procedures		13

PART II. Other Information

Item 1.	Legal Proceedings		13

~~Item 4.~~	~~Submission of Matters to a Vote of Security Holders~~		13

Item 6.	Exhibits ~~and Reports on Form 8-K~~		1413

	Signature		1514

	Three Months Ended June 30,						Six Months ended June 30,
	2004			2003			2004			2003

Operating activities:
Net income	$	67,292		$	5,430		$	99,254		$	21,208
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		23,629			16,643			42,408			32,919
Deferred income taxes		20,930			6,186			32,598			11,430
Loss on disposal of property, plant and equipment		31			—			175			59
Minority interest		562			24			1,211			(627	)
Changes in certain assets and liabilities:
Accounts receivable		(34,558	)		9,706			(73,131	)		6,240
Inventories		(44,181	)		(5,740	)		(95,674	)		(20,220	)
Other assets		(2,360	)		(2,549	)		(10,764	)		(1,855)
Accounts payable		(7,628	)		(450	)		41,635			15,680
Accrued expenses		19,700			4,427			16,370			(6,490	)

Net cash provided by operating activities		43,417			33,677			54,082			58,344

Investing activities:
Purchases of property, plant and equipment		(30,755	)		(23,670	)		(54,660	)		(61,105	)
Other investing activities		—			8			—			(8,283)

Net cash used in investing activities		(30,755	)		(23,662	)		(54,660	)		(69,388	)

Financing activities:
Issuance of long-term debt		134,182			26,768			164,121			48,480
Repayments of long-term debt		(169,749	)		(28,482	)		(203,408	)		(49,900	)
Issuance of common stock, net of expenses and proceeds
and tax benefits from exercise of stock options		4,539			663			14,625			1,670
Purchase of treasury stock		—			—			(238	)		(176)
Debt issuance costs		(1,487	)		(277	)		(1,511	)		(1,320	)

Net cash used in financing activities		(32,515	)		(1,328	)		(26,411	)		(1,246	)

Increase (decrease) in cash and equivalents		(19,853	)		8,687			(26,989	)		(12,290	)
Cash and equivalents at beginning of period		58,294			3,241			65,430			24,218
Cash and equivalents at end of period	$	38,441		$	11,928		$	38,441		$	11,928


Supplemental disclosure of cash flow information:
Cash paid for interest	$	5,420		$	7,052		$	20,345		$	22,684


Cash paid for federal and state income taxes	$	11,850		$	6,860		$	11,927		$	7,474

	Three Months Ended September 30,						Nine Months Ended September 30,

	2004			2003			2004			2003

Operating activities:
Net income	$	113,614		$	9,191		$	212,868		$	30,399
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		21,735			17,472			64,143			50,391
Deferred income taxes		34,272			9,491			66,871			20,921
Loss on disposal of property, plant and equipment		583			—			757			—
Minority interest		451			86			1,661			(541	)
Changes in certain assets and liabilities:
Accounts receivable		(48,598	)		(4,879	)		(121,729	)		1,361
Inventories		(5,620	)		2,043			(101,294	)		(18,177	)
Other assets		6,612			(3,124	)		(4,152	)		(4,920	)
Accounts payable		24,519			8,649			66,154			24,329
Accrued expenses		5,455			524			21,825			(5,966	)

Net cash provided by operating activities		153,023			39,453			207,104			97,797

Investing activities:
Purchases of property, plant and equipment		(18,211	)		(28,883	)		(72,872	)		(89,988	)
Other investing activities		55			—			55			(8,283	)

Net cash used in investing activities		(18,156	)		(28,883	)		(72,817	)		(98,271	)

Financing activities:
Issuance of long-term debt		162			11,343			164,284			59,823
Repayments of long-term debt		(17,450	)		(14,588	)		(220,857	)		(64,488	)
Issuance of common stock, net of expenses and proceeds and tax benefits from exercise of stock options		7,244			2,744			21,869			4,414
Issuance (purchase) of treasury stock		189			—			(49	)		(176	)
Dividends paid		(3,719	)		—			(3,719	)		—
Debt issuance costs		(60	)		(413	)		(1,571	)		(1,733	)

Net cash used in financing activities		(13,634	)		(914	)		(40,043	)		(2,160	)

Increase (decrease) in cash and equivalents		121,233			9,656			94,244			(2,634	)
Cash and equivalents at beginning of period		38,441			11,928			65,430			24,218

Cash and equivalents at end of period	$	159,674		$	21,584		$	159,674		$	21,584

Supplemental disclosure of cash flow information:
Cash paid for interest	$	15,545		$	14,662		$	35,890		$	37,346

Cash paid for federal and state income taxes	$	13,679		$	—		$	25,638		$	7,474

	Three Months Ended						Six Months Ended
	2004			2003			2004			2003

Net income, as reported	$	67,292		$	5,430		$	99,254		$	21,208
Stock-based employee compensation expense, using the fair value based method, net of related tax effect		(714	)		(544	)		(1,430	)		(1,127	)

Net income, pro forma	$	66,578		$	4,886		$	97,824		$	20,081

Basic earnings per share:
As reported	$	1.36		$	.11		$	2.02		$	.45
Pro forma		1.35			.10			1.99			.42
Diluted earnings per share:
As reported	$	1.20		$	.11		$	1.78		$	.44
Pro forma		1.19			.10			1.76			.42

		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the period ended ~~June~~September 30, 2004


OR

	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Commission File Number 0-21719

Steel Dynamics, Inc.
(Exact name of registrant as specified in its charter)

	June 30, 2004			December 31, 2003

	(unaudited)
ASSETS
Current assets:
Cash and equivalents	$	38,441		$	65,430
Accounts receivable, net		171,034			100,933
Accounts receivable-related parties		28,120			25,090
Inventories		280,170			184,496
Deferred taxes		12,563			23,217
Other current assets		18,105			8,769

