-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fa4KbEKu5jgBlbEfO9w2byu3GVCRB/8IQmxtKxm7lzZSxLqqfO9qcAdfJLfeIvnC zJUsc3SBMEA1HBvaaC38/g== 0000950123-97-004232.txt : 19970514 0000950123-97-004232.hdr.sgml : 19970514 ACCESSION NUMBER: 0000950123-97-004232 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STEEL DYNAMICS INC CENTRAL INDEX KEY: 0001022671 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 351929476 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21719 FILM NUMBER: 97603000 BUSINESS ADDRESS: STREET 1: 4500 COUNTY RD 59 CITY: BUTLER STATE: IN ZIP: 46721 BUSINESS PHONE: 2198688000 MAIL ADDRESS: STREET 1: 4500 COUNTY RD 59 CITY: BUTLER STATE: IN ZIP: 46721 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities - ------- Exchange Act of 1934 For the period ended March 31, 1997 OR Transition Report Pursuant to Section 13 or 15(d) of the Securities - ------ Exchange Act of 1934 Commission File Number 0-21719 STEEL DYNAMICS, INC. (Exact name of registrant as specified in its charter) INDIANA 35-1929476 (State or other jurisdiction (I.R.S. employer Identification No.) of incorporation or organization) 4500 COUNTY ROAD 59, BUTLER, IN 46721 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (219) 868-8000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered NONE NONE Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value 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 X No As of May 8, 1997, Registrant had outstanding 47,852,707 shares of Common Stock. 2 STEEL DYNAMICS, INC. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS: Page ---- Consolidated Balance Sheets as of December 31, 1996 and unaudited March 31, 1997 ............... 1 Consolidated Statements of Operations for the three month periods ended March 30, 1996 and March 31, 1997 (unaudited).................................................. 2 Consolidated Statements of Cash Flows for the three month periods ended March 30, 1996 and March 31, 1997 (unaudited).................................................. 3 Notes to Consolidated Financial Statements....................................................... 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................................................................... 5 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................................ 7 SIGNATURE....................................................................................... 7
3 STEEL DYNAMICS, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
DECEMBER 31, MARCH 31, 1996 1997 ------------ ---------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents ...................................................................... $ 57,460 $ 48,179 Accounts receivable, net ....................................................................... 14,600 22,870 Accounts receivable-related parties ............................................................ 17,860 18,381 Inventories .................................................................................... 65,911 46,515 Other current assets ........................................................................... 1,599 1,087 --------- --------- Total current assets .................................................................. 157,430 137,032 PROPERTY, PLANT, AND EQUIPMENT, NET ................................................................. 339,263 380,446 DEBT ISSUANCE COSTS, NET ............................................................................ 12,405 12,006 RESTRICTED CASH ..................................................................................... 2,827 3,063 OTHER ASSETS ........................................................................................ 10,366 10,233 --------- --------- TOTAL ASSETS .......................................................................... $ 522,291 $ 542,780 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable ............................................................................... $ 28,968 $ 35,062 Accounts payable-related parties ............................................................... 12,218 9,264 Other accrued expenses ......................................................................... 9,196 10,230 Current maturities of long-term debt ........................................................... 11,175 29,026 --------- --------- Total current liabilities ............................................................. 61,557 83,582 LONG-TERM DEBT, less current maturities ............................................................. 196,168 177,422 DEFERRED TAXES ...................................................................................... 2,475 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Class A common stock voting, $.01 par value; 100,000,000 shares authorized; 47,803,341 and 47,847,901 shares issued and outstanding as of December 31, 1996 and March 31, 1997, respectively ........................................................................ 478 478 Additional paid-in capital ..................................................................... 303,846 303,996 Accumulated deficit ............................................................................ (39,758) (25,173) --------- --------- Total stockholders' equity ............................................................ 264,566 279,301 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................................ $ 522,291 $ 542,780 ========= =========
