SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|
|
☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the |
|
|
| 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) | ||
|
|
|
Indiana |
| 35-1929476 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
|
|
|
7575 West Jefferson Blvd, Fort Wayne, IN |
| 46804 |
(Address of principal executive offices) |
| (Zip Code) |
|
|
|
Registrant’s telephone number, including area code: (260) 969-3500 |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company (see definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act).
|
|
|
|
(Check one): | Large accelerated filer ☒ | Accelerated filer ☐ | Non-accelerated filer ☐ |
|
|
|
|
| Smaller reporting company ☐ | Emerging growth company ☐ |
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No☒
As of NovemberMay 1, 2017,2018, Registrant had 236,951,784235,933,638 outstanding shares of common stock.
|
|
| |
STEEL DYNAMICS, INC. Table of Contents | |||
| |||
| |||
Page | |||
|
|
| |
| 1 | ||
|
|
| |
| 2 | ||
|
|
| |
| 3 | ||
|
|
| |
| 4 | ||
|
|
| |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| |
|
|
| |
| |||
|
|
| |
| |||
|
|
| |
|
|
| |
|
|
| |
|
| ||
|
|
| |
| |||
|
|
| |
Item 1A. |
| ||
|
|
| |
| |||
|
|
| |
Item 3. |
| ||
|
|
| |
Item 4. |
| ||
|
|
| |
Item 5. |
| ||
|
|
| |
| |||
|
|
| |
|
| 25 | |
26 | |||
|
|
|
STEEL DYNAMICS, INC.
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
| ||
| September 30, |
|
| December 31, | March 31, |
|
| December 31, | ||||
| 2017 |
|
| 2016 | 2018 |
|
| 2017 | ||||
Assets | (unaudited) |
|
|
|
| (unaudited) |
|
|
|
| ||
Current assets |
|
|
|
|
|
|
|
|
|
| ||
Cash and equivalents | $ | 1,101,964 |
|
| $ | 841,483 | $ | 985,824 |
|
| $ | 1,028,649 |
Short term investments |
| 40,000 |
|
|
| - | ||||||
Accounts receivable, net |
| 897,838 |
|
|
| 703,565 |
| 983,457 |
|
|
| 846,415 |
Accounts receivable-related parties |
| 25,179 |
|
|
| 26,219 |
| 4,198 |
|
|
| 22,422 |
Inventories |
| 1,487,516 |
|
|
| 1,275,211 |
| 1,600,058 |
|
|
| 1,519,347 |
Other current assets |
| 59,648 |
|
|
| 83,197 |
| 38,705 |
|
|
| 91,509 |
Total current assets |
| 3,572,145 |
|
|
| 2,929,675 |
| 3,652,242 |
|
|
| 3,508,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
| 2,708,777 |
|
|
| 2,787,215 |
| 2,657,937 |
|
|
| 2,675,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash |
| 17,092 |
|
|
| 18,060 | ||||||
Intangible assets, net |
| 263,357 |
|
|
| 283,977 |
| 249,983 |
|
|
| 256,909 |
Goodwill |
| 388,518 |
|
|
| 393,351 |
| 386,045 |
|
|
| 386,893 |
Other assets |
| 10,848 |
|
|
| 11,454 |
| 26,606 |
|
|
| 27,684 |
Total assets | $ | 6,960,737 |
|
| $ | 6,423,732 | $ | 6,972,813 |
|
| $ | 6,855,732 |
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable | $ | 512,290 |
|
| $ | 382,126 | $ | 544,419 |
|
| $ | 473,765 |
Accounts payable-related parties |
| 16,393 |
|
|
| 13,070 |
| 18,199 |
|
|
| 15,683 |
Income taxes payable |
| 5,596 |
|
|
| 5,593 |
| 14,564 |
|
|
| 3,696 |
Accrued payroll and benefits |
| 171,508 |
|
|
| 164,543 |
| 113,001 |
|
|
| 195,909 |
Accrued interest |
| 49,380 |
|
|
| 30,295 |
| 47,936 |
|
|
| 25,533 |
Accrued expenses |
| 128,701 |
|
|
| 113,556 |
| 112,975 |
|
|
| 125,138 |
Current maturities of long-term debt |
| 182,661 |
|
|
| 3,632 |
| 9,646 |
|
|
| 28,795 |
Total current liabilities |
| 1,066,529 |
|
|
| 712,815 |
| 860,740 |
|
|
| 868,519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
| 2,351,483 |
|
|
| 2,353,194 |
| 2,353,703 |
|
|
| 2,353,145 |
Deferred income taxes |
| 461,399 |
|
|
| 448,375 |
| 314,736 |
|
|
| 305,949 |
Other liabilities |
| 20,305 |
|
|
| 20,649 |
| 20,257 |
|
|
| 21,811 |
Total liabilities |
| 3,899,716 |
|
|
| 3,535,033 |
| 3,549,436 |
|
|
| 3,549,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
| ||
Redeemable noncontrolling interests |
| 111,240 |
|
| 111,240 |
| 111,240 |
|
| 111,240 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock voting, $.0025 par value; 900,000,000 shares authorized; |
|
|
|
|
|
|
|
|
|
| ||
264,161,359 and 264,130,544 shares issued; and 236,951,784 and 243,785,485 |
|
|
|
|
| |||||||
shares outstanding, as of September 30, 2017 and December 31, 2016, respectively |
| 641 |
|
| 641 | |||||||
Treasury stock, at cost; 27,209,575 and 20,345,059 shares, |
|
|
|
|
| |||||||
as of September 30, 2017 and December 31, 2016 respectively |
| (650,210) |
|
| (416,829) | |||||||
265,080,663 and 265,003,133 shares issued; and 236,095,748 and 237,396,839 |
|
|
|
|
| |||||||
shares outstanding, as of March 31, 2018 and December 31, 2017, respectively |
| 644 |
|
| 644 | |||||||
Treasury stock, at cost; 28,984,915 and 27,606,294 shares, |
|
|
|
|
| |||||||
as of March 31, 2018 and December 31, 2017 respectively |
| (730,700) |
|
| (665,297) | |||||||
Additional paid-in capital |
| 1,147,463 |
|
|
| 1,132,749 |
| 1,142,871 |
|
|
| 1,141,534 |
Retained earnings |
| 2,606,831 |
|
|
| 2,210,459 |
| 3,057,904 |
|
|
| 2,874,693 |
Total Steel Dynamics, Inc. equity |
| 3,104,725 |
|
|
| 2,927,020 |
| 3,470,719 |
|
|
| 3,351,574 |
Noncontrolling interests |
| (154,944) |
|
|
| (149,561) |
| (158,582) |
|
|
| (156,506) |
Total equity |
| 2,949,781 |
|
|
| 2,777,459 |
| 3,312,137 |
|
|
| 3,195,068 |
Total liabilities and equity | $ | 6,960,737 |
|
| $ | 6,423,732 | $ | 6,972,813 |
|
| $ | 6,855,732 |
See notes to consolidated financial statements.
1
STEEL DYNAMICS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Three Months Ended |
| Nine Months Ended | Three Months Ended | ||||||||||||
| September 30, |
| September 30, | March 31, | ||||||||||||
| 2017 |
| 2016 |
| 2017 |
| 2016 | 2018 |
| 2017 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrelated parties | $ | 2,399,116 |
| $ | 2,060,596 |
| $ | 7,066,083 |
| $ | 5,737,584 | $ | 2,597,312 |
| $ | 2,319,663 |
Related parties |
| 44,266 |
|
| 40,714 |
|
| 136,235 |
|
| 128,929 |
| 6,563 |
|
| 48,553 |
Total net sales |
| 2,443,382 |
|
| 2,101,310 |
|
| 7,202,318 |
|
| 5,866,513 |
| 2,603,875 |
|
| 2,368,216 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Costs of goods sold |
| 2,046,864 |
|
| 1,692,807 |
|
| 5,941,128 |
|
| 4,841,591 |
| 2,140,459 |
|
| 1,896,062 |
Gross profit |
| 396,518 |
|
| 408,503 |
|
| 1,261,190 |
|
| 1,024,922 |
| 463,416 |
|
| 472,154 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling, general and administrative expenses |
| 97,056 |
| 95,185 |
| 298,422 |
| 279,899 |
| 106,431 |
| 102,933 | ||||
Profit sharing |
| 21,175 |
| 22,255 |
| 69,714 |
| 51,722 |
| 26,662 |
| 27,231 | ||||
Amortization of intangible assets |
| 7,272 |
|
| 7,208 |
|
| 22,120 |
|
| 21,359 |
| 6,926 |
|
| 7,424 |
Operating income |
| 271,015 |
|
| 283,855 |
|
| 870,934 |
|
| 671,942 |
| 323,397 |
|
| 334,566 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense, net of capitalized interest |
| 34,177 |
| 36,199 |
| 102,019 |
| 109,888 |
| 31,896 |
| 33,973 | ||||
Other expense (income), net |
| 2,526 |
|
| 4,351 |
|
| (4,968) |
|
| 741 |
| (4,463) |
|
| (3,659) |
Income before income taxes |
| 234,312 |
|
| 243,305 |
|
| 773,883 |
|
| 561,313 |
| 295,964 |
|
| 304,252 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income tax expense |
| 83,300 |
|
| 88,892 |
|
| 271,258 |
|
| 205,139 |
| 70,489 |
|
| 105,586 |
Net income |
| 151,012 |
|
| 154,413 |
|
| 502,625 |
|
| 356,174 |
| 225,475 |
|
| 198,666 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss attributable to noncontrolling interests |
| 2,246 |
|
| 2,984 |
|
| 5,383 |
|
| 5,929 |
| 2,076 |
|
| 2,151 |
Net income attributable to Steel Dynamics, Inc. | $ | 153,258 |
| $ | 157,397 |
| $ | 508,008 |
| $ | 362,103 | $ | 227,551 |
| $ | 200,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic earnings per share attributable to Steel Dynamics, |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Inc. stockholders | $ | 0.64 |
| $ | 0.65 |
| $ | 2.11 |
| $ | 1.49 | $ | 0.96 |
| $ | 0.83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
| 239,066 |
|
| 243,761 |
|
| 241,117 |
|
| 243,539 |
| 236,623 |
|
| 242,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share attributable to Steel Dynamics, Inc. |
|
|
|
|
|
|
|
|
|
|
|
| ||||
stockholders, including the effect of assumed conversions |
|
|
|
|
|
|
|
|
|
|
|
| ||||
when dilutive | $ | 0.64 |
| $ | 0.64 |
| $ | 2.09 |
| $ | 1.48 | $ | 0.96 |
| $ | 0.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares and share equivalents outstanding |
| 240,880 |
|
| 245,682 |
|
| 242,816 |
|
| 245,227 |
| 237,723 |
|
| 244,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share | $ | 0.155 |
| $ | 0.140 |
| $ | 0.465 |
| $ | 0.420 | $ | 0.1875 |
| $ | 0.155 |
See notes to consolidated financial statements.
2
STEEL DYNAMICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Three Months Ended |
| Nine Months Ended | Three Months Ended | ||||||||||||
| September 30, |
| September 30, | March 31, | ||||||||||||
| 2017 |
| 2016 |
| 2017 |
| 2016 | 2018 |
| 2017 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income | $ | 151,012 |
| $ | 154,413 |
| $ | 502,625 |
| $ | 356,174 | $ | 225,475 |
| $ | 198,666 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Adjustments to reconcile net income to net cash provided by |
|
|
|
|
|
|
|
|
|
|
|
| ||||
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation and amortization |
| 75,210 |
| 74,190 |
| 224,068 |
| 222,970 |
| 76,135 |
| 75,057 | ||||
Equity-based compensation |
| 6,875 |
| 5,946 |
| 24,558 |
| 23,716 |
| 12,841 |
| 11,303 | ||||
Deferred income taxes |
| 3,284 |
| 18,478 |
| 17,849 |
| 53,879 |
| 9,545 |
| 7,716 | ||||
Other adjustments |
| 8,202 |
| 161 |
| 8,055 |
| 1,376 |
| 30 |
| (104) | ||||
Changes in certain assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts receivable |
| (36,123) |
| 29,384 |
| (193,233) |
| (149,810) |
| (118,818) |
| (153,364) | ||||
Inventories |
| (67,285) |
| (76,013) |
| (211,726) |
| (102,339) |
| (80,711) |
| (86,819) | ||||
Other assets |
| (9,234) |
| 694 |
| (1,703) |
| 11,855 |
| (105) |
| 2,094 | ||||
Accounts payable |
| 44,887 |
| (49,171) |
| 133,251 |
| 117,220 |
| 66,332 |
| 133,809 | ||||
Income taxes receivable/payable |
| (12,929) |
| (7,421) |
| 5,803 |
| 40,960 |
| 63,962 |
| 96,319 | ||||
Accrued expenses |
| 62,249 |
|
| 45,701 |
|
| 38,058 |
|
| 69,361 |
| (76,751) |
|
| (44,247) |
Net cash provided by operating activities |
| 226,148 |
|
| 196,362 |
|
| 547,605 |
|
| 645,362 |
| 177,935 |
|
| 240,430 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Purchases of property, plant and equipment |
| (42,795) |
| (59,774) |
| (127,746) |
| (123,168) |
| (50,606) |
| (41,677) | ||||
Acquisition of business, net of cash acquired |
| (5,518) |
| (109,065) |
| (5,518) |
| (109,065) | ||||||||
Purchases of short term investments |
| (40,000) |
| - | ||||||||||||
Other investing activities |
| 1,081 |
|
| 1,507 |
|
| 30,386 |
|
| 5,767 |
| 229 |
|
| 26,918 |
Net cash used in investing activities |
| (47,232) |
|
| (167,332) |
|
| (102,878) |
|
| (226,466) |
| (90,377) |
|
| (14,759) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Issuance of current and long-term debt |
| 450,215 |
| 12,911 |
| 501,448 |
| 97,018 |
| 93,058 |
| - | ||||
Repayment of current and long-term debt |
| (294,913) |
| (9,999) |
| (331,339) |
| (95,253) |
| (113,034) |
| (1,429) | ||||
Dividends paid |
| (37,180) |
| (34,124) |
| (108,837) |
| (101,639) |
| (36,797) |
| (34,130) | ||||
Purchases of treasury stock |
| (99,085) |
| - |
| (237,154) |
| - |
| (69,269) |
| (61,256) | ||||
Other financing activities |
| (4,832) |
|
| 1,005 |
|
| (8,364) |
|
| 5,435 |
| (5,180) |
|
| (3,532) |
Net cash provided by (used in) financing activities |
| 14,205 |
|
| (30,207) |
|
| (184,246) |
|
| (94,439) | |||||
Net cash used in financing activities |
| (131,222) |
|
| (100,347) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and equivalents |
| 193,121 |
| (1,177) |
| 260,481 |
| 324,457 |
| (43,664) |
| 125,324 | ||||
Cash and equivalents at beginning of period |
| 908,843 |
|
| 1,052,666 |
|
| 841,483 |
|
| 727,032 | |||||
Cash, cash equivalents, and restricted cash at beginning of period |
| 1,035,085 |
|
| 848,105 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents at end of period | $ | 1,101,964 |
| $ | 1,051,489 |
| $ | 1,101,964 |
| $ | 1,051,489 | |||||
Cash, cash equivalents, and restricted cash at end of period | $ | 991,421 |
| $ | 973,429 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Supplemental disclosure information: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash paid for interest | $ | 13,530 |
| $ | 26,225 |
| $ | 80,155 |
| $ | 97,605 | $ | 8,629 |
| $ | 12,649 |
Cash paid for income taxes, net | $ | 93,123 |
| $ | 75,860 |
| $ | 246,793 |
| $ | 104,124 | |||||
Cash paid (received) for income taxes, net | $ | (1,045) |
| $ | 1,554 |
See notes to consolidated financial statements.
3
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Description of the Business and Significant Accounting Policies
Description of the Business
Steel Dynamics, Inc. (SDI), together with its subsidiaries (the company), is a domestic manufacturer of steel products and metals recycler. The company has three reportingreportable segments: steel operations, metals recycling operations, and steel fabrication operations.
