STLD Steel Dynamics Inc



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q





Commission File Number 0-21719





Securities registered pursuant to Section 12(b) of the Act.






Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock voting, $0.025 par value	STLD	NASDAQ Global Select Market



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). 





If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ☒



As of May 1, 2019 , Registrant had 222,245,142 outstanding shares of common stock.

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STEEL DYNAMICS, INC.

CONSOLIDATED B AL ANCE SHEETS

(in thousands, except share data)







	March 31,				December 31,
	2019				2018
Assets	(unaudited)
Current assets
Cash and equivalents	$	791,444			$	828,220
Short-term investments		173,723				228,783
Accounts receivable, net		1,141,038				1,040,220
Accounts receivable-related parties		2,357				3,536
Inventories		1,867,700				1,859,168
Other current assets		52,628				72,730
Total current assets		4,028,890				4,032,657

Property, plant and equipment, net		2,936,893				2,945,767

Intangible assets, net		263,315				270,328
Goodwill		530,716				429,645
Other assets		97,419				25,166
Total assets	$	7,857,233			$	7,703,563
Liabilities and Equity
Current liabilities
Accounts payable	$	582,284			$	536,743
Accounts payable-related parties		9,183				14,011
Income taxes payable		26,896				7,468
Accrued payroll and benefits		114,575				264,542
Accrued interest		47,955				25,526
Accrued expenses		141,239				146,613
Current maturities of long-term debt		80,958				24,234
Total current liabilities		1,003,090				1,019,137

Long-term debt		2,354,427				2,352,489
Deferred income taxes		447,087				435,838
Other liabilities		63,171				8,870
Total liabilities		3,867,775				3,816,334

Commitments and contingencies

Redeemable noncontrolling interests		139,930				111,240

Equity
Common stock voting, $.0025 par value; 900,000,000 shares authorized;
265,552,825 and 265,822,402 shares issued; and 222,931,285 and 225,272,174
shares outstanding, as of March 31, 2019 and December 31, 2018, respectively		645				645
Treasury stock, at cost; 42,621,540 and 40,550,228 shares,
as of March 31, 2019 and December 31, 2018, respectively		(1,261,837)				(1,184,243)
Additional paid-in capital		1,160,139				1,160,048
Retained earnings		4,109,034				3,958,320
Accumulated other comprehensive income		130				301
Total Steel Dynamics, Inc. equity		4,008,111				3,935,071
Noncontrolling interests		(158,583)				(159,082)
Total equity		3,849,528				3,775,989
Total liabilities and equity	$	7,857,233			$	7,703,563

See notes to consolidated financial statements.

1

 

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STEEL DYNAMICS, INC.

CONSOLIDATED STATEM ENT S OF INCOME (UNAUDITED)

(in thousands, except per share data)







	Three Months Ended
	March 31,
	2019			2018

Net sales
Unrelated parties	$	2,814,486		$	2,597,312
Related parties		2,949			6,563
Total net sales		2,817,435			2,603,875

Costs of goods sold		2,383,865			2,140,459
Gross profit		433,570			463,416

Selling, general and administrative expenses		111,038			106,431
Profit sharing		23,677			26,662
Amortization of intangible assets		7,013			6,926
Operating income		291,842			323,397

Interest expense, net of capitalized interest		31,122			31,896
Other (income) expense, net		(6,343)			(4,463)
Income before income taxes		267,063			295,964

Income tax expense		62,236			70,489
Net income		204,827			225,475

Net (income) loss attributable to noncontrolling interests		(499)			2,076
Net income attributable to Steel Dynamics, Inc.	$	204,328		$	227,551



Basic earnings per share attributable to Steel Dynamics,
Inc. stockholders	$	0.91		$	0.96

Weighted average common shares outstanding		224,058			236,623

Diluted earnings per share attributable to Steel Dynamics, Inc.
stockholders, including the effect of assumed conversions
when dilutive	$	0.91		$	0.96

Weighted average common shares and share equivalents outstanding		224,962			237,723

Dividends declared per share	$	0.2400		$	0.1875





















See notes to consolidated financial statements.

