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 quarterly period ended March 31, 2013
OR
o 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 |
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35-1929476 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
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7575 West Jefferson Blvd, Fort Wayne, IN |
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46804 |
(Address of principal executive offices) |
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(Zip Code) |
Registrants telephone number, including area code: (260) 969-3500
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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (see definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act).
(Check one): |
Large accelerated filer x |
Accelerated filer o |
Non-accelerated filer o |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of April 30, 2013, Registrant had 220,400,174, outstanding shares of common stock.
STEEL DYNAMICS, INC.
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Page |
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PART I. Financial Information |
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Item 1. |
Financial Statements: |
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|
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Consolidated Balance Sheets as of March 31, 2013 (unaudited) and December 31, 2012 |
1 |
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2 | |
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3 | |
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4 | |
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
15 | |
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22 | ||
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|
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22 | ||
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| |
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23 | ||
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23 | ||
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23 | ||
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23 | ||
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23 | ||
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23 | ||
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24 | ||
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25 |
STEEL DYNAMICS, INC.
(in thousands, except share data)
|
|
March 31, |
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December 31, |
| ||
|
|
2013 |
|
2012 |
| ||
|
|
(unaudited) |
|
|
| ||
Assets |
|
|
|
|
| ||
Current assets |
|
|
|
|
| ||
Cash and equivalents |
|
$ |
477,861 |
|
$ |
375,917 |
|
Investments in short-term commercial paper |
|
|
|
31,520 |
| ||
Accounts receivable, net |
|
703,896 |
|
599,499 |
| ||
Accounts receivable-related parties |
|
49,405 |
|
42,864 |
| ||
Inventories |
|
1,170,159 |
|
1,202,507 |
| ||
Deferred income taxes |
|
23,564 |
|
23,449 |
| ||
Other current assets |
|
24,056 |
|
20,469 |
| ||
Total current assets |
|
2,448,941 |
|
2,296,225 |
| ||
|
|
|
|
|
| ||
Property, plant and equipment, net |
|
2,232,413 |
|
2,231,198 |
| ||
|
|
|
|
|
| ||
Restricted cash |
|
23,400 |
|
27,749 |
| ||
Intangible assets, net |
|
408,832 |
|
416,635 |
| ||
Goodwill |
|
736,912 |
|
738,542 |
| ||
Other assets |
|
106,076 |
|
105,067 |
| ||
Total assets |
|
$ |
5,956,574 |
|
$ |
5,815,416 |
|
|
|
|
|
|
| ||
Liabilities and Equity |
|
|
|
|
| ||
Current liabilities |
|
|
|
|
| ||
Accounts payable |
|
$ |
401,407 |
|
$ |
344,953 |
|
Accounts payable-related parties |
|
9,225 |
|
15,144 |
| ||
Income taxes payable |
|
13,438 |
|
16,941 |
| ||
Accrued payroll and benefits |
|
59,488 |
|
85,802 |
| ||
Accrued interest |
|
19,290 |
|
35,306 |
| ||
Accrued expenses |
|
80,257 |
|
81,900 |
| ||
Current maturities of long-term debt |
|
231,582 |
|
29,631 |
| ||
Total current liabilities |
|
814,687 |
|
609,677 |
| ||
|
|
|
|
|
| ||
Long-term debt |
|
|
|
|
| ||
Term note |
|
240,625 |
|
247,500 |
| ||
Senior notes |
|
1,500,000 |
|
1,600,000 |
| ||
Convertible senior notes |
|
287,496 |
|
287,496 |
| ||
Other long-term debt |
|
41,093 |
|
37,610 |
| ||
Total long-term debt |
|
2,069,214 |
|
2,172,606 |
| ||
|
|
|
|
|
| ||
Deferred income taxes |
|
546,722 |
|
537,304 |
| ||
Other liabilities |
|
19,947 |
|
19,173 |
| ||
Commitments and contingencies |
|
|
|
|
| ||
Redeemable noncontrolling interest |
|
99,414 |
|
98,814 |
| ||
|
|
|
|
|
| ||
Equity |
|
|
|
|
| ||
Common stock voting, $.0025 par value; 900,000,000 shares authorized; 256,333,083 and 255,592,901 shares issued; and 220,333,057 and 219,522,655 shares outstanding, as of March 31, 2013 and December 31, 2012, respectively |
|
639 |
|
637 |
| ||
Treasury stock, at cost; 36,000,026 and 36,070,246 shares, as of March 31, 2013 and December 31, 2012, respectively |
|
(719,076 |
) |
(720,479 |
) | ||
Additional paid-in capital |
|
1,045,973 |
|
1,037,687 |
| ||
Retained earnings |
|
2,111,597 |
|
2,087,620 |
| ||
Total Steel Dynamics, Inc. equity |
|
2,439,133 |
|
2,405,465 |
| ||
Noncontrolling interests |
|
(32,543 |
) |
(27,623 |
) | ||
Total equity |
|
2,406,590 |
|
2,377,842 |
| ||
Total liabilities and equity |
|
$ |
5,956,574 |
|
$ |
5,815,416 |
|
See notes to consolidated financial statements.
