UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the period
ended September 30, 2019
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 | |
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(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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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
Securities registered pursuant to Section 12(b) of the Act.
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Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock voting, $0.0025 par value | STLD | |
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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 every Interactive Data File required to be submitted 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 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 ◻ | |||
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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☒ No⌧
As of November 1, 2018,October 28, 2019, Registrant had 229,552,226215,452,169 outstanding shares of common stock.stock.
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| Consolidated Balance Sheets as of September 30, | 1 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20 | |
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STEEL DYNAMICS, INC.
CONSOLIDATED BALANCEBALANCE SHEETS
(in thousands, except share data)
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| September 30, | | | December 31, | ||
| 2019 | | | 2018 | ||
Assets | (unaudited) | | | | | |
Current assets | | | | | | |
Cash and equivalents | $ | 1,146,007 | | | $ | 828,220 |
Short-term investments | | 69,529 | | | | 228,783 |
Accounts receivable, net | | 983,515 | | | | 1,040,220 |
Accounts receivable-related parties | | 3,431 | | | | 3,536 |
Inventories | | 1,767,020 | | | | 1,859,168 |
Other current assets | | 50,818 | | | | 72,730 |
Total current assets | | 4,020,320 | | | | 4,032,657 |
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Property, plant and equipment, net | | 3,031,731 | | | | 2,945,767 |
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Intangible assets, net | | 249,598 | | | | 270,328 |
Goodwill | | 540,913 | | | | 429,645 |
Other assets | | 100,685 | | | | 25,166 |
Total assets | $ | 7,943,247 | | | $ | 7,703,563 |
Liabilities and Equity | | | | | | |
Current liabilities | | | | | | |
Accounts payable | $ | 518,909 | | | $ | 536,743 |
Accounts payable-related parties | | 9,720 | | | | 14,011 |
Income taxes payable | | 2,074 | | | | 7,468 |
Accrued payroll and benefits | | 181,785 | | | | 264,542 |
Accrued interest | | 47,945 | | | | 25,526 |
Accrued expenses | | 162,692 | | | | 146,613 |
Current maturities of long-term debt | | 82,150 | | | | 24,234 |
Total current liabilities | | 1,005,275 | | | | 1,019,137 |
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Long-term debt | | 2,355,243 | | | | 2,352,489 |
Deferred income taxes | | 468,248 | | | | 435,838 |
Other liabilities | | 70,126 | | | | 8,870 |
Total liabilities | | 3,898,892 | | | | 3,816,334 |
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Commitments and contingencies | | | | | | |
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Redeemable noncontrolling interests | | 143,614 | | | | 111,240 |
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Equity | | | | | | |
Common stock voting, $.0025 par value; 900,000,000 shares authorized; | | | | | | |
265,553,499 and 265,822,402 shares issued; and 215,740,572 and 225,272,174 | | | | | | |
shares outstanding, as of September 30, 2019 and December 31, 2018, respectively | | 645 | | | | 645 |
Treasury stock, at cost; 49,812,927 and 40,550,228 shares, | | | | | | |
as of September 30, 2019 and December 31, 2018, respectively | | (1,469,078) | | | | (1,184,243) |
Additional paid-in capital | | 1,175,512 | | | | 1,160,048 |
Retained earnings | | 4,349,523 | | | | 3,958,320 |
Accumulated other comprehensive income | | 39 | | | | 301 |
Total Steel Dynamics, Inc. equity | | 4,056,641 | | | | 3,935,071 |
Noncontrolling interests | | (155,900) | | | | (159,082) |
Total equity | | 3,900,741 | | | | 3,775,989 |
Total liabilities and equity | $ | 7,943,247 | | | $ | 7,703,563 |
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| September 30, |
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| December 31, | ||
| 2018 |
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Assets | (unaudited) |
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Current assets |
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Cash and equivalents | $ | 884,315 |
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Short term investments |
| 115,000 |
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Accounts receivable, net |
| 1,224,477 |
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| 846,415 |
Accounts receivable-related parties |
| 3,713 |
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| 22,422 |
Inventories |
| 1,853,862 |
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| 1,519,347 |
Other current assets |
| 50,110 |
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| 91,509 |
Total current assets |
| 4,131,477 |
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| 3,508,342 |
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Property, plant and equipment, net |
| 2,901,658 |
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| 2,675,904 |
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Intangible assets, net |
| 236,563 |
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| 256,909 |
Goodwill |
| 502,900 |
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| 386,893 |
Other assets |
| 25,770 |
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| 27,684 |
Total assets | $ | 7,798,368 |
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| $ | 6,855,732 |
Liabilities and Equity |
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Current liabilities |
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Accounts payable | $ | 595,286 |
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| $ | 473,765 |
Accounts payable-related parties |
| 15,742 |
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| 15,683 |
Income taxes payable |
| 10,872 |
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| 3,696 |
Accrued payroll and benefits |
| 228,911 |
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| 195,909 |
Accrued interest |
| 47,967 |
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| 25,533 |
Accrued expenses |
| 136,111 |
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| 125,138 |
Current maturities of long-term debt |
| 14,776 |
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| 28,795 |
Total current liabilities |
| 1,049,665 |
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| 868,519 |
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Long-term debt |
| 2,351,979 |
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| 2,353,145 |
Deferred income taxes |
| 398,814 |
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| 305,949 |
Other liabilities |
| 11,833 |
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| 21,811 |
Total liabilities |
| 3,812,291 |
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| 3,549,424 |
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Commitments and contingencies |
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Redeemable noncontrolling interests |
| 111,240 |
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| 111,240 |
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Equity |
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Common stock voting, $.0025 par value; 900,000,000 shares authorized; |
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265,117,573 and 265,003,133 shares issued; and 233,422,108 and 237,396,839 |
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shares outstanding, as of September 30, 2018 and December 31, 2017, respectively |
| 644 |
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| 644 |
Treasury stock, at cost; 31,695,465 and 27,606,294 shares, |
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as of September 30, 2018 and December 31, 2017, respectively |
| (854,052) |
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| (665,297) |
Additional paid-in capital |
| 1,156,556 |
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| 1,141,534 |
Retained earnings |
| 3,730,662 |
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| 2,874,693 |
Accumulated other comprehensive loss |
| (42) |
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Total Steel Dynamics, Inc. equity |
| 4,033,768 |
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| 3,351,574 |
Noncontrolling interests |
| (158,931) |
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| (156,506) |
Total equity |
| 3,874,837 |
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| 3,195,068 |
Total liabilities and equity | $ | 7,798,368 |
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| $ | 6,855,732 |
See notes to consolidated financial statements.statements.
1
STEEL DYNAMICS, INC.
CONSOLIDATED STATEMENTSSTATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)
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| Three Months Ended | | Nine Months Ended | ||||||||
| September 30, | | September 30, | ||||||||
| 2019 | | 2018 | | 2019 | | 2018 | ||||
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Net sales | | | | | | | | | | | |
Unrelated parties | $ | 2,523,279 | | $ | 3,220,891 | | $ | 8,104,129 | | $ | 8,902,025 |
Related parties | | 3,566 | | | 2,656 | | | 10,666 | | | 15,922 |
Total net sales | | 2,526,845 | | | 3,223,547 | | | 8,114,795 | | | 8,917,947 |
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Costs of goods sold | | 2,167,006 | | | 2,537,466 | | | 6,900,220 | | | 7,116,368 |
Gross profit | | 359,839 | | | 686,081 | | | 1,214,575 | | | 1,801,579 |
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Selling, general and administrative expenses | | 107,242 | | | 102,614 | | | 324,530 | | | 310,076 |
Profit sharing | | 17,848 | | | 45,304 | | | 64,396 | | | 114,301 |
Amortization of intangible assets | | 6,704 | | | 6,591 | | | 20,730 | | | 20,346 |
Operating income | | 228,045 | | | 531,572 | | | 804,919 | | | 1,356,856 |
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Interest expense, net of capitalized interest | | 31,339 | | | 31,560 | | | 94,782 | | | 94,968 |
Other income, net | | (4,545) | | | (7,103) | | | (15,137) | | | (16,601) |
Income before income taxes | | 201,251 | | | 507,115 | | | 725,274 | | | 1,278,489 |
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Income tax expense | | 48,643 | | | 109,209 | | | 171,093 | | | 292,536 |
Net income | | 152,608 | | | 397,906 | | | 554,181 | | | 985,953 |
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Net (income) loss attributable to noncontrolling interests | | (1,560) | | | 469 | | | (4,503) | | | 2,422 |
Net income attributable to Steel Dynamics, Inc. | $ | 151,048 | | $ | 398,375 | | $ | 549,678 | | $ | 988,375 |
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Basic earnings per share attributable to Steel Dynamics, | | | | | | | | | | | |
Inc. stockholders | $ | 0.69 | | $ | 1.70 | | $ | 2.49 | | $ | 4.20 |
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Weighted average common shares outstanding | | 217,873 | | | 234,208 | | | 221,145 | | | 235,483 |
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Diluted earnings per share attributable to Steel Dynamics, Inc. | | | | | | | | | | | |
stockholders, including the effect of assumed conversions | | | | | | | | | | | |
when dilutive | $ | 0.69 | | $ | 1.69 | | $ | 2.47 | | $ | 4.17 |
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Weighted average common shares and share equivalents outstanding | | 219,109 | | | 235,649 | | | 222,197 | | | 236,772 |
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Dividends declared per share | $ | 0.2400 | | $ | 0.1875 | | $ | 0.7200 | | $ | 0.5625 |
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| Three Months Ended |
| Nine Months Ended | ||||||||
| September 30, |
| September 30, | ||||||||
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||
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Net sales |
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Unrelated parties | $ | 3,220,891 |
| $ | 2,399,116 |
| $ | 8,902,025 |
| $ | 7,066,083 |
Related parties |
| 2,656 |
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| 44,266 |
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| 15,922 |
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| 136,235 |
Total net sales |
| 3,223,547 |
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| 2,443,382 |
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| 8,917,947 |
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| 7,202,318 |
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Costs of goods sold |
| 2,537,466 |
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| 2,046,864 |
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| 7,116,368 |
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| 5,941,128 |
Gross profit |
| 686,081 |
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| 396,518 |
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| 1,801,579 |
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| 1,261,190 |
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Selling, general and administrative expenses |
| 102,614 |
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| 97,056 |
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| 310,076 |
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| 298,422 |
Profit sharing |
| 45,304 |
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| 21,175 |
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| 114,301 |
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| 69,714 |
Amortization of intangible assets |
| 6,591 |
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| 7,272 |
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| 20,346 |
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| 22,120 |
Operating income |
| 531,572 |
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| 271,015 |
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| 1,356,856 |
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| 870,934 |
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Interest expense, net of capitalized interest |
| 31,560 |
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| 34,177 |
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| 94,968 |
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| 102,019 |
Other (income) expense, net |
| (7,103) |
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| 2,526 |
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| (16,601) |
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| (4,968) |
Income before income taxes |
| 507,115 |
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| 234,312 |
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| 1,278,489 |
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| 773,883 |
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Income tax expense |
| 109,209 |
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| 83,300 |
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| 292,536 |
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| 271,258 |
Net income |
| 397,906 |
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| 151,012 |
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| 985,953 |
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| 502,625 |
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Net loss attributable to noncontrolling interests |
| 469 |
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| 2,246 |
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| 2,422 |
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| 5,383 |
Net income attributable to Steel Dynamics, Inc. | $ | 398,375 |
| $ | 153,258 |
| $ | 988,375 |
| $ | 508,008 |
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Basic earnings per share attributable to Steel Dynamics, |
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Inc. stockholders | $ | 1.70 |
| $ | 0.64 |
| $ | 4.20 |
| $ | 2.11 |
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Weighted average common shares outstanding |
| 234,208 |
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| 239,066 |
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| 235,483 |
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| 241,117 |
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Diluted earnings per share attributable to Steel Dynamics, Inc. |
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stockholders, including the effect of assumed conversions |
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when dilutive | $ | 1.69 |
| $ | 0.64 |
| $ | 4.17 |
| $ | 2.09 |
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Weighted average common shares and share equivalents outstanding |
| 235,649 |
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| 240,880 |
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| 236,772 |
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| 242,816 |
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Dividends declared per share | $ | 0.1875 |
| $ | 0.1550 |
| $ | 0.5625 |
| $ | 0.4650 |
See notes to consolidated financial statements.statements.
2
STEEL DYNAMICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)
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| Three Months Ended | | Nine Months Ended | ||||||||
| September 30, | | September 30, | ||||||||
| 2019 | | 2018 | | 2019 | | 2018 | ||||
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Net income | $ | 152,608 | | $ | 397,906 | | $ | 554,181 | | $ | 985,953 |
Other comprehensive income (loss) - net unrealized gain (loss) on | | | | | | | | | | | |
cash flow hedging derivatives, net of income tax expense (benefit) | | (39) | | | 63 | | | (262) | | | (42) |
Comprehensive income | | 152,569 | | | 397,969 | | | 553,919 | | | 985,911 |
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Comprehensive (income) loss attributable to noncontrolling interests | | (1,560) | | | 469 | | | (4,503) | | | 2,422 |
Comprehensive income attributable to Steel Dynamics, Inc. | $ | 151,009 | | $ | 398,438 | | $ | 549,416 | | $ | 988,333 |
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| Three Months Ended |
| Nine Months Ended | ||||||||
| September 30, |
| September 30, | ||||||||
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||
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Net income | $ | 397,906 |
| $ | 151,012 |
| $ | 985,953 |
| $ | 502,625 |
Other comprehensive income (loss) - net unrealized gain (loss) on cash flow |
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hedging derivatives, net of income tax expense (benefit) of $19 and $(13) |
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for the three and nine months ended September 30, 2018, respectively |
| 63 |
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| (42) |
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| - |
Comprehensive income |
| 397,969 |
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| 151,012 |
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| 985,911 |
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| 502,625 |
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Comprehensive loss attributable to noncontrolling interests |
| 469 |
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| 2,246 |
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| 2,422 |
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| 5,383 |
Comprehensive income attributable to Steel Dynamics, Inc. | $ | 398,438 |
| $ | 153,258 |
| $ | 988,333 |
| $ | 508,008 |
See notes to consolidated financial statements.statements.
