-----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, LcgKxTq4OUsSKUYnbdkIAl4qUMVa6J8kdvbqSx1cWh/IuAFlH4QRaMnkXVudSiCv LQnG8gTHK/Srdv+pcVRC3w== 0000950123-00-004477.txt : 20000508 0000950123-00-004477.hdr.sgml : 20000508 ACCESSION NUMBER: 0000950123-00-004477 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000505 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: SEC FILE NUMBER: 000-21719 FILM NUMBER: 619682 BUSINESS ADDRESS: STREET 1: 7030 POINTE INVERNESS WAY STREET 2: SUITE 310 CITY: FORT WAYNE STATE: IN ZIP: 46804 BUSINESS PHONE: 2194593553 MAIL ADDRESS: STREET 1: 7030 POINTE INVERNERSS WAY STREET 2: SUITE 310 CITY: FORT WAYNE STATE: IN ZIP: 46804 10-Q 1 STEEL DYNAMICS, INC. 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, 2000 OR / / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 0-21719 Steel Dynamics, Inc. (Exact name of registrant as specified in its charter)
Indiana 35-1929476 (State or other jurisdiction of incorporation or organization) (I.R.S. employer Identification No.)
7030 Pointe Inverness Way, Suite 310, Fort Wayne, IN 46804 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (219) 459-3553 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 April 24, 2000, Registrant had outstanding 48,029,281 shares of Common Stock. 2 STEEL DYNAMICS, INC. Table of Contents PART I. Financial Information
Item 1. Consolidated Financial Statements: Consolidated Balance Sheets as of March 31, 2000 (unaudited) and December 31, 1999 .............. 1 Consolidated Statements of Income for the three months ended March 31, 2000 and 1999 (unaudited).............................................................. 2 Consolidated Statements of Cash Flows for the three months ended March 31, 2000 and 1999 (unaudited).............................................................. 3 Notes to Consolidated Financial Statements....................................................... 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................................................... 6 Item 3. Quantitative and Qualitative Disclosures About Market Risk....................................... 8
PART II. Other Information
Item 1. Legal Proceedings................................................................................ 9 Item 6. Exhibits and Reports on Form 8-K................................................................. 9 Signature........................................................................................ 10
3 STEEL DYNAMICS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
March 31 December 31 2000 1999 ---- ---- (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents............................................................... $ 16,160 $ 16,615 Accounts receivable, net................................................................ 88,757 74,642 Accounts receivable-related parties..................................................... 15,172 12,007 Inventories............................................................................. 118,923 106,742 Deferred taxes.......................................................................... 8,535 10,987 Other current assets.................................................................... 4,245 4,808 ---------- ---------- Total current assets........................................................... 251,792 225,801 PROPERTY, PLANT, AND EQUIPMENT, NET.......................................................... 760,269 742,787 RESTRICTED CASH.............................................................................. 6,812 6,696 OTHER ASSETS................................................................................. 17,283 16,272 ---------- ---------- TOTAL ASSETS................................................................... $1,036,156 $ 991,556 ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES: Accounts payable........................................................................ $ 28,362 $ 19,622 Accounts payable-related parties........................................................ 27,313 18,014 Accrued interest........................................................................ 4,949 4,941 Other accrued expenses.................................................................. 24,765 20,077 Current maturities of long-term debt.................................................... 9,596 7,921 ---------- ---------- Total current liabilities...................................................... 94,985 70,575 LONG-TERM DEBT, less current maturities...................................................... 497,733 498,042 DEFERRED TAXES............................................................................... 32,011 29,774 MINORITY INTEREST............................................................................ 4,584 1,795 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Class A common stock voting, $.01 par value; 100,000,000 shares authorized; 49,312,783 and 49,265,078 shares issued; and 48,018,683 and 47,970,978 shares outstanding, as of March 31, 2000 and December 31, 1999, respectively .... 493 493 Treasury stock, at cost; 1,294,100 shares............................................... (19,650) (19,650) Additional paid-in capital.............................................................. 335,460 335,237 Retained earnings....................................................................... 90,540 75,290 ---------- ---------- Total stockholders' equity..................................................... 406,843 391,370 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................... $1,036,156 $ 991,556 ========== ==========