STEEL DYNAMICS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)
|
|
Three Months Ended |
| ||||
|
|
March 31, |
| ||||
|
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Net sales |
|
|
|
|
| ||
Unrelated parties |
|
$ |
1,728,401 |
|
$ |
1,905,075 |
|
Related parties |
|
67,295 |
|
76,965 |
| ||
Total net sales |
|
1,795,696 |
|
1,982,040 |
| ||
|
|
|
|
|
| ||
Costs of goods sold |
|
1,619,432 |
|
1,780,776 |
| ||
Gross profit |
|
176,264 |
|
201,264 |
| ||
|
|
|
|
|
| ||
Selling, general and administrative expenses |
|
65,262 |
|
64,384 |
| ||
Profit sharing |
|
6,643 |
|
8,072 |
| ||
Amortization of intangible assets |
|
8,127 |
|
8,992 |
| ||
Total selling, general and administrative expenses |
|
80,032 |
|
81,448 |
| ||
|
|
|
|
|
| ||
Operating income |
|
96,232 |
|
119,816 |
| ||
|
|
|
|
|
| ||
Interest expense, net of capitalized interest |
|
34,629 |
|
41,112 |
| ||
Other expense (income), net |
|
(1,046 |
) |
10,248 |
| ||
Income before income taxes |
|
62,649 |
|
68,456 |
| ||
|
|
|
|
|
| ||
Income taxes |
|
21,397 |
|
26,679 |
| ||
|
|
|
|
|
| ||
Net income |
|
41,252 |
|
41,777 |
| ||
|
|
|
|
|
| ||
Net loss attributable to noncontrolling interests |
|
6,963 |
|
3,898 |
| ||
|
|
|
|
|
| ||
Net income attributable to Steel Dynamics, Inc. |
|
$ |
48,215 |
|
$ |
45,675 |
|
|
|
|
|
|
| ||
Basic earnings per share attributable to Steel Dynamics, Inc. stockholders |
|
$ |
.22 |
|
$ |
.21 |
|
|
|
|
|
|
| ||
Weighted average common shares outstanding |
|
219,995 |
|
218,996 |
| ||
|
|
|
|
|
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Diluted earnings per share attributable to Steel Dynamics, Inc. stockholders, including the effect of assumed conversions when dilutive |
|
$ |
.21 |
|
$ |
.20 |
|
|
|
|
|
|
| ||
Weighted average common shares and share equivalents outstanding |
|
238,087 |
|
236,526 |
| ||
|
|
|
|
|
| ||
Dividends declared per share |
|
$ |
.11 |
|
$ |
.10 |
|
See notes to consolidated financial statements.