1 4 STEEL DYNAMICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED ------------------------------- MARCH 30, MARCH 31, 1996 1997 -------------- -------------- (UNAUDITED) (UNAUDITED) NET SALES: Unrelated parties ....................... $ 18,872 $ 52,165 Related parties ......................... 13,415 45,894 -------- -------- Total net sales ..................... 32,287 98,059 Cost of goods sold ........................... 35,184 73,910 -------- -------- GROSS PROFIT (LOSS) .......................... (2,897) 24,149 Selling, general and administrative expenses.. 2,817 5,339 -------- -------- OPERATING INCOME (LOSS) ...................... (5,714) 18,810 Foreign currency gain ........................ 154 92 Interest expense ............................. (5,837) (2,401) Interest income .............................. 93 752 -------- -------- INCOME (LOSS) BEFORE INCOME TAXES ............ (11,304) 17,253 Income taxes ................................. 2,668 -------- -------- NET INCOME (LOSS) ............................ $(11,304) $ 14,585 ======== ======== NET INCOME (LOSS) PER SHARE .................. $ (.35) $ .30 ======== ======== WEIGHTED AVERAGE SHARES OUTSTANDING .......... 32,665 47,838 ======== ========
2 5 STEEL DYNAMICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED ------------------------------ MARCH 30, 1996 MARCH 31, 1997 -------------- -------------- (UNAUDITED) (UNAUDITED) OPERATING ACTIVITIES: Net income (loss) ............................................. $(11,304) $ 14,585 Adjustments to reconcile net income (loss) to net cash provided (used) in operating activities: Depreciation and amortization ............................. 3,588 5,691 Foreign currency gain ..................................... (154) (92) Deferred taxes ............................................ 2,475 Changes in certain assets and liabilities: Accounts receivable .................................. (19,981) (8,791) Inventories .......................................... (7,755) 19,396 Other assets ......................................... 21 512 Accounts payable ..................................... 1,529 3,140 Accrued expenses ..................................... 6,513 1,126 -------- -------- Net cash provided (used) in operating activities . (27,543) 38,042 -------- -------- INVESTING ACTIVITIES: Purchases of property, plant, and equipment ................... (5,471) (46,330) Proceeds from government grants ............................... 1,413 Other ......................................................... (955) (1) -------- -------- Net cash used in investing activities ............ (5,013) (46,331) -------- -------- FINANCING ACTIVITIES: Issuance of long-term debt .................................... 34,961 Repayments of long-term debt .................................. (154) (1,131) Issuance of common stock, net of expenses ..................... 5,052 150 Debt issuance costs ........................................... (3,500) (11) -------- -------- Net cash provided by financing activities ........ 36,359 (992) -------- -------- Increase (decrease) in cash and cash equivalents ................... 3,803 (9,281) Cash and cash equivalents at beginning of period ................... 6,884 57,460 -------- -------- Cash and cash equivalents at end of period ......................... $ 10,687 $ 48,179 ======== ========
3 6 STEEL DYNAMICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The preparation of financial statements in conformity with generally accepted accounting principles requires that management make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements. The reported amounts of revenues and expenses during the reporting period may also be affected by the estimates and assumptions management is required to make. Actual results may differ from those estimates. In the opinion of management these estimates reflect all adjustments, consisting of only normal recurring accruals, including elimination of all significant intercompany balances and transactions, which are necessary to a fair statement of the results for the interim periods covered by such statements. Certain amounts from prior year financial statements have been reclassified to conform to the current year presentation. These financial statements and notes should be read in conjunction with the audited financial statements included in the Company's 1996 Annual Report on Form 10-K. 2. INVENTORIES (in thousands)
December 31, March 31, 1996 1997 ------------ --------- Raw Materials ................................ $48,065 $28,871 Supplies ..................................... 11,854 13,084 Finished Goods ............................... 5,992 4,560 ------- ------- $65,911 $46,515 ======= =======
3. COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
Shares Amount ---------- -------- (in thousands) Balance at January 1, 1997 ................... 47,803,341 $304,324 Exercise of stock options .................... 44,560 150 ---------- -------- Balance at March 31, 1997 .................... 47,847,901 $304,474 ========== ========