3
STEEL DYNAMICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
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| Three Months Ended | | Nine Months Ended | ||||||||
| September 30, | | September 30, | ||||||||
| 2019 | | 2018 | | 2019 | | 2018 | ||||
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Operating activities: | | | | | | | | | | | |
Net income | $ | 152,608 | | $ | 397,906 | | $ | 554,181 | | $ | 985,953 |
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Adjustments to reconcile net income to net cash provided by | | | | | �� | | | | | | |
operating activities: | | | | | | | | | | | |
Depreciation and amortization | | 79,470 | | | 81,383 | | | 240,555 | | | 236,638 |
Equity-based compensation | | 8,841 | | | 7,978 | | | 33,229 | | | 28,860 |
Deferred income taxes | | 11,311 | | | 23,899 | | | 34,952 | | | 45,437 |
Other adjustments | | (1,116) | | | 312 | | | (952) | | | 197 |
Changes in certain assets and liabilities: | | | | | | | | | | | |
Accounts receivable | | 85,633 | | | (48,024) | | | 95,195 | | | (330,307) |
Inventories | | 35,479 | | | (69,885) | | | 139,889 | | | (240,908) |
Other assets | | 39 | | | (6,429) | | | 7,632 | | | (7,164) |
Accounts payable | | 1,111 | | | (14,883) | | | (54,167) | | | 100,368 |
Income taxes receivable/payable | | 6,293 | | | (31,127) | | | 19,715 | | | 55,414 |
Accrued expenses | | 64,533 | | | 79,310 | | | (83,001) | | | 49,920 |
Net cash provided by operating activities | | 444,202 | | | 420,440 | | | 987,228 | | | 924,408 |
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Investing activities: | | | | | | | | | | | |
Purchases of property, plant and equipment | | (154,131) | | | (70,668) | | | (293,687) | | | (176,477) |
Purchases of short-term investments | | (34,884) | | | (35,000) | | | (134,026) | | | (125,000) |
Proceeds from maturities of short-term investments | | 79,508 | | | 10,000 | | | 293,279 | | | 10,000 |
Acquisition of business, net of cash and restricted cash acquired | | (3,694) | | | (37,589) | | | (97,106) | | | (433,998) |
Other investing activities | | 2,746 | | | 576 | | | 4,023 | | | 1,462 |
Net cash used in investing activities | | (110,455) | | | (132,681) | | | (227,517) | | | (724,013) |
| | | | | | | | | | | |
Financing activities: | | | | | | | | | | | |
Issuance of current and long-term debt | | 128,230 | | | 110,041 | | | 374,686 | | | 327,670 |
Repayment of current and long-term debt | | (119,988) | | | (115,039) | | | (369,134) | | | (346,162) |
Dividends paid | | (52,751) | | | (44,081) | | | (148,493) | | | (125,146) |
Purchases of treasury stock | | (114,950) | | | (74,965) | | | (292,394) | | | (193,379) |
Other financing activities | | (1,527) | | | - | | | (7,259) | | | (8,324) |
Net cash used in financing activities | | (160,986) | | | (124,044) | | | (442,594) | | | (345,341) |
| | | | | | | | | | | |
Increase (decrease) in cash, cash equivalents, and restricted cash | | 172,761 | | | 163,715 | | | 317,117 | | | (144,946) |
Cash, cash equivalents, and restricted cash at beginning of period | | 978,779 | | | 726,424 | | | 834,423 | | | 1,035,085 |
| | | | | | | | | | | |
Cash, cash equivalents, and restricted cash at end of period | $ | 1,151,540 | | $ | 890,139 | | $ | 1,151,540 | | $ | 890,139 |
| | | | | | | | | | | |
| | | | | | | | | | | |
Supplemental disclosure information: | | | | | | | | | | | |
Cash paid for interest | $ | 9,115 | | $ | 8,643 | | $ | 71,702 | | $ | 70,498 |
Cash paid for income taxes, net | $ | 29,794 | | $ | 119,802 | | $ | 116,149 | | $ | 198,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | ||||||||
| September 30, |
| September 30, | ||||||||
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
Net income | $ | 397,906 |
| $ | 151,012 |
| $ | 985,953 |
| $ | 502,625 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by |
|
|
|
|
|
|
|
|
|
|
|
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
| 81,383 |
|
| 75,210 |
|
| 236,638 |
|
| 224,068 |
Equity-based compensation |
| 7,978 |
|
| 6,875 |
|
| 28,860 |
|
| 24,558 |
Deferred income taxes |
| 23,899 |
|
| 3,284 |
|
| 45,437 |
|
| 17,849 |
Other adjustments |
| 312 |
|
| 8,202 |
|
| 197 |
|
| 8,055 |
Changes in certain assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
| (48,024) |
|
| (36,123) |
|
| (330,307) |
|
| (193,233) |
Inventories |
| (69,885) |
|
| (67,285) |
|
| (240,908) |
|
| (211,726) |
Other assets |
| (6,429) |
|
| (9,528) |
|
| (7,164) |
|
| (2,014) |
Accounts payable |
| (14,883) |
|
| 44,887 |
|
| 100,368 |
|
| 133,251 |
Income taxes receivable/payable |
| (31,127) |
|
| (12,929) |
|
| 55,414 |
|
| 5,803 |
Accrued expenses |
| 79,310 |
|
| 62,249 |
|
| 49,920 |
|
| 38,058 |
Net cash provided by operating activities |
| 420,440 |
|
| 225,854 |
|
| 924,408 |
|
| 547,294 |
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
| (70,668) |
|
| (42,795) |
|
| (176,477) |
|
| (127,746) |
Purchases of short term investments |
| (35,000) |
|
| - |
|
| (125,000) |
|
| - |
Proceeds from maturities of short term investments |
| 10,000 |
|
| - |
|
| 10,000 |
|
| - |
Acquisition of business, net of cash and restricted cash acquired |
| (37,589) |
|
| (5,518) |
|
| (433,998) |
|
| (5,518) |
Other investing activities |
| 576 |
|
| 1,081 |
|
| 1,462 |
|
| 30,386 |
Net cash used in investing activities |
| (132,681) |
|
| (47,232) |
|
| (724,013) |
|
| (102,878) |
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
Issuance of current and long-term debt |
| 110,041 |
|
| 450,215 |
|
| 327,670 |
|
| 501,448 |
Repayment of current and long-term debt |
| (115,039) |
|
| (294,913) |
|
| (346,162) |
|
| (331,339) |
Dividends paid |
| (44,081) |
|
| (37,180) |
|
| (125,146) |
|
| (108,837) |
Purchases of treasury stock |
| (74,965) |
|
| (99,085) |
|
| (193,379) |
|
| (237,154) |
Other financing activities |
| - |
|
| (4,832) |
|
| (8,324) |
|
| (8,364) |
Net cash provided by (used in) financing activities |
| (124,044) |
|
| 14,205 |
|
| (345,341) |
|
| (184,246) |
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash, cash equivalents, and restricted cash |
| 163,715 |
|
| 192,827 |
|
| (144,946) |
|
| 260,170 |
Cash, cash equivalents, and restricted cash at beginning of period |
| 726,424 |
|
| 915,448 |
|
| 1,035,085 |
|
| 848,105 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents, and restricted cash at end of period | $ | 890,139 |
| $ | 1,108,275 |
| $ | 890,139 |
| $ | 1,108,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure information: |
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest | $ | 8,643 |
| $ | 13,530 |
| $ | 70,498 |
| $ | 80,155 |
Cash paid for income taxes, net | $ | 119,802 |
| $ | 93,123 |
| $ | 198,752 |
| $ | 246,793 |
See notes to consolidated financial statements.statements.
4
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 three3 reportable 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, Heartland Flat Roll Division, United Steel Supply (acquired June 29, 2018)75% equity interest March 1, 2019), Structural and Rail Division, Engineered Bar Products Division, Vulcan Threaded Products, Inc., 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, with several downstream coating and numerous downstreambar processing and coating lines. Steel operations accounted for 77%76% and 73%77% of the company’s consolidated external net sales during the three months ended September 30, 20182019 and 2017,2018, respectively, and 75%76% and 73%75% during the nine months ended September 30, 2019 and 2018, and 2017.respectively.
Metals Recycling Operations Segment. Metals recycling operations consists solely of OmniSource, CorporationLLC (OmniSource), and includes both ferrous and nonferrous processing, transportation, marketing, brokerage, and scrap management services. Metals recycling operations accounted for 12%11% and 14%12% of the company’s consolidated external net sales during the three months ended September 30, 20182019 and 2017,2018, respectively, and 14%12% and 15%14% during the nine months ended September 30, 2019 and 2018, and 2017.respectively.
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 8%10% and 9%8% of the company’s consolidated external net sales during the three months ended September 30, 20182019 and 2017,2018, respectively, and 9% and 8% of the company’s consolidated external net sales during the nine months ended September 30, 2019 and 2018, and 2017.respectively.
Other. Other operations consists of subsidiary operations that are below the quantitative thresholds required for reportable segments and primarily consist of oursmaller joint ventures, and the idle Minnesota ironmaking operations that have been idle since May 2015, and other smaller joint ventures.operations. 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 whollywholly- and majority-owned or majority-owned/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 majority-owned/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, 2017.2018.
5
Senior Secured Credit Facility
The company renewed its senior secured credit facility (Facility), which provides a $1.2 billion Revolver, in June 2018, and extended the maturity to June 2023. Subject to certain conditions, the company has the opportunity to increase the Revolver size by a minimumTable of $750.0 million. The Facility is guaranteed by certain of the company’s subsidiaries; and is secured by substantially all of the company’s and its wholly-owned subsidiaries’ receivables and inventories, and by pledges of all shares of the company’s wholly-owned subsidiaries’ capital stock or other equity interests, and intercompany debt held by the company as collateral. The Revolver is available to fund working capital, capital expenditures, and other general corporate purposes.Contents
5
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Description of the Business and Significant Accounting Policies (Continued)
Cash and Equivalents, and Restricted Cash
Goodwill. The company’s goodwillCash and equivalents include all highly liquid investments with a maturity of three months or less at the date of acquisition. Restricted cash is allocated to the following reporting units at September 30, 2018, and December 31, 2017, (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
| ||
|
|
| 2018 |
| 2017 |
| ||
| Steel Operations Segment: |
|
|
|
|
|
|
|
| Columbus Flat Roll Division |
| $ | 19,682 |
| $ | 19,682 |
|
| The Techs |
|
| 142,783 |
|
| 142,783 |
|
| Heartland Flat Roll Division |
|
| 118,550 |
|
| - |
|
| Vulcan Threaded Products |
|
| 7,824 |
|
| 7,824 |
|
| Roanoke Bar Division |
|
| 29,041 |
|
| 29,041 |
|
| Metals Recycling Operations Segment: |
|
|
|
|
|
|
|
| OmniSource |
|
| 88,095 |
|
| 90,638 |
|
| Indiana Steel Mills |
|
| 95,000 |
|
| 95,000 |
|
| Steel Fabrication Operations Segment |
|
| 1,925 |
|
| 1,925 |
|
|
|
| $ | 502,900 |
| $ | 386,893 |
|
Heartland Flat Roll Division (Heartland) was acquired June 29, 2018 (refer to Note 2 Acquisition - Heartland), resultingprimarily funds held in a preliminary purchase price allocation in which $118.6 million of goodwill was recorded. OmniSource goodwill decreased $2.5 million from December 31, 2017 to September 30, 2018, in recognition of the 2018 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 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 later 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: 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 effective January 1, 2018 using the modified retrospective approach. There was no change in the amount or timing of revenue recognized under ASC 606, or significant changes required to the company’s functions, processes or systems. See Note 3 Revenue from Contracts with Customers for disclosureescrow as required by ASC 606various insurance 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 adopted the provisions of ASU 2016-18 as of January 1, 2018, retrospectively changed beginning and ending amounts reflected in the consolidated statements of cash flows for the three and nine months ended September 30, 2018 and 2017, to include restricted cash.government organizations. The balance of cash, cash equivalents and restricted cash in the consolidated statements of cash flows includes restricted cash of $5.5 million, $6.2 million, $6.2 million, $5.8 million, $6.0 million, and $6.4 million at September 30, 2019, June 30, 2019, December 31, 2018, $6.0 million atSeptember 30, 2018, June 30, 2018, $6.4 million atand December 31, 2017, $6.3 million at September 30, 2017, and $6.6 million at June 30, 2017 and December 31, 2016,respectively, which are recorded in Other Assets (noncurrent) in the company’s consolidated balance sheets.
Goodwill
The company’s goodwill consisted of the following at September 30, 2019, and December 31, 2018, (in thousands):
| | | | | | | | |
| | | | | | | | |
| | | September 30, | | December 31, | | ||
| | | 2019 | | 2018 | | ||
| | | | | | | | |
| Steel Operations Segment | | $ | 359,283 | | $ | 245,473 | |
| Metals Recycling Operations Segment | | | 179,705 | | | 182,247 | |
| Steel Fabrication Operations Segment | | | 1,925 | | | 1,925 | |
| | | $ | 540,913 | | $ | 429,645 | |
The company acquired a 75% equity interest in United Steel Supply on March 1, 2019 (refer to Note 2 Acquisition – United Steel Supply, LLC), resulting in a preliminary purchase price allocation in which $113.8 million of goodwill has been recorded in the Steel Operations Segment at September 30, 2019. Metals Recycling Operations segment goodwill decreased $2.5 million from December 31, 2018 to September 30, 2019, in recognition of the 2019 tax benefit related to the normal amortization of the component of tax-deductible goodwill in excess of book goodwill.
Recently Issued Accounting Standards
In FebruaryJune 2016, the FASB issued ASU 2016-02, Leases (Topic 842);2016-13, Financial Instruments - Credit Losses, and it’s subsequent corresponding updates: which establishesrequires an entity to use a new lease accountingforward-looking expected loss model that requires lessees to recognize a right of use asset and related lease liabilityversus the current incurred loss model for most leases having lease terms of more than 12 months (ASU 2016-02).financial instruments, including accounts receivable. This new guidance is effective for annual and interim periods beginning after December 15, 2018,2019, but can be early adopted. The company anticipates adopting ASU 2016-022016-13 on January 1, 2019.2020. The company is working through its adoption plan to evaluate the lease portfolio, systems,policies, processes and policiessystems to determine the impact of the adoption of the provisions of ASU 2016-02 to our2016-13 will have in its consolidated financial statements and disclosures. However, the company expects that each of assets and liabilities will increase in the consolidated balance sheet, related to the company’s then existing operating leases. disclosure.
Note 2. Acquisition - Heartland
– United Steel Supply, LLC
On June 29, 2018,March 1, 2019, the company completed its acquisitionpurchased 75% of 100%the equity interest of HeartlandUnited Steel Processing,Supply, LLC (formerly known as Companhia Siderurgica Nacional, LLC) (Heartland),(USS) for an initial cash purchase priceconsideration of $396.4$93.4 million, plus a customary working capital transaction purchase price adjustment of $37.6$3.7 million which was paid in September 2018. Located2019. Additionally, the company has an option to purchase, and the sellers have the option to require the company to purchase, the remaining 25% equity interest of USS in Terre Haute, Indiana, Heartland produces various typesthe future. Headquartered in Austin, Texas, USS is a leading distributor of higher-margin,painted Galvalume® flat roll steel by further processing hot roll coils into pickleused for roofing and oil, cold roll,siding applications, with distribution centers strategically located in Mississippi, Indiana, Arkansas, and galvanized products. The acquisition will expandOregon. USS provides the company’s annual flat rollcompany a new, complementary distribution channel and connects it to a rapidly growing industry segment with customers that do not traditionally purchase steel shipping capacity of lighter-gaugedirectly from a steel producer. USS’s operating results from and greater width flat roll steel offerings that will broaden and diversify the company’s value-added product portfolio, and provide operational and logistics benefits to other nearby operations. Heartland’s post-acquisition operating resultsafter March 1, 2019, are reflected in the company’s financial statements in the steel operations reporting segment.
6
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 2. Acquisition – United Steel Supply, LLC (Continued)
The aggregate purchase price was preliminarily allocated to the opening balance sheet of HeartlandUSS as of June 29, 2018,March 1, 2019, and updated in September 2019 upon the acquisition date.final working capital adjustment, as presented below. The following allocation of the purchase price (in thousands) is preliminary based on the information available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed. In conjunction with the settlement of the working capital adjustment in September 2018, the net assets acquired as initially estimated and allocated at June 29, 2018, decreased $8.1 million, to $434.0 million. The accounting for the acquisition has not yet been completed because the company has not finalized the valuations of the acquired property, plant and equipment, and identifiable intangible assets, if any, includingand thus goodwill. The company anticipates finalizing the valuation of identifiable intangible assets by December 31, 2019.
| | | | | | | | | | | | |
| | | | September 30, | | | | | | | | |
| | | | 2019 Allocation | | | Adjustments | | | Initial Allocation | | |
| | Current assets, net of cash acquired | $ | 86,236 | | $ | (7,784) | | $ | 94,020 | | |
| | Property, plant & equipment | | 7,388 | | | - | | | 7,388 | | |
| | Intangible assets and goodwill | | 113,810 | | | 11,892 | | | 101,918 | | |
| | Total assets acquired | | 207,434 | | | 4,108 | | | 203,326 | | |
| | Liabilities assumed | | 77,954 | | | (3,270) | | | 81,224 | | |
| | Redeemable noncontrolling interest | | 32,374 | | | 3,684 | | | 28,690 | | |
| | Net cash consideration | $ | 97,106 | | $ | 3,694 | | $ | 93,412 | | |
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|
Note 3. Revenue from Contracts with CustomersLeases
In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842) and its subsequent corresponding updates; which established 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. The company adopted ASC 606842 effective January 1, 2018,2019, using the modifiedoptional transition method, thereby applying the new guidance at the effective date, without retrospective approach. We appliedapplication to prior periods. The company elected practical expedients permitted under the standard to contracts that were not completed as of the adoption date, with no cumulative effect adjustment at date of adoption. Accordingly, 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 totransition guidance which allowed the company expects to be entitled in exchange for those goods or services.
Innot reassess under the steelnew standard its prior conclusions regarding lease identification 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 variable consideration included in the company’s 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
recorded on an expected value basis. Revenue recognized is limited to the amount the company expects to receive.classification. The company does not exercise significant judgements inelected to use hindsight when determining the timinglease term. The company also elected the short-term lease exemption, and did not recognize right-of-use assets and lease liabilities for short-term leases, those with lease commencement date terms 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 year12 months or less. The company doesrecognized right-of-use assets and lease liabilities of $76.3 million, with no impact on retained earnings, in the consolidated balance sheet on January 1, 2019, and the standard did not exercisehave a significant judgements in determiningimpact on the timing of satisfaction of performance obligationscompany’s operating results or cash flows for the transaction price. Shipment of productsthree and nine-month periods ended September 30, 2019.
The company has operating leases relating principally to customers, which occurs after control over the product has transferred to the customertransportation and revenue is recognized, is consideredother equipment, and some real estate. The company determines if an arrangement contains 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,lease at inception, which generally occurs upon shipmentwhen the arrangement identifies a specific asset that the company has the right to direct the use of and obtain substantially all of the products. Shipment for the steel fabrication operations segment generally occurs within 30 days of satisfactioneconomic benefit from use of the performance obligationidentified asset. Certain of our lease agreements contain rent escalation clauses (including fixed and revenue recognition.index-based escalations), and options to extend or terminate the lease. For purposes of calculating operating lease obligations under the standard, the company’s lease terms include options to extend the lease when it is reasonably certain that the company will exercise such option. 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.uses its incremental borrowing rate at lease commencement to determine the present value of lease payments. The allowance for doubtful accounts for all operating segmentsincremental borrowing rate is basedthe rate of interest the company could borrow on a collateralized basis over a similar term with similar payments. Operating lease expense is recognized on a straight-line basis over the company’s best estimatelease term.
Operating lease right-of-use assets and lease obligations included in the consolidated balance sheet at September 30, 2019, are as follows (in thousands):
| | | | | |
| | Right of use assets under operating leases: | | | |
| | Other assets - noncurrent | $ | 74,843 | |
| | Lease obligations under operating leases: | | | |
| | Accrued liabilities | $ | 17,202 | |
| | Other liabilities - noncurrent | | 57,946 | |
| | | $ | 75,148 | |
7
Table of probable credit losses, along with historical experience.Contents
Refer to Note 10 Segment Information, for disaggregated revenue by segment to external, external non-United States, and other segment customers.