See notes to consolidated financial statements. 1 4 STEEL DYNAMICS, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data)
Three Months Ended March 31 2000 1999 ---- ---- (unaudited) NET SALES: Unrelated parties...................................................................... $ 151,675 $ 85,133 Related parties........................................................................ 37,497 32,320 ----------- ----------- Total net sales.................................................................... 189,172 117,453 Cost of goods sold.......................................................................... 145,161 99,072 ----------- ----------- GROSS PROFIT................................................................................ 44,011 18,381 Selling, general and administrative expenses................................................ 13,850 8,099 ----------- ----------- OPERATING INCOME............................................................................ 30,161 10,282 Interest expense............................................................................ (4,929) (5,599) Other income .............................................................................. 183 262 ----------- ----------- INCOME BEFORE INCOME TAXES.................................................................. 25,415 4,945 Income taxes .............................................................................. 10,166 1,975 ----------- ----------- NET INCOME............................................................................. $ 15,249 $ 2,970 =========== =========== BASIC EARNINGS PER SHARE: Net income per share........................................................................ $ 0.32 $ 0.06 =========== =========== Weighted average common shares outstanding.................................................. 47,996 47,877 =========== =========== DILUTED EARNINGS PER SHARE: Net income per share........................................................................ $ 0.32 $ 0.06 =========== =========== Weighted average common shares and share equivalents outstanding.......................................................... 48,203 48,244 =========== ===========
See notes to consolidated financial statements. 2 5 STEEL DYNAMICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Three Months Ended March 31 2000 1999 ---- ---- (unaudited) OPERATING ACTIVITIES: Net income.............................................................................. $ 15,249 $ 2,970 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization....................................................... 11,903 8,191 Deferred income taxes............................................................... 4,689 (2,631) Minority interest................................................................... 2,789 - Changes in certain assets and liabilities: Accounts receivable............................................................ (17,280) 157 Inventories.................................................................... (12,181) 7,651 Other assets................................................................... 563 3,258 Accounts payable............................................................... 18,039 14,825 Accrued expenses............................................................... 4,696 (1,371) ----------- ------------ Net cash provided by operating activities...................................... 28,467 33,050 ----------- ----------- INVESTING ACTIVITIES: Purchases of property, plant, and equipment............................................. (29,206) (47,851) Other................................................................................... (1,305) (134) ----------- ----------- Net cash used in investing activities.......................................... (30,511) (47,985) ----------- ----------- FINANCING ACTIVITIES: Issuance of long-term debt.............................................................. 5,651 21,762 Repayments of long-term debt............................................................ (4,285) (1,222) Issuance of common stock, net of expenses and proceeds and tax benefits from exercise of stock options............................ 223 83 Debt issuance costs..................................................................... - (14) ----------- ----------- Net cash provided by financing activities...................................... 1,589 20,609 ----------- ----------- Increase (decrease) in cash and cash equivalents............................................. (455) 5,674 Cash and cash equivalents at beginning of period............................................. 16,615 5,243 ----------- ----------- Cash and cash equivalents at end of period................................................... $ 16,160 $ 10,917 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest....................................................................... $ 9,139 $ 8,246 =========== =========== Cash paid for taxes.......................................................................... $ 355 $ 310 =========== ===========