Steel Operations Segment. Steel operations include the company’s Butler Flat Roll Division, Columbus Flat Roll Division, The Techs galvanizing lines, Structural and Rail Division, Engineered Bar Products Division, Vulcan Threaded Products, Inc. – acquired August 1, 2016,, Roanoke Bar Division, Steel of West Virginia, and Iron Dynamics, a liquid pig iron (scrap substitute) production facility that supplies solely the Butler Flat Roll Division. These operations include electric arc furnace steel mills, producing steel from ferrous scrap and scrap substitutes, utilizing continuous casting, automated rolling mills and numerous downstream coating and bar processing lines. Steel operations accounted for 73%74% and 74%73% of the company’s consolidated external net sales during the three months ended September 30,March 31, 2018 and 2017, and 2016, respectively, and 73% and 72% of the company’s consolidated external net sales during the nine months ended September 30, 2017 and 2016, respectively.
Metals Recycling Operations Segment. Metals recycling operations consists solely of OmniSource Corporation (OmniSource), and includes both ferrous and nonferrous processing, transportation, marketing, brokerage, and consulting services. Metals recycling operations accounted for 14% and 15% of the company’s consolidated external net sales during the three months ended September 30, 2017March 31, 2018 and 2016, respectively, and 15% of the company’s consolidated external net sales for the nine months ended September 30, 2017 and 2016.2017.
Steel Fabrication Operations Segment. Steel fabrication operations include the company’s New Millennium Building Systems’ joist and deck plants located throughout the United States, and in Northern Mexico. Revenues from these plants are generated from the fabrication of trusses, girders, steel joists and steel deck used within the non-residential construction industry. Steel fabrication operations accounted for 9% and 8% of the company’s consolidated external net sales during the three months ended September 30, 2017March 31, 2018 and 2016, respectively, and 8% and 9% during the nine months ended September 30, 2017 and 2016, respectively.2017.
Other. Other operations consists of subsidiary operations that are below the quantitative thresholds required for reportable segments and primarily consist of our idled Minnesota ironmaking operations that have been idle since May 2015, and other smaller joint ventures. Also included in “Other” are certain unallocated corporate accounts, such as the company’s senior secured credit facility, senior notes, certain other investments and certain profit sharing expenses.
Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include the accounts of SDI, together with its wholly and majority-owned or controlled subsidiaries, after elimination of significant intercompany accounts and transactions. Noncontrolling interests represent the noncontrolling owner’s proportionate share in the equity, income, or losses of the company’s majority-owned or controlled consolidated subsidiaries.
Use of Estimates. These consolidated 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 consolidated financial statements and in the notes thereto. Significant items subject to such estimates and assumptions include the carrying value of property, plant and equipment, intangible assets, and goodwill; valuation allowances for trade receivables, inventories and deferred income tax assets; unrecognized tax benefits; potential environmental liabilities; and 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 consolidated financial statements and notes should be read in conjunction with the audited financial statements and notes thereto included in the company’s Annual Report on Form 10-K for the year ended December 31, 2016.2017.
4
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Description of the Business and Significant Accounting Policies (Continued)
Goodwill. The company’s goodwill is allocated to the following reporting units at September 30, 2017,March 31, 2018, and December 31, 2016,2017, (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
| ||
|
|
| 2017 |
| 2016 |
| ||
| Steel Operations Segment: |
|
|
|
|
|
|
|
| Columbus Flat Roll Division |
| $ | 19,682 |
| $ | 19,682 |
|
| The Techs |
|
| 142,783 |
|
| 142,783 |
|
| Vulcan Threaded Products |
|
| 7,824 |
|
| 7,824 |
|
| Roanoke Bar Division |
|
| 29,041 |
|
| 29,041 |
|
| Metals Recycling Operations Segment: |
|
|
|
|
|
|
|
| Butler Flat Roll Division, Structural and Rail Division, and |
|
|
|
|
|
|
|
| Engineered Bar Division |
|
| 95,000 |
| �� | 95,000 |
|
| OmniSource |
|
| 92,263 |
|
| 97,096 |
|
| Steel Fabrication Operations Segment |
|
| 1,925 |
|
| 1,925 |
|
|
|
| $ | 388,518 |
| $ | 393,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, |
| December 31, |
| ||
|
|
| 2018 |
| 2017 |
| ||
| Steel Operations Segment: |
|
|
|
|
|
|
|
| Columbus Flat Roll Division |
| $ | 19,682 |
| $ | 19,682 |
|
| The Techs |
|
| 142,783 |
|
| 142,783 |
|
| Vulcan Threaded Products |
|
| 7,824 |
|
| 7,824 |
|
| Roanoke Bar Division |
|
| 29,041 |
|
| 29,041 |
|
| Metals Recycling Operations Segment: |
|
|
|
|
|
|
|
| OmniSource |
|
| 89,790 |
|
| 90,638 |
|
| Indiana Steel Mills |
|
| 95,000 |
|
| 95,000 |
|
| Steel Fabrication Operations Segment |
|
| 1,925 |
|
| 1,925 |
|
|
|
| $ | 386,045 |
| $ | 386,893 |
|
OmniSource goodwill decreased $4.8 million$848,000 from December 31, 20162017 to September 30, 2017,March 31, 2018, in recognition of the 20172018 tax benefit related to the normal amortization of the component of OmniSource tax-deductible goodwill in excess of book goodwill.
Recently Adopted/Issued Accounting Standards
In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (ASU 2015-11), which requires an entity to measure inventory at the lower of cost and net realizable value, rather than at the lower of cost or market. The company adopted ASU 2015-11 as required in the first quarter of 2017 on a prospective basis, and the adoption had no impact on its financial condition, results of operations, or cash flow.
In May 2014, the FASB issued ASU 2014-09, which is codified in ASC 606, Revenue Recognition – Revenue from Contracts with Customers, which amends the guidance in former ASC 605, Revenue Recognition. FASB has sincelater issued clarifying guidance in the form of ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Consideration (Reporting Revenue Gross versus Net), ASU 2016-10, Revenue from Contract with Customers :Customers: Identifying Performance Obligations and Licensing, and ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients, collectively (ASC 606). The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 also requires additional disclosures to help users of financial statements better understand the nature, amount, timing, and potential uncertainty of revenue that is recognized. The company adopted ASC 606 guidance is effective for annual and interim periods beginning after December 15, 2017, but can be early adopted for annual and interim periods ending after December 15, 2016,January1, 2018 using a full retrospective orthe modified retrospective approach. The company is finalizing its adoption plan in which it has identified current revenue streams and analyzed those revenue streams pursuant to the new accounting requirements. The company will complete the adoption plan during the fourth quarter of 2017, including assessment of new required disclosures. Based on our analysis within the adoption plan completed to date, the company does not believe there will be significantThere was no change in the amount or timing of revenue recognized under the new standard,ASC 606, or significant changes required to the company’s functions, processes or systems. See Note 2 – Revenue from Contracts with Customers for disclosure required by ASC 606 and the updated accounting policy for revenue recognition.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230); which requires amounts generally described as restricted cash to be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. The company intends to adoptadopted the provisions of ASU 2014-09 effective2016-18 as of January 1, 2018, usingretrospectively changed beginning and ending amounts reflected in the modified retrospective approach. consolidated statements of cash flows for the three months ended March 31, 2018 and 2017, to include restricted cash. The balance of cash, cash equivalents and restricted cash in the consolidated statements of cash flows includes restricted cash of $5.6 million at March 31, 2018, $6.4 million at January 1, 2018, and $6.6 million at March 31, 2017, and January 1, 2017, which are recorded in Other Assets (noncurrent) in the company’s consolidated balance sheets.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842):; which establishes a new lease accounting model that requires lessees to recognize a right of use asset and related lease liability for most leases having lease terms of more than 12 months (ASU 2016-02). Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. This new guidance is effective for annual and interim periods beginning after December 15, 2018, but can be early adopted. The company is currently evaluatingworking through an adoption plan to evaluate the lease portfolio, systems, processes and policies to determine the impact of the provisions of ASU 2016-02 includingto our financial statements and disclosures. The company anticipates adopting ASU 2016-02 on January 1, 2019.
Note 2. Revenue from Contracts with Customers
The company adopted ASC 606 effective January 1, 2018, using the timingmodified retrospective approach. We applied the standard to contracts that were not completed as of the adoption date, with no cumulative effect adjustment at date of adoption.
ReclassificationsAccordingly, amounts and disclosures for reporting periods beginning after January 1, 2018 are presented under ASC 606, while comparative amounts and disclosures for prior periods have not been adjusted and continue to be reported in accordance with historical accounting policies for revenue recognition prior to the adoption of ASC 606. The new revenue standard requires recognition of revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.
In the steel and metals recycling operations segments, revenue is recognized at the point in time the performance obligation is satisfied and control of the product is transferred to the customer upon shipment or delivery, at the amount of consideration the company expects to receive, including any variable consideration. The company early adopted, effective December 31, 2016, Improvement to Employee Share-based Payment Accounting (ASU 2016-09). Cash paid to tax authorities from shares withheld to satisfyvariable consideration included in the company’s statutory income tax withholding obligation of $2.2 million were reclassified to financing activities from operating activities in the nine-month period ended September 30, 2016, statement of cash flows.
steel operations segment contracts, which is not constrained, include estimated product returns and customer claims based on historical experience, and may include volume rebates which are
5
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 2. Revenue from Contracts with Customers (Continued)
recorded on an expected value basis. Revenue recognized is limited to the amount the company expects to receive. The company does not exercise significant judgements in determining the timing of satisfaction of performance obligations or the transaction price. Shipment of products to customers is considered a fulfillment activity with amounts billed to customers included in sales and costs associated with such included in cost of goods sold.
The company’s steel fabrication operations segment recognizes revenue over time at the amount of consideration the company expects to receive. Revenue is measured on an output method representing completed fabricated tons to date as a percentage of total tons required for each contract. Revenue from fabrication of tons remaining on partially fabricated customer contracts as of a reporting date, which are generally expected to be realized within the following fiscal quarter, and revenue from yet to be fabricated customer contracts, has not been disclosed under the practical expedient in paragraph ASC 606-10-50-14 related to customer contracts with expected duration of one year or less. The company does not exercise significant judgements in determining the timing of satisfaction of performance obligations or the transaction price. Shipment of products to customers, which occurs after control over the product has transferred to the customer and revenue is recognized, is considered a fulfillment activity with amounts billed to customers included in sales and costs associated with such included in cost of goods sold.
Payments from customers for all operating segments are generally due within 30 days of invoicing, which generally occurs upon shipment of the products. Shipment for the steel fabrication operations segment generally occurs within 30 days of satisfaction of the performance obligation and revenue recognition. The company does not have financing components. Payments from customers have historically generally been within these terms, however, payments for non-US sales may extend longer. The allowance for doubtful accounts for all operating segments is based on the company’s best estimate of probable credit losses, along with historical experience.
Refer to Note 9 Segment Information, for disaggregated revenue by segment to external, external non-United States, and other segment customers.
Note 2.3. 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 the weighted average dilutive effect of common share equivalents outstanding during the period applied to the company’s basic earnings per share. Common share equivalents represent potentially dilutive restricted stock units, deferred stock units, restricted stock, options and other equity-based awards;performance awards, and are excluded from the computation in periods in which they have an anti-dilutive effect. There were no anti-dilutive common share equivalents atas of or for the three and nine months ended SeptemberMarch 31, 2018 and March 30, 2017 and 2016.2017.
The following tables present a reconciliation of the numerators and the denominators of the company’s basic and diluted earnings per share computations for the three and nine months ended SeptemberMarch 31, 2018 and March 30, 2017 and 2016 (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Three Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2017 |
| 2016 | 2018 |
| 2017 | ||||||||||||||||||||||||||||
| Net Income |
| Shares |
| Per Share |
| Net Income |
| Shares |
| Per Share | Net Income |
| Shares |
| Per Share |
| Net Income |
| Shares |
| Per Share | ||||||||||||
| (Numerator) |
|
| (Denominator) |
| Amount |
| (Numerator) |
|
| (Denominator) |
| Amount | (Numerator) |
|
| (Denominator) |
| Amount |
| (Numerator) |
|
| (Denominator) |
| Amount | ||||||||
Basic earnings per share | $ | 153,258 |
|
| 239,066 |
| $ | 0.64 |
| $ | 157,397 |
|
| 243,761 |
| $ | 0.65 | $ | 227,551 |
|
| 236,623 |
| $ | 0.96 |
| $ | 200,817 |
|
| 242,943 |
| $ | 0.83 |
Dilutive common share equivalents |
| - |
|
| 1,814 |
|
|
|
|
| - |
|
| 1,921 |
|
|
|
| - |
|
| 1,100 |
|
|
|
|
| - |
|
| 1,603 |
|
|
|
Diluted earnings per share | $ | 153,258 |
|
| 240,880 |
| $ | 0.64 |
| $ | 157,397 |
|
| 245,682 |
| $ | 0.64 | $ | 227,551 |
|
| 237,723 |
| $ | 0.96 |
| $ | 200,817 |
|
| 244,546 |
| $ | 0.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, | ||||||||||||||||
| 2017 |
| 2016 | ||||||||||||||
| Net Income |
| Shares |
| Per Share |
| Net Income |
| Shares |
| Per Share | ||||||
| (Numerator) |
| (Denominator) |
| Amount |
| (Numerator) |
| (Denominator) |
| Amount | ||||||
Basic earnings per share | $ | 508,008 |
|
| 241,117 |
| $ | 2.11 |
| $ | 362,103 |
|
| 243,539 |
| $ | 1.49 |
Dilutive common share equivalents |
| - |
|
| 1,699 |
|
|
|
|
| - |
|
| 1,688 |
|
|
|
Diluted earnings per share | $ | 508,008 |
|
| 242,816 |
| $ | 2.09 |
| $ | 362,103 |
|
| 245,227 |
| $ | 1.48 |
Note 3.4. Inventories
Inventories are stated at lower of cost or net realizable value. Cost is determined using a weighted average cost method for raw materials and supplies, and on a first-in, first-out basis for other inventory. Inventory consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
|
| ||
|
|
| 2017 |
| 2016 |
|
| ||
|
| Raw materials | $ | 677,187 |
| $ | 515,924 |
|
|
|
| Supplies |
| 376,984 |
|
| 383,134 |
|
|
|
| Work in progress |
| 119,735 |
|
| 103,606 |
|
|
|
| Finished goods |
| 313,610 |
|
| 272,547 |
|
|
|
| Total inventories | $ | 1,487,516 |
| $ | 1,275,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, |
| December 31, |
|
| ||
|
|
| 2018 |
| 2017 |
|
| ||
|
| Raw materials | $ | 725,748 |
| $ | 675,715 |
|
|
|
| Supplies |
| 386,123 |
|
| 374,515 |
|
|
|
| Work in progress |
| 169,441 |
|
| 128,565 |
|
|
|
| Finished goods |
| 318,746 |
|
| 340,552 |
|
|
|
| Total inventories | $ | 1,600,058 |
| $ | 1,519,347 |
|
|
6
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 4. Debt
In September 2017, the company issued $350.0 million of 4.125% senior notes due 2025 (the "2025 Notes"), the proceeds of which, along with available cash, were used to fund the September 2017 tender to purchase at a redemption price of 103.563%, $182.9 million principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, of the company's 6.375% senior notes due 2022 (the "2022 Notes"), and the October 2017 call and repayment at a redemption price of 103.188% of the $167.1 million remaining outstanding principal amount of the 2022 Notes, plus accrued and unpaid interest to, but not including, the date of repayment. The $167.1 remaining outstanding principal amount is included in current maturities of long-term debt in the company’s September 30, 2017, balance sheet. The company recorded expenses related to tender premiums, write off of unamortized debt issuance costs, and other expenses of $8.0 million, which are reflected in other expenses in the consolidated statements of income for the three- and nine-months ended September 30, 2017. Additional call premiums of $6.6 million related to the October 2017 call and repayment will be recorded as other expenses in the consolidated statements of income for the three months and year ended
December 31, 2017.