7
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 3. Leases (Continued)
The weighted average remaining lease term for our operating leases is six years and the weighted-average discount rate is 4.0% as of September 30, 2019. Future operating lease liabilities as of September 30, 2019, for the next five years and thereafter are as follows (in thousands):
| | | | | |
| | 2019 - for the remaining three months | $ | 19,954 | |
| | 2020 | | 17,120 | |
| | 2021 | | 13,719 | |
| | 2022 | | 10,636 | |
| | 2023 | | 7,506 | |
| | Thereafter | | 17,095 | |
| | Total undiscounted cash flows | | 86,030 | |
| | Less imputed interest | | (10,882) | |
| | Lease obligations under operating leases | $ | 75,148 | |
Operating lease expense included in the consolidated statements of income was $5.2 million and $15.0 million for the three and nine months ended September 30, 2019, respectively. Cash paid related to operating lease obligations was $5.2 million and $15.1 million for the three and nine months ended September 30, 2019, respectively. Variable lease costs were not material for the three and nine months ended September 30, 2019. Short-term lease expense included in the consolidated statements of income was $5.0 million and $14.8 million for the three and nine months ended September 30, 2019, respectively. Right-of-use assets obtained in exchange for new operating lease liabilities during the three and nine months ended September 30, 2019 were $1.4 million and $11.3 million, respectively.
Note 4. 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, and performance awards, and are excluded from the computation in periods in which they have an anti-dilutive effect. There were no0 anti-dilutive common share equivalents as of or for the three or nine monthsand nine-month periods ended September 30, 20182019 and 2017.2018.
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | ||||||||||||||||
| 2019 | | 2018 | ||||||||||||||
| | | | Weighted | | | | | | | | Weighted | | | | ||
| | | | Average | | | | | | | | Average | | | | ||
| Net Income | | Shares | | Per Share | | Net Income | | Shares | | Per Share | ||||||
| (Numerator) | | (Denominator) | | Amount | | (Numerator) | | (Denominator) | | Amount | ||||||
Basic earnings per share | $ | 151,048 | | | 217,873 | | $ | 0.69 | | $ | 398,375 | | | 234,208 | | $ | 1.70 |
Dilutive common share equivalents | | - | | | 1,236 | | | | | | - | | | 1,441 | | | |
Diluted earnings per share | $ | 151,048 | | | 219,109 | | $ | 0.69 | | $ | 398,375 | | | 235,649 | | $ | 1.69 |
8
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 nine months ended September 30, 2018 and 2017 (in thousands, except per share data):
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| Three Months Ended September 30, | ||||||||||||||||
| 2018 |
| 2017 | ||||||||||||||
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| Weighted |
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| Weighted |
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| Average |
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| Average |
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| Net Income |
| Shares |
| Per Share |
| Net Income |
| Shares |
| Per Share | ||||||
| (Numerator) |
| (Denominator) |
| Amount |
| (Numerator) |
| (Denominator) |
| Amount | ||||||
Basic earnings per share | $ | 398,375 |
|
| 234,208 |
| $ | 1.70 |
| $ | 153,258 |
|
| 239,066 |
| $ | 0.64 |
Dilutive common share equivalents |
| - |
|
| 1,441 |
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|
| - |
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| 1,814 |
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|
Diluted earnings per share | $ | 398,375 |
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| 235,649 |
| $ | 1.69 |
| $ | 153,258 |
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| 240,880 |
| $ | 0.64 |
STEEL DYNAMICS, INC.
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| Nine Months Ended September 30, | ||||||||||||||||
| 2018 |
| 2017 | ||||||||||||||
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| Weighted |
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| Weighted |
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| Average |
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| Average |
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| Net Income |
| Shares |
| Per Share |
| Net Income |
| Shares |
| Per Share | ||||||
| (Numerator) |
| (Denominator) |
| Amount |
| (Numerator) |
| (Denominator) |
| Amount | ||||||
Basic earnings per share | $ | 988,375 |
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| 235,483 |
| $ | 4.20 |
| $ | 508,008 |
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| 241,117 |
| $ | 2.11 |
Dilutive common share equivalents |
| - |
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| 1,289 |
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| - |
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| 1,699 |
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|
Diluted earnings per share | $ | 988,375 |
|
| 236,772 |
| $ | 4.17 |
| $ | 508,008 |
|
| 242,816 |
| $ | 2.09 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 4. Earnings Per Share (Continued)
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | ||||||||||||||||
| 2019 | | 2018 | ||||||||||||||
| | | | Weighted | | | | | | | | Weighted | | | | ||
| | | | Average | | | | | | | | Average | | | | ||
| Net Income | | Shares | | Per Share | | Net Income | | Shares | | Per Share | ||||||
| (Numerator) | | (Denominator) | | Amount | | (Numerator) | | (Denominator) | | Amount | ||||||
Basic earnings per share | $ | 549,678 | | | 221,145 | | $ | 2.49 | | $ | 988,375 | | | 235,483 | | $ | 4.20 |
Dilutive common share equivalents | | - | | | 1,052 | | | | | | - | | | 1,289 | | | |
Diluted earnings per share | $ | 549,678 | | | 222,197 | | $ | 2.47 | | $ | 988,375 | | | 236,772 | | $ | 4.17 |
Note 5. 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):
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| September 30, |
| December 31, |
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| 2018 |
| 2017 |
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| ||
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| Raw materials | $ | 855,566 |
| $ | 675,715 |
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| Supplies |
| 425,635 |
|
| 374,515 |
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| Work in progress |
| 184,377 |
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| 128,565 |
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| Finished goods |
| 388,284 |
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| 340,552 |
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| Total inventories | $ | 1,853,862 |
| $ | 1,519,347 |
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| | | | | | | | | |
| | | September 30, | | December 31, | | | ||
| | | 2019 | | 2018 | | | ||
| | Raw materials | $ | 758,677 | | $ | 810,766 | | |
| | Supplies | | 492,604 | | | 436,828 | | |
| | Work in progress | | 156,443 | | | 195,224 | | |
| | Finished goods | | 359,296 | | | 416,350 | | |
| | Total inventories | $ | 1,767,020 | | $ | 1,859,168 | | |
8
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 6. Changes in Equity
The following table providestables provide 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 noncontrolling interests (in thousands): for each quarterly period in the nine months ended September 30, 2019 and 2018:
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Stockholders of Steel Dynamics, Inc. | | | | | | | | | | |||||||||||||
| | | | | | | | | | Accumulated | | | | | | | |||||||
| | | | | Additional | | | | Other | | | | | | Redeemable | ||||||||
| Common | | Treasury | | Paid-In | | Retained | | Comprehensive | | Noncontrolling | | Total | | Noncontrolling | ||||||||
| Stock | | Stock | | Capital | | Earnings | | Loss | | Interests | | Equity | | Interests | ||||||||
Balances at December 31, 2018 | $ | 645 | | $ | (1,184,243) | | $ | 1,160,048 | | $ | 3,958,320 | | $ | 301 | | $ | (159,082) | | $ | 3,775,989 | | $ | 111,240 |
Dividends declared | | - | | | - | | | - | | | (53,504) | | | - | | | - | | | (53,504) | | | - |
Noncontrolling investors of USS | | - | | | - | | | - | | | - | | | - | | | - | | | - | | | 28,690 |
Share repurchases | | - | | | (84,308) | | | - | | | - | | | - | | | - | | | (84,308) | | | - |
Equity-based compensation | | - | | | 6,714 | | | 91 | | | (110) | | | - | | | - | | | 6,695 | | | - |
Net income | | - | | | - | | | - | | | 204,328 | | | - | | | 499 | | | 204,827 | | | - |
Other comprehensive loss, net of tax | | - | | | - | | | - | | | - | | | (171) | | | - | | | (171) | | | - |
Balances at March 31, 2019 | | 645 | | | (1,261,837) | | | 1,160,139 | | | 4,109,034 | | | 130 | | | (158,583) | | | 3,849,528 | | | 139,930 |
Dividends declared | | - | | | - | | | - | | | (52,751) | | | - | | | - | | | (52,751) | | | - |
Share repurchases | | - | | | (93,136) | | | - | | | - | | | - | | | - | | | (93,136) | | | - |
Equity-based compensation | | - | | | 816 | | | 7,366 | | | (166) | | | - | | | - | | | 8,016 | | | - |
Net income | | - | | | - | | | - | | | 194,302 | | | - | | | 2,444 | | | 196,746 | | | - |
Other comprehensive loss, net of tax | | - | | | - | | | - | | | - | | | (52) | | | - | | | (52) | | | - |
Balances at June 30, 2019 | | 645 | | | (1,354,157) | | | 1,167,505 | | | 4,250,419 | | | 78 | | | (156,139) | | | 3,908,351 | | | 139,930 |
Dividends declared | | - | | | - | | | - | | | (51,778) | | | - | | | - | | | (51,778) | | | - |
Noncontrolling investors of USS | | - | | | - | | | - | | | - | | | - | | | (1,321) | | | (1,321) | | | 3,684 |
Share repurchases | | - | | | (114,950) | | | - | | | - | | | - | | | - | | | (114,950) | | | - |
Equity-based compensation | | - | | | 29 | | | 8,007 | | | (166) | | | - | | | - | | | 7,870 | | | - |
Net income | | - | | | - | | | - | | | 151,048 | | | - | | | 1,560 | | | 152,608 | | | - |
Other comprehensive loss, net of tax | | - | | | - | | | - | | | - | | | (39) | | | - | | | (39) | | | - |
Balances at September 30, 2019 | $ | 645 | | $ | (1,469,078) | | $ | 1,175,512 | | $ | 4,349,523 | | $ | 39 | | $ | (155,900) | | $ | 3,900,741 | | $ | 143,614 |
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| Stockholders of Steel Dynamics, Inc. |
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| Accumulated |
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| Additional |
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| Other |
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| Redeemable | ||||||||
| Common |
| Treasury |
| Paid-In |
| Retained |
| Comprehensive |
| Noncontrolling |
| Total |
| Noncontrolling | ||||||||
| Stock |
| Stock |
| Capital |
| Earnings |
| Loss |
| Interests |
| Equity |
| Interests | ||||||||
Balances at December 31, 2017 | $ | 644 |
| $ | (665,297) |
| $ | 1,141,534 |
| $ | 2,874,693 |
| $ | - |
| $ | (156,506) |
| $ | 3,195,068 |
| $ | 111,240 |
Dividends declared |
| - |
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| - |
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| - |
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| (132,116) |
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| - |
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| - |
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| (132,116) |
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| - |
Noncontrolling investors, net |
| - |
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| - |
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| - |
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| - |
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| - |
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| (3) |
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| (3) |
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| - |
Share repurchases |
| - |
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| (193,379) |
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| - |
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| - |
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| - |
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| - |
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| (193,379) |
|
| - |
Equity-based compensation |
| - |
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| 4,624 |
|
| 15,022 |
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| (290) |
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| - |
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| - |
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| 19,356 |
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| - |
Net income |
| - |
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| - |
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| - |
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| 988,375 |
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| - |
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| (2,422) |
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| 985,953 |
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| - |
Other comprehensive loss, net of tax |
| - |
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| - |
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| - |
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| - |
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| (42) |
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| - |
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| (42) |
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| - |
Balances at September 30, 2018 | $ | 644 |
| $ | (854,052) |
| $ | 1,156,556 |
| $ | 3,730,662 |
| $ | (42) |
| $ | (158,931) |
| $ | 3,874,837 |
| $ | 111,240 |
9
Note 6. Changes in Equity (Continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Stockholders of Steel Dynamics, Inc. | | | | | | | | | | | | | ||||||||||
| | | | | | | | | | | | | Accumulated | | | | | | | | | | |
| | | | | | Additional | | | | Other | | | | | | Redeemable | |||||||
| Common | | Treasury | | Paid-In | | Retained | | Comprehensive | | Noncontrolling | | Total | | Noncontrolling | ||||||||
| Stock | | Stock | | Capital | | Earnings | | Loss | | Interests | | Equity | | Interests | ||||||||
Balances at December 31, 2017 | $ | 644 | | $ | (665,297) | | $ | 1,141,534 | | $ | 2,874,693 | | $ | - | | $ | (156,506) | | $ | 3,195,068 | | $ | 111,240 |
Dividends declared | | - | | | - | | | - | | | (44,269) | | | - | | | - | | | (44,269) | | | - |
Share repurchases | | - | | | (69,269) | | | - | | | - | | | - | | | - | | | (69,269) | | | - |
Equity-based compensation | | - | | | 3,866 | | | 1,337 | | | (71) | | | - | | | - | | | 5,132 | | | - |
Comprehensive and net income (loss) | | - | | | - | | | - | | | 227,551 | | | - | | | (2,076) | | | 225,475 | | | - |
Balances at March 31, 2018 | | 644 | | | (730,700) | | | 1,142,871 | | | 3,057,904 | | | - | | | (158,582) | | | 3,312,137 | | | 111,240 |
Dividends declared | | - | | | - | | | - | | | (44,080) | | | - | | | - | | | (44,080) | | | - |
Noncontrolling investors, net | | - | | | - | | | - | | | - | | | - | | | (3) | | | (3) | | | - |
Share repurchases | | - | | | (49,145) | | | - | | | - | | | - | | | - | | | (49,145) | | | - |
Equity-based compensation | | - | | | 757 | | | 6,496 | | | (110) | | | - | | | - | | | 7,143 | | | - |
Net income | | - | | | - | | | - | | | 362,449 | | | - | | | 123 | | | 362,572 | | | - |
Other comprehensive loss, net of tax | | - | | | - | | | - | | | - | | | (105) | | | - | | | (105) | | | - |
Balances at June 30, 2018 | | 644 | | | (779,088) | | | 1,149,367 | | | 3,376,163 | | | (105) | | | (158,462) | | | 3,588,519 | | | 111,240 |
Dividends declared | | - | | | - | | | - | | | (43,767) | | | - | | | - | | | (43,767) | | | - |
Noncontrolling investors, net | | - | | | - | | | - | | | - | | | - | | | - | | | - | | | - |
Share repurchases | | - | | | (74,965) | | | - | | | - | | | - | | | - | | | (74,965) | | | - |
Equity-based compensation | | - | | | 1 | | | 7,189 | | | (109) | | | - | | | - | | | 7,081 | | | - |
Net income | | - | | | - | | | - | | | 398,375 | | | - | | | (469) | | | 397,906 | | | - |
Other comprehensive loss, net of tax | | - | | | - | | | - | | | - | | | 63 | | | - | | | 63 | | | - |
Balances at September 30, 2018 | $ | 644 | | $ | (854,052) | | $ | 1,156,556 | | $ | 3,730,662 | | $ | (42) | | $ | (158,931) | | $ | 3,874,837 | | $ | 111,240 |
Note 7. 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, and occasionally to mitigate foreign currency exchange rate risk and have in the past to mitigateor 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 and ferrous 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 significant futures contract commitments as of September 30, 2018: 2019:
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| Commodity Futures | | Long/Short | | Metric Tons | |
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| Aluminum | | Long | | 575 | |
| Aluminum | | Short | | 4,100 | |
| Copper | | Long | | 10,036 | |
| Copper | | Short | |||
| 21,704 |
10
Note 7. Derivative Financial Instruments (Continued)
The following summarizes the location and amounts of the fair values reported on the company’s consolidated balance sheets as of September 30, 2018,2019, and December 31, 2017,2018, and gains and losses related to derivatives included in the company’s statement of income for the three and nine monthsnine-month periods ended September 30, 20182019 and 20172018 (in thousands):
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| Asset Derivatives |
| Liability Derivatives | |||||||||||||||||||||
| Balance sheet |
| Fair Value |
| Fair Value | |||||||||||||||||||||
| location |
| September 30, 2018 |
| December 31, 2017 |
| September 30, 2018 |
| December 31, 2017 | |||||||||||||||||
| | | | | | | | | | | | | | |||||||||||||
| | | | | | | | | | | | | | |||||||||||||
| | | Asset Derivatives | | Liability Derivatives | |||||||||||||||||||||
| Balance sheet | | Fair Value | | Fair Value | |||||||||||||||||||||
| location | | September 30, 2019 | | December 31, 2018 | | September 30, 2019 | | December 31, 2018 | |||||||||||||||||
Derivative instruments designated as hedges |
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| | | | | | | | | | | | | |
Commodity futures | Other current assets |
| $ | 418 |
| $ | 1,211 |
| $ | 3,588 |
| $ | 5,364 | Other current assets | | $ | 1,063 | | $ | 2,999 | | $ | 805 | | $ | 1,837 |
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Derivative instruments not designated as hedges |
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Commodity futures | Other current assets | | | 313 | | | 1,559 | | | 3,100 | | | 2,053 | |||||||||||||
Total derivative instruments | | | $ | 1,376 | | $ | 4,558 | | $ | 3,905 | | $ | 3,890 | |||||||||||||
9
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Commodity futures | Other current assets |
|
| 571 |
|
| 1,579 |
|
| 1,134 |
|
| 5,142 |
Total derivative instruments |
|
| $ | 989 |
| $ | 2,790 |
| $ | 4,722 |
| $ | 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 $3.5$4.3 million at September 30, 2018,2019, and $5.6$4.9 million at December 31, 2017,2018, and are reflected in other current assets in the consolidated balance sheets.