2

 

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STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)







	Three Months Ended
	March 31,
	2019			2018

Net income	$	204,827		$	225,475
Other comprehensive loss - net unrealized loss on cash flow
hedging derivatives, net of income tax benefit of $54
for the three months ended March 31, 2019		(171)			-
Comprehensive income		204,656			225,475

Comprehensive (income) loss attributable to noncontrolling interests		(499)			2,076
Comprehensive income attributable to Steel Dynamics, Inc.	$	204,157		$	227,551

























































































See notes to consolidated financial statements.

3

 

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STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)







	Three Months Ended
	March 31,
	2019			2018

Operating activities:
Net income	$	204,827		$	225,475

Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization		80,174			76,135
Equity-based compensation		15,308			12,841
Deferred income taxes		12,091			9,545
Other adjustments		728			30
Changes in certain assets and liabilities:
Accounts receivable		(61,062)			(118,818)
Inventories		39,469			(80,711)
Other assets		301			(105)
Accounts payable		3,206			66,332
Income taxes receivable/payable		49,850			63,962
Accrued expenses		(163,339)			(76,751)
Net cash provided by operating activities		181,553			177,935

Investing activities:
Purchases of property, plant and equipment		(54,436)			(50,606)
Purchases of short-term investments		(49,677)			(40,000)
Proceeds from maturities of short-term investments		104,737			-
Acquisition of business, net of cash and restricted cash acquired		(93,412)			-
Other investing activities		364			229
Net cash used in investing activities		(92,424)			(90,377)

Financing activities:
Issuance of current and long-term debt		121,234			93,058
Repayment of current and long-term debt		(115,271)			(113,034)
Dividends paid		(42,239)			(36,797)
Purchases of treasury stock		(84,308)			(69,269)
Other financing activities		(5,720)			(5,180)
Net cash used in financing activities		(126,304)			(131,222)

Decrease in cash, cash equivalents, and restricted cash		(37,175)			(43,664)
Cash, cash equivalents, and restricted cash at beginning of period		834,423			1,035,085

Cash, cash equivalents, and restricted cash at end of period	$	797,248		$	991,421


Supplemental disclosure information:
Cash paid for interest	$	8,606		$	8,629
Cash paid (received) for income taxes, net	$	1,839		$	(1,045)







See notes to consolidated financial statements.

 

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Note 1.  Description of the Business and Significant Accounting Policies



Description of the Business

Steel Dynamics, Inc. (SDI), together with its subsidiaries (the company), is a domestic manufacturer of steel products and metals recycler. The company has three 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 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 bar processing lines. Steel operations accounted for 75% and 74% of the company’s consolidated external net sales during the three months ended March 31, 2019 and 2018, respectively.

Metals Recycling Operations Segment. Metals recycling operations consists solely of OmniSource Corporation (OmniSource), and includes both ferrous and nonferrous processing, transportation, marketing, brokerage, and scrap management services. Metals recycling operations accounted for 13% and 15% of the company’s consolidated external net sales during the three months ended March 31, 2019 and 2018, 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% of the company’s consolidated external net sales during the three months ended March 31, 2019 and 2018.

Other. Other operations consists of subsidiary operations that are below the quantitative thresholds required for reportable segments and primarily consist of smaller joint ventures, and the idle Minnesota ironmaking 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 wholly- and majority-owned/ controlled subsidiaries, after elimination of 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/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, 2018.



Cash and Equivalents. And Restricted Cash

Cash and equivalents include all highly liquid investments with a maturity of three months or less at the date of acquisition. Restricted cash is primarily funds held in escrow as required by various insurance and government organizations. The balance of cash, cash equivalents and restricted cash in the consolidated statements of cash flows includes restricted cash of $5.8 million, $6.2 million, $5.6 million, and $6.4 million at March 31, 2019, December 31, 2018, March 31, 2018, and December 31, 2017, respectively, which are recorded in Other Assets (noncurrent) in the company’s consolidated balance sheets.