Note 5. Changes in Equity
The following table provides a reconciliation of the beginning and ending carrying amounts of total equity, equity attributable to stockholders of Steel Dynamics, Inc., and equity and redeemable amounts attributable to the noncontrolling interests (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
| Stockholders of Steel Dynamics, Inc. |
|
|
|
|
|
| Stockholders of Steel Dynamics, Inc. |
|
|
|
|
|
| ||||||||||||||||||||||||||
|
|
|
|
| Additional |
|
|
|
|
|
|
| Redeemable |
|
|
|
| Additional |
|
|
|
|
|
|
| Redeemable | ||||||||||||||
| Common |
| Treasury |
| Paid-In |
| Retained |
| Noncontrolling |
| Total |
| Noncontrolling | Common |
| Treasury |
| Paid-In |
| Retained |
| Noncontrolling |
| Total |
| Noncontrolling | ||||||||||||||
| Stock |
| Stock |
| Capital |
| Earnings |
| Interests |
| Equity |
| Interests | Stock |
| Stock |
| Capital |
| Earnings |
| Interests |
| Equity |
| Interests | ||||||||||||||
Balances at December 31, 2016 | $ | 641 |
| $ | (416,829) |
| $ | 1,132,749 |
| $ | 2,210,459 |
| $ | (149,561) |
| $ | 2,777,459 |
| $ | 111,240 | ||||||||||||||||||||
Balances at December 31, 2017 | $ | 644 |
| $ | (665,297) |
| $ | 1,141,534 |
| $ | 2,874,693 |
| $ | (156,506) |
| $ | 3,195,068 |
| $ | 111,240 | ||||||||||||||||||||
Dividends declared |
| - |
|
| - |
|
| - |
|
| (111,435) |
|
| - |
|
| (111,435) |
|
| - |
| - |
|
| - |
|
| - |
|
| (44,269) |
|
| - |
|
| (44,269) |
|
| - |
Share repurchases |
| - |
|
| (237,154) |
|
| - |
|
| - |
|
| - |
|
| (237,154) |
|
| - |
| - |
|
| (69,269) |
|
| - |
|
| - |
|
| - |
|
| (69,269) |
|
| - |
Equity-based compensation |
| - |
|
| 3,773 |
|
| 14,714 |
|
| (201) |
|
| - |
|
| 18,286 |
|
| - |
| - |
|
| 3,866 |
|
| 1,337 |
|
| (71) |
|
| - |
|
| 5,132 |
|
| - |
Comprehensive and net income (loss) |
| - |
|
| - |
|
| - |
|
| 508,008 |
|
| (5,383) |
|
| 502,625 |
|
| - |
| - |
|
| - |
|
| - |
|
| 227,551 |
|
| (2,076) |
|
| 225,475 |
|
| - |
Balances at September 30, 2017 | $ | 641 |
| $ | (650,210) |
| $ | 1,147,463 |
| $ | 2,606,831 |
| $ | (154,944) |
| $ | 2,949,781 |
| $ | 111,240 | ||||||||||||||||||||
Balances at March 31, 2018 | $ | 644 |
| $ | (730,700) |
| $ | 1,142,871 |
| $ | 3,057,904 |
| $ | (158,582) |
| $ | 3,312,137 |
| $ | 111,240 |
Note 6. Derivative Financial Instruments
The company is exposed to certain risks relating to its ongoing business operations. The company utilizes derivative instruments to mitigate commodity margin risk, interestoccasionally to mitigate foreign currency exchange rate risk, and foreign currency exchangehave in the past to mitigate interest rate fluctuation risk. The company routinely enters into forward exchange traded futures and option contracts to manage the price risk associated with nonferrous metals inventory as well as purchases and sales of nonferrous metals (primarily aluminum and copper). The company offsets fair value amounts recognized for derivative instruments executed with the same counterparty under master netting agreements.
Commodity Futures Contracts. If the company is “long” on futures contracts, it means the company has more futures contracts purchased than futures contracts sold for the underlying commodity. If the company is “short” on a futures contract, it means the company has more futures contracts sold than futures contracts purchased for the underlying commodity. The following summarizes the company’s futures contract commitments as of September 30, 2017:March 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commodity Futures |
| Long/Short |
| Metric Tons |
|
| Aluminum |
| Long |
|
| |
| Aluminum |
| Short |
|
| |
| Copper |
| Long |
|
| |
| Copper |
| Short |
|
| |
|
|
|
|
|
|
|
The following summarizes the location and amounts of the fair values reported on the company’s balance sheets as of September 30, 2017,March 31, 2018, and December 31, 2016,2017, and gains and losses related to derivatives included in the company’s statement of income for the three and nine months ended SeptemberMarch 31, 2018, and March 30, 2017 and 2016 (in thousands):
7
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 6. Derivative Financial Instruments (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Asset Derivatives |
| Liability Derivatives | ||||||||||
| Balance sheet |
| Fair Value |
| Fair Value | ||||||||
| location |
| September 30, 2017 |
| December 31, 2016 |
| September 30, 2017 |
| December 31, 2016 | ||||
Derivative instruments designated |
|
|
|
|
|
|
|
|
|
|
|
|
|
as fair value hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity futures | Other current assets |
| $ | 2,576 |
| $ | 2,910 |
| $ | 396 |
| $ | 1,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments not designated |
|
|
|
|
|
|
|
|
|
|
|
|
|
as hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity futures | Other current assets |
|
| 1,573 |
|
| 1,150 |
|
| 497 |
|
| 783 |
Total derivative instruments |
|
| $ | 4,149 |
| $ | 4,060 |
| $ | 893 |
| $ | 2,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Asset Derivatives |
| Liability Derivatives | ||||||||
| Balance sheet |
| Fair Value |
| Fair Value | ||||||||
| location |
| March 31, 2018 |
| December 31, 2017 |
| March 31, 2018 |
| December 31, 2017 | ||||
Derivative instruments designated as fair value hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity futures | Other current assets |
| $ | 4,918 |
| $ | 1,211 |
| $ | 555 |
| $ | 5,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments not designated as hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity futures | Other current assets |
|
| 2,233 |
|
| 1,579 |
|
| 852 |
|
| 5,142 |
Total derivative instruments |
|
| $ | 7,151 |
| $ | 2,790 |
| $ | 1,407 |
| $ | 10,506 |
The fair value of the above derivative instruments along with required margin deposit amounts with the same counterparty under master netting arrangements totaled $6.0$3.5 million at September 30, 2017,March 31, 2018, and $3.2$5.6 million at December 31, 2016,2017, and are reflected in other current assets in the consolidated balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
| Amount of gain (loss) recognized |
|
|
| Location of gain |
| Amount of gain (loss) recognized |
|
|
| Amount of gain (loss) recognized |
|
|
| Location of gain |
| Amount of gain (loss) recognized | ||||||||||||||||
|
| Location of gain |
| in income on derivatives |
|
|
| (loss) recognized |
| in income on related hedged items |
| Location of gain |
| in income on derivatives |
|
|
| (loss) recognized |
| in income on related hedged items | ||||||||||||||||
|
| (loss) recognized |
| for the three months ended |
| Hedged items in |
| in income on |
| for the three months ended |
| (loss) recognized |
| for the three months ended |
| Hedged items in |
| in income on |
| for the three months ended | ||||||||||||||||
|
| in income on |
| September 30, |
| September 30, |
| fair value hedge |
| related hedged |
| September 30, |
| September 30, |
| in income on |
| March 31, |
| March 31, |
| fair value hedge |
| related hedged |
| March 31, |
| March 31, | ||||||||
|
| derivatives |
| 2017 |
| 2016 |
| relationships |
| items |
| 2017 |
| 2016 |
| derivatives |
| 2018 |
| 2017 |
| relationships |
| items |
| 2018 |
| 2017 | ||||||||
Derivatives in fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
hedging relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Commodity futures |
| Costs of goods sold |
| $ | 4,122 |
| $ | 826 |
| Firm commitments |
| Costs of goods sold |
| $ | (1,711) |
| $ | (793) |
| Costs of goods sold |
| $ | 8,516 |
| $ | (153) |
| Firm commitments |
| Costs of goods sold |
| $ | (793) |
| $ | 539 |
|
|
|
|
|
|
|
|
|
| Inventory |
| Costs of goods sold |
|
| (1,330) |
|
| (177) |
|
|
|
|
|
|
|
|
| Inventory |
| Costs of goods sold |
|
| (2,596) |
|
| 495 |
Derivatives not designated |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | (3,041) |
| $ | (970) |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | (3,389) |
| $ | 1,034 |
as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity futures |
| Costs of goods sold |
| $ | (10,566) |
| $ | (638) |
|
|
|
|
|
|
|
|
|
| Costs of goods sold |
| $ | 2,756 |
| $ | (4,346) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amount of gain (loss) recognized |
|
|
| Location of gain |
| Amount of gain (loss) recognized | ||||||||
|
| Location of gain |
| in income on derivatives |
|
|
| (loss) recognized |
| in income on related hedged items | ||||||||
|
| (loss) recognized |
| for the nine months ended |
| Hedged items in |
| in income on |
| for the nine months ended | ||||||||
|
| in income on |
| September 30, |
| September 30, |
| fair value hedge |
| on related |
| September 30, |
| September 30, | ||||
|
| derivatives |
| 2017 |
| 2016 |
| relationships |
| hedged items |
| 2017 |
| 2016 | ||||
Derivatives in fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
hedging relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity futures |
| Costs of goods sold |
| $ | 571 |
| $ | 1,281 |
| Firm commitments |
| Costs of goods sold |
| $ | 995 |
| $ | (2,223) |
|
|
|
|
|
|
|
|
|
| Inventory |
| Costs of goods sold |
|
| 179 |
|
| 642 |
Derivatives not designated |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 1,174 |
| $ | (1,581) |
as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity futures |
| Costs of goods sold |
| $ | (12,528) |
| $ | (394) |
|
|
|
|
|
|
|
|
|
|
Derivatives accounted for as fair value hedges had ineffectiveness resulting in losses of $35,000 and $84,000$101,000 during the three-month periods ended September 30, 2017March 31, 2018 and 2016, respectively; and a gaingains of $62,000 and loss of $175,000 during$48,000 for the nine-month periodsthree months ended September 30, 2017 and 2016, respectively.March 31, 2017. Gains excluded from hedge effectiveness testing of $1.1$5.0 million and $833,000 decreased cost of goods sold during the three-month period ended September 30, 2017, March 31, 2018, and losses excluded from hedge effectiveness testing of $60,000 increased costs of goods sold during the three-month period ended September 30, 2016. Gains of $1.7 million decreased costs of goods sold during the nine-month period ended September 30, 2017, and losses of $125,000 increased costs of goods sold during the nine month period ended September 30, 2016. respectively.
8
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 7. Fair Value Measurements
FASB accounting standards provide a comprehensive framework for measuring fair value and sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. Levels within the hierarchy are defined as follows:
· | Level 1—Unadjusted quoted prices for identical assets and liabilities in active markets; |
· | Level 2—Quoted prices for similar assets and liabilities in active markets (other than those included in Level 1) which are observable for the asset or liability, either directly or indirectly; and |
· | Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
The following table sets forth financial assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheet and the respective levels to which the fair value measurements are classified within the fair value hierarchy as of September 30, 2017,March 31, 2018, and December 31, 20162017 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
| Quoted Prices |
| Significant |
|
|
|
|
| Quoted Prices |
| Significant |
|
| ||||||
|
|
|
| in Active |
| Other |
| Significant |
|
|
| in Active |
| Other |
| Significant | ||||||
|
|
|
| Markets for |
| Observable |
| Unobservable |
|
|
| Markets for |
| Observable |
| Unobservable | ||||||
|
|
|
| Identical Assets |
| Inputs |
| Inputs |
|
|
| Identical Assets |
| Inputs |
| Inputs | ||||||
| Total |
| (Level 1) |
| (Level 2) |
| (Level 3) | Total |
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||||||
September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
March 31, 2018 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Commodity futures – financial assets | $ | 4,149 |
| $ | - |
| $ | 4,149 |
| $ | - | $ | 7,151 |
| $ | - |
| $ | 7,151 |
| $ | - |
Commodity futures – financial liabilities |
| 893 |
| - |
| 893 |
| - |
| 1,407 |
| - |
| 1,407 |
| - | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
December 31, 2017 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Commodity futures – financial assets | $ | 4,060 |
| $ | - |
| $ | 4,060 |
| $ | - | $ | 2,790 |
| $ | - |
| $ | 2,790 |
| $ | - |
Commodity futures – financial liabilities |
| 2,083 |
| - |
| 2,083 |
| - |
| 10,506 |
|
| - |
|
| 10,506 |
|
| - |
8
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 7. Fair Value Measurements (Continued)
The carrying amounts of financial instruments including cash and equivalents, and short-term investments in certificates of deposit approximate fair value. The fair values of commodity futures contracts are estimated by the use of quoted market prices, estimates obtained from brokers, and other appropriate valuation techniques based on references available. The fair value of long-term debt, including current maturities, as determined by quoted market prices (Level 2), was approximately $2.6$2.4 billion and $2.5 billion at September 30, 2017March 31, 2018 and December 31, 2016,2017, respectively (with a corresponding carrying amount in the consolidated balance sheet of $2.5 and $2.4 billion at September 30, 2017,March 31, 2018 and December 31, 2016, respectively)2017).
Note 8. Commitments and Contingencies
The company is involved in various routine litigation matters, including administrative proceedings, regulatory proceedings, governmental investigations, environmental matters, and commercial and construction contract disputes, none of which are expected to have a material impact on our financial condition, results of operations, or liquidity.
Note 9. Segment Information
The company’s operations are primarily organized and managed by reportable operating segments, which are steel operations, metals recycling operations, and steel fabrication operations. The segment operations are more fully described in Note 1 to thesethe consolidated financial statements. 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 thesethe consolidated financial statements. Intra‑segment sales and any related profits are eliminated in consolidation. Amounts included in the category “Other” are from subsidiary operations that are below the quantitative thresholds required for reportable segments and primarily consist of our Minnesota ironmaking operations and several small joint ventures. In addition, “Other” also includes certain unallocated corporate accounts, such as the company’s senior secured credit facility, senior notes, certain other investments and certain profit sharing expenses.