| | | | | | | | | | | | | | |
| | | Amount of gain (loss) | | | | | Amount of gain (loss) | ||||||
| | | recognized in income | | | | Location of gain | recognized in income | ||||||
| | Location of gain | on derivatives for the | | | | (loss) recognized | on derivatives for the | ||||||
| | (loss) recognized | three months ended | | Hedged items in | | in income on | three months ended | ||||||
| | in income on | September 30, | | fair value hedge | | related hedged | September 30, | ||||||
| | derivatives | 2019 | 2018 | | relationships | | items | 2019 | 2018 | ||||
Derivatives in fair value | | | | | | | | | | | | | | |
hedging relationships | | | | | | | | | | | | | | |
Commodity futures | | Costs of goods sold | $ | 302 | $ | (8,943) | | Firm commitments | | Costs of goods sold | $ | (519) | $ | 5,111 |
| | | | | | | | Inventory | | Costs of goods sold | | (182) | | 1,753 |
Derivatives not designated | | | | | | | | | | | $ | (701) | $ | 6,864 |
as hedging instruments | | | | | | | | | | | | | | |
Commodity futures | | Costs of goods sold | $ | 4,536 | $ | 13,803 | | | | | | | | |
| | | | | | | | | | | | | | |
| | | Amount of gain (loss) | | | | | Amount of gain (loss) | ||||||
| | | recognized in income | | | | Location of gain | recognized in income | ||||||
| | Location of gain | on derivatives for the | | | | (loss) recognized | on derivatives for the | ||||||
| | (loss) recognized | three months ended | | Hedged items in | | in income on | three months ended | ||||||
| | in income on | September 30, | | fair value hedge | | related hedged | September 30, | ||||||
| | derivatives | 2019 | 2018 | | relationships | | items | 2019 | 2018 | ||||
Derivatives in fair value | | | | | | | | | | | | | | |
hedging relationships | | | | | | | | | | | | | | |
Commodity futures | | Costs of goods sold | $ | (560) | $ | 1,113 | | Firm commitments | | Costs of goods sold | $ | (603) | $ | 1,718 |
| | | | | | | | Inventory | | Costs of goods sold | | 245 | | (1,659) |
Derivatives not designated | | | | | | | | | | | $ | (358) | $ | 59 |
as hedging instruments | | | | | | | | | | | | | | |
Commodity futures | | Costs of goods sold | $ | 5,946 | $ | 19,523 | | | | | | | | |
Note 7. Derivative Financial Instruments (Continued)
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| 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 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, | ||||
|
| derivatives |
| 2018 |
| 2017 |
| relationships |
| items |
| 2018 |
| 2017 | ||||
Derivatives in fair value |
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|
hedging relationships |
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Commodity futures |
| Costs of goods sold |
| $ | (8,943) |
| $ | 4,122 |
| Firm commitments |
| Costs of goods sold |
| $ | 5,111 |
| $ | (1,711) |
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| Inventory |
| Costs of goods sold |
|
| 1,753 |
|
| (1,330) |
Derivatives not designated |
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| $ | 6,864 |
| $ | (3,041) |
as hedging instruments |
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Commodity futures |
| Costs of goods sold |
| $ | 13,803 |
| $ | (10,566) |
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| 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 |
| 2018 |
| 2017 |
| relationships |
| hedged items |
| 2018 |
| 2017 | ||||
Derivatives in fair value |
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hedging relationships |
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Commodity futures |
| Costs of goods sold |
| $ | 1,113 |
| $ | 571 |
| Firm commitments |
| Costs of goods sold |
| $ | 1,718 |
| $ | 995 |
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| Inventory |
| Costs of goods sold |
|
| (1,659) |
|
| 179 |
Derivatives not designated |
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| $ | 59 |
| $ | 1,174 |
as hedging instruments |
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Commodity futures |
| Costs of goods sold |
| $ | 19,523 |
| $ | (12,528) |
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|
Derivatives accounted for as fair value hedges had ineffectiveness resulting in gains of $5,000$69,000 and losses of $35,000$5,000 during the three-month periods ended September 30, 2019, and 2018, respectively; and 2017, respectively;gains of $101,000 and losses of $10,500 and gains of $62,000 during the nine-month periods ended September 30, 2018,2019, and 2017,2018, respectively. Losses excluded from hedge effectiveness testing of $399,000 and $2.1 million increased cost of goods sold during the three-month periods ended September 30, 2018. Gains2019, and 2018, respectively. Losses excluded from hedge effectiveness testing of $1.1 million decreased cost of goods sold during the three-month period ended September 30, 2017. Gains excluded from hedge effectiveness testing of $1.2 million and $1.7 million decreased$918,000 increased cost of goods sold during the nine-month periodsperiod ended September 30, 2018,2019 and 2017, respectively. gains of $1.2 million decreased the cost of goods sold during the nine-month period ended September 30, 2018.
11
Note 7. Derivative Financial Instruments (Continued)
Derivatives accounted for as cash flow hedges resulted in net losses of $8,000 and net gains of $82,000 recognized in other comprehensive income for the three-month periodperiods ended September 30, 2019, and 2018, respectively; and net gains of $139,000 and net losses of $55,000 for the nine-month periodperiods ended September 30, 2018. There2019 and 2018, respectively. Net gains of $43,000 and $483,000 were no reclassifications of gains or lossesreclassified from accumulated other comprehensive income into income, nor gains or losses recognized into income duringfor the three- orthree and nine-month periods ended September 30, 2018, and 2017.2019. At September 30, 2018,2019, the company expects to reclassify $55,000$51,000 of net lossesgains on derivative instruments from accumulated other comprehensive income to earnings during the next 12 months due to the settlement of futures contracts.
Note 8. 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. |
10
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 8. Fair Value Measurements (Continued)
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, 2018,2019, and December 31, 20172018 (in thousands):
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | Quoted Prices | | Significant | | | | ||
| | | | in Active | | Other | | Significant | |||
| | | | Markets for | | Observable | | Unobservable | |||
| | | | Identical Assets | | Inputs | | Inputs | |||
| Total | | (Level 1) | | (Level 2) | | (Level 3) | ||||
September 30, 2019 | | | | | | | | | | | |
Short-term investments | $ | 69,529 | | $ | - | | $ | 69,529 | | $ | - |
Commodity futures – financial assets | | 1,376 | | | - | | | 1,376 | | | - |
Commodity futures – financial liabilities | | 3,905 | | | - | | | 3,905 | | | - |
| | | | | | | | | | | |
December 31, 2018 | | | | | | | | | | | |
Short-term investments | $ | 228,783 | | $ | - | | $ | 228,783 | | $ | - |
Commodity futures – financial assets | | 4,558 | | | - | | | 4,558 | | | - |
Commodity futures – financial liabilities | | 3,890 | | | - | | | 3,890 | | | - |
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| Quoted Prices |
| Significant |
|
|
| ||
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| in Active |
| Other |
| Significant | |||
|
|
|
| Markets for |
| Observable |
| Unobservable | |||
|
|
|
| Identical Assets |
| Inputs |
| Inputs | |||
| Total |
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
September 30, 2018 |
|
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|
|
|
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|
|
Commodity futures – financial assets | $ | 989 |
| $ | - |
| $ | 989 |
| $ | - |
Commodity futures – financial liabilities |
| 4,722 |
|
| - |
|
| 4,722 |
|
| - |
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|
December 31, 2017 |
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|
Commodity futures – financial assets | $ | 2,790 |
| $ | - |
| $ | 2,790 |
| $ | - |
Commodity futures – financial liabilities |
| 10,506 |
|
| - |
|
| 10,506 |
|
| - |
The carrying amounts of financial instruments including cash and equivalents and short term investments in certificates of deposit approximate fair value.value (Level 1). The fair values of short-term investments and the 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.available (Level 2). The fair value of long-term debt, including current maturities, as determined by quoted market prices (Level 2), was approximately $2.4$2.5 billion and $2.5$2.4 billion at September 30, 20182019 and December 31, 2017,2018, respectively (with a corresponding carrying amount in the consolidated balance sheet of $2.4$2.5 billion at September 30, 20182019 and $2.4 billion at December 31, 2017)2018).
Note 9. 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. liquidity.
12
Note 10. 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 the 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 the consolidated financial statements. Intra‑segmentIntra-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 oursmaller joint ventures, and the idle Minnesota ironmaking operations and several small joint ventures. In addition,operations. Also included in “Other” also includesare certain unallocated corporate accounts, such as the company’s senior secured credit facility, senior notes, certain other investments and certain profit sharing expenses.
The company’s segment results, including disaggregated revenue by segment to external, external non-United States, and other segment customers, are as follows (in thousands):
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | Metals | | Steel | | | | | | | | | | ||
For the three months ended | | Steel | | Recycling | | Fabrication | | | | | | | | | �� | |||
September 30, 2019 | | Operations | | Operations | | Operations | | Other | | Eliminations | | Consolidated | ||||||
| | | | | | | | | | | | | | | | | | |
Net sales - disaggregated revenue | | | | | | | | | | | | | | | | | | |
External | | $ | 1,838,682 | | $ | 230,086 | | $ | 245,914 | | $ | 77,330 | | $ | - | | $ | 2,392,012 |
External Non-U.S. | | | 83,845 | | | 50,823 | | | 165 | | | - | | | - | | | 134,833 |
Other segments | | | 85,678 | | | 293,999 | | | 637 | | | 100 | | | (380,414) | | | - |
| | | 2,008,205 | | | 574,908 | | | 246,716 | | | 77,430 | | | (380,414) | | | 2,526,845 |
Operating income (loss) | | | 234,683 | | | (101) | | | 35,280 | | | (42,441) | (1) | | 624 | (2) | | 228,045 |
Income (loss) before income taxes | | | 217,699 | | | (1,159) | | | 34,080 | | | (49,780) | | | 411 | | | 201,251 |
Depreciation and amortization | | | 63,170 | | | 11,769 | | | 2,941 | | | 1,590 | | | - | | | 79,470 |
Capital expenditures | | | 40,818 | | | 11,498 | | | 3,759 | | | 98,056 | | | - | | | 154,131 |
| | | | | | | | | | | | | | | | | | |
As of September 30, 2019 | | | | | | | | | | | | | | | | | | |
Assets | | $ | 5,119,419 | | $ | 972,493 | | $ | 414,835 | | $ | 1,513,798 | (3) | $ | (77,298) | (4) | $ | 7,943,247 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Footnotes related to the three months ended September 30, 2019, segment results (in millions): | ||||||||
| | | | | | | | |
(1) | Corporate SG&A | $ | (15.4) | | (2) | Gross profit increase from intra-company sales | $ | 0.4 |
| Company-wide equity-based compensation | | (8.7) | | | | | |
| Profit sharing | | (17.0) | | | | | |
| Other, net | | (1.3) | | | | | |
| | $ | (42.4) | | | | | |
| | | | | | | | |
(3) | Cash and equivalents | $ | 1,072.5 | | (4) | Elimination of intra-company receivables | $ | (61.2) |
| Short-term investments | | 69.5 | | | Elimination of intra-company debt | | (8.7) |
| Accounts receivable | | 7.8 | | | Other | | (7.4) |
| Inventories | | 36.5 | | | | $ | (77.3) |
| Property, plant and equipment, net | | 271.8 | | | | | |
| Intra-company debt | | 8.7 | | | | | |
| Other | | 47.0 | | | | | |
| | $ | 1,513.8 | | | | | |
11
13
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 10. Segment Information (Continued)
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | Metals | | Steel | | | | | | | | | | ||
For the three months ended | | Steel | | Recycling | | Fabrication | | | | | | | | | | |||
September 30, 2018 | | Operations | | Operations | | Operations | | Other | | Eliminations | | Consolidated | ||||||
| | | | | | | | | | | | | | | | | | |
Net sales - disaggregated revenue | | | | | | | | | | | | | | | | | | |
External | | $ | 2,400,329 | | $ | 323,611 | | $ | 250,625 | | $ | 110,659 | | $ | - | | $ | 3,085,224 |
External Non-U.S. | | | 74,715 | | | 63,608 | | | - | | | - | | | - | | | 138,323 |
Other segments | | | 111,582 | | | 412,795 | | | 120 | | | 1,294 | | | (525,791) | | | - |
| | | 2,586,626 | | | 800,014 | | | 250,745 | | | 111,953 | | | (525,791) | | | 3,223,547 |
Operating income (loss) | | | 573,848 | | | 14,674 | | | 13,104 | | | (67,113) | (1) | | (2,941) | | | 531,572 |
Income (loss) before income taxes | | | 557,870 | | | 13,488 | | | 11,801 | | | (73,109) | | | (2,935) | (2) | | 507,115 |
Depreciation and amortization | | | 64,088 | | | 11,491 | | | 2,941 | | | 2,863 | | | - | | | 81,383 |
Capital expenditures | | | 57,074 | | | 11,603 | | | 1,395 | | | 596 | | | - | | | 70,668 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Footnotes related to the three months ended September 30, 2018, segment results (in millions): | ||||||||
| | | | | | | | |
(1) | Corporate SG&A | $ | (13.8) | | (2) | Gross profit decrease from intra-company sales | $ | (2.9) |
| Company-wide equity-based compensation | | (7.8) | | | | | |
| Profit sharing | | (43.4) | | | | | |
| Other, net | | (2.1) | | | | | |
| | $ | (67.1) | | | | | |
The company’s segment results are as follows (in thousands):
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | Metals | | Steel | | | | | | | | | | ||
For the nine months ended | | Steel | | Recycling | | Fabrication | | | | | | | | | | |||
September 30, 2019 | | Operations | | Operations | | Operations | | Other | | Eliminations | | Consolidated | ||||||
| | | | | | | | | | | | | | | | | | |
Net sales - disaggregated revenue | | | | | | | | | | | | | | | | | | |
External | | $ | 5,918,189 | | $ | 778,637 | | $ | 714,782 | | $ | 290,219 | | $ | - | | $ | 7,701,827 |
External Non-U.S. | | | 235,259 | | | 176,508 | | | 1,201 | | | - | | | - | | | 412,968 |
Other segments | | | 243,107 | | | 1,013,574 | | | 826 | | | 469 | | | (1,257,976) | | | - |
| | | 6,396,555 | | | 1,968,719 | | | 716,809 | | | 290,688 | | | (1,257,976) | | | 8,114,795 |
Operating income (loss) | | | 835,172 | | | 24,480 | | | 86,567 | | | (148,514) | (1) | | 7,214 | | | 804,919 |
Income (loss) before income taxes | | | 784,873 | | | 20,846 | | | 82,897 | | | (169,914) | | | 6,572 | (2) | | 725,274 |
Depreciation and amortization | | | 188,832 | | | 34,733 | | | 8,882 | | | 8,108 | | | - | | | 240,555 |
Capital expenditures | | | 128,069 | | | 30,313 | | | 8,771 | | | 126,534 | | | - | | | 293,687 |
| | | | | | | | | | | | | | | | | | |
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| Metals |
| Steel |
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| ||
For the three months ended |
| Steel |
| Recycling |
| Fabrication |
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| |||
September 30, 2018 |
| Operations |
| Operations |
| Operations |
| Other |
| Eliminations |
| Consolidated | ||||||
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Net Sales - disaggregated revenue |
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|
|
|
External |
| $ | 2,400,329 |
| $ | 323,611 |
| $ | 250,625 |
| $ | 110,659 |
| $ | - |
| $ | 3,085,224 |
External Non-U.S. |
|
| 74,715 |
|
| 63,608 |
|
| - |
|
| - |
|
| - |
|
| 138,323 |
Other segments |
|
| 111,582 |
|
| 412,795 |
|
| 120 |
|
| 1,294 |
|
| (525,791) |
|
| - |
|
|
| 2,586,626 |
|
| 800,014 |
|
| 250,745 |
|
| 111,953 |
|
| (525,791) |
|
| 3,223,547 |
Operating income (loss) |
|
| 573,848 |
|
| 14,674 |
|
| 13,104 |
|
| (67,113) | (1) |
| (2,941) | (2) |
| 531,572 |
Income (loss) before income taxes |
|
| 557,870 |
|
| 13,488 |
|
| 11,801 |
|
| (73,109) |
|
| (2,935) |
|
| 507,115 |
Depreciation and amortization |
|
| 64,088 |
|
| 11,491 |
|
| 2,941 |
|
| 2,863 |
|
| - |
|
| 81,383 |
Capital expenditures |
|
| 57,074 |
|
| 11,603 |
|
| 1,395 |
|
| 596 |
|
| - |
|
| 70,668 |
|
|
|
|
|
|
|
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|
|