See notes to consolidated financial statements. 3 6 STEEL DYNAMICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION Principles of Consolidation. The consolidated financial statements include the accounts of Steel Dynamics, Inc. (SDI), together with its subsidiaries (the company) after elimination of the significant intercompany accounts and transactions. Minority interest represents the minority shareholders' proportionate share in the equity or income of the company's consolidated subsidiary, New Millennium Building Systems, LLC (NMBS). Use of Estimates. These financial statements are prepared in conformity with generally accepted accounting principles and, accordingly, include amounts that are based on management's estimates and assumptions that affect the amounts reported in the financial statements and in the notes thereto. Actual results may differ from those estimates. In the opinion of management, these estimates reflect all normal recurring adjustments necessary for a fair presentation of the interim period results. These financial statements and notes should be read in conjunction with the audited financial statements included in the company's 1999 Annual Report on Form 10-K. 2. INVENTORIES Inventories are stated at lower of cost (principally standard cost which approximates actual cost on a first-in, first-out basis) or market. Inventories consisted of the following (in thousands):
March 31 December 31 2000 1999 ---- ---- Raw Materials................................................................................ $ 53,860 $ 46,171 Supplies..................................................................................... 41,474 39,981 Work-in-progress............................................................................. 6,980 3,754 Finished Goods............................................................................... 16,609 16,836 ---------- ---------- $ 118,923 $ 106,742 ========== ==========
3. EARNINGS PER SHARE Diluted earnings per share amounts are based upon the weighted average number of common and common equivalent shares outstanding during the year. Common equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect. The difference between basic and diluted earnings per share for the company is solely attributable to the dilutive effect of stock options. The reconciliation of the weighted average common shares for basic and diluted earnings per share for the three months ended March 31 is as follows (in thousands):
2000 1999 ---- ---- Basic weighted average common shares outstanding............................................. 47,996 47,877 Dilutive effect of stock options ............................................................ 207 367 -------- -------- Diluted weighted average common shares and share equivalents outstanding .................... 48,203 48,244 ======== =========
4. NEW ACCOUNTING PRONOUNCEMENTS Statement of Financial Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued in June 1998 and then was amended by SFAS No. 137 in June 1999. SFAS No. 137 deferred the effective date of SFAS No. 133 to all fiscal years beginning after June 15, 2000. This statement establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial condition and measure those instruments at fair value. If certain conditions are met a derivative may be specifically designated as a fair value hedge, a cash flow hedge, or a hedge of foreign currency exposure. The accounting for changes in the fair value of a derivative (that is, gains and losses) is dependent upon the intended use of the derivative and the resulting designation. Management has not yet quantified the effect, if any, of the new standard on the financial statements. 4 7 STEEL DYNAMICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. SEGMENT INFORMATION The company has two operating segments: Steel Operations and Steel Scrap Substitute Operations. Steel Operations include all revenues from the flat roll mill facility, which produces and sells hot rolled, cold rolled, and galvanized sheet steel; and also includes all start-up costs associated with the structural and rail mill, which will produce structural steel and rail products. Steel Scrap Substitute Operations include revenues from Iron Dynamics, Inc., which will provide liquid pig iron to the company. In addition, Corporate and Eliminations include certain unallocated corporate accounts, such as SDI senior bank debt and certain other investments, which include the start-up operation of NMBS. The company's operations are primarily organized and managed by operating segment. The company evaluates performance and allocates resources based on operating profit or loss before income taxes. The accounting policies of the operating segments are consistent with those described in Note 1 to the financial statements. Intersegment sales and transfers are accounted for at standard prices and are eliminated in consolidation. Segment results for the three months ended March 31, are as follows (in thousands):
2000 1999 ------------ ------------ STEEL OPERATIONS Net sales External $ 189,172 $ 117,453 Other segments - - Operating income 38,762 14,160 Assets 876,650 800,563 ------------ ------------- STEEL SCRAP SUBSTITUTE OPERATIONS Net sales External $ - $ - Other segments 3,264 53 Operating loss (4,110) (2,964) Assets 126,001 105,550 ------------ ------------- CORPORATE AND ELIMINATIONS Net sales External $ - $ - Other segments (3,264) (53) Operating loss (4,491) (914) Assets 33,505 39,915 ------------ ------------- CONSOLIDATED Net sales External $ 189,172 $ 117,453 Operating income 30,161 10,282 Assets 1,036,156 946,028 ------------ -------------