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Note 1.  Description of the Business and Significant Accounting Policies (Continued)



Goodwill    



The company’s goodwill consisted of the following reporting units at March 31, 2019, and December 31, 2018, (in thousands):



			March 31,			December 31,
			2019			2018
	Steel Operations Segment
	Columbus Flat Roll Division		$	19,682		$	19,682
	The Techs			142,783			142,783
	Heartland Flat Roll Division			46,143			46,143
	United Steel Supply			101,918			-
	Vulcan Threaded Products			7,824			7,824
	Roanoke Bar Division			29,041			29,041
	Metals Recycling Operations Segment – OmniSource			181,400			182,247
	Steel Fabrication Operations Segment – New Millennium Building Systems			1,925			1,925
			$	530,716		$	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 $101.9 million of goodwill was recorded. OmniSource goodwill decreased $847,000 from December 31, 2018 to March 31, 2019, in recognition of the 2019 tax benefit related to the normal amortization of the component of OmniSource tax-deductible goodwill in excess of book goodwill.



Recently Issued Accounting Standards



In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: which requires an entity to use a forward-looking expected loss model versus the current incurred loss model for most financial instruments, including accounts receivable.  This new guidance is effective for annual and interim periods beginning after December 15, 2019, but can be early adopted.  The company is currently evaluating the impact ASU 2016-13 will have in its consolidated financial statements and related disclosure.





Note 2. Acquisition – United Steel Supply, LLC  



On March 1, 2019, the company purchased 75% of the equity interest of United Steel Supply, LLC (USS) for cash consideration of $93.4 million, subject to customary actual working capital purchase price adjustments. 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 the future.  Headquartered in Austin, Texas, USS is a leading distributor of painted Galvalume ® flat roll steel used for roofing and siding applications, with distribution centers strategically located in Mississippi, Indiana, Arkansas, and Oregon. USS provides the company a new, complementary distribution channel and connects it to a rapidly growing industry segment with customers that do not traditionally purchase steel directly from a steel producer.  USS’s operating results from and after March 1, 2019, are reflected in the company’s financial statements in the steel operations reporting segment.



The aggregate purchase price was preliminarily allocated to the ope ning balance sheet of USS as of March 1, 2019. The following initial 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.  The accounting for the acquisition has not yet been completed because the company has not finalized the valuations of the acquired assets, assumed liabilities and identifiable intangible assets, if any, including goodwill. 











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Note 3.  Leases



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 842 effective January 1, 2019, using the optional transition method, thereby applying the new guidance at the effective date, without retrospective application to prior periods. The company elected practical expedients permitted under the transition guidance which allowed the company to not reassess under the new standard its prior conclusions regarding lease identification and classification. The company elected to use hindsight when determining the lease 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 12 months or less. The company recognized 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 have a significant impact on the company’s operating results or cash flows for the three-month period ended March 31, 2019.



The company has operating leases relating principally to transportation and other equipment, and some real estate. The company determines if an arrangement contains a lease at inception, which generally occurs when the arrangement identifies a specific asset that the company has the right to direct the use of and obtain substantially all of the economic benefit from use of the identified asset. Certain of our lease agreements contain rent escalation clauses (including fixed and 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 uses its incremental borrowing rate at lease commencement to determine the present value of lease payments. The incremental borrowing rate is the 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 lease terms.



Operating lease right-of-use assets and lease obligations included in the consolidated balance sheet at March 31, 2019, are as follows (in thousands):





The weighted average remaining lease term for our operating leases is 6.3 years and the weighted-average discount rate is 4.00% as of

March 31, 2019. Future operating lease liabilities as of March 31, 2019, for the next five years and thereafter are as follows (in thousands):







Operating and short-term lease expense included in the consolidated statement of income was $4.7 million and $4.4 million, respectively, for the three-month period ended March 31, 2019. Cash paid related to operating lease obligations was $4.8 million for the three-month period ended

March 31, 2019. Variable lease costs were not material for the three-month period ended March 31, 2019.