9
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 9. Segment Information (Continued)
The company’s segment results are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
| Metals |
| Steel |
|
|
|
|
|
|
|
|
|
|
| Metals |
| Steel |
|
|
|
|
|
|
|
| ||||||||
For the three months ended |
| Steel |
| Recycling |
| Fabrication |
|
|
|
|
|
|
|
|
| Steel |
| Recycling |
| Fabrication |
|
|
|
|
|
|
|
| ||||||||
September 30, 2017 |
| Operations |
| Operations |
| Operations |
| Other |
| Eliminations |
| Consolidated | ||||||||||||||||||||||||
March 31, 2018 |
| Operations |
| Operations |
| Operations |
| Other |
| Eliminations |
| Consolidated | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Net Sales - disaggregated revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
External |
| $ | 1,700,707 |
| $ | 301,422 |
| $ | 211,271 |
| $ | 101,057 |
| $ | - |
| $ | 2,314,457 |
| $ | 1,832,303 |
| $ | 329,872 |
| $ | 201,437 |
| $ | 92,471 |
| $ | - |
| $ | 2,456,083 |
External Non-U.S. |
|
| 82,098 |
| 46,793 |
| 34 |
| - |
|
| - |
|
| 128,925 |
|
| 89,486 |
| 58,250 |
| 56 |
| - |
|
| - |
|
| 147,792 | ||||||
Other segments |
|
| 65,321 |
|
| 360,982 |
|
| 89 |
|
| 116 |
|
| (426,508) |
|
| - |
|
| 59,985 |
|
| 364,644 |
|
| 210 |
|
| 147 |
|
| (424,986) |
|
| - |
|
|
| 1,848,126 |
|
| 709,197 |
|
| 211,394 |
|
| 101,173 |
|
| (426,508) |
|
| 2,443,382 |
|
| 1,981,774 |
|
| 752,766 |
|
| 201,703 |
|
| 92,618 |
|
| (424,986) |
|
| 2,603,875 |
Operating income (loss) |
|
| 276,547 |
|
| 17,624 |
|
| 21,862 |
|
| (44,326) | (1) |
| (692) |
|
| 271,015 |
|
| 334,562 |
|
| 24,715 |
|
| 19,791 |
|
| (55,406) | (1) |
| (265) |
|
| 323,397 |
Income (loss) before income taxes |
| 255,539 |
| 16,020 |
|
| 20,199 |
| (56,754) |
|
| (692) |
|
| 234,312 |
| 315,805 |
| 23,005 |
|
| 18,457 |
| (61,033) |
|
| (270) |
|
| 295,964 | ||||||
Depreciation and amortization |
| 57,644 |
| 12,020 |
| 2,866 |
| 2,680 |
|
| - |
|
| 75,210 |
| 59,141 |
| 11,558 |
| 2,898 |
| 2,538 |
|
| - |
|
| 76,135 | ||||||||
Capital expenditures |
| 31,654 |
| 8,589 |
| 1,524 |
| 1,028 |
|
| - |
|
| 42,795 |
| 38,402 |
| 6,946 |
| 2,077 |
| 3,181 |
|
| - |
|
| 50,606 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
As of September 30, 2017 |
|
|
|
| �� |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
As of March 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Assets |
| $ | 4,353,904 |
| $ | 1,032,018 |
| $ | 381,931 |
| $ | 1,346,968 | (2) | $ | (154,084) | (3) | $ | 6,960,737 |
| $ | 4,462,706 |
| $ | 1,006,510 |
| $ | 350,359 |
| $ | 1,250,869 | (2) | $ | (97,631) | (3) | $ | 6,972,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
| Footnotes related to the three months ended September 30, 2017, segment results (in millions): | ||||||||||||||||
Footnotes related to the three months ended March 31, 2018, segment results (in millions): | Footnotes related to the three months ended March 31, 2018, segment results (in millions): | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
(1) | Corporate SG&A | $ | (12.1) |
|
| (3) | Elimination of intra-company receivables | $ | (130.4) | Corporate SG&A | $ | (15.7) |
| (3) | Elimination of intra-company receivables | $ | (72.4) |
| Company-wide equity-based compensation |
| (6.8) |
|
|
| Elimination of intra-company debt |
| (10.7) | Company-wide equity-based compensation |
| (8.5) |
|
| Elimination of intra-company debt |
| (12.9) |
| Profit sharing |
| (20.2) |
|
|
| Other |
| (13.0) | Profit sharing |
| (25.6) |
|
| Other |
| (12.3) |
| Other, net |
| (5.2) |
|
|
|
| $ | (154.1) | Other, net |
| (5.6) |
|
|
| $ | (97.6) |
|
| $ | (44.3) |
|
|
|
|
|
|
| $ | (55.4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) | Cash and equivalents | $ | 1,065.9 |
|
|
|
|
| Cash and equivalents | $ | 970.5 |
|
|
|
| ||
| Accounts receivable |
| 14.0 |
|
|
|
|
| Short-term investments |
| 40.0 |
|
|
|
| ||
| Inventories |
| 42.8 |
|
|
|
|
| Inventories |
| 28.4 |
|
|
|
| ||
| Property, plant and equipment, net |
| 162.4 |
|
|
|
|
| Property, plant and equipment, net |
| 161.7 |
|
|
|
| ||
| Intra-company debt |
| 10.7 |
|
|
|
|
|
| Intra-company debt |
| 12.9 |
|
|
|
|
|
| Other |
| 51.2 |
|
|
|
|
|
| Other |
| 37.4 |
|
|
|
|
|
|
| $ | 1,347.0 |
|
|
|
|
|
|
| $ | 1,250.9 |
|
|
|
|
|
10
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 9. Segment Information (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
| Metals |
| Steel |
|
|
|
|
|
|
|
|
|
|
| Metals |
| Steel |
|
|
|
|
|
|
|
| ||||||||
For the three months ended |
| Steel |
| Recycling |
| Fabrication |
|
|
|
|
|
|
|
|
| Steel |
| Recycling |
| Fabrication |
|
|
|
|
|
|
|
| ||||||||
September 30, 2016 |
| Operations |
| Operations |
| Operations |
| Other |
| Eliminations |
| Consolidated | ||||||||||||||||||||||||
March 31, 2017 |
| Operations |
| Operations |
| Operations |
| Other |
| Eliminations |
| Consolidated | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Net Sales - disaggregated revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
External |
| $ | 1,502,726 |
| $ | 260,518 |
| $ | 177,341 |
| $ | 60,282 |
| $ | - |
| $ | 2,000,867 |
| $ | 1,633,630 |
| $ | 310,951 |
| $ | 194,035 |
| $ | 88,951 |
| $ | - |
| $ | 2,227,567 |
External Non-U.S. |
|
| 54,776 |
| 45,574 |
| 88 |
| 5 |
|
| - |
|
| 100,443 |
|
| 87,703 |
| 52,885 |
| 61 |
| - |
|
| - |
|
| 140,649 | ||||||
Other segments |
|
| 70,384 |
|
| 259,171 |
|
| 1,211 |
|
| 1,108 |
|
| (331,874) |
|
| - |
|
| 54,343 |
|
| 356,301 |
|
| 12 |
|
| 334 |
|
| (410,990) |
|
| - |
|
|
| 1,627,886 |
|
| 565,263 |
|
| 178,640 |
|
| 61,395 |
|
| (331,874) |
|
| 2,101,310 |
|
| 1,775,676 |
|
| 720,137 |
|
| 194,108 |
|
| 89,285 |
|
| (410,990) |
|
| 2,368,216 |
Operating income (loss) |
|
| 307,553 |
|
| 6,154 |
|
| 17,744 |
|
| (47,687) | (1) |
| 91 |
|
| 283,855 |
|
| 348,532 |
|
| 17,849 |
|
| 23,726 |
|
| (53,970) | (1) |
| (1,571) | (2) |
| 334,566 |
Income (loss) before income taxes |
| 285,131 |
| 2,437 |
|
| 15,645 |
| (59,999) |
|
| 91 |
|
| 243,305 |
| 326,764 |
| 16,072 |
|
| 22,339 |
| (59,352) |
|
| (1,571) |
|
| 304,252 | ||||||
Depreciation and amortization |
| 53,456 |
| 13,836 |
| 2,848 |
| 4,101 |
|
| (51) |
|
| 74,190 |
| 56,331 |
| 13,035 |
| 2,971 |
| 2,720 |
|
| - |
|
| 75,057 | ||||||||
Capital expenditures |
| 49,200 |
| 9,506 |
| 747 |
| 321 |
|
| - |
|
| 59,774 |
| 33,578 |
| 6,776 |
| 1,151 |
| 172 |
|
| - |
|
| 41,677 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Footnotes related to the three months ended September 30, 2016, segment results (in millions): | ||||||||||||||||
Footnotes related to the three months ended March 31, 2017, segment results (in millions): | Footnotes related to the three months ended March 31, 2017, segment results (in millions): | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Corporate SG&A | $ | (12.6) |
|
|
|
|
| Corporate SG&A | $ | (12.4) |
| (2) | Gross profit decrease from intra-company sales | $ | (1.6) |
| Company-wide equity-based compensation |
| (6.1) |
|
|
|
|
| Company-wide equity-based compensation |
| (9.6) |
|
|
|
|
|
| Profit sharing |
| (21.0) |
|
|
|
|
| Profit sharing |
| (26.5) |
|
|
|
|
|
| Other, net |
| (8.0) |
|
|
|
|
| Other, net |
| (5.5) |
|
|
|
|
|
|
| $ | (47.7) |
|
|
|
|
|
| $ | (54.0) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Metals |
| Steel |
|
|
|
|
|
|
|
|
| ||
For the nine months ended |
| Steel |
| Recycling |
| Fabrication |
|
|
|
|
|
|
|
|
| |||
September 30, 2017 |
| Operations |
| Operations |
| Operations |
| Other |
| Eliminations |
| Consolidated | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
| $ | 5,025,310 |
| $ | 910,830 |
| $ | 603,140 |
| $ | 281,091 |
| $ | - |
| $ | 6,820,371 |
External Non-U.S. |
|
| 237,070 |
|
| 144,750 |
|
| 127 |
|
| - |
|
| - |
|
| 381,947 |
Other segments |
|
| 183,374 |
|
| 1,067,770 |
|
| 244 |
|
| 1,065 |
|
| (1,252,453) |
|
| - |
|
|
| 5,445,754 |
|
| 2,123,350 |
|
| 603,511 |
|
| 282,156 |
|
| (1,252,453) |
|
| 7,202,318 |
Operating income (loss) |
|
| 895,008 |
|
| 51,968 |
|
| 65,735 |
|
| (141,406) | (1) |
| (371) |
|
| 870,934 |
Income (loss) before income taxes |
|
| 830,865 |
|
| 46,674 |
|
| 61,171 |
|
| (164,456) |
|
| (371) |
|
| 773,883 |
Depreciation and amortization |
|
| 170,125 |
|
| 37,048 |
|
| 8,743 |
|
| 8,152 |
|
| - |
|
| 224,068 |
Capital expenditures |
|
| 101,939 |
|
| 18,539 |
|
| 5,748 |
|
| 1,520 |
|
| - |
|
| 127,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes related to the nine months ended September 30, 2017, segment results (in millions): | ||||||||
|
|
|
|
|
|
|
|
|
(1) | Corporate SG&A | $ | (37.9) |
|
|
|
|
|
| Company-wide equity-based compensation |
| (23.5) |
|
|
|
|
|
| Profit sharing |
| (66.8) |
|
|
|
|
|
| Other, net |
| (13.2) |
|
|
|
|
|
|
| $ | (141.4) |
|
|
|
|
|
11
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 9. Segment Information (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Metals |
| Steel |
|
|
|
|
|
|
|
|
| ||
For the nine months ended |
| Steel |
| Recycling |
| Fabrication |
|
|
|
|
|
|
|
|
| |||
September 30, 2016 |
| Operations |
| Operations |
| Operations |
| Other |
| Eliminations |
| Consolidated | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
| $ | 4,068,688 |
| $ | 769,260 |
| $ | 527,859 |
| $ | 210,358 |
| $ | - |
| $ | 5,576,165 |
External Non-U.S. |
|
| 172,694 |
|
| 117,299 |
|
| 167 |
|
| 188 |
|
| - |
|
| 290,348 |
Other segments |
|
| 178,190 |
|
| 756,613 |
|
| 2,415 |
|
| 3,603 |
|
| (940,821) |
|
| - |
|
|
| 4,419,572 |
|
| 1,643,172 |
|
| 530,441 |
|
| 214,149 |
|
| (940,821) |
|
| 5,866,513 |
Operating income (loss) |
|
| 712,939 |
|
| 20,014 |
|
| 73,230 |
|
| (125,186) | (1) |
| (9,055) | (2) |
| 671,942 |
Income (loss) before income taxes |
|
| 645,189 |
|
| 10,300 |
|
| 67,175 |
|
| (152,296) |
|
| (9,055) |
|
| 561,313 |
Depreciation and amortization |
|
| 159,614 |
|
| 42,666 |
|
| 8,431 |
|
| 12,413 |
|
| (154) |
|
| 222,970 |
Capital expenditures |
|
| 103,202 |
|
| 17,068 |
|
| 1,918 |
|
| 980 |
|
| - |
|
| 123,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes related to the nine months ended September 30, 2016, segment results (in millions): | ||||||||
|
|
|
|
|
|
|
|
|
(1) | Corporate SG&A | $ | (38.5) |
| (2) | Gross profit decrease from intra-company sales | $ | (9.1) |
| Company-wide equity-based compensation |
| (20.4) |
|
|
|
|
|
| Profit sharing |
| (47.7) |
|
|
|
|
|
| Other, net |
| (18.6) |
|
|
|
|
|
|
| $ | (125.2) |
|
|
|
|
|
12
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 10. Condensed Consolidating Information
Certain 100% owned subsidiaries of SDI have fully and unconditionally guaranteed jointly and severally all of the indebtedness relating to the issuance of the company’s senior unsecured notes due 2021, 2023, 2024, 2025 and 2026. Following are the company’s condensed consolidating financial statements, including the guarantors, which 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 on a consolidated basis. The following statements should be read in conjunction with the accompanying consolidated financial statements and the company’s Annual Report on Form 10-K for the year ended December 31, 2016.2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Condensed Consolidating Balance Sheets (in thousands) | Condensed Consolidating Balance Sheets (in thousands) |
|
|
|
|
|
|
|
| Condensed Consolidating Balance Sheets (in thousands) |
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
| Combined |
| Consolidating |
| Total |
|
|
|
|
| Combined |
| Consolidating |
| Total | ||||||||||
As of September 30, 2017 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | ||||||||||||||||||||
As of March 31, 2018 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | ||||||||||||||||||||
Cash and equivalents |
| $ | 1,064,499 |
| $ | 32,968 |
| $ | 4,497 |
| $ | - |
| $ | 1,101,964 |
| $ | 969,240 |
| $ | 9,294 |
| $ | 7,290 |
| $ | - |
| $ | 985,824 |
Short term investments |
|
| 40,000 |
|
| - |
|
| - |
|
| - |
|
| 40,000 | |||||||||||||||
Accounts receivable, net |
| 294,753 |
|
| 1,450,968 |
|
| 48,082 |
|
| (870,786) |
|
| 923,017 |
| 349,276 |
|
| 1,475,249 |
|
| 33,922 |
|
| (870,792) |
|
| 987,655 | ||
Inventories |
| 669,076 |
|
| 754,526 |
|
| 72,990 |
|
| (9,076) |
|
| 1,487,516 |
| 743,939 |
|
| 804,504 |
|
| 59,192 |
|
| (7,577) |
|
| 1,600,058 | ||
Other current assets |
|
| 36,828 |
|
| 21,404 |
|
| 5,124 |
|
| (3,708) |
|
| 59,648 |
|
| 23,717 |
|
| 14,814 |
|
| 5,095 |
|
| (4,921) |
|
| 38,705 |
Total current assets |
|
| 2,065,156 |
|
| 2,259,866 |
|
| 130,693 |
|
| (883,570) |
|
| 3,572,145 |
|
| 2,126,172 |
|
| 2,303,861 |
|
| 105,499 |
|
| (883,290) |
|
| 3,652,242 |
Property, plant and equipment, net |
| 873,015 |
|
| 1,634,215 |
|
| 201,547 |
|
| - |
|
| 2,708,777 |
| 854,685 |
|
| 1,605,485 |
|
| 197,767 |
|
| - |
|
| 2,657,937 | ||
Intangible assets, net |
| - |
|
| 231,838 |
|
| 31,519 |
|
| - |
|
| 263,357 |
| - |
|
| 219,374 |
|
| 30,609 |
|
| - |
|
| 249,983 | ||
Goodwill |
| - |
|
| 380,695 |
|
| 7,823 |
|
| - |
|
| 388,518 |
| - |
|
| 378,221 |
|
| 7,824 |
|
| - |
|
| 386,045 | ||
Other assets, including investments in subs |
|
| 2,611,965 |
|
| 7,060 |
|
| 5,578 |
|
| (2,596,663) |
|
| 27,940 |
|
| 2,486,756 |
|
| 6,081 |
|
| 5,588 |
|
| (2,471,819) |
|
| 26,606 |
Total assets |
| $ | 5,550,136 |
| $ | 4,513,674 |
| $ | 377,160 |
| $ | (3,480,233) |
| $ | 6,960,737 |
| $ | 5,467,613 |
| $ | 4,513,022 |
| $ | 347,287 |
| $ | (3,355,109) |
| $ | 6,972,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 196,177 |
| $ | 348,347 |
| $ | 106,208 |
| $ | (122,049) |
| $ | 528,683 |
| $ | 185,459 |
| $ | 363,178 |
| $ | 87,276 |
| $ | (73,295) |
| $ | 562,618 |
Accrued expenses |
| 224,156 |
|
| 251,694 |
|
| 9,437 |
|
| (130,102) |
|
| 355,185 |
| 185,020 |
|
| 232,542 |
|
| 11,103 |
|
| (140,189) |
|
| 288,476 | ||
Current maturities of long-term debt |
|
| 167,840 |
|
| - |
|
| 40,482 |
|
| (25,661) |
|
| 182,661 |
|
| 746 |
|
| - |
|
| 36,761 |
|
| (27,861) |
|
| 9,646 |
Total current liabilities |
|
| 588,173 |
|
| 600,041 |
|
| 156,127 |
|
| (277,812) |
|
| 1,066,529 |
|
| 371,225 |
|
| 595,720 |
|
| 135,140 |
|
| (241,345) |
|
| 860,740 |
Long-term debt |
|
| 2,324,240 |
|
| - |
|
| 172,243 |
|
| (145,000) |
|
| 2,351,483 |
|
| 2,327,621 |
|
| - |
|
| 167,787 |
|
| (141,705) |
|
| 2,353,703 |
Other liabilities |
|
| (467,002) |
|
| 983,737 |
|
| 27,238 |
|
| (62,269) |
|
| 481,704 |
|
| (701,952) |
|
| 775,007 |
|
| 22,547 |