The external net sales of the company's Steel Operations include sales to Non-U.S. companies of $6.1 million and $444,000 for the three months ended March 31, 2000 and 1999, respectively. 5 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statement as a result of risks and uncertainties, including those incorporated by reference herein from "Exhibit 99.1" filed with our Report on Form 10-K for the year ended December 31, 1999. You should read this commentary in conjunction with our Annual Report on Form 10-K, for the year ended December 31, 1999 for a full understanding of our financial condition and results of operations. Overview We operate a technologically advanced flat-rolled steel mini-mill in Butler, Indiana with an annual production capacity of 2.2 million tons. We manufacture and market a broad range of high quality flat-rolled carbon steel products. We sell hot rolled, cold rolled and coated steel products, including high strength low alloy and medium carbon steels. We sell these products directly to end users and through steel service centers primarily in the Midwestern United States. Our products are used for various applications, including automotive, appliance, manufacturing, consumer durable goods, industrial machinery and various other applications. In addition to our flat-rolled mini-mill, we are completing a second facility, preparing to build a third and investing in a steel fabrication plant. Our second facility, operated by our subsidiary, Iron Dynamics Inc., involves the pioneering of a process to produce direct reduced iron, which is then converted into liquid pig iron, a high quality, lower-cost steel scrap substitute for use in our flat-rolled facility. During 1999, we determined that Iron Dynamics would require design modifications to obtain its fully intended operating functionality. The modifications are planned to occur during the second half of 2000, until which time Iron Dynamics will operate at limited production levels. Our third facility, a planned structural and rail mill, and our investment in New Millennium Building Systems, LLC, (NMBS) provide an opportunity for further product diversification and market penetration. Upon completion of the structural and rail mill, which we estimate to be in the first half of 2001, we plan to manufacture structural steel beams, pilings and rails for the construction and railroad markets. In addition, our investment in New Millennium provides a like opportunity for our steel to access the non-residential construction markets with steel joists, trusses and girders and roof and floor decking products. NET SALES Our sales are a factor of net tons shipped, product mix and related pricing. Our net sales are determined by subtracting product returns, sales discounts, return allowances and claims from total sales. We charge premium prices for certain grades of steel, dimensions of product, or certain smaller volumes, based on our cost of production. We also provide further value-added products from our cold mill. These products include hot rolled and cold rolled galvanized products, along with cold rolled products, allowing us to charge marginally higher prices compared to hot-rolled products. In order to ensure consistent and efficient hot band plant utilization, we have entered into a multi-year "off-take" sales and distribution agreement with Heidtman Steel Products, Inc. which accounts for approximately 30,000 tons of our monthly flat-rolled production at prevailing market prices. We do not enter into material fixed price, long-term, exceeding one calendar quarter, contracts for the sale of steel. Although fixed price contracts may reduce risks related to price declines, these contracts may also limit our ability to take advantage of price increases. COST OF GOODS SOLD Our cost of goods sold represents all direct and indirect costs associated with the manufacture of our flat-rolled carbon steel, and hot rolled, cold rolled and coated products. The principal elements of these costs are: - Alloys - Electricity - Natural gas - Oxygen - Argon - Electrodes - Steel scrap and scrap substitutes - Depreciation - Direct and indirect labor and benefits
Steel scrap and scrap substitutes represent the most significant component of our cost of goods sold. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE Selling, general and administrative expenses are comprised of all costs associated with the sales, finance and accounting, materials and transportation, and administrative departments. These costs include labor and benefits, professional services, financing cost amortization, property taxes, profit sharing expense and start-up costs associated with new projects. 6 9 INTEREST EXPENSE Interest expense consists of interest associated with our senior credit facility and other debt agreements as described in our notes to financial statements, net of capitalized interest costs that are related to construction expenditures during the construction period of capital projects. OTHER INCOME (EXPENSE) Other income consists of interest income earned on our cash balance and any other non-operating income activity. Other expense consists of any non-operating costs, including permanent impairments of reported investments. