ITEM 2.
MAN
AG
EMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This report contains some predictive statements about future events, including statements related to conditions in the steel and metallic scrap markets, Steel Dynamics’ revenues, costs of purchased materials, future profitability and earnings, and the operation of new or existing facilities. These statements, which we generally precede or accompany by such typical conditional words as "anticipate," "intend," "believe," "estimate," "plan," "seek," "project" or "expect," or by the words "may," "will," or "should," are intended to be made as “forward-looking,” subject to many risks and uncertainties, within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These statements speak only as of this date and are based upon information and assumptions, which we consider reasonable as of this date, concerning our businesses and the environments in which they operate. Such predictive statements are not guarantees of future performance, and we undertake no duty to update or revise any such statements. Some factors that could cause such forward-looking statements to turn out differently than anticipated include: (1) the effects of uncertain economic conditions; (2) cyclical and changing industrial demand; (3) changes in conditions in any of the steel or scrap-consuming sectors of the economy which affect demand for our products, including the strength of the non-residential and residential construction, automotive, manufacturing, appliance, pipe and tube, and other steel-consuming industries; (4) fluctuations in the cost of key raw materials and supplies (including steel scrap, iron units, and energy costs) and our ability to pass on any cost increases; (5) the impact of domestic and foreign import price competition; (6) unanticipated difficulties in integrating or starting up new or acquired businesses; (7) risks and uncertainties involving product and/or technology development; and (8) occurrences of unexpected plant outages or equipment failures.
More specifically, we refer you to our more detailed explanation of these and other factors and risks that may cause such predictive statements to turn out
differently
, as set forth in our most recent Annual Report on Form 10-K under the headings
Special Note Regarding Forward-Looking Statements
and
Risk Factors
for the year ended December 31, 2017,
in our quarterly reports on Form 10-Q, or in other reports which we from time to time file with the Securities and Exchange Commission. These reports are available publicly on the Securities and Exchange Commission website,
www.sec.gov
, and on our website,
www.steeldynamics.com
under “Investors – SEC Filings.”
Description of the Business
We are one of the largest domestic steel producers and metal recyclers in the United States based on estimated annual steelmaking and metals recycling capability, with facilities located throughout the United States, and in Mexico. We produce steel products, including hot roll, cold roll 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 sell ferrous and nonferrous scrap. 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 recognizes 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, 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
. C
ompany-wide profit sharing and amortization of intangible assets
are each separately presented in the statement of operations
.
Interest Expense, net of Capitalized Interest
. Interest expense consists of interest associated with our senior credit facilities and other debt net of interest costs that are required to be capitalized during the construction period of certain capital investment projects.
Othe
r
Expense
(Income),
net
. Other income consists of interest income earned on our temporary cash deposits and
short term
investments; any other non-operating income activity, including income from non-consolidated investments accounted for under the equity method. Other expense consists of any non-operating costs, such as certain acquisition and financing expenses.
Acquisition of Heartland Flat Roll Division (Heartland)
On
June
29, 2018, we completed our acquisition of 100% of
Heartland Steel Processing, LLC (formerly known as
Companhia Siderurgica Nacional, LLC
)
(Heartland), for an initial cash purchase price of $396.4 million
,
subject to customary actual working capital transaction purchase price adjustments payable
before year-end
2018. Located in Terre Haute, Indiana, Heartland produces various types of higher-margin, flat roll steel by further processing hot roll coils into pickle and oil, cold roll, and galvanized products. The acquisition will expand our annual flat roll steel shipping capacity of lighter-gauge 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.
Results Overview
Our consolidated results for the second quarter and first half of 2018 benefited from continued strong demand in each of our three operating segments. Steel operations achieved record shipments and increased average selling prices in second quarter 2018 compared to the same quarter in 2017, while our metals recycling operations benefited from increased average selling prices and shipments due to strong domestic scrap demand. The non-residential construction market remained strong, resulting in improved year over year shipments for our steel fabrication operations, with average selling prices continuing to rise. While our steel and metals recycling operations were able to achieve substantial growth in operating income, steel fabrication operations reported a decrease in operating income due to increases in steel input costs which outpaced higher average selling prices.