Effective January 10, 1997, the SDI Board of Directors, acting as the Committee under the 1994 Incentive Stock Option Plan, reduced the vesting period for exercise of stock options to six months after the grant date with respect to one-third of the shares covered by options, and this was made effective for all outstanding as well as newly granted options. The remaining two-thirds of the optioned shares retain their original five year vesting period. 4. EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128"). SFAS No. 128 establishes new standards for computing and presenting earnings per share ("EPS"). Specifically, SFAS No. 128 replaces the presentation of primary EPS with a presentation of basic EPS, requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997; earlier application is not permitted. Management has determined that the adoption of SFAS No. 128 will not have a material effect on the accompanying consolidated financial statements. 4 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net Sales Net sales totaled approximately $98.1 million for the first quarter 1997. SDI commercial production of primary grade steel on January 2, 1996 and has continued to increase its net sales as its production tons increased. By the end of the first quarter of operations ended March 31, 1996, the Company was operating at an annualized rate of 440,000 tons, or 31% of full capacity. By the end of March 1997, the Company was operating at an annualized rate of 1,100,000, or 79% of full capacity. In addition, the average sales price per prime ton increased from $302 for January 1996 to $360 for March 1997 and the percentage of prime tons produced increased from 74% for the quarter ended March 30, 1996 to 95% for the quarter ended March 31, 1997. Cost of Goods Sold Cost of goods sold totaled approximately $73.9 million, or 75% of net sales, for the first quarter of 1997. As the Company continues to increase the number of prime tons sold, the Company expects that cost of goods sold will continue to increase but, as a percentage of net sales, the cost of goods sold will decrease. Selling, General and Administrative Selling, general and administrative was approximately $2.8 million and $5.3 million for the first quarter of 1996 and 1997, respectively. Interest Expense Interest expense totaled approximately $5.8 million and $2.4 million for the first quarter of 1996 and 1997, respectively. Foreign Currency Gain The foreign currency gains represent transaction gains incurred by the Company for purchases of equipment used within the Company's mini-mill. A portion of the purchase price, as stated within the contract to purchase the equipment, was denominated in German marks. The Company committed to purchase the equipment in December 1993 with settlement of the liability primarily occurring during the construction period of the mini-mill. No commitments for equipment purchases denominated in a foreign currency exist as of April 30, 1997. Foreign currency gain totaled $154,000 and $92,000 for the three months ended March 30, 1996 and March 31, 1997, respectively. Interest Income Interest income totaled approximately $93,000 and $752,000 and the first quarter of 1996 and 1997, respectively. Taxes At December 31, 1996, the Company had available net operating losses ("NOLs") for federal income tax purposes of approximately $49.4 million of which $.2 million expire in 2009, $2.3 million expire in 2010 and $46.9 million expire in 2011. Because of the Company's limited operating history, a valuation allowance has been established for a portion of the deferred tax asset. As the Company continues to be a profitable operation the valuation allowance will continue to be adjusted. For the three months ended March 31, 1997, income taxes are computed using the company's expected annual effective tax rate, which gives effect to the utilization of available net operating loss carryforwards. LIQUIDITY AND CAPITAL RESOURCES Steel Dynamics' business is capital intensive and requires substantial expenditures for, among other things, the purchase and maintenance of equipment used in its steelmaking and finishing operations and compliance with environmental laws. The Company's liquidity needs arise primarily from capital investments, working capital requirements and principal and interest payments on its indebtedness. Since its inception, SDI has met these liquidity requirements with cash provided by equity, long-term borrowings, state and local government grants and capital cost reimbursements. Net cash used in operating activities totaled approximately $27.5 million for the first quarter of 1996 The use of cash in operating activities for the first quarter of 1996 primarily related to the build up of raw material inventory as a result of favorable pricing and the substantial increase in 5 8 accounts receivable from the beginning of the year as a result of production and sales increases. During the first quarter of 1997, the Company provided net cash of approximately $38.0 million from operating activities resulting from net income and decreased raw material inventory due to less favorable pricing levels. Net cash used in investing activities totaled approximately $5 million from the first quarter of 1996 and approximately $46.3 million for the first quarter of 1997. Investing activities primarily consisted of capital expenditures of approximately $5.4 million and $46.3 million the first quarter of 1996 and 1997, respectively, for the construction of the Company's existing facilities and the beginning of the Cold Mill Project. Cash provided by financing activities totaled approximately $36.3 million for the first quarter of 1996 and cash used in financing activities totaled approximately $992,000 for the first quarter of 1997. The 1996 increase in cash provided by financing activities primarily relates to the approximately $35 million of proceeds from senior term debt. The Company's Credit Agreement provides for up to an aggregate of $300.0 million of senior term loans and a $45.0 million revolving credit facility (the "Revolving Credit Facility") for working capital purposes, subject to borrowing base restrictions. Indebtedness outstanding under the Credit Agreement is secured by a first priority lien on substantially all of the assets of the Company. Of the $300.0 million in senior term loan commitments, the Company borrowed $150.0 million for the construction of the mini-mill and $150.0 