Total current assets		548,433			407,935

Property, plant and equipment, net		1,018,005			1,001,116

Restricted cash		4,215			2,636

Other assets		33,301			36,752

Total assets	$	1,603,594		$	1,448,439


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	120,961		$	42,698
Accounts payable-related parties		–			36,628
Accrued interest		14,862			11,312
Other accrued expenses		57,722			46,678
Current maturities of long-term debt		5,000			15,988

Total current liabilities		198,545			153,304

Long-term debt including unamortized bond premium of $7,991 and $8,834 as of June 30 2004 and December 31 2003 respectively		563,287			591,586

Deferred taxes		137,647			115,703

Minority interest		1,823			613

Commitments and contingencies

Stockholders’ equity:
Common stock voting, $.01 par value; 100,000,000 shares authorized; 51,824,065 and 51,011,839 shares issued; and 49,446,939 and 48,645,246 shares outstanding as of June 30 2004 and December 31 2003 respectively		517			509
Treasury stock at cost; 2,377 126 and 2,366,593 shares at June 30 2004 and December 31 2003 respectively		(28,908	)		(28,670	)
Additional paid-in capital		376,945			362,328
Retained earnings		356,508			257,254
Other accumulated comprehensive loss		(2,410	)		(4,188	)

Total stockholders’ equity		702,652			587,233

Total liabilities and stockholders’ equity	$	1,603,954		$	1,448,439

	Three Months Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003

Net sales:
Unrelated parties	$	474,317		$	187,342		$	809,983		$	389,488
Related parties		51,340			31,290			99,819			64,648

Total net sales		525,657			218,632			909,802			454,136

Cost of goods sold		382,459			186,724			685,014			372,693

Gross profit		143,198			31,908			224,788			81,443

Selling, general and administrative expenses		28,082			14,682			51,132			29,657

Operating income		115,116			17,226			173,656			51,786

Interest expense		10,592			8,938			20,096			18,104
Other income		(3,143	)		(399	)		(5,246	)		(250	)

Income before income taxes		107,667			8,687			158,806			33,932

Income taxes		40,375			3,257			59,552			12,724

Net income	$	67,292		$	5,430		$	99,254		$	21,208



Basic earnings per share	$	1.36		$	.11		$	2.02		$	.45


Weighted average common shares outstanding		49,340			47,650			49,143			47,625


Diluted earnings per share, including effect of assumed conversions	$	1.20		$	11		$	1.78		$	.44


Weighted average common shares and share equivalents outstanding		56,545			47,853			56,379			47,820

	June 30,		December 31,
	2004		2003

Raw materials	$	110,419	$	46,347
Supplies		69,797		60,420
Work-in-progress		30,061		15,996
Finished goods		69,893		61,733

Total inventories	$	280,170	$	184,496

	Parent			Guarantors		Combined non-guarantors			Consolidating adjustments			Total consolidated

Cash	$	32,514		$	577	$	5,350		$	—		$	38,441
Accounts receivable		166,006			158,768		23,233			(148,853	)		199,154
Inventories		222,819			36,417		21,203			(269	)		280,170
Other current assets		28,876			864		1,117			(189	)		30,668

Total current assets		450,215			196,626		50,903			(149,311	)		548,433
Property, plant and equipment, net		735,678			131,887		150,558			(118	)		1,018,005
Other assets		360,975			90,531		143			(414,133	)		37,516

Total assets	$	1,546,868		$	419,044	$	201,604		$	(563,562	)	$	1,603,954

Accounts payable	$	102,749		$	21,534	$	18,043		$	(21,365	)	$	120,961
Accrued expenses		61,433			5,034		6,816			(699	)		72,584
Current maturities of long-term debt		2,924			—		2,097			(21	)		5,000

Total current liabilities		167,106			26,568		26,956			(22,085	)		198,545
Other liabilities		104,845			142,206		10,949			(120,353	)		137,647
Long-term debt		562,417			—		1,032			(162	)		563,287
Minority interest		—			—		—			1,823			1,823
Common stock		517			89,426		202,184			(291,610	)		517
Treasury stock		(28,908	)		—		—			—			(28,908)
Additional paid in capital		376,945			116,868		—			(116,868	)		376,945
Retained earnings		366,373			43,976		(39,534	)		(14,307	)		356,508
Other accumulated comprehensive loss		(2,427	)		—		17			—			(2,410)

Total stockholders’ equity		712,500			250,270		162,667			(422,785	)		702,652

Total liabilities and stockholders’ equity	$	1,546,868		$	419,044	$	201,604		$	(563,562	)	$	1,603,954

						Combined			Consolidating			Total
	Parent		Guarantor			non-guarantors			adjustments			consolidated

Net sales	$	836,004	$	885,901		$	84,360		$	(896,463	)	$	909,802
Cost of goods sold		620,233		868,514			77,663			(881,396	)		685,014

Gross profit		215,771		17,387			6,697			(15,067	)		224,788
Selling, general and administrative		38,430		7,268			5,702			(268	)		51,132

Operating income (loss)		177,341		10,119			995			(14,799	)		173,656
Interest expense		19,872		(629	)		843			10			20,096
Other (income) expense		48,147		(53,444	)		(2	)		53			(5,246	)

Income (loss) before income taxes and Equity in net loss of subsidiaries		109,322		64,192			154			(14,862	)		158,806
Income taxes		42,377		22,779			58			(5,662	)		59,552

		66,945		41,413			96			(9,200	)		99,254
Equity in net income of subsidiaries		41,509		—			—			(41,509	)		—

Net income (loss)	$	108,454	$	41,413		$	96		$	(50,709	)	$	99,254