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THREE MONTHS ENDED MARCH 31, 1999 Net Sales. Our net sales were $189.2 million, with shipments of 511,200 net tons for the three months ended March 31, 2000, as compared to net sales of $117.5 million, with shipments of 369,500 net tons for the three months ended March 31, 1999, an increase in net sales of $71.7 million, or 61%. These increases were attributable in part to increased volumes of 141,700 net tons, or 38%, in conjunction with an increase of approximately $52, or 16%, in our average price per ton, for the three months ended March 31, 2000, as compared to the same period in 1999. These price increases were experienced throughout our product lines as a result of the continued strengthening of the industry. Cost of Goods Sold. Cost of goods sold was $145.2 million for the three months ended March 31, 2000, as compared to $99.1 million for the three months ended March 31, 1999, an increase of $46.1 million, or 47%. This increase was primarily attributable to increased volumes. Steel scrap represented approximately 55% and 51% of our total cost of goods sold for the three months ended March 31, 2000 and 1999, respectively. Our costs associated with steel scrap averaged $21 per ton more during the first quarter of 2000 than during the first quarter of 1999 and $14 per ton more than during the fourth quarter of 1999. As a percentage of net sales, cost of goods sold represented approximately 77% and 84% for the three months ended March 31, 2000 and 1999, respectively, reflecting the increase in our average price per ton and in our constant focus on production efficiencies and cost savings. Selling, General and Administrative Expenses. Selling, general and administrative expenses were $13.9 million for the three months ended March 31, 2000, as compared to $8.1 million for the three months ended March 31, 1999, an increase of $5.8 million, or 72%. This increase was partially attributable to an increase in start-up costs related to our expansion projects. Start-up costs related to our structural mill project, NMBS project and IDI were $6.1 million for the three months ended March 31, 2000, as compared to $4.0 million for the three months ended March 31, 1999, an increase of $2.1 million, or 53%. As a result of significantly improved operating results during the first quarter of 2000 as compared to 1999, employee performance-based incentives also comprised approximately $2.4 million of the total selling, general and administrative expense increase. As a percentage of net sales, selling, general and administrative expenses represented approximately 7% for the three months ended March 31, 2000 and 1999. Interest Expense. Interest expense was $4.9 million for the three months ended March 31, 2000, as compared to $5.6 million for the three months ended March 31, 1999, a decrease of $700,000, or 13%. This decrease was the direct result of increased capitalized interest of $654,000, or 31%, offsetting interest costs which were substantially level when comparing the first three months of 2000 to the same period in 1999. Other Income. For the three months ended March 31, 2000, other income, primarily composed of interest income, was $183,000, as compared to $262,000 for the three months ended March 31, 1999, a decrease of $79,000, or 30%. Federal Income Taxes. Our federal income tax provision was $10.2 million for the three months ended March 31, 2000, as compared to $2.0 million for the same period in 1999. This tax provision reflects income tax expense at the statutory income tax rate. LIQUIDITY AND CAPITAL RESOURCES Our business is capital intensive and requires substantial expenditures for, among other things, the purchase and maintenance of equipment used in our steelmaking and finishing operations and to remain compliant with environmental laws. Our short-term and long-term liquidity needs arise primarily from capital expenditures, working capital requirements and principal and interest payments related to our outstanding indebtedness. We have met these liquidity requirements with cash provided by operations, equity, long-term borrowings, state and local grants and capital cost reimbursements. 7 10 For the three months ended March 31, 2000, cash provided by operating activities was $28.5 million, as compared to $33.1 million for the three months ended March 31, 1999, a decrease of $4.6 million. Increasing inventory and accounts receivable levels were the primarily drivers of this decrease. Cash used in investing activities was $30.5 million, as compared to $48.0 million for the three months ended March 31, 2000 and 1999, respectively. Substantially all of these funds were invested in our capital projects. Approximately 56% of our capital investment costs incurred during the first three months of 2000 were utilized in site preparation and other pre-construction activities for the structural mill. Cash provided by financing activities was $1.6 million for the three months ended March 31, 2000, as compared to $20.6 million for the same period in 1999. This decrease in funds provided was the direct result of our utilization of increased cash from operations in relation to our additional borrowings. We are in the process of amending our senior credit bank facility to provide us with the ability to borrow an additional $50.0 million in the form of an unsecured term loan facility. At least $25.0 million of these funds will be available to us