Consolidated operating income increased $236.5 million, or 89%, to $501.9 million for the second quarter 2018, compared to the second quarter 2017. Second quarter 2018 net income attributable to Steel Dynamics, Inc. increased $208.5 million, or 135%, to $362.4 million, compared to the second quarter 2017, due to increased operating income along with the reduction in the effective income tax rate post tax reform to 23.7% in the second quarter 2018 from 35.0% in the second quarter 2017.
Consolidated operating income increased $225.4 million, or 38%, to $825.3 million for the first half 2018, compared to the first half 2017. First half 2018 net income attributable to Steel Dynamics, Inc. increased $235.2 million, or 66%, to $590.0 million, compared to the first half 2017, due to increased operating income along with the reduction in the effective income tax rate post tax reform to 23.8% in the first half 2018 from 34.8% in the first half 2017.
Segment Operating Results 2018 vs. 2017 (
dollars in thousands
)
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|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2018
|
|
% Change
|
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|
2017
|
|
2018
|
|
% Change
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|
2017
|
Net sales:
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|
Steel Operations Segment
|
$
|
2,435,688
|
|
34%
|
|
$
|
1,821,952
|
|
$
|
4,417,462
|
|
23%
|
|
$
|
3,597,628
|
Metals Recycling Operations Segment
|
|
884,095
|
|
27%
|
|
|
694,016
|
|
|
1,636,861
|
|
16%
|
|
|
1,414,153
|
Steel Fabrication Operations Segment
|
|
217,896
|
|
10%
|
|
|
198,009
|
|
|
419,599
|
|
7%
|
|
|
392,117
|
Other
|
|
123,080
|
|
34%
|
|
|
91,698
|
|
|
215,698
|
|
19%
|
|
|
180,983
|
|
|
3,660,759
|
|
|
|
|
2,805,675
|
|
|
6,689,620
|
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|
5,584,881
|
Intra-company
|
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(570,234)
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(414,955)
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|
(995,220)
|
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|
(825,945)
|
|
$
|
3,090,525
|
|
29%
|
|
$
|
2,390,720
|
|
$
|
5,694,400
|
|
20%
|
|
$
|
4,758,936
|
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|
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Operating income (loss):
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Steel Operations Segment
|
$
|
533,494
|
|
98%
|
|
$
|
269,929
|
|
$
|
868,056
|
|
40%
|
|
$
|
618,461
|
Metals Recycling Operations Segment
|
|
22,638
|
|
37%
|
|
|
16,495
|
|
|
47,353
|
|
38%
|
|
|
34,344
|
Steel Fabrication Operations Segment
|
|
14,144
|
|
(30)%
|
|
|
20,147
|
|
|
33,935
|
|
(23)%
|
|
|
43,873
|
Other
|
|
(63,618)
|
|
(48)%
|
|
|
(43,110)
|
|
|
(119,024)
|
|
(23)%
|
|
|
(97,080)
|
|
|
506,658
|
|
|
|
|
263,461
|
|
|
830,320
|
|
|
|
|
599,598
|
Intra-company
|
|
(4,771)
|
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|
|
1,892
|
|
|
(5,036)
|
|
|
|
|
321
|
|
$
|
501,887
|
|
89%
|
|
$
|
265,353
|
|
$
|
825,284
|
|
38%
|
|
$
|
599,919
|
|
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
. Steel operations accounted for 75% and 73% of our consolidated external net sales during the second quarter of 2018 and 2017, respectively, and 75% and 73% during the first half of 2018 and 2017, respectively.
Steel Operations Segment Shipments (tons):
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Three Months Ended June 30,
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Six Months Ended June 30,
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2018
|
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% Change
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2017
|
|
2018
|
|
% Change
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|
2017
|
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|
Total shipments
|
2,733,936
|
|
13%
|
|
2,421,897
|
|
5,268,580
|
|
7%
|
|
4,903,644
|
Intra-segment shipments
|
(145,998)
|
|
|
|
(88,571)
|
|
(267,651)
|
|
|
|
(191,356)
|
Steel Operations Segment Shipments
|
2,587,938
|
|
11%
|
|
2,333,326
|
|
5,000,929
|
|
6%
|
|
4,712,288
|
|
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|
External shipments
|
2,480,223
|
|
10%
|
|
2,246,569
|
|
4,807,738
|
|
6%
|
|
4,551,649
|
Segment Results 2018 vs. 2017
Overall domestic steel demand improved during the second quarter of 2018, with the automotive, construction and energy sectors remaining strong, while general industrial demand continued to grow. Improved steel demand and product pricing resulted in record quarterly steel shipments and earnings from expanded margins. Steel operations segment shipments increased 11% in the second quarter 2018, as compared to the same period in 2017, with long products in particular reporting strong gains over the prior year. Net sales for the steel operations increased 34% in the second quarter 2018 when compared to the same period in 2017, due primarily to an increase of $159 per ton, or 20%, in average selling prices consistent with increased steel market pricing.