|
| 239,391 |
|
| 334,993 |
Total liabilities |
|
| 2,445,411 |
|
| 1,583,778 |
|
| 355,608 |
|
| (485,081) |
|
| 3,899,716 |
|
| 1,996,894 |
|
| 1,370,727 |
|
| 325,474 |
|
| (143,659) |
|
| 3,549,436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Redeemable noncontrolling interests |
| - |
|
| - |
|
| 111,240 |
|
| - |
|
| 111,240 |
| - |
|
| - |
|
| 111,240 |
|
| - |
|
| 111,240 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Common stock |
| 641 |
|
| 1,727,859 |
|
| 14,908 |
|
| (1,742,767) |
|
| 641 |
| 644 |
|
| 1,727,859 |
|
| 15,016 |
|
| (1,742,875) |
|
| 644 | ||
Treasury stock |
| (650,210) |
|
| - |
|
| - |
|
| - |
|
| (650,210) |
| (730,700) |
|
| - |
|
| - |
|
| - |
|
| (730,700) | ||
Additional paid-in-capital |
| 1,147,463 |
|
| 128,076 |
|
| 791,196 |
|
| (919,272) |
|
| 1,147,463 |
| 1,142,871 |
|
| 128,076 |
|
| 803,204 |
|
| (931,280) |
|
| 1,142,871 | ||
Retained earnings (deficit) |
|
| 2,606,831 |
|
| 1,073,961 |
|
| (740,848) |
|
| (333,113) |
|
| 2,606,831 |
|
| 3,057,904 |
|
| 1,286,360 |
|
| (749,065) |
|
| (537,295) |
|
| 3,057,904 |
Total Steel Dynamics, Inc. equity |
|
| 3,104,725 |
|
| 2,929,896 |
|
| 65,256 |
|
| (2,995,152) |
|
| 3,104,725 |
|
| 3,470,719 |
|
| 3,142,295 |
|
| 69,155 |
|
| (3,211,450) |
|
| 3,470,719 |
Noncontrolling interests |
|
| - |
|
| - |
|
| (154,944) |
|
| - |
|
| (154,944) |
|
| - |
|
| - |
|
| (158,582) |
|
| - |
|
| (158,582) |
Total equity |
|
| 3,104,725 |
|
| 2,929,896 |
|
| (89,688) |
|
| (2,995,152) |
|
| 2,949,781 |
|
| 3,470,719 |
|
| 3,142,295 |
|
| (89,427) |
|
| (3,211,450) |
|
| 3,312,137 |
Total liabilities and equity |
| $ | 5,550,136 |
| $ | 4,513,674 |
| $ | 377,160 |
| $ | (3,480,233) |
| $ | 6,960,737 |
| $ | 5,467,613 |
| $ | 4,513,022 |
| $ | 347,287 |
| $ | (3,355,109) |
| $ | 6,972,813 |
12
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 10. Condensed Consolidating Information (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Combined |
| Consolidating |
| Total | |||
As of December 31, 2017 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | |||||
Cash and equivalents |
| $ | 1,001,405 |
| $ | 20,441 |
| $ | 6,803 |
| $ | - |
| $ | 1,028,649 |
Accounts receivable, net |
|
| 274,968 |
|
| 1,426,036 |
|
| 37,387 |
|
| (869,554) |
|
| 868,837 |
Inventories |
|
| 685,103 |
|
| 752,151 |
|
| 91,890 |
|
| (9,797) |
|
| 1,519,347 |
Other current assets |
|
| 73,748 |
|
| 16,005 |
|
| 5,962 |
|
| (4,206) |
|
| 91,509 |
Total current assets |
|
| 2,035,224 |
|
| 2,214,633 |
|
| 142,042 |
|
| (883,557) |
|
| 3,508,342 |
Property, plant and equipment, net |
|
| 859,419 |
|
| 1,618,438 |
|
| 198,047 |
|
| - |
|
| 2,675,904 |
Intangible assets, net |
|
| - |
|
| 225,503 |
|
| 31,406 |
|
| - |
|
| 256,909 |
Goodwill |
|
| - |
|
| 379,069 |
|
| 7,824 |
|
| - |
|
| 386,893 |
Other assets, including investments in subs |
|
| 2,512,594 |
|
| 6,622 |
|
| 5,505 |
|
| (2,497,037) |
|
| 27,684 |
Total assets |
| $ | 5,407,237 |
| $ | 4,444,265 |
| $ | 384,824 |
| $ | (3,380,594) |
| $ | 6,855,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 168,282 |
| $ | 316,676 |
| $ | 101,948 |
| $ | (97,458) |
| $ | 489,448 |
Accrued expenses |
|
| 222,023 |
|
| 254,196 |
|
| 10,243 |
|
| (136,186) |
|
| 350,276 |
Current maturities of long-term debt |
|
| 731 |
|
| - |
|
| 56,454 |
|
| (28,390) |
|
| 28,795 |
Total current liabilities |
|
| 391,036 |
|
| 570,872 |
|
| 168,645 |
|
| (262,034) |
|
| 868,519 |
Long-term debt |
|
| 2,326,466 |
|
| - |
|
| 169,799 |
|
| (143,120) |
|
| 2,353,145 |
Other liabilities |
|
| (661,839) |
|
| 869,196 |
|
| 24,868 |
|
| 95,535 |
|
| 327,760 |
Total liabilities |
|
| 2,055,663 |
|
| 1,440,068 |
|
| 363,312 |
|
| (309,619) |
|
| 3,549,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests |
|
| - |
|
| - |
|
| 111,240 |
|
| - |
|
| 111,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
| 644 |
|
| 1,727,859 |
|
| 14,908 |
|
| (1,742,767) |
|
| 644 |
Treasury stock |
|
| (665,297) |
|
| - |
|
| - |
|
| - |
|
| (665,297) |
Additional paid-in-capital |
|
| 1,141,534 |
|
| 128,076 |
|
| 797,196 |
|
| (925,272) |
|
| 1,141,534 |
Retained earnings (deficit) |
|
| 2,874,693 |
|
| 1,148,262 |
|
| (745,326) |
|
| (402,936) |
|
| 2,874,693 |
Total Steel Dynamics, Inc. equity |
|
| 3,351,574 |
|
| 3,004,197 |
|
| 66,778 |
|
| (3,070,975) |
|
| 3,351,574 |
Noncontrolling interests |
|
| - |
|
| - |
|
| (156,506) |
|
| - |
|
| (156,506) |
Total equity |
|
| 3,351,574 |
|
| 3,004,197 |
|
| (89,728) |
|
| (3,070,975) |
|
| 3,195,068 |
Total liabilities and equity |
| $ | 5,407,237 |
| $ | 4,444,265 |
| $ | 384,824 |
| $ | (3,380,594) |
| $ | 6,855,732 |
13
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 10. Condensed Consolidating Information (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Combined |
| Consolidating |
| Total | |||
As of December 31, 2016 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | |||||
Cash and equivalents |
| $ | 766,685 |
| $ | 54,677 |
| $ | 20,121 |
| $ | - |
| $ | 841,483 |
Accounts receivable, net |
|
| 229,148 |
|
| 1,257,245 |
|
| 23,689 |
|
| (780,298) |
|
| 729,784 |
Inventories |
|
| 587,319 |
|
| 639,148 |
|
| 58,696 |
|
| (9,952) |
|
| 1,275,211 |
Other current assets |
|
| 45,049 |
|
| 36,062 |
|
| 4,447 |
|
| (2,361) |
|
| 83,197 |
Total current assets |
|
| 1,628,201 |
|
| 1,987,132 |
|
| 106,953 |
|
| (792,611) |
|
| 2,929,675 |
Property, plant and equipment, net |
|
| 899,370 |
|
| 1,679,751 |
|
| 208,094 |
|
| - |
|
| 2,787,215 |
Intangible assets, net |
|
| - |
|
| 251,919 |
|
| 32,058 |
|
| - |
|
| 283,977 |
Goodwill |
|
| - |
|
| 385,527 |
|
| 7,824 |
|
| - |
|
| 393,351 |
Other assets, including investments in subs |
|
| 2,769,884 |
|
| 7,335 |
|
| 5,832 |
|
| (2,753,537) |
|
| 29,514 |
Total assets |
| $ | 5,297,455 |
| $ | 4,311,664 |
| $ | 360,761 |
| $ | (3,546,148) |
| $ | 6,423,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 141,089 |
| $ | 265,764 |
| $ | 89,659 |
| $ | (101,316) |
| $ | 395,196 |
Accrued expenses |
|
| 198,085 |
|
| 220,917 |
|
| 8,793 |
|
| (113,808) |
|
| 313,987 |
Current maturities of long-term debt |
|
| 674 |
|
| 700 |
|
| 29,347 |
|
| (27,089) |
|
| 3,632 |
Total current liabilities |
|
| 339,848 |
|
| 487,381 |
|
| 127,799 |
|
| (242,213) |
|
| 712,815 |
Long-term debt |
|
| 2,324,298 |
|
| - |
|
| 168,566 |
|
| (139,670) |
|
| 2,353,194 |
Other liabilities |
|
| (293,711) |
|
| 1,219,444 |
|
| 42,482 |
|
| (499,191) |
|
| 469,024 |
Total liabilities |
|
| 2,370,435 |
|
| 1,706,825 |
|
| 338,847 |
|
| (881,074) |
|
| 3,535,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests |
|
| - |
|
| - |
|
| 111,240 |
|
| - |
|
| 111,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
| 641 |
|
| 1,727,859 |
|
| 14,908 |
|
| (1,742,767) |
|
| 641 |
Treasury stock |
|
| (416,829) |
|
| - |
|
| - |
|
| - |
|
| (416,829) |
Additional paid-in-capital |
|
| 1,132,749 |
|
| 128,076 |
|
| 779,678 |
|
| (907,754) |
|
| 1,132,749 |
Retained earnings (deficit) |
|
| 2,210,459 |
|
| 748,904 |
|
| (734,351) |
|
| (14,553) |
|
| 2,210,459 |
Total Steel Dynamics, Inc. equity |
|
| 2,927,020 |
|
| 2,604,839 |
|
| 60,235 |
|
| (2,665,074) |
|
| 2,927,020 |
Noncontrolling interests |
|
| - |
|
| - |
|
| (149,561) |
|
| - |
|
| (149,561) |
Total equity |
|
| 2,927,020 |
|
| 2,604,839 |
|
| (89,326) |
|
| (2,665,074) |
|
| 2,777,459 |
Total liabilities and equity |
| $ | 5,297,455 |
| $ | 4,311,664 |
| $ | 360,761 |
| $ | (3,546,148) |
| $ | 6,423,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Operations (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended, |
|
|
|
|
|
|
| Combined |
| Consolidating |
| Total | |||
March 31, 2018 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | |||||
Net sales |
| $ | 1,036,674 |
| $ | 2,823,129 |
| $ | 152,587 |
| $ | (1,408,515) |
| $ | 2,603,875 |
Costs of goods sold |
|
| 819,145 |
|
| 2,551,620 |
|
| 148,630 |
|
| (1,378,936) |
|
| 2,140,459 |
Gross profit |
|
| 217,529 |
|
| 271,509 |
|
| 3,957 |
|
| (29,579) |
|
| 463,416 |
Selling, general and administrative |
|
| 62,927 |
|
| 76,952 |
|
| 5,597 |
|
| (5,457) |
|
| 140,019 |
Operating income (loss) |
|
| 154,602 |
|
| 194,557 |
|
| (1,640) |
|
| (24,122) |
|
| 323,397 |
Interest expense, net of capitalized interest |
|
| 18,623 |
|
| 12,437 |
|
| 3,540 |
|
| (2,704) |
|
| 31,896 |
Other expense (income), net |
|
| (5,203) |
|
| (1,697) |
|
| (273) |
|
| 2,710 |
|
| (4,463) |
Income (loss) before income taxes and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equity in net income of subsidiaries |
|
| 141,182 |
|
| 183,817 |
|
| (4,907) |
|
| (24,128) |
|
| 295,964 |
Income taxes |
|
| 29,746 |
|
| 45,720 |
|
| 909 |
|
| (5,886) |
|
| 70,489 |
|
|
| 111,436 |
|
| 138,097 |
|
| (5,816) |
|
| (18,242) |
|
| 225,475 |
Equity in net income of subsidiaries |
|
| 116,115 |
|
| - |
|
| - |
|
| (116,115) |
|
| - |
Net loss attributable to noncontrolling interests |
|
| - |
|
| - |
|
| 2,076 |
|
| - |
|
| 2,076 |
Net income (loss) attributable to Steel Dynamics, Inc. |
| $ | 227,551 |
| $ | 138,097 |
| $ | (3,740) |
| $ | (134,357) |
| $ | 227,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended, |
|
|
|
|
|
|
| Combined |
| Consolidating |
| Total | |||
March 31, 2017 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | |||||
Net sales |
| $ | 924,566 |
| $ | 2,572,238 |
| $ | 143,408 |
| $ | (1,271,996) |
| $ | 2,368,216 |
Costs of goods sold |
|
| 711,579 |
|
| 2,289,664 |
|
| 138,041 |
|
| (1,243,222) |
|
| 1,896,062 |
Gross profit |
|
| 212,987 |
|
| 282,574 |
|
| 5,367 |
|
| (28,774) |
|
| 472,154 |
Selling, general and administrative |
|
| 61,655 |
|
| 76,282 |
|
| 5,053 |
|
| (5,402) |
|
| 137,588 |
Operating income |
|
| 151,332 |
|
| 206,292 |
|
| 314 |
|
| (23,372) |
|
| 334,566 |
Interest expense, net of capitalized interest |
|
| 18,081 |
|
| 15,123 |
|
| 3,266 |
|
| (2,497) |
|
| 33,973 |
Other expense (income), net |
|
| (3,254) |
|
| (2,667) |
|
| (236) |
|
| 2,498 |
|
| (3,659) |
Income (loss) before income taxes and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equity in net income of subsidiaries |
|
| 136,505 |
|
| 193,836 |
|
| (2,716) |
|
| (23,373) |
|
| 304,252 |
Income taxes |
|
| 41,585 |
|
| 70,311 |
|
| 1,790 |
|
| (8,100) |
|
| 105,586 |
|
|
| 94,920 |
|
| 123,525 |
|
| (4,506) |
|
| (15,273) |
|
| 198,666 |
Equity in net income of subsidiaries |
|
| 105,897 |
|
| - |
|
| - |
|
| (105,897) |
|
| - |
Net loss attributable to noncontrolling interests |
|
| - |
|
| - |
|
| 2,151 |
|
| - |
|
| 2,151 |
Net income (loss) attributable to Steel Dynamics, Inc. |
| $ | 200,817 |
| $ | 123,525 |
| $ | (2,355) |
| $ | (121,170) |
| $ | 200,817 |
14
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 10. Condensed Consolidating Information (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Operations (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended, |
|
|
|
|
|
|
| Combined |
| Consolidating |
| Total | |||
September 30, 2017 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | |||||
Net sales |
| $ | 946,136 |
| $ | 2,641,067 |
| $ | 161,556 |
| $ | (1,305,377) |
| $ | 2,443,382 |
Costs of goods sold |
|
| 763,310 |
|
| 2,402,670 |
|
| 157,564 |
|
| (1,276,680) |
|
| 2,046,864 |
Gross profit |
|
| 182,826 |
|
| 238,397 |
|
| 3,992 |
|
| (28,697) |
|
| 396,518 |
Selling, general and administrative |
|
| 51,464 |
|
| 74,151 |
|
| 4,896 |
|
| (5,008) |
|
| 125,503 |
Operating income (loss) |
|
| 131,362 |
|
| 164,246 |
|
| (904) |
|
| (23,689) |
|
| 271,015 |
Interest expense, net of capitalized interest |
|
| 18,831 |
|
| 14,481 |
|
| 3,181 |
|
| (2,316) |
|
| 34,177 |
Other (income) expense, net |
|
| 2,660 |
|
| (2,492) |
|
| 42 |
|
| 2,316 |
|
| 2,526 |
Income (loss) before income taxes and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equity in net income of subsidiaries |
|
| 109,871 |
|
| 152,257 |
|
| (4,127) |
|
| (23,689) |
|
| 234,312 |
Income taxes |
|
| 35,309 |
|
| 55,183 |
|
| 1,169 |
|
| (8,361) |
|
| 83,300 |
|
|
| 74,562 |
|
| 97,074 |
|
| (5,296) |
|
| (15,328) |
|
| 151,012 |
Equity in net income of subsidiaries |
|
| 78,696 |
|
| - |
|
| - |
|
| (78,696) |
|
| - |
Net loss attributable to noncontrolling interests |
|
| - |
|
| - |
|
| 2,246 |
|
| - |
|
| 2,246 |
Net income (loss) attributable to Steel Dynamics, Inc. |
| $ | 153,258 |
| $ | 97,074 |
| $ | (3,050) |
| $ | (94,024) |
| $ | 153,258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended, |
|
|
|
|
|
|
| Combined |
| Consolidating |
| Total | |||
September 30, 2016 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | |||||
Net sales |
| $ | 845,585 |
| $ | 2,258,466 |
| $ | 96,409 |
| $ | (1,099,150) |
| $ | 2,101,310 |
Costs of goods sold |
|
| 647,983 |
|
| 2,016,874 |
|
| 100,470 |
|
| (1,072,520) |
|
| 1,692,807 |
Gross profit (loss) |
|
| 197,602 |
|
| 241,592 |
|
| (4,061) |
|
| (26,630) |
|
| 408,503 |
Selling, general and administrative |
|
| 52,995 |
|
| 72,605 |
|
| 4,134 |
|
| (5,086) |
|
| 124,648 |
Operating income (loss) |
|
| 144,607 |
|
| 168,987 |
|
| (8,195) |
|
| (21,544) |
|
| 283,855 |
Interest expense, net of capitalized interest |
|
| 17,818 |
|
| 17,741 |
|
| 2,847 |
|
| (2,207) |
|
| 36,199 |
Other (income) expense, net |
|
| 2,342 |
|
| 3,937 |
|
| (4,135) |
|
| 2,207 |
|
| 4,351 |
Income (loss) before income taxes and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equity in net income of subsidiaries |
|
| 124,447 |
|
| 147,309 |
|
| (6,907) |
|
| (21,544) |
|
| 243,305 |
Income taxes |
|
| 40,242 |
|
| 55,684 |
|
| 797 |
|
| (7,831) |
|
| 88,892 |
|
|
| 84,205 |
|
| 91,625 |
|
| (7,704) |
|
| (13,713) |
|
| 154,413 |
Equity in net income of subsidiaries |
|
| 73,192 |
|
| - |
|
| - |
|
| (73,192) |
|
| - |
Net loss attributable to noncontrolling interests |
|
| - |
|
| - |
|
| 2,984 |
|
| - |
|
| 2,984 |
Net income (loss) attributable to Steel Dynamics, Inc. |
| $ | 157,397 |
| $ | 91,625 |
| $ | (4,720) |
| $ | (86,905) |
| $ | 157,397 |
15
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 10. Condensed Consolidating Information (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended, |
|
|
|
|
|
|
| Combined |
| Consolidating |
| Total | |||
September 30, 2017 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | |||||
Net sales |
| $ | 2,797,557 |
| $ | 7,827,981 |
| $ | 449,902 |
| $ | (3,873,122) |
| $ | 7,202,318 |
Costs of goods sold |
|
| 2,241,936 |
|
| 7,054,938 |
|
| 432,657 |
|
| (3,788,403) |
|
| 5,941,128 |
Gross profit (loss) |