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|
|
|
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|
|
|
As of September 30, 2018 |
|
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|
|
Assets |
| $ | 5,195,048 |
| $ | 1,019,089 |
| $ | 489,469 |
| $ | 1,204,565 | (3) | $ | (109,803) | (4) | $ | 7,798,368 |
|
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| | | | | | | | |
Footnotes related to the nine months ended September 30, 2019, segment results (in millions): | ||||||||
| | | | | | | | |
(1) | Corporate SG&A | $ | (56.0) | | (2) | Gross profit increase from intra-company sales | $ | 6.6 |
| Company-wide equity-based compensation | | (26.1) | | | | | |
| Profit sharing | | (61.3) | | | | | |
| Other, net | | (5.1) | | | | | |
| | $ | (148.5) | | | | | |
|
|
|
|
|
|
|
|
|
Footnotes related to the three months ended September 30, 2018, segment results (in millions): | ||||||||
|
|
|
|
|
|
|
|
|
(1) | Corporate SG&A | $ | (13.8) |
| (2) | Gross profit decrease from intra-company sales | $ | (3.0) |
| Company-wide equity-based compensation |
| (7.8) |
|
|
|
|
|
| Profit sharing |
| (43.4) |
|
|
|
|
|
| Other, net |
| (2.1) |
|
|
|
|
|
|
| $ | (67.1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) | Cash and equivalents | $ | 866.1 |
| (4) | Elimination of intra-company receivables | $ | (72.6) |
| Short term investments |
| 85.0 |
|
| Elimination of intra-company debt |
| (17.2) |
| Inventories |
| 26.3 |
|
| Other |
| (20.0) |
| Property, plant and equipment, net |
| 158.9 |
|
|
| $ | (109.8) |
| Intra-company debt |
| 17.2 |
|
|
|
|
|
| Other |
| 51.1 |
|
|
|
|
|
|
| $ | 1,204.6 |
|
|
|
|
|
12
14
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 10. Segment Information (Continued)
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | Metals | | Steel | | | | | | | | | | ||
For the nine months ended | | Steel | | Recycling | | Fabrication | | | | | | | | | | |||
September 30, 2018 | | Operations | | Operations | | Operations | | Other | | Eliminations | | Consolidated | ||||||
| | | | | | | | | | | | | | | | | | |
Net sales - disaggregated revenue | | | | | | | | | | | | | | | | | | |
External | | $ | 6,360,177 | | $ | 1,001,267 | | $ | 669,500 | | $ | 326,086 | | $ | - | | $ | 8,357,030 |
External Non-U.S. | | | 362,083 | | | 198,778 | | | 56 | | | - | | | - | | | 560,917 |
Other segments | | | 281,828 | | | 1,236,830 | | | 788 | | | 1,565 | | | (1,521,011) | | | - |
| | | 7,004,088 | | | 2,436,875 | | | 670,344 | | | 327,651 | | | (1,521,011) | | | 8,917,947 |
Operating income (loss) | | | 1,441,904 | | | 62,027 | | | 47,039 | | | (186,137) | (1) | | (7,977) | | | 1,356,856 |
Income (loss) before income taxes | | | 1,390,074 | | | 57,458 | | | 42,898 | | | (203,970) | | | (7,971) | (2) | | 1,278,489 |
Depreciation and amortization | | | 184,998 | | | 34,602 | | | 8,785 | | | 8,253 | | | - | | | 236,638 |
Capital expenditures | | | 137,484 | | | 27,496 | | | 5,526 | | | 5,971 | | | - | | | 176,477 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Footnotes related to the nine months ended September 30, 2018, segment results (in millions): | ||||||||
| | | | | | | | |
(1) | Corporate SG&A | $ | (44.0) | | (2) | Gross profit decrease from intra-company sales | $ | (8.0) |
| Company-wide equity-based compensation | | (24.8) | | | | | |
| Profit sharing | | (109.6) | | | | | |
| Other, net | | (7.7) | | | | | |
| | $ | (186.1) | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Metals |
| Steel |
|
|
|
|
|
|
|
|
| ||
For the three months ended |
| Steel |
| Recycling |
| Fabrication |
|
|
|
|
|
|
|
|
| |||
September 30, 2017 |
| Operations |
| Operations |
| Operations |
| Other |
| Eliminations |
| Consolidated | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales - disaggregated revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
| $ | 1,700,707 |
| $ | 301,422 |
| $ | 211,271 |
| $ | 101,057 |
| $ | - |
| $ | 2,314,457 |
External Non-U.S. |
|
| 82,098 |
|
| 46,793 |
|
| 34 |
|
| - |
|
| - |
|
| 128,925 |
Other segments |
|
| 65,321 |
|
| 360,982 |
|
| 89 |
|
| 116 |
|
| (426,508) |
|
| - |
|
|
| 1,848,126 |
|
| 709,197 |
|
| 211,394 |
|
| 101,173 |
|
| (426,508) |
|
| 2,443,382 |
Operating income (loss) |
|
| 276,547 |
|
| 17,624 |
|
| 21,862 |
|
| (44,326) | (1) |
| (692) |
|
| 271,015 |
Income (loss) before income taxes |
|
| 255,539 |
|
| 16,020 |
|
| 20,199 |
|
| (56,754) |
|
| (692) |
|
| 234,312 |
Depreciation and amortization |
|
| 57,644 |
|
| 12,020 |
|
| 2,866 |
|
| 2,680 |
|
| - |
|
| 75,210 |
Capital expenditures |
|
| 31,654 |
|
| 8,589 |
|
| 1,524 |
|
| 1,028 |
|
| - |
|
| 42,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes related to the three months ended September 30, 2017, segment results (in millions): | ||||||||
|
|
|
|
|
|
|
|
|
(1) | Corporate SG&A | $ | (12.1) |
|
|
|
|
|
| Company-wide equity-based compensation |
| (6.8) |
|
|
|
|
|
| Profit sharing |
| (20.2) |
|
|
|
|
|
| Other, net |
| (5.2) |
|
|
|
|
|
|
| $ | (44.3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Metals |
| Steel |
|
|
|
|
|
|
|
|
| ||
For the nine months ended |
| Steel |
| Recycling |
| Fabrication |
|
|
|
|
|
|
|
|
| |||
September 30, 2018 |
| Operations |
| Operations |
| Operations |
| Other |
| Eliminations |
| Consolidated | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales - disaggregated revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
| $ | 6,360,177 |
| $ | 1,001,267 |
| $ | 669,500 |
| $ | 326,086 |
| $ | - |
| $ | 8,357,030 |
External Non-U.S. |
|
| 362,083 |
|
| 198,778 |
|
| 56 |
|
| - |
|
| - |
|
| 560,917 |
Other segments |
|
| 281,828 |
|
| 1,236,830 |
|
| 788 |
|
| 1,565 |
|
| (1,521,011) |
|
| - |
|
|
| 7,004,088 |
|
| 2,436,875 |
|
| 670,344 |
|
| 327,651 |
|
| (1,521,011) |
|
| 8,917,947 |
Operating income (loss) |
|
| 1,441,904 |
|
| 62,027 |
|
| 47,039 |
|
| (186,137) | (1) |
| (7,977) | (2) |
| 1,356,856 |
Income (loss) before income taxes |
|
| 1,390,074 |
|
| 57,458 |
|
| 42,898 |
|
| (203,970) |
|
| (7,971) |
|
| 1,278,489 |
Depreciation and amortization |
|
| 184,998 |
|
| 34,602 |
|
| 8,785 |
|
| 8,253 |
|
| - |
|
| 236,638 |
Capital expenditures |
|
| 137,484 |
|
| 27,496 |
|
| 5,526 |
|
| 5,971 |
|
| - |
|
| 176,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes related to the nine months ended September 30, 2018, segment results (in millions): | ||||||||
|
|
|
|
|
|
|
|
|
(1) | Corporate SG&A | $ | (44.0) |
| (2) | Gross profit decrease from intra-company sales | $ | (8.0) |
| Company-wide equity-based compensation |
| (24.8) |
|
|
|
|
|
| Profit sharing |
| (109.6) |
|
|
|
|
|
| Other, net |
| (7.7) |
|
|
|
|
|
|
| $ | (186.1) |
|
|
|
|
|
13
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 10. Segment Information (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Metals |
| Steel |
|
|
|
|
|
|
|
|
| ||
For the nine months ended |
| Steel |
| Recycling |
| Fabrication |
|
|
|
|
|
|
|
|
| |||
September 30, 2017 |
| Operations |
| Operations |
| Operations |
| Other |
| Eliminations |
| Consolidated | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales - disaggregated revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) |
|
|
|
|
|
14
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 11. 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 2026.2026, at September 30, 2019. 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 readIn October 2019, the Company’s corporate credit rating was upgraded to an investment grade credit level by all three credit rating agencies, resulting in conjunction withall the accompanying consolidated financial statements andreferenced guarantees being automatically released pursuant to the company’s Annual Report on Form 10-K for the year ended December 31, 2017.applicable Indentures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheets (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| Combined |
| Consolidating |
| Total | |||
As of September 30, 2018 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | |||||
Cash and equivalents |
| $ | 863,917 |
| $ | 13,686 |
| $ | 6,712 |
| $ | - |
| $ | 884,315 |
Short term investments |
|
| 85,000 |
|
| 30,000 |
|
| - |
|
| - |
|
| 115,000 |
Accounts receivable, net |
|
| 382,836 |
|
| 1,745,801 |
|
| 35,404 |
|
| (935,851) |
|
| 1,228,190 |
Inventories |
|
| 774,486 |
|
| 1,058,194 |
|
| 34,251 |
|
| (13,069) |
|
| 1,853,862 |
Other current assets |
|
| 30,939 |
|
| 21,613 |
|
| 3,451 |
|
| (5,893) |
|
| 50,110 |
Total current assets |
|
| 2,137,178 |
|
| 2,869,294 |
|
| 79,818 |
|
| (954,813) |
|
| 4,131,477 |
Property, plant and equipment, net |
|
| 864,007 |
|
| 1,879,224 |
|
| 158,427 |
|
| - |
|
| 2,901,658 |
Intangible assets, net |
|
| - |
|
| 236,563 |
|
| - |
|
| - |
|
| 236,563 |
Goodwill |
|
| - |
|
| 502,900 |
|
| - |
|
| - |
|
| 502,900 |
Other assets, including investments in subs |
|
| 3,043,057 |
|
| 5,905 |
|
| 5,535 |
|
| (3,028,727) |
|
| 25,770 |
Total assets |
| $ | 6,044,242 |
| $ | 5,493,886 |
| $ | 243,780 |
| $ | (3,983,540) |
| $ | 7,798,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 195,810 |
| $ | 399,704 |
| $ | 86,375 |
| $ | (70,861) |
| $ | 611,028 |
Accrued expenses |
|
| 283,085 |
|
| 283,977 |
|
| 9,719 |
|
| (152,920) |
|
| 423,861 |
Current maturities of long-term debt |
|
| 777 |
|
| 1,355 |
|
| 44,884 |
|
| (32,240) |
|
| 14,776 |
Total current liabilities |
|
| 479,672 |
|
| 685,036 |
|
| 140,978 |
|
| (256,021) |
|
| 1,049,665 |
Long-term debt |
|
| 2,326,733 |
|
| 335 |
|
| 168,476 |
|
| (143,565) |
|
| 2,351,979 |
Other liabilities |
|
| (795,835) |
|
| 681,043 |
|
| 34,562 |
|
| 490,877 |
|
| 410,647 |
Total liabilities |
|
| 2,010,570 |
|
| 1,366,414 |
|
| 344,016 |
|
| 91,291 |
|
| 3,812,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests |
|
| - |
|
| - |
|
| 111,240 |
|
| - |
|
| 111,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
| 644 |
|
| 1,727,859 |
|
| 15,016 |
|
| (1,742,875) |
|
| 644 |
Treasury stock |
|
| (854,052) |
|
| - |
|
| - |
|
| - |
|
| (854,052) |
Additional paid-in-capital |
|
| 1,156,556 |
|
| 683,048 |
|
| 689,502 |
|
| (1,372,550) |
|
| 1,156,556 |
Retained earnings (deficit) |
|
| 3,730,662 |
|
| 1,716,469 |
|
| (757,063) |
|
| (959,406) |
|
| 3,730,662 |
Accumulated other comprehensive loss |
|
| (138) |
|
| 96 |
|
| - |
|
| - |
|
| (42) |
Total Steel Dynamics, Inc. equity |
|
| 4,033,672 |
|
| 4,127,472 |
|
| (52,545) |
|
| (4,074,831) |
|
| 4,033,768 |
Noncontrolling interests |
|
| - |
|
| - |
|
| (158,931) |
|
| - |
|
| (158,931) |
Total equity |
|
| 4,033,672 |
|
| 4,127,472 |
|
| (211,476) |
|
| (4,074,831) |
|
| 3,874,837 |
Total liabilities and equity |
| $ | 6,044,242 |
| $ | 5,493,886 |
| $ | 243,780 |
| $ | (3,983,540) |
| $ | 7,798,368 |
15
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 11. Condensed Consolidating Information (Continued)
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Condensed Consolidating Balance Sheets (in thousands) | | | | | | | | | | | | | |||
| | | | | | | | Combined | | Consolidating | | Total | |||
As of September 30, 2019 | | Parent | | Guarantors | | Non-Guarantors | | Adjustments | | Consolidated | |||||
Cash and equivalents | | $ | 1,070,215 | | $ | 64,398 | | $ | 11,394 | | $ | - | | $ | 1,146,007 |
Short-term investments | | | 69,529 | | | - | | | - | | | - | | | 69,529 |
Accounts receivable, net | | | 303,259 | | | 1,675,521 | | | 63,962 | | | (1,055,796) | | | 986,946 |
Inventories | | | 725,792 | | | 960,506 | | | 88,871 | | | (8,149) | | | 1,767,020 |
Other current assets | | | 29,754 | | | 17,464 | | | 4,548 | | | (948) | | | 50,818 |
Total current assets | | | 2,198,549 | | | 2,717,889 | | | 168,775 | | | (1,064,893) | | | 4,020,320 |
Property, plant and equipment, net | | | 966,715 | | | 1,902,414 | | | 162,602 | | | - | | | 3,031,731 |
Intangible assets, net | | | - | | | 249,598 | | | - | | | - | | | 249,598 |
Goodwill | | | - | | | 427,103 | | | 113,810 | | | - | | | 540,913 |
Other assets, including investments in subs | | | 2,723,786 | | | 61,910 | | | 6,420 | | | (2,691,431) | | | 100,685 |
Total assets | | $ | 5,889,050 | | $ | 5,358,914 | | $ | 451,607 | | $ | (3,756,324) | | $ | 7,943,247 |
| | | | | | | | | | | | | | | |
Accounts payable | | $ | 177,308 | | $ | 332,299 | | $ | 99,162 | | $ | (80,140) | | $ | 528,629 |
Accrued expenses | | | 228,600 | | | 316,684 | | | 16,694 | | | (167,482) | | | 394,496 |
Current maturities of long-term debt | | | 843 | | | 517 | | | 103,551 | | | (22,761) | | | 82,150 |
Total current liabilities | | | 406,751 | | | 649,500 | | | 219,407 | | | (270,383) | | | 1,005,275 |
Long-term debt | | | 2,330,968 | | | - | | | 147,310 | | | (123,035) | | | 2,355,243 |
Other liabilities | | | (905,310) | | | 1,087,758 | | | 34,290 | | | 321,636 | | | 538,374 |
Total liabilities | | | 1,832,409 | | | 1,737,258 | | | 401,007 | | | (71,782) | | | 3,898,892 |
| | | | | | | | | | | | | | | |
Redeemable noncontrolling interests | | | - | | | - | | | 143,614 | | | - | | | 143,614 |
| | | | | | | | | | | | | | | |
Common stock | | | 645 | | | 1,727,859 | | | 15,016 | | | (1,742,875) | | | 645 |
Treasury stock | | | (1,469,078) | | | - | | | - | | | - | | | (1,469,078) |
Additional paid-in-capital | | | 1,175,512 | | | 683,048 | | | 804,625 | | | (1,487,673) | | | 1,175,512 |
Retained earnings (deficit) | | | 4,349,523 | | | 1,210,749 | | | (756,755) | | | (453,994) | | | 4,349,523 |
Accumulated other comprehensive loss | | | 39 | | | - | | | - | | | - | | | 39 |
Total Steel Dynamics, Inc. equity | | | 4,056,641 | | | 3,621,656 | | | 62,886 | | | (3,684,542) | | | 4,056,641 |
Noncontrolling interests | | | - | | | - | | | (155,900) | | | - | | | (155,900) |
Total equity | | | 4,056,641 | | | 3,621,656 | | | (93,014) | | | (3,684,542) | | | 3,900,741 |
Total liabilities and equity | | $ | 5,889,050 | | $ | 5,358,914 | | $ | 451,607 | | $ | (3,756,324) | | $ | 7,943,247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
16
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 11. Condensed Consolidating Information (Continued)
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | Combined | | Consolidating | | Total | |||
As of December 31, 2018 | | Parent | | Guarantors | | Non-Guarantors | | Adjustments | | Consolidated | |||||
Cash and equivalents | | $ | 809,763 | | $ | 13,491 | | $ | 4,966 | | $ | - | | $ | 828,220 |
Short-term investments | | | 198,783 | | | 30,000 | | | - | | | - | | | 228,783 |
Accounts receivable, net | | | 340,439 | | | 1,635,168 | | | 26,655 | | | (958,506) | | | 1,043,756 |
Inventories | | | 793,174 | | | 1,038,702 | | | 39,214 | | | (11,922) | | | 1,859,168 |
Other current assets | | | 56,578 | | | 18,627 | | | 3,994 | | | (6,469) | | | 72,730 |
Total current assets | | | 2,198,737 | | | 2,735,988 | | | 74,829 | | | (976,897) | | | 4,032,657 |
Property, plant and equipment, net | | | 871,482 | | | 1,918,198 | | | 156,087 | | | - | | | 2,945,767 |
Intangible assets, net | | | - | | | 270,328 | | | - | | | - | | | 270,328 |
Goodwill | | | - | | | 429,645 | | | - | | | - | | | 429,645 |
Other assets, including investments in subs | | | 2,862,556 | | | 5,593 | | | 5,557 | | | (2,848,540) | | | 25,166 |
Total assets | | $ | 5,932,775 | | $ | 5,359,752 | | $ | 236,473 | | $ | (3,825,437) | | $ | 7,703,563 |
| | | | | | | | | | | | | | | |
Accounts payable | | $ | 209,156 | | $ | 330,156 | | $ | 74,353 | | $ | (62,911) | | $ | 550,754 |
Accrued expenses | | | 296,528 | | | 295,668 | | | 11,171 | | | (159,218) | | | 444,149 |
Current maturities of long-term debt | | | 793 | | | 1,355 | | | 51,079 | | | (28,993) | | | 24,234 |
Total current liabilities | | | 506,477 | | | 627,179 | | | 136,603 | | | (251,122) | | | 1,019,137 |
Long-term debt | | | 2,327,798 | | | 381 | | | 166,226 | | | (141,916) | | | 2,352,489 |
Other liabilities | | | (836,571) | | | 1,447,464 | | | 31,791 | | | (197,976) | | | 444,708 |
Total liabilities | | | 1,997,704 | | | 2,075,024 | | | 334,620 | | | (591,014) | | | 3,816,334 |
| | | | | | | | | | | | | | | |
Redeemable noncontrolling interests | | | - | | | - | | | 111,240 | | | - | | | 111,240 |
| | | | | | | | | | | | | | | |
Common stock | | | 645 | | | 1,727,859 | | | 15,016 | | | (1,742,875) | | | 645 |
Treasury stock | | | (1,184,243) | | | - | | | - | | | - | | | (1,184,243) |
Additional paid-in-capital | | | 1,160,048 | | | 683,048 | | | 695,502 | | | (1,378,550) | | | 1,160,048 |
Retained earnings (deficit) | | | 3,958,320 | | | 873,821 | | | (760,823) | | | (112,998) | | | 3,958,320 |
Accumulated other comprehensive income | | | 301 | | | - | | | - | | | - | | | 301 |