Our steel mill utilization rate averaged 99% for the second quarter 2018, as compared to 91% in the second quarter 2017.
Net sales for the steel operations increased 23% in the first half of 2018 when compared to the same period in 2017, due primarily to an increase of $119 per ton, or 16%, in average selling prices, consistent with increased steel market demand and product pricing.
Metallic raw materials used in our electric arc furnaces represent our single most significant steel manufacturing cost, generally comprising approximately 60% of our steel operations’ manufacturing costs, excluding the operations of The Techs and Vulcan, which purchase, rather than produce, the steel they further process. Our metallic raw material cost per net ton consumed in our steel operations increased $45, or 15%, in the second quarter 2018, compared to the same period in 2017, consistent with overall increased domestic scrap pricing
.
In the first half of 2018, our metallic raw material cost per ton increased $51, or 18% compared to the same period in 2017.
As a result of selling prices increasing more than scrap costs, metal spread (which we define as the difference between average selling prices and the cost of ferrous scrap consumed) increased 24% in the second quarter 2018 compared to the second quarter 2017. Operating income for the steel operations increased 98%, to $533.5 million, in the second quarter 2018, compared to the same period in 2017, due to metal spread expansion and increased shipments. First half 2018 operating income increased 40%, to $868.1 million, compared to the first half of 2017, again due to improved metal spreads and shipping volumes.
|
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 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 14% of our consolidated external net sales during the second quarters of 2018 and 2017, and 14% and 15% during the first half of 2018 and 2017, respectively.
Metals Recycling Operations Shipments:
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Three Months Ended June 30,
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Six Months Ended June 30,
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2018
|
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% Change
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2017
|
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2018
|
|
% Change
|
|
2017
|
Ferrous metal (gross tons)
|
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Total
|
1,347,016
|
|
10%
|
|
1,222,777
|
|
2,603,915
|
|
2%
|
|
2,561,376
|
Inter-company
|
(880,891)
|
|
|
|
(756,271)
|
|
(1,700,800)
|
|
|
|
(1,609,456)
|
External shipments
|
466,125
|
|
-
|
|
466,506
|
|
903,115
|
|
(5)%
|
|
951,920
|
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Nonferrous metals (thousands of pounds)
|
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Total
|
304,034
|
|
12%
|
|
270,444
|
|
575,662
|
|
4%
|
|
554,047
|
Inter-company
|
(40,306)
|
|
|
|
(39,880)
|
|
(61,161)
|
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|
(70,547)
|
External shipments
|
263,728
|
|
14%
|
|
230,564
|
|
514,501
|
|
6%
|
|
483,500
|
Segment Results 2018 vs. 2017
Our metals recycling operations benefited from stronger domestic steel mill demand during the second quarter 2018, as overall domestic steel mill utilization was approximately 76% in the second quarter of 2018, compared to 74% in the same 2017 period. Net sales increased 27% in the second quarter 2018 as compared to the same period in 2017, driven by increased pricing and shipments for both ferrous and nonferrous metals. Ferrous scrap average selling prices increased 15% during the second quarter 2018 compared to the same period in 2017, while nonferrous average selling prices increased 12%. Nonferrous metal spread (which we define as the difference between average selling prices and the cost of purchased scrap) increased 12% on increased selling prices, while ferrous metal spread contracted 5%, as higher unprocessed scrap procurement costs more than offset higher selling prices. Ferrous shipments to our own steel mills increased by 16% in the second quarter 2018, compared to the same period in 2017. Metals recycling operations operating income in the second quarter 2018 of $22.6 million increased 37% from the second quarter 2017 operating income of $16.5 million, due to increased ferrous and nonferrous shipments, coupled with improved nonferrous metal spread
.