million was designated and remains available for the construction of the Cold Mill Project. As of March 31 1997, a total of $150.0 million of senior term loans were outstanding and there were no outstanding borrowings under the Revolving Credit Facility. The Company is in the process of renegotiating the terms of the senior term loans. It is anticipated that the amendment to the Credit Agreement will be completed in the second quarter of 1997. The Company anticipates the amendment will include revised pricing and covenants, which the Company believes will be more favorable than the current agreement. As of March 31, 1997, the Company's long-term debt (including the current portion) was approximately $206 million. Approximately 72% of this indebtedness bears interest at floating rates. The Company currently estimates that the funds required for the construction and start-up of the Cold Mill, IDI and Caster Project will total approximately $350.0 million. Approximately $118 million of that amount has been expensed through March 31, 1997. The Company intends to finance the remaining needs of the Cold Mill and Caster Projects with cash on hand and borrowings available under the Credit Agreement. The Company will use $20.0 million of the it received from the private placement of its common stock in 1996 to finance a portion of the IDI Project and intends to finance the remaining $45.0 million with additional debt. Although IDI is negotiating to obtain the financing needed, it has not yet secured a commitment. The Company anticipates that the financing for the IDI project will be secured by the end of the second quarter in 1997. However, no assurance can be given that the IDI financing commitment currently being negotiated will be obtained on terms acceptable to the Company ,or at all. The Company raised approximately $140.2 million (net of expenses) with its initial public offering in November 1996. Approximately $56.0 million was used to prepay the subordinated notes, including accrued interest and prepayment fees. As of December 31, 1996, the Company had approximately $58.0 million invested in short-term cash investments. This cash will be used to fund the construction of the Caster Project as the costs of construction are incurred. Approximately $26.2 million of the IPO proceeds were used for capital and working capital needs through the end of the year. The Company intends to finance the Cold Mill Project with cash on hand and borrowings available under the Credit Agreement. ENVIRONMENTAL EXPENDITURES AND OTHER CONTINGENCIES SDI has incurred and, in the future, will continue to incur capital expenditures and operating expenses for matters relating to environmental control, remediation, monitoring and compliance. Steel Dynamics believes that compliance with current environmental laws and regulations is not likely to have a material adverse effect on the Company's financial condition, results of operations or liquidity; however, environmental laws and regulations have changed rapidly in recent years and SDI may become subject to more stringent environmental laws and regulations in the future. INFLATION SDI does not believe that inflation has had a material effect on its results of operations. 6 9 PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits - Exhibit 11.1 Statement of Computation of Earnings per Share (page 8) (B) Reports on Form 8-K for the quarter ended March 31, 1997 - None Item 1 - 5 are not applicable for this reporting period and have been omitted. SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of Securities Exchange Act of 1934, Steel Dynamics, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. May 14, 1997 STEEL DYNAMICS, INC. By: /s/ TRACY L. SHELLABARGER ---------------------------------------- Tracy L. Shellabarger VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (Principal Financial and Accounting Officer and Duly Authorized Officer) 7 EX-11.1 2 STATEMENT OF COMPUTATION OF PER SHARE EANINGS 1 Statement re: Computation of Per Share Earnings EXHIBIT 11.1 STEEL DYNAMICS, INC. COMPUTATION OF NET INCOME (LOSS) PER SHARE (amounts in thousands, except per share data)
for Three Months Ended --------------------------- March 30, March 31, 1996 1997 --------- --------- Weighted average shares outstanding ............... 28,773 47,838 Adjustment for Staff Accounting Bulletin No. 83 .......................................... 3,892 Dilutive effect for options and warrants .......... N/A(a) N/A(a) --------- --------- Adjusted weighted average shares outstanding ...... 32,665 47,838 ========= ========= Net income (loss) ................................. $(11,304) $14,585 ========= ========= Net loss per share ................................ $ (0.35)(b) $ 0.30(b) ========= =========
(a) Net income (loss) per share for the quarters ended March 30, 1996 and March 31, 1997 were calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding including the anti-dilutive effect of shares issued from September 23, 1995 through September 23, 1996 using the treasury stock method. Net income per share for the quarter ended March 31, 1997 excludes the anti-dilutive effect of common stock equivalents. (b) Fully diluted earnings per share is the same as primary earnings per share. 1 EX-27 3 FINANCIAL DATA SCHEDULE
5 1 U.S. DOLLARS 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 48,178,515 0 41,879,738 628,256 46,514,870 1,087,391 402,416,147 21,970,625 542,780,222 83,581,252 0 0 0 478,479 298,828,049 542,780,222 98,059,315 98,973,970 73,910,018 79,319,908 0 0 2,401,115 17,252,947 2,667,989 14,584,958 0 0 0 14,584,958 .30 .30
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