|
| 555,621 |
|
| 773,043 |
|
| 17,245 |
|
| (84,719) |
|
| 1,261,190 |
Selling, general and administrative |
|
| 164,061 |
|
| 226,153 |
|
| 15,253 |
|
| (15,211) |
|
| 390,256 |
Operating income (loss) |
|
| 391,560 |
|
| 546,890 |
|
| 1,992 |
|
| (69,508) |
|
| 870,934 |
Interest expense, net of capitalized interest |
|
| 55,353 |
|
| 44,245 |
|
| 9,494 |
|
| (7,073) |
|
| 102,019 |
Other (income) expense, net |
|
| (4,463) |
|
| (7,305) |
|
| (273) |
|
| 7,073 |
|
| (4,968) |
Income (loss) before income taxes and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equity in net income of subsidiaries |
|
| 340,670 |
|
| 509,950 |
|
| (7,229) |
|
| (69,508) |
|
| 773,883 |
Income taxes |
|
| 106,036 |
|
| 184,891 |
|
| 4,651 |
|
| (24,320) |
|
| 271,258 |
|
|
| 234,634 |
|
| 325,059 |
|
| (11,880) |
|
| (45,188) |
|
| 502,625 |
Equity in net income of subsidiaries |
|
| 273,374 |
|
| - |
|
| - |
|
| (273,374) |
|
| - |
Net loss attributable to noncontrolling interests |
|
| - |
|
| - |
|
| 5,383 |
|
| - |
|
| 5,383 |
Net income (loss) attributable to Steel Dynamics, Inc. |
| $ | 508,008 |
| $ | 325,059 |
| $ | (6,497) |
| $ | (318,562) |
| $ | 508,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended, |
|
|
|
|
|
|
| Combined |
| Consolidating |
| Total | |||
September 30, 2016 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | |||||
Net sales |
| $ | 2,297,389 |
| $ | 6,322,158 |
| $ | 271,694 |
| $ | (3,024,728) |
| $ | 5,866,513 |
Costs of goods sold |
|
| 1,823,408 |
|
| 5,676,265 |
|
| 286,486 |
|
| (2,944,568) |
|
| 4,841,591 |
Gross profit (loss) |
|
| 473,981 |
|
| 645,893 |
|
| (14,792) |
|
| (80,160) |
|
| 1,024,922 |
Selling, general and administrative |
|
| 145,596 |
|
| 212,613 |
|
| 9,352 |
|
| (14,581) |
|
| 352,980 |
Operating income (loss) |
|
| 328,385 |
|
| 433,280 |
|
| (24,144) |
|
| (65,579) |
|
| 671,942 |
Interest expense, net of capitalized interest |
|
| 53,842 |
|
| 54,493 |
|
| 7,558 |
|
| (6,005) |
|
| 109,888 |
Other (income) expense, net |
|
| (2,137) |
|
| 8,012 |
|
| (11,139) |
|
| 6,005 |
|
| 741 |
Income (loss) before income taxes and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equity in net income of subsidiaries |
|
| 276,680 |
|
| 370,775 |
|
| (20,563) |
|
| (65,579) |
|
| 561,313 |
Income taxes (benefit) |
|
| 89,210 |
|
| 139,958 |
|
| (63) |
|
| (23,966) |
|
| 205,139 |
|
|
| 187,470 |
|
| 230,817 |
|
| (20,500) |
|
| (41,613) |
|
| 356,174 |
Equity in net income of subsidiaries |
|
| 174,633 |
|
| - |
|
| - |
|
| (174,633) |
|
| - |
Net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
| 5,929 |
|
|
|
|
| 5,929 |
Net income (loss) attributable to Steel Dynamics, Inc. |
| $ | 362,103 |
| $ | 230,817 |
| $ | (14,571) |
| $ | (216,246) |
| $ | 362,103 |
16
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 10. Condensed Consolidating Information (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Cash Flows (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended, |
|
|
|
|
|
|
| Combined |
| Consolidating |
| Total | |||
September 30, 2017 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used in) by operating activities |
| $ | 126,267 |
| $ | 434,450 |
| $ | (17,762) |
| $ | 4,650 |
| $ | 547,605 |
Net cash used in investing activities |
|
| (48,799) |
|
| (50,975) |
|
| (7,006) |
|
| 3,902 |
|
| (102,878) |
Net cash provided by (used in) financing activities |
|
| 220,346 |
|
| (405,184) |
|
| 9,144 |
|
| (8,552) |
|
| (184,246) |
Increase (decrease) in cash and equivalents |
|
| 297,814 |
|
| (21,709) |
|
| (15,624) |
|
| - |
|
| 260,481 |
Cash and equivalents at beginning of period |
|
| 766,685 |
|
| 54,677 |
|
| 20,121 |
|
| - |
|
| 841,483 |
Cash and equivalents at end of period |
| $ | 1,064,499 |
| $ | 32,968 |
| $ | 4,497 |
| $ | - |
| $ | 1,101,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Cash Flows (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended, |
|
|
|
|
|
|
| Combined |
| Consolidating |
| Total | |||
March 31, 2018 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | |||||
Net cash provided by operating activities |
| $ | 9,009 |
| $ | 149,336 |
| $ | 21,283 |
| $ | (1,693) |
| $ | 177,935 |
Net cash used in investing activities |
|
| (60,919) |
|
| (24,517) |
|
| (2,997) |
|
| (1,944) |
|
| (90,377) |
Net cash provided by (used in) financing activities |
|
| 18,920 |
|
| (135,966) |
|
| (17,813) |
|
| 3,637 |
|
| (131,222) |
Increase (decrease) in cash and equivalents |
|
| (32,990) |
|
| (11,147) |
|
| 473 |
|
| - |
|
| (43,664) |
Cash, cash equivalents, and restricted cash at beginning of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
period |
|
| 1,002,230 |
|
| 20,740 |
|
| 12,115 |
|
| - |
|
| 1,035,085 |
Cash, cash equivalents, and restricted cash at end of period |
| $ | 969,240 |
| $ | 9,593 |
| $ | 12,588 |
| $ | - |
| $ | 991,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended, |
|
|
|
|
|
|
| Combined |
| Consolidating |
| Total | |||
September 30, 2016 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
| $ | 282,918 |
| $ | 358,657 |
| $ | 52 |
| $ | 3,735 |
| $ | 645,362 |
Net cash used in investing activities |
|
| (143,427) |
|
| (81,983) |
|
| (3,935) |
|
| 2,879 |
|
| (226,466) |
Net cash provided by (used in) financing activities |
|
| 196,242 |
|
| (297,596) |
|
| 13,529 |
|
| (6,614) |
|
| (94,439) |
Increase (decrease) in cash and equivalents |
|
| 335,733 |
|
| (20,922) |
|
| 9,646 |
|
| - |
|
| 324,457 |
Cash and equivalents at beginning of period |
|
| 636,877 |
|
| 81,976 |
|
| 8,179 |
|
| - |
|
| 727,032 |
Cash and equivalents at end of period |
| $ | 972,610 |
| $ | 61,054 |
| $ | 17,825 |
| $ | - |
| $ | 1,051,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended, |
|
|
|
|
|
|
| Combined |
| Consolidating |
| Total | |||
March 31, 2017 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | |||||
Net cash provided by (used in) operating activities |
| $ | 102,209 |
| $ | 132,733 |
| $ | (877) |
| $ | 6,365 |
| $ | 240,430 |
Net cash used in investing activities |
|
| (19,409) |
|
| (1,510) |
|
| (192) |
|
| 6,352 |
|
| (14,759) |
Net cash provided by (used in) financing activities |
|
| 86,776 |
|
| (174,914) |
|
| 508 |
|
| (12,717) |
|
| (100,347) |
Increase (decrease) in cash and equivalents |
|
| 169,576 |
|
| (43,691) |
|
| (561) |
|
| - |
|
| 125,324 |
Cash, cash equivalents, and restricted cash at beginning of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
period |
|
| 767,594 |
|
| 54,859 |
|
| 25,652 |
|
| - |
|
| 848,105 |
Cash, cash equivalents, and restricted cash at end of period |
| $ | 937,170 |
| $ | 11,168 |
| $ | 25,091 |
| $ | - |
| $ | 973,429 |
1715
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This report contains some predictive statements about future events, including statements related to conditions in the steel and metallic scrap markets, Steel Dynamics’ revenues, costs of purchased materials, future profitability and earnings, and the operation of new or existing facilities. These statements, which we generally precede or accompany by such typical conditional words as "anticipate," "intend," "believe," "estimate," "plan," "seek," "project" or "expect," or by the words "may," "will," or "should," are intended to be made as “forward-looking,” subject to many risks and uncertainties, within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These statements speak only as of this date and are based upon information and assumptions, which we consider reasonable as of this date, concerning our businesses and the environments in which they operate. Such predictive statements are not guarantees of future performance, and we undertake no duty to update or revise any such statements. Some factors that could cause such forward-looking statements to turn out differently than anticipated include: (1) the effects of uncertain economic conditions; (2) cyclical and changing industrial demand; (3) changes in conditions in any of the steel or scrap-consuming sectors of the economy which affect demand for our products, including the strength of the non-residential and residential construction, automotive, manufacturing, appliance, pipe and tube, and other steel-consuming industries; (4) fluctuations in the cost of key raw materials and supplies (including steel scrap, iron units, and energy costs) and our ability to pass on any cost increases; (5) the impact of domestic and foreign import price competition; (6) unanticipated difficulties in integrating or starting up new or acquired businesses; (7) risks and uncertainties involving product and/or technology development; and (8) occurrences of unexpected plant outages or equipment failures.
More specifically, we refer you to our more detailed explanation of these and other factors and risks that may cause such predictive statements to turn out differently, as set forth in our most recent Annual Report on Form 10-K under the headings Special Note Regarding Forward-Looking Statements and Risk Factors, in our most recent Annual Report on Form 10-K for the year ended December 31, 2016,2017, in our quarterly reports on Form 10-Q, or in other reports which we from time to time file with the Securities and Exchange Commission. These reports are available publicly on the Securities and Exchange Commission website, www.sec.gov, and on our website, www.steeldynamics.com under “Investors – SEC Filings.”
Description of the Business
We are one of the largest domestic steel producers and metal recyclers in the United States based on current estimated annual steelmaking and coating capacity of 11 million tons and actual metals recycling volumes.capability, with facilities located throughout the United States, and in Mexico. The primary source of revenues are from the manufacture and sale of steel products, processing and sale of recycled ferrous and nonferrous metals, and fabrication and sale of steel joists and deck products. We have three reportable segments: steel operations, metals recycling operations, and steel fabrication operations.
Operating Statement Classifications
Net Sales. Net sales from our operations are a factor of volumes shipped, product mix and related pricing. We charge premium prices for certain grades of steel, product dimensions, certain smaller volumes, and for value-added processing or coating of theour steel products. Except for the steel fabrication operations, we recognize revenues from sales and the allowance for estimated returns and claims from these sales at the point in time the titlecontrol of the product transfers to the customer, upon shipment. Provision is made for estimated product returns and customer claims based on historical experience. If the historical data used in the estimates does not reflect future returns and claims trends, additional provision may be necessary.shipment or delivery. Our steel fabrication operations recognizes revenues from construction contracts utilizing a percentage of completion methodologyover time based on steelcompleted fabricated tons used on completed units to date as a percentage of estimated total steel tons required for each contract.
Costs of Goods Sold. Our costs of goods sold represent all direct and indirect costs associated with the manufacture of our products. The principal elements of these costs are scrap and scrap substitutes (which represent the most significant single component of our consolidated costs of goods sold), steel, direct and indirect labor and related benefits, alloys, zinc, transportation and freight, repairs and maintenance, utilities such as electricity and natural gas, and depreciation.
Selling, General and Administrative Expenses. Selling, general and administrative expenses consist of all costs associated with our sales, finance and accounting, and administrative departments. These costs include, among other items, labor and related benefits, professional services, insurance premiums, and property taxes, company-widetaxes. Company-wide profit sharing and amortization of intangible assets.assets are each separately presented in the statement of operations.
Interest Expense, net of Capitalized Interest. Interest expense consists of interest associated with our senior credit facilities and other debt net of interest costs that are required to be capitalized during the construction period of certain capital investment projects.
Other Expense (Income), net. Other income consists of interest income earned on our temporary cash deposits and short term investments; any other non-operating income activity, including income from non-consolidated investments accounted for under the equity method. Other expense consists of any non-operating costs, such as certain acquisition and financing expenses.
Results Overview
Consolidated operating income decreased $12.8 million, or 5%, to $271.0 million for the third quarter 2017, compared to the third quarter 2016. Third quarter 2017 net income attributable to Steel Dynamics, Inc. decreased $4.1 million, or 3%, to $153.3 million, compared to the third quarter 2016.
1816
Results Overview
Our consolidated results for the first quarter of 2018 benefited from continued strong demand in each of our three operating segments. Steel operations achieved record shipments and increased average selling prices in first quarter 2018 compared to the same quarter in 2017, while our metals recycling operations benefited from increased average selling prices, more than offsetting the impact of lower shipments resulting from the mid-March 2017 sale of some non-core locations. The non-residential construction market remained strong, resulting in consistent year over year shipments for our steel fabrication operations, with average selling prices continuing to rise. While our metals recycling operations was able to achieve substantial growth in operating income, both steel and steel fabrication operations experienced slight decreases in operating income due to increases in operating expenses which outpaced modestly higher metal spreads in both segments.
Consolidated operating income increased $199.0decreased $11.2 million, or 30%3%, to $870.9$323.4 million for the first nine months of 2017,quarter 2018, compared to $671.9 million for the first nine months of 2016.quarter 2017. First nine months 2017quarter 2018 net income attributable to Steel Dynamics, Inc. increased $145.9$26.7 million, or 40%13%, to $508.0$227.6 million, compared to the first nine months of 2016.