Net sales for our metals recycling operations increased 16% in the first half of 2018 as compared to the same period in 2017, driven by increased pricing and shipments on continued strong domestic steel scrap demand. Ferrous scrap average selling prices increased 14% during the first half of 2018 compared to the same period in 2017, while nonferrous average selling prices increased 10%. Nonferrous metal spread increased 17% on increased selling prices, while ferrous metal spread was flat in the first half of 2018 compared to the first half of 2017. Metals recycling operations operating income in the first half of 2018 of $47.4 million increased 38% from the first half of 2017 operating income of $34.3 million, due to increased ferrous and nonferrous shipments, coupled with improved nonferrous metal spread.
|
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 7% of our consolidated external net sales during the second quarter and first half of 2018, and 8% during the same periods in 2017.
Segment Results 2018 vs. 2017
Net sales for the steel fabrication operations increased $19.9 million, or 10%, during the second quarter 2018,
compared
to the same period in 2017, as shipments increased 5%, and average selling prices increased $69 per ton, or 5%. Net sales for the segment increased $27.5 million, or 7%, during the first half of 2018,
compared
to the same period in 2017, as shipments increased 2%, and average selling prices increased $62 per ton, or 5%. Our steel fabrication operations continue to leverage our national operating footprint to sustain and improve market share. Market demand and order backlogs continue to be strong as our customer base remains optimistic about non-residential construction project development.
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 17% in the second quarter 2018, as compared to the same period in 2017 consistent with increased selling prices discussed in the steel operations results, while average selling prices increased only 5%, with resulting metal spread (which we define as the difference between average selling prices and the cost of purchased steel) decreasing 9% on a per ton basis
.
Operating income decreased $6.0 million, or 30%, to $14.1 million in the second quarter 2018 compared to the same period in 2017, due to
increased steel input costs outpacing price and volume increases. For the first half of 2018, operating income decreased $9.9 million, or 23%, compared to the first half of 2017, again due to increased steel input costs outpacing price and volume increases, as metal spreads decreased 4% period over period.
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
.
Second Quarter Consolidated Results 2018 vs. 2017
Selling, General and Administrative Expenses.
Selling, general and administrative expenses of $101.0 million during the second quarter 2018 increased 3% from $98.4 million during the second quarter 2017,
representing 3.3% and 4.1% of net sales, respectively
. Profit sharing expense during the second quarter of 2018 of $42.3 million was nearly double the $21.3 million during the same period in 2017, consistent with increases in income before income taxes.
Interest Expense, net of Capitalized Interest.
During the second quarter 2018, interest expense decreased 7% to $31.5 million from $33.9 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.
Income Tax Expense
.
During the second quarter 2018, our income tax expense was $112.8 million at an effective income tax rate of 23.7%, as compared to $82.4 million at an effective income tax rate of 35.0%, during the second quarter 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.
First Six Months Consolidated Results 2018 vs. 2017
Selling, General and Administrative Expenses.
Selling, general and administrative expenses of $207.5 million during the first half of 2018 increased 3% from $201.4 million during the first half of 2017,
representing 3.6% and 4.2% of net sales, respectively
. Profit sharing expense during the first half of 2018 of $69.0 million increased 42% from the $48.5 million during the same period in 2017, consistent with increases in income before income taxes.
Interest Expense, net of Capitalized Interest.
During the first half of 2018, interest expense decreased 6% to $63.4 million from $67.8 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.
Income Tax Expense.
During the first half of 2018, our income tax expense was $183.3 million at an effective income tax rate of 23.8%, as compared to $188.0 million at an effective income tax rate of 34.8%, during the first half 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.
Liquidity and Capital Resources
Heartland Acquisition.
In June 2018, we used $396.4 million of available cash to acquire 100% of Heartland.
Capital Resources and Long
‑term Debt.
Our business is capital intensive and requires substantial expenditures for, among other things, the purchase and maintenance of equipment used in our steel, metals recycling, and steel fabrication operations, and to remain in compliance with environmental laws. Our short-term and long-term liquidity needs arise primarily from working capital requirements, capital expenditures, principal and interest payments related to our outstanding indebtedness, dividends to our shareholders, and acquisitions. We have met these liquidity requirements primarily with cash provided by operations and long-term borrowings, and we also have availability under our Revolver
. Our liquidity at June 30, 2018, is as follows (in thousands):
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Cash and equivalents
|
|
$
|
720,445
|
|
|
|
|
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|
Short term investments
|
|
|
90,000
|
|
|
|
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|
|
Revolver availability
|
|
|
1,188,139
|
|
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|
Total liquidity
|
|
$
|
1,998,584
|
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|
Our total outstanding debt decreased $11.5 million during the first half of 2018 due to decreased revolving credit facility borrowings at one of our controlled subsidiaries. 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 39.0% at June 30, 2018, compared to 41.9% at December 31, 2017.