 



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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 no anti-dilutive common share equivalents as of or for the three months ended March 31, 2019 and 2018.



The following tables present a reconciliation of the numerators and the denominators of the company’s basic and diluted earnings per share computations for the three months ended March 31, 2019 and 2018 (in thousands, except per share data):









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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Note 6.  Changes in Equity



The following tables 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 the three months ended

March 31, 2019 and 2018:







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, occasionally to mitigate foreign currency exchange rate risk, and have in the past to mitigate interest rate fluctuation risk. The company routinely enters into forward exchange traded futures and option contracts to manage the price risk associated with nonferrous metals inventory as well as purchases and sales of nonferrous 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. 



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Note 7.  Derivative Financial Instruments (Continued)



Commodity Futures Contracts . If the company is “long” on futures contracts, it means the company has more futures contracts purchased than futures contracts sold for the underlying commodity. If the company is “short” on a futures contract, it means the company has more futures contracts sold than futures contracts purchased for the underlying commodity. The following summarizes the company’s futures contract commitments as of March 31, 2019:



The following summarizes the location and amounts of the fair values reported on the company’s consolidated balance sheets as of March 31, 2019, and December 31, 2018, and gains and losses related to derivatives included in the company’s statement of income for the three months ended March 31, 2019 and 2018 (in thousands):





The fair value of the above derivative instruments along with required margin deposit amounts with the same counterparty under master netting arrangements totaled $3.7 million at March 31, 2019, and $4.9 million at December 31, 2018, and are reflected in other current assets in the consolidated balance sheets.





Derivatives accounted for as fair value hedges had ineffectiveness resulting in losses of $1.1 million and $101,000 during the three-month periods ended March 31, 2019, and 2018, respectively. Losses excluded from hedge effectiveness testing of $2.2 million increased cost of goods sold during the three-month period ended March 31, 2019. Gains excluded from hedge effectiveness testing of $5.0 million decreased cost of goods sold during the three-month period ended March 31, 2018.



Derivatives accounted for as cash flow hedges resulted in net gains of $58,000 recognized in other comprehensive income for the three-month period ended March 31, 2019. Net gains of $283,000 were reclassified from accumulated other comprehensive three-month period ended March 31, 2019. At March 31, 2019, the company expects to reclassify $170,000 of net gains on derivative instruments from accumulated other comprehensive income to earnings during the next 12 months due to the settlement of futures contracts.







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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:





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 March 31, 2019, and December 31, 2018 (in thousands):    





The carrying amounts of financial instruments including cash and equivalents approximate fair 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 (Level 2). The fair value of long-term debt, including current maturities, as determined by quoted market prices (Level 2), was approximately $2.5 billion and $2.4 billion at March 31, 2019 and December 31, 2018, respectively (with a corresponding carrying amount in the consolidated balance sheet of $2.5 billion at March 31, 2019 and $2.4 billion at   December 31, 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 . 



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 ‑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 smaller joint ventures, and our idle Minnesota ironmaking operations. In addition, “Other” also includes certain unallocated corporate accounts, such as the company’s senior secured credit facility, senior notes, certain other investments and certain profit sharing expenses.