Our consolidated results forquarter 2017, with the thirdreduction in the effective income tax rate to 23.8% in the first quarter and2018 from 34.7% in the first nine months of 2017 benefited from continued strong demand primarily for our sheet and special-bar-quality steel products coupled with continued low customer inventory levels. However, increased import levels continued hindering the ability of domestic steel prices to keep pace with raw material costs. Decreased scrap volumes for our metals recycling operations were offset by improved pricing and ferrous metal spreads and reduced operating expenses, resulting in significantly increased operating income during the 2017 third quarter and year-to-date periods compared to the same periods in 2016. The non-residential construction market remained strong, resulting in record quarterly shipments for our steel fabrication operations for the third straight quarter. 2017.
Segment Operating Results 2017 vs. 2016 (dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
| Three Months Ended September 30, |
| Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||
| 2017 |
| % Change |
|
| 2016 |
| 2017 |
| % Change |
| 2016 | 2018 |
| % Change |
|
| 2017 | ||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel Operations Segment | $ | 1,848,126 |
| 14% |
| $ | 1,627,886 |
| $ | 5,445,754 |
| 23% |
| $ | 4,419,572 | $ | 1,981,774 |
| 12% |
| $ | 1,775,676 |
Metals Recycling Operations Segment |
| 709,197 |
| 25% |
|
| 565,263 |
|
| 2,123,350 |
| 29% |
|
| 1,643,172 |
| 752,766 |
| 5% |
|
| 720,137 |
Steel Fabrication Operations Segment |
| 211,394 |
| 18% |
|
| 178,640 |
|
| 603,511 |
| 14% |
|
| 530,441 |
| 201,703 |
| 4% |
|
| 194,108 |
Other |
| 101,173 |
| 65% |
|
| 61,395 |
|
| 282,156 |
| 32% |
|
| 214,149 |
| 92,618 |
| 4% |
|
| 89,285 |
|
| 2,869,890 |
|
|
|
| 2,433,184 |
|
| 8,454,771 |
|
|
|
| 6,807,334 |
| 3,028,861 |
|
|
|
| 2,779,206 |
Intra-company |
| (426,508) |
|
|
|
| (331,874) |
|
| (1,252,453) |
|
|
|
| (940,821) |
| (424,986) |
|
|
|
| (410,990) |
| $ | 2,443,382 |
| 16% |
| $ | 2,101,310 |
| $ | 7,202,318 |
| 23% |
| $ | 5,866,513 | $ | 2,603,875 |
| 10% |
| $ | 2,368,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Steel Operations Segment | $ | 276,547 |
| (10)% |
| $ | 307,553 |
| $ | 895,008 |
| 26% |
| $ | 712,939 | $ | 334,562 |
| (4)% |
| $ | 348,532 |
Metals Recycling Operations Segment |
| 17,624 |
| 186% |
|
| 6,154 |
|
| 51,968 |
| 160% |
|
| 20,014 |
| 24,715 |
| 38% |
|
| 17,849 |
Steel Fabrication Operations Segment |
| 21,862 |
| 23% |
|
| 17,744 |
|
| 65,735 |
| (10)% |
|
| 73,230 |
| 19,791 |
| (17)% |
|
| 23,726 |
Other |
| (44,326) |
| 7% |
|
| (47,687) |
|
| (141,406) |
| (13)% |
|
| (125,186) |
| (55,406) |
| (3)% |
|
| (53,970) |
|
| 271,707 |
|
|
|
| 283,764 |
|
| 871,305 |
|
|
|
| 680,997 |
| 323,662 |
|
|
|
| 336,137 |
Intra-company |
| (692) |
|
|
|
| 91 |
|
| (371) |
|
|
|
| (9,055) |
| (265) |
|
|
|
| (1,571) |
| $ | 271,015 |
| (5)% |
| $ | 283,855 |
| $ | 870,934 |
| 30% |
| $ | 671,942 | $ | 323,397 |
| (3)% |
| $ | 334,566 |
|
Steel Operations Segment |
Steel Operations Segment. Steel operations consist of our six electric arc furnace steel mills, producing sheet and long products steel from ferrous scrap and scrap substitutes, utilizing continuous casting, automated rolling mills and elevenwith several downstream steel coating lines, and several bar processing lines, as well as Iron Dynamics,IDI, our liquid pig iron production facility that supplies solely the Butler Flat Roll Division. Our steel operations sell a diverse portfolio of sheet and long products directly to end-users, steel fabricators, and service centers. These products are used in numerous industry sectors, including the construction, automotive, manufacturing, transportation, heavy equipment and agriculture, equipment, and pipe and tube (including OCTG) markets. Steel operations accounted for 73%74% and 74% of our consolidated external net sales during the third quarter of 2017 and 2016, respectively, and 73% and 72% of our consolidated external net sales during the first nine monthsquarter of 20172018 and 2016,2017, respectively.
Sheet Steel Products. Our sheet steel products operations consist of Butler and Columbus Flat Roll Divisions, and downstream coating lines. These operations sell a broad range of sheet steel products, consisting of hot roll, cold roll and coated steel products, including a wide variety of specialty products, such as light gauge hot roll, galvanized, Galvalume®, and painted products. The Techs is comprised of three galvanizing lines which sell specialized galvanized sheet steels used in primarily non-automotive applications.
Long Products. Our Structural and Rail Division sells structural steel beams and pilings to the construction market, as well as standard‑grade and premium rail to the railroad industry. Our Engineered Bar Products Division primarily sells engineered special-bar-quality, merchant-bar-quality, round‑cornered squares, and smaller-diameter engineered round bars. Vulcan Threaded Products produces threaded rod products and also cold drawn and heat treated bar. Our Roanoke Bar Division primarily sells merchant steel products, including angles, merchant rounds, flats and channels, and reinforcing bar. Steel of West Virginia primarily sells beams, channels and specialty steel sections.
1917
Steel Operations Segment Shipments (tons):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||
| 2017 |
| % Change |
| 2016 |
| 2017 |
| % Change |
| 2016 | 2018 |
| % Change |
| 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shipments | 2,458,992 |
| 8% |
| 2,271,230 |
| 7,362,636 |
| 5% |
| 7,039,801 | 2,534,644 |
| 2% |
| 2,481,747 |
Intra-segment shipments | (88,211) |
|
|
| (65,438) |
| (279,567) |
|
|
| (216,217) | (121,653) |
|
|
| (102,785) |
Steel Operations Segment Shipments | 2,370,781 |
| 7% |
| 2,205,792 |
| 7,083,069 |
| 4% |
| 6,823,584 | 2,412,991 |
| 1% |
| 2,378,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External shipments | 2,279,228 |
| 8% |
| 2,104,219 |
| 6,830,877 |
| 5% |
| 6,517,253 | 2,327,515 |
| 1% |
| 2,305,080 |
Segment Results 20172018 vs. 20162017
Overall domestic steel demandconsumption remained strong, but elevated levels of steel imports persisted duringparticularly within the quarter, hindering the ability for domestic steel pricesautomotive and construction sectors, while energy and general industrial demand continued to keep pace with raw material costs.grow. Steel operations segment shipments increased 7%remained relatively flat in the thirdfirst quarter 2017,2018, as compared to the same period in 2016, driven by improved flat roll and engineered bar shipments. Demand from2017, with long products improving slightly. Net sales for the construction sector continuessteel operations increased 12% in the first quarter 2018 when compared to improve, and energy has shown a continued positive demand trend. Demand has also improved for heavy off-road equipment and more general industrial manufacturing. Conversely, demand from the domestic automotive sectors has softened somewhat, but still remains near historically high levels.same period in 2017, due primarily to an increase of $74 per ton, or 10%, in average selling prices consistent with increased steel market pricing. Our steel mill utilization rate averaged 92%94% for the thirdfirst quarter 2017,2018, as compared to 85% in the third quarter 2016. Sheet steel average selling prices increased 4% in the third quarter 2017 compared to the same period in 2016, while long products rose 8%. Net sales for the steel operations increased 14% in the third quarter 2017, when compared to the same period in 2016, due to an increase of $39 per ton, or 5%, in average selling prices combined with a 7% increase in steel operations shipments. Net sales for the steel operations increased 23%95% in the first nine months of 2017, when compared to the same period in 2016, due to a 4% increase in steel operations segment shipments combined with an increase of $118 per ton, or 18%, in average selling prices. The increase in shipments and pricing for the first nine months of 2017 was the result of much stronger markets in the first and third quarters 2017, compared to the same periods in 2016.quarter 2017.
Metallic raw materials used in our electric arc furnaces represent our single most significant steel manufacturing cost, generally comprising approximately 60% of our steel operations’ manufacturing costs, excluding the operations of The Techs and Vulcan, which purchase, rather than produce, the steel they further process. Our metallic raw material cost per net ton consumed in our steel operations increased $55,$56, or 22%21%, in the thirdfirst quarter 2017,2018, compared to the same period in 2016,2017, consistent with overall increased domestic scrap pricing. In the first nine months As a result of 2017, our metallic raw material cost per net ton consumed increased $70, or 32%, compared to the same period in 2016.
20
Operating income for the steel operations decreased 10%, to $276.5 million, in the third quarter 2017, compared to the same period in 2016, due to a 3% decrease inselling prices increasing more than scrap costs, metal spread (which we define as the difference between average selling prices and the cost of ferrous scrap consumed) more than offsetting increased steel shipments. 4% in the first quarter 2018 compared to the first quarter 2017.
Operating income for the first nine months 2017 increased 26%steel operations decreased 4%, to $895.0$334.6 million, in the first quarter 2018, compared to the first nine months of 2016,same period in 2017, due primarily to an 11% expansion of steel segment operations metal spread, coupled with a 4% increaseincreases in steel shipments.other manufacturing costs not related to metallic raw materials, including planned maintenance outages.
|
18
Metals Recycling Operations Segment |
Metals Recycling Operations Segment. Metals recycling operations consists solely of OmniSource and includes both ferrous and nonferrous scrap metal processing, transportation, marketing, brokerage, and consultingbrokerage services, strategically located primarily in close proximity to our steel mills and other end-user scrap consumers throughout the eastern half of the United States. In addition, OmniSource designs, installs, and manages customized scrap management programs for industrial manufacturing companies at hundreds of locations throughout North America. Our steel mills utilize a large portion (61% - 63%(65% and 64% for the periods presented) of the ferrous scrap sold by OmniSource as raw material in our steelmaking operations, and the remainder is sold to other consumers, such as other steel manufacturers and foundries. Our metals recycling operations accounted for 14% and 15% of our consolidated external net sales during the third quarterfirst quarters of 20172018 and 2016, respectively, and 15% for each of the first nine months of 2017 and 2016.2017.
Metals Recycling Operations Shipments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||
| 2017 |
| % Change |
| 2016 |
| 2017 |
| % Change |
| 2016 | 2018 |
| % Change |
| 2017 |
Ferrous metal (gross tons) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total | 1,219,582 |
| (2)% |
| 1,243,277 |
| 3,780,958 |
| (3)% |
| 3,894,755 | 1,256,899 |
| (6)% |
| 1,338,599 |
Inter-company | (756,899) |
|
|
| (774,779) |
| (2,366,355) |
|
|
| (2,383,223) | (819,909) |
|
|
| (853,185) |
External shipments | 462,683 |
| (1)% |
| 468,498 |
| 1,414,603 |
| (6)% |
| 1,511,532 | 436,990 |
| (10)% |
| 485,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonferrous metals (thousands of pounds) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total | 261,716 |
| (7)% |
| 280,107 |
| 815,763 |
| (2)% |
| 828,715 | 271,628 |
| (4)% |
| 283,603 |
Inter-company | (37,316) |
|
|
| (25,185) |
| (107,863) |
|
|
| (83,741) | (20,855) |
|
|
| (30,667) |
External shipments | 224,400 |
| (12)% |
| 254,922 |
| 707,900 |
| (5)% |
| 744,974 | 250,773 |
| (1)% |
| 252,936 |
Segment Results 20172018 vs. 20162017
Metals recycling operations operating income in the thirdfirst quarter 20172018 of $17.6$24.7 million was 186% higher thanincreased 38% from the thirdfirst quarter 20162017 operating income of $6.2$17.8 million, due to improvementsa slight improvement in ferrous and a more pronounced improvement in nonferrous metal spreadspreads (which we define as the difference between average selling prices and the cost of purchased scrap), and reduced operating costs.. Net sales increased 25%5% in the thirdfirst quarter 20172018 as compared to the same period in 2016,2017, driven by increased pricing, which more than offset decreased shipments.offsetting the impact of lower shipments, resulting from the mid-March 2017 sale of some non-core locations. Ferrous scrap average selling prices increased 12% during the first quarter 2018 compared to the same period in 2017, while nonferrous average selling prices increased 6% compared to the same period in 2017, resulting in ferrous metal spread expansion of 3%, and nonferrous metal spread expansion of 24%. Overall domestic steel mill utilization was 76% in the first quarter of 2018, compared to 75% in the third quarter ofsame 2017 compared to 70% in the same 2016 period. Ferrous shipments to our own steel mills decreased by 2%4% in the thirdfirst quarter 2017,2018, compared to the same period in 2016. Ferrous scrap average selling prices increased 30% during the third quarter 2017 compared to the same period in 2016, while nonferrous average selling prices increased 36% compared to the same period in 2016, resulting in ferrous metal spread increasing 11%, and nonferrous metal spread increasing 2%.
Metals recycling operations operating income in the first nine months of 2017 of $52.0 million was 160% higher than the first nine months 2016 operating income of $20.0 million, due to increased selling prices resulting in a 17% improvement in ferrous metal spread, and reduced operating expenses. Net sales increased 29% in the first nine months of 2017 as compared to the same period in 2016, driven by increased pricing for both ferrous and nonferrous products, which increased 40% and 27%, respectively, during the first nine months of 2017 compared to the same period in 2016.
2017.
|
Steel Fabrication Operations Segment |
Steel fabrication operations include our New Millennium Building Systems’Systems joist and deck plants located throughout the United States and in Northern Mexico. Revenues from these plants are generated from the fabrication of steel joists, trusses, girders and steel deck used within the non-residential construction industry. Steel fabrication operations accounted for 9% and 8% of our consolidated external net sales during the third quarterfirst quarters of 20172018 and 2016, respectively, and 8% and 9% during the first nine months of 2017 and 2016, respectively.2017.
2119
Segment Results 20172018 vs. 20162017
The overall non-residential construction market has continued to remain strong, demonstrating a positive growth profile, as our fabrication operations achieved a third consecutive quarterly shipments record in the third quarter of 2017. Net sales for the steel fabrication operations increased $32.8$7.6 million, or 18%4%, during the thirdfirst quarter 2017,2018, compared to the same period in 2016,2017, as shipments increased 13%,remained consistent, while average selling prices increased $64$54 per ton, or 5%4%.Net sales for the segment increased $73.1 million, or 14%, in the first nine months of 2017, compared to the first nine months of 2016, as volumes increased 7% and selling prices increased 6%. Our steel fabrication operations continue to realize strength in order activity and resulting shipments, as we continue to leverage our national operating footprint to sustain and improve market share,share. Market demand and order backlogs continue to be strong heading into the seasonally busier months ahead, indicating that the non-residential construction market demand continues to improve.grow.
The purchase of various steel products is the largest single cost of production for our steel fabrication operations, generally representing approximately two-thirds of the total cost of manufacturing. The average cost of steel consumed increased by 12%7% in the thirdfirst quarter 2017,2018, as compared to the same period in 2016,2017 consistent with increased selling prices discussed in the steel operations results, while average selling prices increased only 5%4%, with resulting in metal spread (which we define as the difference between average selling prices and the cost of purchased steel) declining 2%remaining relatively steady on a per ton basis. However, operating income increased 23%decreased $3.9 million, or 17%, to $21.9$19.8 million in the thirdfirst quarter 20172018 compared to the same period in 2016, as increased shipments more than offset metal spread contraction. S2017, due primarily to increases in other non steel related costsegment operating income of $65.7 million in the first nine months of 2017 decreased 10%, from $73.2 million in the first nine months of 2016, despite a 7% increase in shipments, as metal spreads decreased 7% year over year..
|
Other Operations |
Other operations consists of subsidiary operations that are below the quantitative thresholds required for reportable segments and primarily consist of our idled Minnesota ironmaking operations and smaller joint ventures. Also included in “Other” are certain unallocated corporate accounts, such as the company’s senior secured credit facility, senior notes, certain other investments and certain profit sharing expenses.
ThirdFirst Quarter Consolidated Results 20172018 vs. 20162017
Selling, General and Administrative Expenses. Selling, general and administrative expenses (including profit sharing and amortization of intangible assets) of $125.5$106.4 million during the thirdfirst quarter 2017 were consistent with the $124.62018 increased 3% from $102.9 million during the thirdfirst quarter 2016,2017, representing approximately 5.1%a comparable 4.1% and 5.9%4.3% of net sales, respectively.