Total Steel Dynamics, Inc. equity | | | 3,935,071 | | | 3,284,728 | | | (50,305) | | | (3,234,423) | | | 3,935,071 |
Noncontrolling interests | | | - | | | - | | | (159,082) | | | - | | | (159,082) |
Total equity | | | 3,935,071 | | | 3,284,728 | | | (209,387) | | | (3,234,423) | | | 3,775,989 |
Total liabilities and equity | | $ | 5,932,775 | | $ | 5,359,752 | | $ | 236,473 | | $ | (3,825,437) | | $ | 7,703,563 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Condensed Consolidating Statements of Operations (in thousands) | | | | | | | | | | | | | |||
| | | | | | | | | | | | | | | |
For the three months ended, | | | | | | | | Combined | | Consolidating | | Total | |||
September 30, 2019 | | Parent | | Guarantors | | Non-Guarantors | | Adjustments | | Consolidated | |||||
Net sales | | $ | 976,470 | | $ | 2,710,767 | | $ | 205,617 | | $ | (1,366,009) | | $ | 2,526,845 |
Costs of goods sold | | | 814,622 | | | 2,502,257 | | | 188,967 | | | (1,338,840) | | | 2,167,006 |
Gross profit | | | 161,848 | | | 208,510 | | | 16,650 | | | (27,169) | | | 359,839 |
Selling, general and administrative | | | 55,613 | | | 74,433 | | | 7,827 | | | (6,079) | | | 131,794 |
Operating income | | | 106,235 | | | 134,077 | | | 8,823 | | | (21,090) | | | 228,045 |
Interest expense, net of capitalized interest | | | 18,716 | | | 11,536 | | | 3,490 | | | (2,403) | | | 31,339 |
Other income, net | | | (5,394) | | | (1,574) | | | (196) | | | 2,619 | | | (4,545) |
Income before income taxes and | | | | | | | | | | | | | | | |
equity in net income of subsidiaries | | | 92,913 | | | 124,115 | | | 5,529 | | | (21,306) | | | 201,251 |
Income taxes | | | 23,625 | | | 29,965 | | | 128 | | | (5,075) | | | 48,643 |
| | | 69,288 | | | 94,150 | | | 5,401 | | | (16,231) | | | 152,608 |
Equity in net income of subsidiaries | | | 81,760 | | | - | | | - | | | (81,760) | | | - |
Net income attributable to noncontrolling interests | | | - | | | - | | | (1,560) | | | - | | | (1,560) |
Net income attributable to Steel Dynamics, Inc. | | $ | 151,048 | | $ | 94,150 | | $ | 3,841 | | $ | (97,991) | | $ | 151,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Operations (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended, |
|
|
|
|
|
|
| Combined |
| Consolidating |
| Total | |||
September 30, 2018 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | |||||
Net sales |
| $ | 1,304,801 |
| $ | 3,540,381 |
| $ | 144,145 |
| $ | (1,765,780) |
| $ | 3,223,547 |
Costs of goods sold |
|
| 956,735 |
|
| 3,163,110 |
|
| 142,005 |
|
| (1,724,384) |
|
| 2,537,466 |
Gross profit |
|
| 348,066 |
|
| 377,271 | �� |
| 2,140 |
|
| (41,396) |
|
| 686,081 |
Selling, general and administrative |
|
| 78,824 |
|
| 78,694 |
|
| 2,974 |
|
| (5,983) |
|
| 154,509 |
Operating income (loss) |
|
| 269,242 |
|
| 298,577 |
|
| (834) |
|
| (35,413) |
|
| 531,572 |
Interest expense, net of capitalized interest |
|
| 18,559 |
|
| 12,489 |
|
| 3,134 |
|
| (2,622) |
|
| 31,560 |
Other (income) expense, net |
|
| (7,121) |
|
| (2,292) |
|
| (306) |
|
| 2,616 |
|
| (7,103) |
Income (loss) before income taxes and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equity in net income of subsidiaries |
|
| 257,804 |
|
| 288,380 |
|
| (3,662) |
|
| (35,407) |
|
| 507,115 |
Income taxes |
|
| 45,599 |
|
| 71,466 |
|
| 420 |
|
| (8,276) |
|
| 109,209 |
|
|
| 212,205 |
|
| 216,914 |
|
| (4,082) |
|
| (27,131) |
|
| 397,906 |
Equity in net income of subsidiaries |
|
| 186,170 |
|
| - |
|
| - |
|
| (186,170) |
|
| - |
Net income attributable to noncontrolling interests |
|
| - |
|
| - |
|
| 469 |
|
| - |
|
| 469 |
Net income (loss) attributable to Steel Dynamics, Inc. |
| $ | 398,375 |
| $ | 216,914 |
| $ | (3,613) |
| $ | (213,301) |
| $ | 398,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
| 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 |
17
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 11. Condensed Consolidating Information (Continued)
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
For the three months ended, | | | | | | | | Combined | | Consolidating | | Total | |||
September 30, 2018 | | Parent | | Guarantors | | Non-Guarantors | | Adjustments | | Consolidated | |||||
Net sales | | $ | 1,304,801 | | $ | 3,540,381 | | $ | 144,145 | | $ | (1,765,780) | | $ | 3,223,547 |
Costs of goods sold | | | 956,735 | | | 3,163,110 | | | 142,005 | | | (1,724,384) | | | 2,537,466 |
Gross profit | | | 348,066 | | | 377,271 | | | 2,140 | | | (41,396) | | | 686,081 |
Selling, general and administrative | | | 78,824 | | | 78,694 | | | 2,974 | | | (5,983) | | | 154,509 |
Operating income (loss) | | | 269,242 | | | 298,577 | | | (834) | | | (35,413) | | | 531,572 |
Interest expense, net of capitalized interest | | | 18,559 | | | 12,489 | | | 3,134 | | | (2,622) | | | 31,560 |
Other income, net | | | (7,121) | | | (2,292) | | | (306) | | | 2,616 | | | (7,103) |
Income (loss) before income taxes and | | | | | | | | | | | | | | | |
equity in net income of subsidiaries | | | 257,804 | | | 288,380 | | | (3,662) | | | (35,407) | | | 507,115 |
Income taxes | | | 45,599 | | | 71,466 | | | 420 | | | (8,276) | | | 109,209 |
| | | 212,205 | | | 216,914 | | | (4,082) | | | (27,131) | | | 397,906 |
Equity in net income of subsidiaries | | | 186,170 | | | - | | | - | | | (186,170) | | | - |
Net loss attributable to noncontrolling interests | | | - | | | - | | | 469 | | | - | | | 469 |
Net income (loss) attributable to Steel Dynamics, Inc. | | $ | 398,375 | | $ | 216,914 | | $ | (3,613) | | $ | (213,301) | | $ | 398,375 |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
| | | | | | | | | | | | | | | ||||||||||||||||
| | | | | | | | | | | | | | | ||||||||||||||||
For the nine months ended, |
|
|
|
|
| Combined |
| Consolidating |
| Total | | | | | | | Combined | | Consolidating | | Total | |||||||||
September 30, 2018 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | ||||||||||||||||||||
September 30, 2019 | | Parent | | Guarantors | | Non-Guarantors | | Adjustments | | Consolidated | ||||||||||||||||||||
Net sales |
| $ | 3,635,571 |
| $ | 9,804,316 |
| $ | 417,450 |
| $ | (4,939,390) |
| $ | 8,917,947 | | $ | 3,198,215 | | $ | 8,837,385 | | $ | 611,407 | | $ | (4,532,212) | | $ | 8,114,795 |
Costs of goods sold |
|
| 2,746,516 |
|
| 8,783,145 |
|
| 413,607 |
|
| (4,826,900) |
|
| 7,116,368 | | | 2,628,849 | | | 8,141,120 | | | 568,914 | | | (4,438,663) | | | 6,900,220 |
Gross profit |
|
| 889,055 |
|
| 1,021,171 |
|
| 3,843 |
|
| (112,490) |
|
| 1,801,579 | | | 569,366 | | | 696,265 | | | 42,493 | | | (93,549) | | | 1,214,575 |
Selling, general and administrative |
|
| 218,839 |
|
| 233,989 |
|
| 8,550 |
|
| (16,655) |
|
| 444,723 | | | 185,647 | | | 221,592 | | | 19,891 | | | (17,474) | | | 409,656 |
Operating income (loss) |
|
| 670,216 |
|
| 787,182 |
|
| (4,707) |
|
| (95,835) |
|
| 1,356,856 | |||||||||||||||
Operating income | | | 383,719 | | | 474,673 | | | 22,602 | | | (76,075) | | | 804,919 | |||||||||||||||
Interest expense, net of capitalized interest |
|
| 56,568 |
|
| 36,793 |
|
| 9,489 |
|
| (7,882) |
|
| 94,968 | | | 56,818 | | | 35,107 | | | 10,327 | | | (7,470) | | | 94,782 |
Other (income) expense, net |
|
| (18,299) |
|
| (5,612) |
|
| (565) |
|
| 7,875 |
|
| (16,601) | |||||||||||||||
Income (loss) before income taxes and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Other income, net | | | (17,752) | | | (4,746) | | | (753) | | | 8,114 | | | (15,137) | |||||||||||||||
Income before income taxes and | | | | | | | | | | | | | | | | |||||||||||||||
equity in net income of subsidiaries |
|
| 631,947 |
|
| 756,001 |
|
| (13,631) |
|
| (95,828) |
|
| 1,278,489 | | | 344,653 | | | 444,312 | | | 13,028 | | | (76,719) | | | 725,274 |
Income taxes |
|
| 127,083 |
|
| 187,794 |
|
| 530 |
|
| (22,871) |
|
| 292,536 | | | 81,422 | | | 107,384 | | | 495 | | | (18,208) | | | 171,093 |
|
|
| 504,864 |
|
| 568,207 |
|
| (14,161) |
|
| (72,957) |
|
| 985,953 | |||||||||||||||
| | | 263,231 | | | 336,928 | | | 12,533 | | | (58,511) | | | 554,181 | |||||||||||||||
Equity in net income of subsidiaries |
|
| 483,511 |
|
| - |
|
| - |
|
| (483,511) |
|
| - | | | 286,447 | | | - | | | - | | | (286,447) | | | - |
Net loss attributable to noncontrolling interests |
|
| - |
|
| - |
|
| 2,422 |
|
| - |
|
| 2,422 | |||||||||||||||
Net income (loss) attributable to Steel Dynamics, Inc. |
| $ | 988,375 |
| $ | 568,207 |
| $ | (11,739) |
| $ | (556,468) |
| $ | 988,375 | |||||||||||||||
Net income attributable to noncontrolling interests | | | - | | | - | | | (4,503) | | | - | | | (4,503) | |||||||||||||||
Net income attributable to Steel Dynamics, Inc. | | $ | 549,678 | | $ | 336,928 | | $ | 8,030 | | $ | (344,958) | | $ | 549,678 | |||||||||||||||
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
For the nine months ended, | | | | | | | | Combined | | Consolidating | | Total | |||
September 30, 2018 | | Parent | | Guarantors | | Non-Guarantors | | Adjustments | | Consolidated | |||||
Net sales | | $ | 3,635,571 | | $ | 9,804,316 | | $ | 417,450 | | $ | (4,939,390) | | $ | 8,917,947 |
Costs of goods sold | | | 2,746,516 | | | 8,783,145 | | | 413,607 | | | (4,826,900) | | | 7,116,368 |
Gross profit | | | 889,055 | | | 1,021,171 | | | 3,843 | | | (112,490) | | | 1,801,579 |
Selling, general and administrative | | | 218,839 | | | 233,989 | | | 8,550 | | | (16,655) | | | 444,723 |
Operating income (loss) | | | 670,216 | | | 787,182 | | | (4,707) | | | (95,835) | | | 1,356,856 |
Interest expense, net of capitalized interest | | | 56,568 | | | 36,793 | | | 9,489 | | | (7,882) | | | 94,968 |
Other income, net | | | (18,299) | | | (5,612) | | | (565) | | | 7,875 | | | (16,601) |
Income (loss) before income taxes and | | | | | | | | | | | | | | | |
equity in net income of subsidiaries | | | 631,947 | | | 756,001 | | | (13,631) | | | (95,828) | | | 1,278,489 |
Income taxes | | | 127,083 | | | 187,794 | | | 530 | | | (22,871) | | | 292,536 |
| | | 504,864 | | | 568,207 | | | (14,161) | | | (72,957) | | | 985,953 |
Equity in net income of subsidiaries | | | 483,511 | | | - | | | - | | | (483,511) | | | - |
Net loss attributable to noncontrolling interests | | | - | | | - | | | 2,422 | | | - | | | 2,422 |
Net income (loss) attributable to Steel Dynamics, Inc. | | $ | 988,375 | | $ | 568,207 | | $ | (11,739) | | $ | (556,468) | | $ | 988,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
| 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 |
|
| 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 |
18
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 11. Condensed Consolidating Information (Continued)
| | | | | | | | | | | | | | | |
Condensed Consolidating Statements of Cash Flows (in thousands) | | | | | | | | | | | | | |||
| | | | | | | | | | | | | | | |
For the nine months ended, | | | | | | | | Combined | | Consolidating | | Total | |||
September 30, 2019 | | Parent | | Guarantors | | Non-Guarantors | | Adjustments | | Consolidated | |||||
Net cash provided by operating activities | | $ | 368,148 | | $ | 624,223 | | $ | 18,893 | | $ | (24,036) | | $ | 987,228 |
Net cash used in investing activities | | | (116,470) | | | (78,193) | | | (7,740) | | | (25,114) | | | (227,517) |
Net cash provided by (used in) financing activities | | | 8,774 | | | (495,488) | | | (5,030) | | | 49,150 | | | (442,594) |
Increase in cash, cash equivalents and | | | | | | | | | | | | | | | |
restricted cash | | | 260,452 | | | 50,542 | | | 6,123 | | | - | | | 317,117 |
Cash, cash equivalents, and restricted cash | | | | | | | | | | | | | | | |
at beginning of period | | | 809,763 | | | 14,368 | | | 10,292 | | | - | | | 834,423 |
Cash, cash equivalents, and restricted cash | | | | | | | | | | | | | | | |
at end of period | | $ | 1,070,215 | | $ | 64,910 | | $ | 16,415 | | $ | - | | $ | 1,151,540 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
For the nine months ended, | | | | | | | | Combined | | Consolidating | | Total | |||
September 30, 2018 | | Parent | | Guarantors | | Non-Guarantors | | Adjustments | | Consolidated | |||||
Net cash provided by operating activities | | $ | 401,680 | | $ | 505,175 | | $ | 2,101 | | $ | 15,452 | | $ | 924,408 |
Net cash used in investing activities | | | (617,158) | | | (106,230) | | | (4,920) | | | 4,295 | | | (724,013) |
Net cash provided by (used in) financing activities | | | 77,165 | | | (405,499) | | | 2,740 | | | (19,747) | | | (345,341) |
Decrease in cash, cash equivalents and | | | (138,313) | | | (6,554) | | | (79) | | | - | | | (144,946) |
restricted cash | | | | | | | | | | | | | | | |
Cash, cash equivalents, and restricted cash | | | 1,002,230 | | | 20,748 | | | 12,107 | | | - | | | 1,035,085 |
at beginning of period | | | | | | | | | | | | | | | |
Cash, cash equivalents, and restricted cash | | | | | | | | | | | | | | | |
at end of period | | $ | 863,917 | | $ | 14,194 | | $ | 12,028 | | $ | - | | $ | 890,139 |
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Cash Flows (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended, |
|
|
|
|
|
|
| Combined |
| Consolidating |
| Total | |||
September 30, 2018 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | |||||
Net cash provided by operating activities |
| $ | 401,680 |
| $ | 505,175 |
| $ | 2,101 |
| $ | 15,452 |
| $ | 924,408 |
Net cash used in investing activities |
|
| (617,158) |
|
| (106,230) |
|
| (4,920) |
|
| 4,295 |
|
| (724,013) |
Net cash provided by (used in) financing activities |
|
| 77,165 |
|
| (405,499) |
|
| 2,740 |
|
| (19,747) |
|
| (345,341) |
Decrease in cash, cash equivalents and restricted cash |
|
| (138,313) |
|
| (6,554) |
|
| (79) |
|
| - |
|
| (144,946) |
Cash, cash equivalents, and restricted cash at beginning of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
period |
|
| 1,002,230 |
|
| 20,748 |
|
| 12,107 |
|
| - |
|
| 1,035,085 |
Cash, cash equivalents, and restricted cash at end of period |
| $ | 863,917 |
| $ | 14,194 |
| $ | 12,028 |
| $ | - |
| $ | 890,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended, |
|
|
|
|
|
|
| Combined |
| Consolidating |
| Total | |||
September 30, 2017 |
| Parent |
| Guarantors |
| Non-Guarantors |
| Adjustments |
| Consolidated | |||||
Net cash provided by (used in) operating activities |
| $ | 126,183 |
| $ | 434,450 |
| $ | (17,989) |
| $ | 4,650 |
| $ | 547,294 |
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, cash equivalents and restricted cash |
|
| 297,730 |
|
| (21,709) |
|
| (15,851) |
|
| - |
|
| 260,170 |
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 |
| $ | 1,065,324 |
| $ | 33,150 |
| $ | 9,801 |
| $ | - |
| $ | 1,108,275 |
19
ITEM 2.MANAGEMENT’S 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 domestic or global economies, conditions in the steel and metallic scrap markets,recycled metals market places, Steel Dynamics’ revenues, costs of purchased materials, future profitability and earnings, and the operation of new, existing or existingplanned 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, zinc, graphite electrodes, and energy costs) and our ability to pass on any cost increases; (5) the impact of domestic and foreign import price competition;imports, including trade policy, restrictions, or agreements; (6) unanticipated difficulties in integrating or starting up new, existing or acquired businesses;planned businesses or assets; (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 for the year ended December 31, 2017,2018, 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 capability and actual metals recycling capability, with facilities located throughoutvolumes. Our primary source of revenues is from the United States,manufacture and in Mexico. We producesale of steel products, including hot roll, cold rollprocessing and coated sheet steel, structural steel beams and shapes, rail, engineered special-bar-quality steel, cold finished steel, merchant bar products, specialty steel sections and joist and deck. In addition, we produce liquid pig iron and process and sellsale of recycled ferrous and nonferrous scrap.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 our 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 control of the product transfers to the customer, upon shipment or delivery. Our steel fabrication operations recognizesrecognize revenues over time based on completed fabricated tons to date as a percentage of total 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 substrate, 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-wide profit sharing and amortization of intangible assets are each separately presented in the statement of operations.income.