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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

Note 10.  Segment Information (Continued)



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
March 31, 2019		Operations			Operations			Operations			Other			Eliminations			Consolidated

Net sales - disaggregated revenue
External		$	2,044,491		$	285,725		$	228,429		$	113,248		$	-		$	2,671,893
External Non-U.S.			80,079			65,412			51			-			-			145,542
Other segments			75,595			385,908			189			248			(461,940)			-
			2,200,165			737,045			228,669			113,496			(461,940)			2,817,435
Operating income (loss)			309,078			16,962			20,623			(56,920)	(1)		2,099			291,842
Income (loss) before income taxes			293,019			15,505			19,351			(62,696)			1,884			267,063
Depreciation and amortization			62,512			11,439			2,967			3,256			-			80,174
Capital expenditures			43,676			6,642			1,993			2,125			-			54,436

As of March 31, 2019
Assets		$	5,378,536		$	982,844		$	407,576		$	1,170,832	(2)	$	(82,555)	(3)	$	7,857,233







Footnotes related to the three months ended March 31, 2019, segment results (in millions):

(1)	Corporate SG&A	$	(22.6)		(3)	Elimination of intra-company receivables	$	(59.5)
	Company-wide equity-based compensation		(9.0)			Elimination of intra-company debt		(10.8)
	Profit sharing		(23.0)			Other		(12.3)
	Other, net		(2.3)				$	(82.6)
		$	(56.9)

(2)	Cash and equivalents	$	756.9
	Short-term investments		153.7
	Accounts receivable		12.2
	Inventories		36.1
	Property, plant and equipment, net		152.6
	Intra-company debt		10.8
	Other		48.5
		$	1,170.8

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

Note 10.  Segment Information (Continued)





					Metals			Steel
For the three months ended		Steel			Recycling			Fabrication
March 31, 2018		Operations			Operations			Operations			Other			Eliminations			Consolidated

Net sales - disaggregated revenue
External		$	1,832,303		$	329,872		$	201,437		$	92,471		$	-		$	2,456,083
External Non-U.S.			89,486			58,250			56			-			-			147,792
Other segments			59,985			364,644			210			147			(424,986)			-
			1,981,774			752,766			201,703			92,618			(424,986)			2,603,875
Operating income (loss)			334,562			24,715			19,791			(55,406)	(1)		(265)			323,397
Income (loss) before income taxes			315,805			23,005			18,457			(61,033)			(270)			295,964
Depreciation and amortization			59,141			11,558			2,898			2,538			-			76,135
Capital expenditures			38,402			6,946			2,077			3,181			-			50,606







Footnotes related to the three months ended March 31, 2018, segment results (in millions):

(1)	Corporate SG&A	$	(15.7)
	Company-wide equity-based compensation		(8.5)
	Profit sharing		(25.6)
	Other, net		(5.6)
		$	(55.4)





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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. 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.









Condensed Consolidating Balance Sheets (in thousands)
								Combined			Consolidating			Total
As of March 31, 2019		Parent			Guarantors			Non-Guarantors			Adjustments			Consolidated
Cash and equivalents		$	755,014		$	26,067		$	10,363		$	-		$	791,444
Short-term investments			153,723			20,000			-			-			173,723
Accounts receivable, net			344,209			1,727,028			71,953			(999,795)			1,143,395
Inventories			786,300			1,010,636			84,420			(13,656)			1,867,700
Other current assets			38,977			17,243			3,331			(6,923)			52,628
Total current assets			2,078,223			2,800,974			170,067			(1,020,374)			4,028,890
Property, plant and equipment, net			870,626			1,905,151			161,116			-			2,936,893
Intangible assets, net			-			263,315			-			-			263,315
Goodwill			-			428,798			101,918			-			530,716
Other assets, including investments in subs			2,934,875			59,075			5,850			(2,902,381)			97,419
Total assets		$	5,883,724		$	5,457,313		$	438,951		$	(3,922,755)		$	7,857,233

Accounts payable		$	197,481		$	376,400		$	94,697		$	(77,111)		$	591,467
Accrued expenses			200,512			275,807			17,763			(163,417)			330,665
Current maturities of long-term debt			809			1,116			104,574			(25,541)			80,958
Total current liabilities			398,802			653,323			217,034			(266,069)			1,003,090
Long-term debt			2,328,859			-			166,353			(140,785)			2,354,427
Other liabilities			(852,048)			1,398,528			33,483			(69,705)			510,258
Total liabilities			1,875,613			2,051,851			416,870			(476,559)			3,867,775