Interest Expense, net of Capitalized Interest. During the thirdfirst quarter 2017,2018, interest expense decreased 6% to $34.2$31.9 million from $36.2$34.0 million during the same period in 2016,2017, due primarily to the December 2016 refinancingcall and repayment of $400.0our $350.0 million of 6.125%6.375% senior notes due 20192022 with 5.000%4.125% senior notes due 2026. In addition, in December 2016 we repaid the remaining $228.1 million of outstanding Senior Term Loan debt, which was set to mature on November 14, 2019.
Income Tax Expense. During the third quarter 2017, our income tax expense was $83.3 million at an effective income tax rate of 35.6%, as compared to $88.9 million at an effective income tax rate of 36.5%, during the third quarter 2016. The lower effective tax rate in 2017 is due
22
primarily to additional permanent tax benefit items, most notably the 2017 domestic manufacturing deduction, resulting from increases in taxable income.
First Nine Months Consolidated Results 2017 vs. 2016
Selling, General and Administrative Expenses. Selling, general and administrative expenses (including profit sharing and amortization of intangible assets) of $390.3 million during the first nine months of 2017 increased 11% from $353.0 million during the first nine months of 2016, representing approximately 5.4% and 6.0% of net sales, respectively. The increase2025 in the first nine months 2017 expenses compared to the same period in 2016 is due most notably to increased performance-based incentive compensation, including profit sharing, associated with our increased profitability.
Interest Expense, netlatter half of Capitalized Interest. During the first nine months of 2017, interest expense decreased $7.9 million to $102.0 million, when compared to the same period in 2016. The decrease in interest expense is due primarily to the December 2016 refinancing of $400.0 million of 6.125% senior notes due 2019 with 5.000% senior notes due 2026. In addition, in December 2016 we repaid the remaining $228.1 million of outstanding Senior Term Loan debt, which was set to mature on November 14, 2019.2017.
Income Tax Expense. During the first nine months of 2017,quarter 2018, our income tax expense was $271.3$70.5 million at an effective income tax rate of 35.1%23.8%, as compared to $205.1$105.6 million at an effective income tax rate of 36.5%34.7%, during the first nine months of 2016.quarter 2017. The lower effective tax rate in 20172018 is due primarily to additional permanentthe enacted Tax Cuts and Jobs Act of 2017, signed into law in December 2017, which lowered the federal income tax benefit items, most notably the 2017 domestic manufacturing deduction, resultingrate from increases35% to 21% in taxable income.2018.
20
Liquidity and Capital Resources
Capital Resources and Long‑term Debt. Our business is capital intensive and requires substantial expenditures for, among other things, the purchase and maintenance of equipment used in our steel, metals recycling, and steel fabrication operations, and to remain in compliance with environmental laws. Our short-term and long-term liquidity needs arise primarily from working capital requirements, capital expenditures, principal and interest payments related to our outstanding indebtedness, dividends to our shareholders, and acquisitions. We have met these liquidity requirements primarily with cash provided by operations and long-term borrowings, and we also have availability under our Revolver. Our liquidity at September 30, 2017,March 31, 2018, is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and |
| $ | ||||
Short term investments | 40,000 |
|
|
| |||||
|
|
| Revolver availability |
|
|
|
|
| |
|
|
| Total liquidity |
| $ |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Our total outstanding debt remained relatively unchangeddecreased $18.6 million during the first nine monthsquarter of 20172018 due to decreased revolving credit facility borrowings at $2.4 billion (adjusted to reflect the October 13, 2017, repaymentone of the remaining $167.1 million 6.375% Senior Notes due 2022).our controlled subsidiaries. Our total adjusted long-term debt to capitalization ratio (representing our long-term debt, including current maturities, divided by the sum of our long-term debt, redeemable noncontrolling interests, and our total stockholders’ equity) was 43.9%decreased to 40.8% at September 30, 2017,March 31, 2018, compared to 44.9%41.9% at December 31, 2016.
23
In September 2017, we issued $350.0 million of 4.125% senior notes due 2025 (the "2025 Notes"), the proceeds of which, along with available cash, were used to fund the September 2017 tender to purchase at a redemption price of 103.563%, $182.9 million principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, of our 6.375% senior notes due 2022 (the "2022 Notes"), and the October 2017 call and repayment at a redemption price of 103.188% of the $167.1 million remaining outstanding principal amount of the 2022 Notes, plus accrued and unpaid interest to, but not including, the date of repayment. The $167.1 remaining outstanding principal amount is included in current maturities of long-term debt in our September 30, 2017, balance sheet.2017.
Our November 2014 senior secured credit facility (Facility), which provides a $1.2 billion Revolver, matures November 2019. Subject to certain conditions, we have the opportunity to increase the Revolver size by at least $750.0 million. The Facility is guaranteed by certain of our subsidiaries; and is secured by substantially all of our and our wholly-owned subsidiaries’ receivables and inventories, and by pledges of all shares of our wholly-owned subsidiaries’ capital stock or other equity interests, and intercompany debt held by us as collateral. The Revolver is available to fund working capital, capital expenditures, and other general corporate purposes. The Facility contains financial covenants and other covenants pertaining to our ability (which may under certain circumstances be limited) to make capital expenditures; incur indebtedness; permit liens on property; enter into transactions with affiliates; make restricted payments or investments; enter into mergers, acquisitions or consolidations; conduct asset sales; pay dividends or distributions, or enter into other specified transactions and activities. Our ability to borrow funds within the terms of the Revolver is dependent upon our continued compliance with the financial and other covenants. At September 30, 2017,March 31, 2018, we had $1.2 billion of availability on the Revolver, $11.9 million of outstanding letters of credit and other obligations which reduce availability, and there were no borrowings outstanding.
The financial covenants under our Facility state that we must maintain an interest coverage ratio of not less than 2.50:1.00. Our interest coverage ratio is calculated by dividing our last-twelve-months (LTM) consolidated adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and certain other non-cash transactions as allowed in the Facility) by our LTM gross interest expense, less amortization of financing fees. In addition, a net debt (as defined in the Facility) to consolidated LTM adjusted EBITDA (net debt leverage ratio) of not more than 5.00:1.00 must be maintained. If the net debt leverage ratio exceeds 3.50:1:00 at any time, our ability to make certain payments as defined in the Facility (which includes cash dividends to stockholders and share purchases, among other things), is limited. At September 30, 2017,March 31, 2018, our interest coverage ratio and net debt leverage ratio were 10.22:10.76:1.00 and 1.49:1.36:1.00, respectively. We were, therefore, in compliance with these covenants at September 30, 2017,March 31, 2018, and we anticipate we will continue to be in compliance during the next twelve months.
Working Capital. We generated cash flow from operations of $547.6$177.9 million in the first nine monthsquarter of 2017.2018. Operational working capital (representing amounts invested in trade receivables and inventories, less current liabilities other than income taxes payable and debt) increased $230.9$199.0 million to $1.5$1.7 billion at September 30, 2017. IncreasesMarch 31, 2018, consistent with increases in volumes, pricing and profitability resulted in increased accounts receivable, and related increases in inventory, which were only partially offset by related increases in accounts payableduring the first quarter 2018.
Capital Investments. During the first nine monthsquarter of 2017,2018, we invested $127.7$50.6 million in property, plant and equipment, primarily within our steel operations segment, compared with $123.2$41.7 million invested during the same period in 2016.2017.
Cash Dividends. As a reflection of continued confidence in our current and future cash flow generation ability and financial position, we increased our quarterly cash dividend by 11%21% to $0.155$0.1875 per share in the first quarter 20172018 (from $0.140$0.155 per share in 2016)2017), resulting in declared cash dividends of $111.4$44.3 million during the first nine monthsquarter of 2017,2018, compared to $102.3$37.5 million during the same period in 2016.2017. We paid cash dividends of $108.8$36.8 million and $101.6$34.1 million during the first nine monthsquarter of 20172018 and 2016,2017, respectively. Our board of directors, along with executive management, approves the payment of dividends on a quarterly basis. The determination to pay cash dividends in the future is at the discretion of our board of directors, after taking into account various factors, including our financial condition, results of operations, outstanding indebtedness, current and anticipated cash needs and growth plans. In addition, the terms of our Facility and the indentures relating to our senior notes may restrict the amount of cash dividends we can pay.
Other. In 2016, the board of directors authorized a share repurchase program of up to $450 million of our common stock. Under the share repurchase program, purchases will take place, as and when, we determine in open market or private transactions made based upon the market price of our common stock, the nature of other investment opportunities or growth projects, our cash flows from operations, and general economic conditions. The share repurchase program does not require us to acquire any specific number of shares, and may be modified, suspended, extended or terminated by us at any time. We acquired 7.01.5 million shares of our common stock for $237.2$69.3 million in the first nine monthsquarter of 20172018 pursuant to this program. See Part II Other Information, Item 2 Unregistered Sales of Equity Securities and Use of Proceeds for additional information.
21
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 regulatory factors that are largely beyond our control. In addition, we cannot assure that our operating results, cash flows, access to credit markets 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 flows from operations, together with other available sources of funds, including if necessary borrowings under our Revolver through its term, will be adequate for the next twelve months for making required payments of principal and interest on our indebtedness, funding working capital requirements, and anticipated capital expenditures.
24
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Commodity Risk
In the normal course of business, we are exposed to the market risk and price fluctuations related to the sale of our products and to the purchase of raw materials used in our operations, such as metallic raw materials, electricity, natural gas and its transportation services, fuel, air products, zinc, and zinc.electrodes. 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.demand.
Our risk strategy associated with the purchase of raw materials utilized within our operations has generally been to make some commitments with suppliers relating to future expected requirements for some commodities such as electricity, natural gas and its transportation services, fuel, air products, zinc, and zinc.electrodes. 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 45 years for physical commodity requirements and commodity transportation requirements, and for up to 1211 years for air products. We utilized such “take or pay” requirements during the past three years under these contracts, except for certain air products at our Minnesota ironmaking operations which were idled inhave been idle since May 2015. We believe that production requirements will be such that consumption of the products or services purchased under these commitments will occur in the normal production process, other than certain air products related to our Minnesota ironmaking operations during the idle period. We also purchase electricity consumed at our Butler Flat Roll Division pursuant to a contract which extends through December 2017. The contract designates 160 hours annually as “interruptible service” and2018, which establishes an agreed fixed-rate energy charge per Mill/kWh consumed for each year through the expiration of the agreement.
In our metals recycling operations, we have certain fixed price contracts with various customers and suppliers for future delivery of nonferrous metals. Our risk strategy has been to enter into base metal financial contracts with the goal to protect the profit margin, within certain parameters, that was contemplated when we entered into the transaction with the customer or vendor. At September 30, 2017,March 31, 2018, we had a cumulative unrealized gain associated with these financial contracts of $3.3$5.7 million, substantially all of which have a settlement date within the next twelve months. We believe the customer contracts associated with the financial contracts will be fully consummated.
ITEM 4.CONTROLS AND PROCEDURES
(a) | Evaluation of Disclosure Controls and Procedures |
(a) Evaluation of Disclosure Controls
As required, we carried out an evaluation, under the supervision and Procedures. Our management, with the participation of our principal executive officer and principal financial officer, evaluatedof the effectiveness of our disclosure controls and procedures, as of September 30, 2017. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act meansof 1934, as amended (the Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2018, the end of the period covered by this quarterly report, our disclosure controls and other procedures of a company that arewere designed to ensure provide and were effective to provide reasonable assurance that the information required to be disclosed by a companyus in the reports that it fileswe file or submitssubmit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’sapplicable rules and forms. Disclosure controlsforms, and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’sour management, including itsour principal executive and principal financial officers,officer, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of September 30, 2017, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective.
(b) | Changes in Internal Controls Over Financial Reporting |
(b) Changes in Internal Controls Over Financial Reporting.
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended September 30, 2017,March 31, 2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
2522
PART II OTHER INFORMATION
We are involved in various routine litigation matters, including administrative proceedings, regulatory proceedings, governmental investigations, environmental matters, and commercial and construction contract disputes, none of which are expected to have a material impact on our financial condition, results of operations, or liquidity.
We may also be involved from time to time in various governmental investigations, regulatory proceedings or judicial actions seeking penalties, injunctive relief, and/or remediation under federal, state and local environmental laws and regulations. The United States EPA has conducted such investigations and proceedings involving us, in some instances along with state environmental regulators, under various environmental laws, including RCRA, CERCLA, the Clean Water Act and the Clean Air Act. Some of these matters have resulted in fines or penalties, for which a total of $420,000$432,000 is recorded in our financial statements as of September 30, 2017.March 31, 2018.
No material changes have occurred to the indicated risk factors as disclosed in our Annual Report on Form 10-K for the year ended
December 31, 2016.2017.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(c) Issuer Purchases of Equity Securities
We purchased the following equity securities registered by us pursuant to Section 12 of the Exchange Act during the three months endedSeptember 30, 2017.March 31, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Period |
| Total Number of Shares Purchased |
| Average Price Paid per Share |
| Total Number of Shares Purchased as Part of Publicly Announced Program (1) |
| Maximum Dollar Value of Shares That May Yet be Purchased Under the Program (in thousands) (1) |
| |||||
| Quarter ended September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| July 1 - 31 |
| - |
|
| $ | - |
|
| - |
|
| $ | 286,897 |
|
| August 1 - 31 |
| 947,396 |
|
|
| 34.41 |
|
| 947,396 |
|
|
| 254,296 |
|
| September 1 - 30 |
| 1,973,694 |
|
|
| 33.69 |
|
| 1,973,694 |
|
|
| 187,812 |
|
|
|
| 2,921,090 |
|
|
|
|
|
| 2,921,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Period |
| Total Number of Shares Purchased |
| Average Price Paid per Share |
| Total Number of Shares Purchased as Part of Publicly Announced Program (1) |
| Maximum Dollar Value of Shares That May Yet be Purchased Under the Program (in thousands) (1) |
| |||||
| Quarter ended March 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| January 1 - 31 |
| 315,210 |
|
| $ | 47.59 |
|
| 315,210 |
|
| $ | 157,724 |
|
| February 1 - 28 |
| 1,067,153 |
|
|
| 44.56 |
|
| 1,067,153 |
|
|
| 110,168 |
|
| March 1 - 31 |
| 157,291 |
|
|
| 42.68 |
|
| 157,291 |
|
|
| 103,455 |
|
|
|
| 1,539,654 |
|
|
|
|
|
| 1,539,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | On October 18, 2016, we announced that our board of directors had authorized a share repurchase program of up to $450.0 million of our common stock. Our board of directors cancelled the previously authorized program with respect to which no shares had been repurchased for a number of years. |
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.MINE SAFETY DISCLOSURES
Information normally required to be furnished in Exhibit 95 to this Quarterly Report, pursuant to Item 4 concerning mine safety disclosure matters, if applicable, by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104), is not included in Exhibit 95 to this report, as therequarterly report. There are no applicable mine safety disclosure mattersdisclosures to report for the three months ended September 30, 2017. Accordingly, there isMarch 31, 2018, therefore, no Exhibit 95 attached to this report.is required.
None.
2623
|
|
| ||
| ||||
EXHIBITS | ||||
|
24
| ||||
Executive Officer Certifications | ||||
|
|
| ||
31.1* |
| |||
|
|
| ||
31.2* |
| |||
|
|
| ||
32.1* |
| |||
|
|
| ||
32.2* |
| |||
|
|
| ||
Other |
|
| ||
|
|
| ||
95** |
| Mine Safety Disclosures. | ||
|
|
| ||
XBRL Documents |
| |||
|
|
| ||
101.INS* |
| XBRL Instance Document | ||
|
|
| ||
101.SCH* |
| XBRL Taxonomy Extension Schema Document | ||
|
|
| ||
101.CAL* |
| XBRL Taxonomy Extension Calculation Document | ||
|
|
| ||
101.DEF* |
| XBRL Taxonomy Definition Document | ||
|
|
| ||
101.LAB* |
| XBRL Taxonomy Extension Label Document | ||
|
|
| ||
101.PRE* |
| XBRL Taxonomy Presentation Document |
*Filed concurrently herewith
**Inapplicable for purposes of this report
2725
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NovemberMay 9, 20172018
|
|
|
STEEL DYNAMICS, INC. | ||
|
|
|
By: |
| /s/ Theresa E. Wagler |
|
| Theresa E. Wagler |
|
| Executive Vice President and Chief Financial Officer |
|
| (Principal Financial Officer and Principal Accounting Officer) |
2826