to provide additional funding to IDI during its redesign efforts. We believe the liquidity of our existing cash and cash equivalents, cash from operating activities and our available credit facilities will provide sufficient funding for our working capital and capital expenditure requirements during 2000. However, we may, if we believe circumstances warrant, increase our liquidity through the issuance of additional equity or debt to finance growth or take advantage of other business opportunities. We have not paid dividends on our common stock. INFLATION We believe that inflation has not had a material effect on our results of operation. ENVIRONMENTAL AND OTHER CONTINGENCIES We have incurred, and in the future will continue to incur, capital expenditures and operating expenses for matters relating to environmental control, remediation, monitoring and compliance. We believe, apart from our dependence on environmental construction and operating permits for our existing and proposed manufacturing facilities, such as our planned structural and rail mill project in Whitley County, Indiana, that compliance with current environmental laws and regulations is not likely to have a material adverse effect on our financial condition, results of operations or liquidity; however, environmental laws and regulations have changed rapidly in recent years and we may become subject to more stringent environmental laws and regulations in the future. IMPACT OF YEAR 2000 We did not experience any material adverse issues or business interruptions arising from the date change to January 1, 2000. During 1999, we completed the process of preparing for Year 2000 issues. As a result of our efforts to date, we have not incurred any material costs and do not expect to incur any future material costs in addressing the Year 2000 issue related to either our products or our business and process control systems, operating equipment with embedded chips or software and third party interfaces. We have devoted and will continue to devote the resources necessary to ensure that all Year 2000 issues, if any should arise, are properly addressed. However, there can be no assurance that all Year 2000 issues have been detected. Although considered unlikely, unanticipated problems in our mission critical operating systems, including problems associated with non-compliant third parties and disruptions to our customers and suppliers could still occur despite efforts to date. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK MARKET RISK In the normal course of business our market risk is limited to changes in interest rates. We utilize long-term debt as a primary source of capital. A portion of our debt has an interest component that resets on a periodic basis to reflect current market conditions. We manage exposure to fluctuations in interest rates through the use of an interest rate swap. We agree to exchange, at specific intervals, the difference between fixed rate and floating rate interest amounts calculated on an agreed upon notional amount. This interest differential paid or received is recognized in the consolidated statements of income as a component of interest expense. At March 31, 2000, no material changes had occurred related to our interest rate risk from the information disclosed in the Annual Report of Steel Dynamics, Inc. and on form 10-K for the year ended December 31, 1999. 8 11 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We incorporate by reference to Part I, Item III of our 1999 Form 10-K Annual Report, filed with the Securities and Exchange Commission on March 29, 2000, the description of our pending litigation involving the nine related lawsuits, aggregating some $240 million in claims, brought against us and various investment banking firms, relating to a note offering in March 1998 by Nakornthai Strip Mill Public Company Ltd. ("NSM") and its investment bankers (the other co-defendants in the litigation). Discovery is proceeding in all of these cases. We also incorporate by reference the description of a pending lawsuit brought by our Iron Dynamics subsidiary, for declaratory relief against Taft Contracting Company, involving a $1 million commercial dispute over some work Taft was contracted to provide. This suit is also in the discovery stage. A third lawsuit referenced in our 1999 Form 10-K filing, involving another action for declaratory relief brought by our Iron Dynamics subsidiary against Dover Conveyor Company, and arising out of another construction dispute involving conveyor equipment purchased from Dover, has now been settled and dismissed. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits - *27.1 Financial Data Schedule (B) Reports on Form 8-K for the quarter ended March 31, 2000: None *Filed herewith Items 2 - 5 of Part II are not applicable for this reporting period and have been omitted. 9 12 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 3, 2000 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) 10 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 1 US DOLLARS 3-MOS MAR-31-2000 JAN-01-2000 MAR-31-2000 1 16,159,887 0 105,334,720 1,405,382 118,923,351 251,792,359 880,635,456 120,366,369 1,036,155,679 94,984,556 0 0 0 493,128 406,349,433 1,036,155,679 189,172,067 189,172,067 145,161,132 13,849,812 0 86,000 4,928,608 25,415,212 10,166,086 15,249,126 0 0 0 15,249,126 .32 .32
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