Redeemable noncontrolling interests			-			-			139,930			-			139,930

Common stock			645			1,727,859			15,016			(1,742,875)			645
Treasury stock			(1,261,837)			-			-			-			(1,261,837)
Additional paid-in-capital			1,160,139			683,048			787,572			(1,470,620)			1,160,139
Retained earnings (deficit)			4,109,034			994,555			(761,854)			(232,701)			4,109,034
Accumulated other comprehensive loss			130			-			-			-			130
Total Steel Dynamics, Inc. equity			4,008,111			3,405,462			40,734			(3,446,196)			4,008,111
Noncontrolling interests			-			-			(158,583)			-			(158,583)
Total equity			4,008,111			3,405,462			(117,849)			(3,446,196)			3,849,528
Total liabilities and equity		$	5,883,724		$	5,457,313		$	438,951		$	(3,922,755)		$	7,857,233



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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

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

Note 11.  Condensed Consolidating Information (Continued)

 





Condensed Consolidating Statements of Operations (in thousands)

For the three months ended,								Combined			Consolidating			Total
March 31, 2019		Parent			Guarantors			Non-Guarantors			Adjustments			Consolidated
Net sales		$	1,124,735		$	3,110,229		$	171,883		$	(1,589,412)		$	2,817,435
Costs of goods sold			905,995			2,865,989			165,460			(1,553,579)			2,383,865
Gross profit			218,740			244,240			6,423			(35,833)			433,570
Selling, general and administrative			69,006			74,583			3,930			(5,791)			141,728
Operating income			149,734			169,657			2,493			(30,042)			291,842
Interest expense, net of capitalized interest			18,654			11,766			3,214			(2,512)			31,122
Other (income) expense, net			(7,400)			(1,377)			(292)			2,726			(6,343)
Income (loss) before income taxes and
equity in net income of subsidiaries			138,480			159,268			(429)			(30,256)			267,063
Income taxes			30,764			38,534			103			(7,165)			62,236
			107,716			120,734			(532)			(23,091)			204,827
Equity in net income of subsidiaries			96,612			-			-			(96,612)			-
Net income attributable to noncontrolling interests			-			-			(499)			-			(499)
Net income (loss) attributable to Steel Dynamics, Inc.		$	204,328		$	120,734		$	(1,031)		$	(119,703)		$	204,328







For the three months ended,								Combined			Consolidating			Total
March 31, 2018		Parent			Guarantors			Non-Guarantors			Adjustments			Consolidated
Net sales		$	1,036,674		$	2,823,129		$	152,587		$	(1,408,515)		$	2,603,875
Costs of goods sold			819,145			2,551,620			148,630			(1,378,936)			2,140,459
Gross profit			217,529			271,509			3,957			(29,579)			463,416
Selling, general and administrative			62,927			76,952			5,597			(5,457)			140,019
Operating income (loss)			154,602			194,557			(1,640)			(24,122)			323,397
Interest expense, net of capitalized interest			18,623			12,437			3,540			(2,704)			31,896
Other (income) expense, net			(5,203)			(1,697)			(273)			2,710			(4,463)
Income (loss) before income taxes and
equity in net income of subsidiaries			141,182			183,817			(4,907)			(24,128)			295,964
Income taxes			29,746			45,720			909			(5,886)			70,489
			111,436			138,097			(5,816)			(18,242)			225,475
Equity in net income of subsidiaries			116,115			-			-			(116,115)			-
Net loss attributable to noncontrolling interests			-			-			2,076			-			2,076
Net income (loss) attributable to Steel Dynamics, Inc.		$	227,551		$	138,097		$	(3,740)		$	(134,357)		$	227,551



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Note 11.  Condensed Consolidating Information (Continued)