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 termshort-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.
20
Acquisition of Heartland Flat Roll Division (Heartland)United Steel Supply, LLC
On June 29, 2018,March 1, 2019, we completed our acquisitionpurchased 75% of 100%the equity interest of HeartlandUnited Steel Processing,Supply, LLC (formerly known as Companhia Siderurgica Nacional, LLC) (Heartland),(USS) for an initial cash purchase priceconsideration of $396.4$93.4 million, plus a customary working capital transaction purchase price adjustmentsadjustment of $37.6$3.7 million which were paid in September 2018. Located2019. Additionally, we have an option to purchase, and the sellers have the option to require us to purchase, the remaining 25% equity interest of USS in Terre Haute, Indiana, Heartland produces various typesthe future. Headquartered in Austin, Texas, USS is a leading distributor of higher-margin,painted Galvalume® flat roll steel by further processing hot roll coils into pickleused for roofing and oil, cold roll,siding applications, with distribution centers strategically located in Mississippi, Indiana, Arkansas, and galvanized products. The acquisition will expand our annual flat rollOregon. USS provides us a new, complementary distribution channel and connects us to a rapidly growing industry segment with customers that do not traditionally purchase steel shipping capacity of lighter-gaugedirectly from a steel producer. USS’s operating results from and greater width flat roll steel offerings that will broaden and diversify our value-added product portfolio, and provide operational and logistics benefits to other nearby operations. Heartland’s operating resultsafter March 1, 2019, are reflected in our financial statements in the steel operations reporting segment.
Results Overview
Our consolidated results for the third quarter and first nine months of 2018 benefited from2019 continued strongto be constrained by a challenging steel pricing environment, as well as sharply falling scrap prices. While underlying domestic steel demand remained intact, customers continued to be hesitant to place orders in each of our three operating segments. Steel operations again achieved record quarterly shipments and increased average selling prices in third quarter 2018 compared to the same quarter in 2017,a falling price environment, resulting in record operating income. Ourinventory destocking, in conjunction with further weakening scrap prices. Likewise, our metals recycling operations continue to benefit from strong domestic scrap demand, but declining nonferrous commodity prices and metal spread contraction duringexperienced decreased operating income in the third quarter 2018 resulted in reduced operating incomeof 2019 compared to 2018, due to the same quarter in 2017.continued downward ferrous scrap pricing environment and resulting slower scrap flows, as well as lower copper and aluminum pricing. The non-residential construction market remained strong, resulting in record shipments and sales forwith our steel fabrication operations withmetal margins expanding due to increased average selling prices continuing to rise. However, steel fabrication operations reported a decrease in operating income in third quarter 2018, compared to third quarter 2017, due to increases incoupled with decreased steel input costs, which outpaced higher average selling prices.
costs.
Consolidated operating income increased $260.6decreased $303.5 million, or 96%57%, to $531.6$228.0 million for the third quarter 2018,2019, compared to the record levels in the third quarter 2017.2018. Third quarter 20182019 net income attributable to Steel Dynamics, Inc. increased $245.1decreased $247.3 million, or 160%62%, to $398.4$151.0 million, compared to the third quarter 2017, due to increased operating income along2018, consistent with the reduction in the effective income tax rate post tax reform to 21.5% in the third quarter 2018 from 35.6% in the third quarter 2017.
decreased operating income.
Consolidated operating income increased $485.9decreased $551.9 million, or 56%41%, to $1.4 billion$804.9 million for the first nine months of 2018,2019, compared to the record levels in the first nine months of 2017.2018. First nine months 20182019 net income attributable to Steel Dynamics, Inc. increased $480.4decreased $438.7 million, or 95%44%, to $988.4$549.7 million, compared to the first nine months of 2017, due to increased operating income along2018, consistent with the reduction in the effective income tax rate post tax reform to 22.9% in the first nine months 2018 from 35.1% in the first nine months of 2017.decreased operating income.
Segment Operating Results 2019 vs. 2018 vs. 2017 (dollars in thousands)
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||||||
| 2019 | | % Change | | | 2018 | | 2019 | | % Change | | 2018 | |||
Net sales: | | | | | | | | | | | | | | | |
Steel Operations Segment | $ | 2,008,205 | | (22)% | | $ | 2,586,626 | | $ | 6,396,555 | | (9)% | | $ | 7,004,088 |
Metals Recycling Operations Segment | | 574,908 | | (28)% | | | 800,014 | | | 1,968,719 | | (19)% | | | 2,436,875 |
Steel Fabrication Operations Segment | | 246,716 | | (2)% | | | 250,745 | | | 716,809 | | 7% | | | 670,344 |
Other | | 77,430 | | (31)% | | | 111,953 | | | 290,688 | | (11)% | | | 327,651 |
| | 2,907,259 | | | | | 3,749,338 | | | 9,372,771 | | | | | 10,438,958 |
Intra-company | | (380,414) | | | | | (525,791) | | | (1,257,976) | | | | | (1,521,011) |
| $ | 2,526,845 | | (22)% | | $ | 3,223,547 | | $ | 8,114,795 | | (9)% | | $ | 8,917,947 |
| | | | | | | | | | | | | | | |
Operating income (loss): | | | | | | | | | | | | | | | |
Steel Operations Segment | $ | 234,683 | | (59)% | | $ | 573,848 | | $ | 835,172 | | (42)% | | $ | 1,441,904 |
Metals Recycling Operations Segment | | (101) | | (101)% | | | 14,674 | | | 24,480 | | (61)% | | | 62,027 |
Steel Fabrication Operations Segment | | 35,280 | | 169% | | | 13,104 | | | 86,567 | | 84% | | | 47,039 |
Other | | (42,441) | | 37% | | | (67,113) | | | (148,514) | | 20% | | | (186,137) |
| | 227,421 | | | | | 534,513 | | | 797,705 | | | | | 1,364,833 |
Intra-company | | 624 | | | | | (2,941) | | | 7,214 | | | | | (7,977) |
| $ | 228,045 | | (57)% | | $ | 531,572 | | $ | 804,919 | | (41)% | | $ | 1,356,856 |
|
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|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||||
| 2018 |
| % Change |
|
| 2017 |
| 2018 |
| % Change |
| 2017 | |||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel Operations Segment | $ | 2,586,626 |
| 40% |
| $ | 1,848,126 |
| $ | 7,004,088 |
| 29% |
| $ | 5,445,754 |
Metals Recycling Operations Segment |
| 800,014 |
| 13% |
|
| 709,197 |
|
| 2,436,875 |
| 15% |
|
| 2,123,350 |
Steel Fabrication Operations Segment |
| 250,745 |
| 19% |
|
| 211,394 |
|
| 670,344 |
| 11% |
|
| 603,511 |
Other |
| 111,953 |
| 11% |
|
| 101,173 |
|
| 327,651 |
| 16% |
|
| 282,156 |
|
| 3,749,338 |
|
|
|
| 2,869,890 |
|
| 10,438,958 |
|
|
|
| 8,454,771 |
Intra-company |
| (525,791) |
|
|
|
| (426,508) |
|
| (1,521,011) |
|
|
|
| (1,252,453) |
| $ | 3,223,547 |
| 32% |
| $ | 2,443,382 |
| $ | 8,917,947 |
| 24% |
| $ | 7,202,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel Operations Segment | $ | 573,848 |
| 108% |
| $ | 276,547 |
| $ | 1,441,904 |
| 61% |
| $ | 895,008 |
Metals Recycling Operations Segment |
| 14,674 |
| (17)% |
|
| 17,624 |
|
| 62,027 |
| 19% |
|
| 51,968 |
Steel Fabrication Operations Segment |
| 13,104 |
| (40)% |
|
| 21,862 |
|
| 47,039 |
| (28)% |
|
| 65,735 |
Other |
| (67,113) |
| (51)% |
|
| (44,326) |
|
| (186,137) |
| (32)% |
|
| (141,406) |
|
| 534,513 |
|
|
|
| 271,707 |
|
| 1,364,833 |
|
|
|
| 871,305 |
Intra-company |
| (2,941) |
|
|
|
| (692) |
|
| (7,977) |
|
|
|
| (371) |
| $ | 531,572 |
| 96% |
| $ | 271,015 |
| $ | 1,356,856 |
| 56% |
| $ | 870,934 |
21
Steel Operations Segment |
Steel operations consist of our electric arc furnace steel mills, producing sheet and long products steel from ferrous scrap and scrap substitutes, utilizing continuous casting and automated rolling mills, with numerous downstream processing and coating lines, as well as 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 a wide variety of industry sectors, including the construction, automotive, manufacturing, transportation, heavy equipment and agriculture, and pipe and tube (including OCTG) markets.markets. Steel operations accounted for 77%76% and 73%77% of our consolidated external net sales during the third quarterquarters of 20182019 and 2017,2018, respectively, and 75%76% and 73%75% during the first nine months of 2019 and 2018, and 2017, respectively.
Steel Operations Segment Shipments (tons):
| | | | | | | | | | | |
| | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
| 2019 | | % Change | | 2018 | | 2019 | | % Change | | 2018 |
| | | | | | | | | | | |
Total shipments | 2,711,909 | | (2)% | | 2,756,920 | | 8,165,678 | | 2% | | 8,025,500 |
Intra-segment shipments | (225,399) | | | | (154,837) | | (752,826) | | | | (422,488) |
Steel Operations Segment shipments | 2,486,510 | | (4)% | | 2,602,083 | | 7,412,852 | | (3)% | | 7,603,012 |
| | | | | | | | | | | |
External shipments | 2,362,915 | | (5)% | | 2,489,133 | | 7,096,975 | | (3)% | | 7,296,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
| 2018 |
| % Change |
| 2017 |
| 2018 |
| % Change |
| 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
Total shipments | 2,756,920 |
| 12% |
| 2,458,992 |
| 8,025,500 |
| 9% |
| 7,362,636 |
Intra-segment shipments | (154,837) |
|
|
| (88,211) |
| (422,488) |
|
|
| (279,567) |
Steel Operations Segment Shipments | 2,602,083 |
| 10% |
| 2,370,781 |
| 7,603,012 |
| 7% |
| 7,083,069 |
|
|
|
|
|
|
|
|
|
|
|
|
External shipments | 2,489,133 |
| 9% |
| 2,279,228 |
| 7,296,871 |
| 7% |
| 6,830,877 |
22
Segment Results 20182019 vs. 20172018
Overall domestic steel demand remained strongsteady during the third quarter of 2018, driving record quarterly2019, with continued strength in the automotive, construction and other industrial sectors. However, a challenging steel shipments and earnings from expanded margins.pricing environment has continued throughout 2019, due to customer inventory destocking in conjunction with weakening scrap prices, which has led to decreasing steel selling prices compared to 2018. Steel operations segment shipments increased 10%decreased 4% in the third quarter 2018,2019, as compared to the same period in 2017, with long products in particular reporting strong gains over the prior year due to improved customer demand and less import pressure primarily on structural, merchant-bar-quality and special-bar-quality products.2018. Net sales for the steel operations increased 40%decreased 22% in the third quarter 20182019 when compared to the same period in 2017,2018, due primarily to the 10% increasedecreases in shipments and an increase of $212 per ton, or 27%, in averageoverall steel selling prices, consistent with increased steel market pricing. Ourparticularly in the sheet products, and decreased steel mill utilization rate averaged 98% for the third quarter 2018, as compared to 92% in the third quarter 2017. shipments. Net sales for the steel operations increased 29%decreased 9% in the first nine months of 20182019 when compared to the same period in 2017,2018, again due to the 7% increase in shipments and an increase of $151 per ton, or 20%,decreases in average steel selling prices consistent with increasedand steel market demand and product pricing.segment shipments.
22
Metallic raw materials used in our electric arc furnaces represent our single most significant steel manufacturing cost, generally comprising approximately 60%50 to 60 percent of our steel mill operations’ manufacturing costs, excluding the operations of The Techs, Heartland and Vulcan, which purchase, rather than produce, the steel they further process.costs. Our metallic raw material cost per net ton consumed in our steel operations increased $47,decreased $77, or 15%22%, in the third quarter 2018,2019, compared to the same period in 2017,2018, consistent with overall increaseddecreased domestic scrap pricing.pricing. In the first nine months of 2018,2019, our metallic raw material cost per ton increased $49,decreased $31, or 17%9% compared to the same period in 2017.
2018.
As a result of average selling prices increasingdecreasing more than scrap costs, metal spread (which we define as the difference between average steel mill selling prices and the cost of ferrous scrap consumed) increased 35%consumed in our steel mills) decreased 20% in the third quarter 20182019 compared to the third quarter 2017. Operating2018. Due to this metal spread contraction, most notably in sheet steel, operating income for the steel operations increased 108%decreased 59%, to $573.8$234.7 million, in the third quarter 2018,2019, compared to the record levels in the same period in 2017, due to metal spread expansion and increased shipments.2018. First nine months 20182019 operating income increased 61%decreased 42%, to $1.4 billion,$835.2 million, compared to the first nine months of 2017,2018 record levels, again due to improveddecreased metal spreads and shipping volumes.steel segment shipments.
Metals Recycling Operations Segment |
Metals recycling operations consists solely of OmniSource and includes both ferrous and nonferrous scrap metal processing, transportation, marketing, and brokerage 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 (ranging from 62% to(approximately 65% 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 12%11% and 14%12% of our consolidated external net sales during the third quarters of 20182019 and 2017,2018, respectively, and 14%12% and 15%14% during the first nine months of 20182019 and 2017,2018, respectively.