Our senior secured credit facility (Facility), which provides a $1.2 billion Revolver, was renewed and extended 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; and is secured by substantially all of our and our wholly-owned subsidiaries’ receivables and inventories, and by pledges of all shares of our wholly-owned subsidiaries’ capital stock or other equity interests, and intercompany debt held by us as collateral. The Revolver is available to fund working capital, capital expenditures, and other general corporate purposes. The Facility contains financial covenants and other covenants pertaining to our ability (which may under certain circumstances be limited) to make capital expenditures; incur indebtedness; permit liens on property; enter into transactions with affiliates; make restricted payments or investments; enter into mergers, acquisitions or consolidations; conduct asset sales; pay dividends or distributions, or enter into other specified transactions and activities. Our ability to borrow funds within the terms of the Revolver is dependent upon our continued compliance with the financial and other covenants. At June 30, 2018, we had $1.2 billion of availability on the Revolver, $11.9 million of outstanding letters of credit and other obligations which reduce availability, and there were no borrowings outstanding.
The financial covenants under our Facility state that we must maintain an interest coverage ratio of not less than 2.50:1.00. Our interest coverage ratio is calculated by dividing our last-twelve-months (LTM) consolidated adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and certain other non-cash transactions as allowed in the Facility) by our LTM gross interest expense, less amortization of financing fees. In addition, a net debt (as defined in the Facility) to consolidated LTM adjusted EBITDA (net debt leverage ratio) of not more than 5.00:1.00 must be maintained. If the net debt leverage ratio exceeds 3.50:1:00 at any time, our ability to make certain payments as defined in the Facility (which includes cash dividends to stockholders and share purchases, among other things), is limited. At June 30, 2018, our interest coverage ratio and net debt leverage ratio were 13.14:1.00 and 1.07:1.00, respectively. We were, therefore, in compliance with these covenants at June 30, 2018, and we anticipate we will continue to be in compliance during the next twelve months
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Working Capital.
We generated cash flow from operations of $504.0 million in the first half of 2018. Operational working capital (representing amounts invested in trade receivables and inventories, less current liabilities other than income taxes payable and debt) increased $354.0 million, excluding acquired Heartland working capital, to $2.0 billion at June 30, 2018, consistent with increases in volumes, pricing and profitability during the first half of 2018
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Capital Investments.
During the first half of 2018, we invested $105.8 million in property, plant and equipment, primarily within our steel operations segment, compared with $85.0 million invested during the same period in 2017.
Cash Dividends.
As a reflection of continued confidence in our current and future cash flow generation ability and financial position, we increased our quarterly cash dividend by 21% to $0.1875 per share in the first quarter 2018 (from $0.155 per share in 2017), resulting in declared cash dividends of $88.3 million during the first half of 2018, compared to $74.7 million during the same period in 2017. We paid cash dividends of $81.1 million and $71.7 million during the first half of 2018 and 2017, respectively. Our board of directors, along with executive management, approves the payment of dividends on a quarterly basis. The determination to pay cash dividends in the future is at the discretion of our board of directors, after taking into account various factors, including our financial condition, results of operations, outstanding indebtedness, current and anticipated cash needs and growth plans. In addition, the terms of our Facility and the indentures relating to our senior notes may restrict the amount of cash dividends we can pay
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Other.
In 2016, the board of directors authorized a share repurchase program of up to $450 million of our common stock. Under the share repurchase program, purchases will take place, as and when, we determine in open market or private transactions made based upon the market price of our common stock, the nature of other investment opportunities or growth projects, our cash flows from operations, and general economic conditions. The share repurchase program does not require us to acquire any specific number of shares, and may be modified, suspended, extended or terminated by us at any time. We acquired 2.6 million shares of our common stock for $118.4 million in the first half of 2018 pursuant to this program. See Part II Other Information, Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
for additional information.
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.