Metals Recycling Operations Shipments:
| | | | | | | | | | | |
| | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
| 2019 | | % Change | | 2018 | | 2019 | | % Change | | 2018 |
Ferrous metal (gross tons) | | | | | | | | | | | |
Total | 1,169,963 | | (10)% | | 1,304,164 | | 3,531,003 | | (10)% | | 3,908,079 |
Inter-company | (773,828) | | (8)% | | (844,802) | | (2,326,550) | | (9)% | | (2,545,602) |
External shipments | 396,135 | | (14)% | | 459,362 | | 1,204,453 | | (12)% | | 1,362,477 |
| | | | | | | | | | | |
Nonferrous metals (thousands of pounds) | | | | | | | | | | | |
Total | 257,087 | | (7)% | | 277,332 | | 815,347 | | (4)% | | 852,994 |
Inter-company | (31,419) | | | | (38,287) | | (105,198) | | | | (99,448) |
External shipments | 225,668 | | (6)% | | 239,045 | | 710,149 | | (6)% | | 753,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
| 2018 |
| % Change |
| 2017 |
| 2018 |
| % Change |
| 2017 |
Ferrous metal (gross tons) |
|
|
|
|
|
|
|
|
|
|
|
Total | 1,304,164 |
| 7% |
| 1,219,582 |
| 3,908,079 |
| 3% |
| 3,780,958 |
Inter-company | (844,802) |
|
|
| (756,899) |
| (2,545,602) |
|
|
| (2,366,355) |
External shipments | 459,362 |
| (1)% |
| 462,683 |
| 1,362,477 |
| (4)% |
| 1,414,603 |
|
|
|
|
|
|
|
|
|
|
|
|
Nonferrous metals (thousands of pounds) |
|
|
|
|
|
|
|
|
|
|
|
Total | 277,332 |
| 6% |
| 261,716 |
| 852,994 |
| 5% |
| 815,763 |
Inter-company | (38,287) |
|
|
| (37,316) |
| (99,448) |
|
|
| (107,863) |
External shipments | 239,045 |
| 7% |
| 224,400 |
| 753,546 |
| 6% |
| 707,900 |
23
Segment Results 20182019 vs. 20172018
Our metals recycling operations benefited from stronger domestichave been negatively impacted during 2019 by consistently falling ferrous and nonferrous scrap prices compared to 2018, as well as a somewhat softer steel mill demandmarket as customers were reluctant to purchase during a falling pricing environment, opting instead to defer purchases. Net sales decreased 28% during the third quarter 2018, as overall domestic steel mill utilization was approximately 79% in the third quarter of 2018, compared to 75% in the same 2017 period. Net sales increased 13% in the third quarter 2018 as2019 compared to the same period in 2017,2018, driven by increasedthe combination of decreased shipments for ferrous metals and nonferrous metals, along with increased ferrous pricing. Ferrous scrap average selling prices increased 9% duringprices. Ferrous shipments to our own steel mills decreased by 8% in the third quarter 20182019, compared to the same period in 2017,2018, as our steel mill utilization percentage decreased from 98% to 87% year over year. Ferrous scrap average selling prices decreased 26% during the third quarter 2019 compared to the same period in 2018, while nonferrous average selling prices decreased 2%13%. Ferrous metal spread (which we define as the difference
23
between average selling prices and the cost of purchased scrap) decreased 10%14%, as higherselling prices decreased more than unprocessed scrap procurement costs, more than offset higher selling prices, while nonferrous metal spread increaseddecreased 8%. Ferrous shipments to our own steel mills increased by 12% in the third quarter 2018, compared to the same period in 2017. Metals recycling operations operating income decreased 101% to a loss of $100,000 in the third quarter 2019 compared to the third quarter 2018 operating income of $14.7 million, decreased 17% from the third quarter 2017 operating income of $17.6 million, due to decreased ferrous and nonferrous shipments and metal spread contraction more than offsetting increased shipments.
contraction.
Net sales for our metals recycling operations increased 15%decreased 19% in the first nine months of 20182019 as compared to the same period in 2017,2018, driven by increaseddecreased pricing and shipments on continued strong domestic steel scrap demand.shipments. Ferrous scrap average selling prices increased 12%decreased 16% during the first nine months of 20182019 compared to the same period in 2017,2018, while nonferrous average selling prices increased 6%decreased 7%. Nonferrous metal spread increased 14% on increased selling prices,decreased 2%, while ferrous metal spread contracted 4%decreased 12% in the first nine months 2018of 2019 compared to the first nine months of 2017.2018. Metals recycling operations operating income in the first nine months of 2019 of $24.5 million decreased 61% from the same period 2018 operating income of $62.0 million, increased 19% from the first nine months 2017 operating income of $52.0 million, due to increaseddecreased ferrous and nonferrous shipments, coupled with improved nonferrousand metal spread.spread contraction.
Steel Fabrication Operations Segment |
Steel fabrication operations include our 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 steel joists, trusses, girders and steel deck used within the non-residential construction industry. Steel fabrication operations accounted for 8%10% and 9%8% of our consolidated external net sales during the third quarters of 2019 and 2018, respectively, and 2017, respectively,9% and 8% during the first nine months of each year.2019 and 2018, respectively.
Segment Results 20182019 vs. 20172018
Net sales for the steel fabrication operations increased $39.4 million, or 19%decreased 2%, during the third quarter 2018, 2019 compared to the same period in 2017,2018, as shipments increased 7%, and average selling prices increased $144 per ton, or 11%.were steady, while shipments decreased slightly. Net sales for the segment increased $66.8$46.5 million, or 11%7%, during the first nine months of 2018, 2019, compared to the same period in 2017,2018, as shipments increased 4%decreased 2%, andwhile average selling prices increased $92$125 per ton, or 7%9%. Our steel fabrication operations continue to leverage our national operating footprint to sustain and improve market share. Market demand and order backlogsorders continue to be strong as our customer base remains optimistic aboutfor non-residential construction project development.development; however, wet weather during the first half of 2019 and other construction delays have somewhat restricted shipments in 2019 compared to 2018.
24
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 27%decreased 19% in the third quarter 2018,2019, as compared to the same period in 2017 consistent with increased steel selling prices discussed in the steel operations results, while average selling prices increased only 11%, with resulting2018. As a result, metal spread (which we define as the difference between average selling prices and the cost of purchased steel) decreasing 11% on a per ton basis. Operating income decreased $8.8 million, or 40%, to $13.1 millionincreased 35% in the third quarter 20182019 compared to the same period in 2017,2018. Operating income increased 169% to $35.3 million in the third quarter 2019 compared to the same period in 2018, due to the increasesincrease in steel input costs outpacing price and volume increases.metal spread. For the first nine months of 2018,2019, operating income decreased $18.7increased 84% to $86.6 million or 28%, compared to the first nine months of 2017, again2018, due to the increases inincreased average selling prices and decreased steel input costs outpacing price and volume increases,cost, as metal spreads decreased 6%spread increased 23% period over period.
|
Other Operations |
Other operations consists of subsidiary operations that are below the quantitative thresholds required for reportable segments and primarily consist of our Minnesota ironmaking operations that have been idle since May 2015, 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.
Third Quarter Consolidated Results 20182019 vs. 20172018
Selling, General and Administrative Expenses. Selling, general and administrative expenses of $107.2 million during the third quarter 2019 increased 5% from $102.6 million during the third quarter 2018, increased 6% from $97.1 million during the third quarter 2017, representing 3.2%4.2% and 4.0%3.2% of net sales, respectively. Profit sharing expense during the third quarter of 20182019 of $45.3$17.8 million was over doubledown 61% from the $21.2$45.3 million during the same period in 2017,2018, consistent with increasesdecreases in pretax income before income taxes.from record levels in 2018.
Interest Expense, net of Capitalized Interest.During the third quarter 2018,2019, interest expense decreased 8%of $31.3 million was comparable to the $31.6 million from $34.2 million during the same period in 2017, due primarily to the call and repaymentthird quarter of our $350.0 million 6.375% senior notes due 2022, with 4.125% senior notes due 2025 in the latter half of 2017.2018, on consistent debt levels.
Income Tax Expense. During the thirdExpense. Third quarter 2018, our2019 income tax expense of $48.6 million, at an effective income tax rate of 24.2%, was down 55% from the $109.2 million, at an effective income tax rate of 21.5%, as compared to $83.3 million at an effective income tax rate of 35.6%, during the third quarter 2017.2018, consistent with decreased pretax income. The lowerthird quarter 2018 effective tax rate in 2018 is due primarily towas lower than the enacted Tax Cuts and Jobs Act of 2017, signed into law in December 2017, which lowered the federal incomethird quarter 2019 effective tax rate from 35%due to 21% in 2018, as well as certain discrete tax benefit items realized in the third quarter of 2018.
First Nine Months Consolidated Results 20182019 vs. 20172018
Selling, General and Administrative Expenses. Selling, general and administrative expenses of $310.1$324.5 million during the first nine months of 2019 increased 5% from $310.0 million during the first nine months of 2018, increased 4% from $298.4 million during the first nine months of 2017, representing 3.5%4.0% and 4.1%3.5% of net sales, respectively. Profit sharing expense during the first nine months of 20182019 of $114.3$64.4 million increased 64%decreased 44% from the $69.7$114.3 million during the same period in 2017,2018, consistent with increasesdecreases in pretax income before income taxes.from record levels in 2018.
Interest Expense, net of Capitalized Interest. During the first nine months of 2019 and 2018, interest expense decreased 7%of $94.8 million was comparable to the $95.0 million from $102.0 million during the same period in 2017, due primarily to the call and repayment of our $350.0 million 6.375% senior notes due 2022, with 4.125% senior notes due 2025 in the latter half of 2017.2018, on consistent debt levels.
Income Tax Expense. During the firstFirst nine months of 2018, our2019 income tax expense of $171.1 million, at an effective income tax rate of 23.6%, was down 42% from the $292.5 million, at an effective income tax rate of 22.9%, as compared to $271.3 million at an effective income tax rate of 35.1%, during the first nine months of 2017. The lower effective tax rate in 2018, is due primarily to the enacted Tax Cuts and Jobs Act of 2017, signed into law in December 2017, which lowered the federal income tax rate from 35% to 21% in 2018.
25
consistent with decreased pretax income.
Liquidity and Capital Resources
Heartland Acquisition. In June 2018, we used $396.4 million of available cash to acquire 100% of Heartland, plus customary actual working capital transaction purchase price adjustments of $37.6 million, which were paid from available cash in September 2018.
Capital Resources and Long‑termLong-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, stock repurchases, 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.Revolver. Our liquidity at September 30, 2018,2019, is as follows (in thousands):
| | | | | | | | | |
| | | | | | | | | |
| | | Cash and equivalents | | $ | 1,146,007 | | | |
| | | Short-term investments | | | 69,529 | | | |
| | | Revolver availability | | | 1,158,128 | | | |
| | | Total liquidity | | $ | 2,373,664 | | | |
25 | |||||||||
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In October 2019, our corporate credit rating was upgraded to an investment grade credit level by all three credit rating agencies.
Our total outstanding debt decreased $15.2increased $60.7 million during the first nine months of 20182019 primarily due to decreased revolving credit facility borrowings at onedebt assumed in conjunction with our acquisition of our controlled subsidiaries.USS. Our total 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) decreased to 37.3%was 37.6% and 37.9% at September 30, 2018, compared to 41.9% at2019, and December 31, 2017, due to increases in total equity from earnings.
2018, respectively.
Our senior secured credit facility (Facility), which provides a $1.2 billion Revolver, was renewed and extendedmatures in June 2018 to extend maturity to June 2023. 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; andsubsidiaries. The Facility 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. Subsequent to our corporate credit rating upgrade, we began the process to release the collateral securing the Facility, which we expect to be released on or about November 12, 2019. 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, 2018,2019, we had $1.2 billion of availability on the Revolver, $11.9$41.9 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 LTM 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, 2018,2019, our interest coverage ratio and net debt leverage ratio were 15.54:12.22:1.00 and 0.92:1.20:1.00, respectively. We were, therefore, in compliance with these covenants at September 30, 2018,2019, and we anticipate we will continue to be in compliance during the next twelve months. months.
Working Capital.We generated cash flow from operations of $924.4$987.2 million in the first nine months of 2018.2019. Operational working capital (representing amounts invested in trade receivables and inventories, less current liabilities other than income taxes payable and debt) increased $404.6decreased $124.9 million, excluding the effect of acquired HeartlandUSS working capital, to $2.1$1.85 billion at September 30, 2018,2019, due primarily to decreased accounts receivable and inventories consistent with increases in volumes, selling prices,decreased sales and inventory costs, and profitability during the first nine months of 2018. costs.
Capital Investments.During the first nine months of 2018,2019, we invested $176.5$293.7 million in property, plant and equipment, primarily within our steel operations segment, compared with $127.7$176.5 million invested during the same period in 2017.2018. The increase in the first nine months of 2019 versus the same 2018 period relates primarily to the new Sinton, Texas flat roll steel mill project.
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 21%28% to $0.1875$0.2400 per share in the first quarter 20182019 (from $0.155$0.1875 per share in 2017)2018), resulting in declared cash dividends of $132.1$158.0 million during the first nine months of 2018,2019, compared to $111.4$132.1 million during the same period in 2017.2018. We paid cash dividends of $125.1$148.5 million and $108.8$125.1 million during the first nine months of 20182019 and 2017,2018, 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.pay.
26
Other.In 2016, theAugust 2018, our board of directors authorized a share repurchase program of up to $450 million of our common stock in August 2018. In September 2018, we announced that our board of directors authorized an additional share repurchase program of up to $750 million of our common stock. Under the share repurchase programs,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 programs doprogram 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 4.34.1 million shares of our common stock for $193.4$115.0 million in the third quarter of 2019 pursuant to this program. We acquired 9.5 million shares of our common stock for $292.4 million in the first nine months of 2018 pursuant2019, leaving $106.8 million remaining available to these programs, completingpurchase under the 2016 $450 million program and initiating the 2018 $750 million program. See Part II, Other Information, Item 2 2. Unregistered Sales of Equity Securities and Use of Proceeds for additional information.
26
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.expenditures.
ITEM 3.QUANTITATIVE 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 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.
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 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 5 years for physical commodity requirements and commodity transportation requirements, and for up to 1113 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 idle Minnesota ironmaking operations which have been idle since May 2015.operations. 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 2018,2020, 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, weWe 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, 2018,2019, we had a cumulative unrealized loss associated with these financial contracts of $3.7$2.5 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 CONTROLS AND PROCEDURES
(a) | Evaluation of Disclosure Controls and Procedures |
As required, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2018,2019, the end of the period covered by this quarterly report, our disclosure controls and procedures were designed to provide and were effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(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, 2018,2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II OTHER INFORMATION
ITEM 1.LEGAL LEGAL PROCEEDINGS
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.
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 $436,000$508,000 is recorded in our financial statements as of September 30, 2018.2019.
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, 2017.2018.
ITEM 2.UNREGISTERED UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
| (c) | Issuer Purchases of Equity Securities |
(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 ended2018.2019.
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| | | | | | | | | | | | | | |
| 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 | |||||
| Quarter ended September 30, 2019 | | | | | | | | | | | | ||
| | | | | | | | | | | | | | |
| July 1 - 31 | | 246,100 | | | $ | 32.46 | | | 246,100 | | | $ | 213,715 |
| August 1 - 31 | | 3,509,700 | | | | 27.91 | | | 3,509,700 | | | | 115,749 |
| September 1 - 30 | | 302,186 | | | | 29.77 | | | 302,186 | | | | 106,754 |
| | | 4,057,986 | | | | | | | 4,057,986 | | | | |
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| Period |
| Total Number of Shares Purchased |
| Average Price Paid per Share |
| Total Number of Shares Purchased as Part of Publicly Announced Program (1) (2) |
| Maximum Dollar Value of Shares That May Yet be Purchased Under the Program |
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| Quarter ended September 30, 2018 |
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| July 1 - 31 (1) |
| 199,914 |
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| $ | 46.01 |
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| 199,914 |
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| $ | 45,111 |
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| August 1 - 31 (1) |
| 1,024,428 |
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| 44.03 |
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| 1,024,428 |
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| - |
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| September 1 - 30 (2) |
| 450,114 |
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| 45.90 |
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| 450,114 |
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| 729,338 |
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| 1,674,456 |
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| 1,674,456 |
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| (1) |
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| On September 4, 2018, we announced that our board of directors had authorized |
ITEM 3.DEFAULTS DEFAULTS UPON SENIOR SECURITIES
None.
None.
ITEM 4.MINE MINE SAFETY DISCLOSURES
Information required to be furnished 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 included in Exhibit 95 to this quarterly report. There are no mine safety disclosures to report for the three months ended September 30, 2018,2019, therefore, no Exhibit 95 is required.
ITEM 5.OT OTHER INFORMATION
None.
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None.
Reference is made to the Exhibit Index preceding the signature page hereto, which Exhibit Index is hereby incorporated into this item.
EXHIBIT INDEX
| |
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| ||||
| | |||
3.1 | of Steel Dynamics, Inc., reflecting all amendments thereto through May 17, 2018, incorporated herein by reference from Exhibit 3.1e to our Form 10-Q filed August 9, 2018. | |||
| | |||
3.2 | ||||
| | |||
Executive Officer Certifications | ||||
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31.1* | ||||
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31.2* | ||||
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32.1* | ||||
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32.2* | ||||
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Other | ||||
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95** | Mine Safety Disclosures. | |||
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XBRL Documents | ||||
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101.INS* | XBRL Instance Document | - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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 | |||
| | |||
104 | Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||
*Filed concurrently herewith
**
* | Filed concurrently herewith |
** | Inapplicable for purposes of this report |
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Contents
SIGNATURE
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.
November 7, 2018
October 31, 2019 | | |
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| | |
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) |
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