STEEL DYNAMICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
|
|
Three Months Ended |
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|
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March 31, |
| ||||
|
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Operating activities: |
|
|
|
|
| ||
Net income |
|
$ |
41,252 |
|
$ |
41,777 |
|
|
|
|
|
|
| ||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
Depreciation and amortization |
|
57,061 |
|
55,572 |
| ||
Equity-based compensation |
|
4,753 |
|
6,123 |
| ||
Deferred income taxes |
|
10,935 |
|
9,197 |
| ||
Gain on disposal of property, plant and equipment |
|
(1,383 |
) |
(739 |
) | ||
Changes in certain assets and liabilities: |
|
|
|
|
| ||
Accounts receivable |
|
(110,938 |
) |
(60,820 |
) | ||
Inventories |
|
32,348 |
|
(55,090 |
) | ||
Other assets |
|
3,358 |
|
2,963 |
| ||
Accounts payable |
|
38,988 |
|
34,902 |
| ||
Income taxes receivable/payable |
|
(3,022 |
) |
17,392 |
| ||
Accrued expenses and liabilities |
|
(43,642 |
) |
(29,856 |
) | ||
Net cash provided by operating activities |
|
29,710 |
|
21,421 |
| ||
|
|
|
|
|
| ||
Investing activities: |
|
|
|
|
| ||
Purchases of property, plant and equipment |
|
(45,346 |
) |
(45,555 |
) | ||
Other investing activities |
|
33,934 |
|
(1,864 |
) | ||
Net cash used in investing activities |
|
(11,412 |
) |
(47,419 |
) | ||
|
|
|
|
|
| ||
Financing activities: |
|
|
|
|
| ||
Issuance of current and long-term debt |
|
409,261 |
|
289,969 |
| ||
Repayment of current and long-term debt |
|
(305,691 |
) |
(283,448 |
) | ||
Debt issuance costs |
|
(5,997 |
) |
(2,191 |
) | ||
Proceeds from exercise of stock options, including related tax effect |
|
7,614 |
|
1,097 |
| ||
Contributions from noncontrolling investors, net |
|
411 |
|
9,506 |
| ||
Dividends paid |
|
(21,952 |
) |
(21,887 |
) | ||
Net cash provided by (used in) financing activities |
|
83,646 |
|
(6,954 |
) | ||
|
|
|
|
|
| ||
Increase (decrease) in cash and equivalents |
|
101,944 |
|
(32,952 |
) | ||
Cash and equivalents at beginning of period |
|
375,917 |
|
390,761 |
| ||
|
|
|
|
|
| ||
Cash and equivalents at end of period |
|
$ |
477,861 |
|
$ |
357,809 |
|
|
|
|
|
|
| ||
Supplemental disclosure information: |
|
|
|
|
| ||
Cash paid for interest |
|
$ |
49,732 |
|
$ |
18,753 |
|
Cash paid (received) for federal and state income taxes, net |
|
$ |
11,165 |
|
$ |
(955 |
) |
See notes to consolidated financial statements.
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Description of the Business and Significant Accounting Policies
Description of the Business
Steel Dynamics, Inc. (SDI), together with its subsidiaries (the company), is a domestic manufacturer of steel products and metals recycler. The company has three reporting segments: steel operations, metals recycling and ferrous resources operations, and steel fabrication operations.
Steel Operations. Steel operations include the companys Flat Roll Division, Structural and Rail Division, Engineered Bar Products Division, Roanoke Bar Division, Steel of West Virginia (SWVA) and The Techs operations. These operations consist of mini-mills, producing steel from steel scrap, using electric arc furnaces, continuous casting, automated rolling mills, and downstream finishing facilities. The companys steel operations sell directly to end users and service centers. These products are used in numerous industry sectors, including the automotive, construction, commercial, transportation and industrial machinery markets. Steel operations accounted for approximately 59% and 60% of the companys external net sales during the three-month periods ended March 31, 2013 and 2012, respectively.
Metals Recycling and Ferrous Resources Operations. Metals recycling and ferrous resources operations include OmniSource Corporation (OmniSource), the companys metals recycling, steel scrap procurement, and processing locations, and our two ironmaking initiatives: Iron Dynamics (IDI), a liquid pig iron production facility; and our Minnesota iron operations, an iron nugget production facility and operations to supply the nugget facility with its primary raw material, iron concentrate. Metals recycling and ferrous resources operations accounted for approximately 35% of the companys external net sales during each of the three-month periods ended March 31, 2013 and 2012, respectively.
Steel Fabrication Operations. Steel fabrication operations include the companys New Millennium Building Systems plants located throughout the United States and Northern Mexico. Revenues from these plants are generated from the fabrication of trusses, girders, steel joists and steel decking used within the non-residential construction industry. Steel fabrication operations accounted for approximately 5% and 4% of the companys external net sales during the three-month periods ended March 31, 2013 and 2012, respectively.
Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include the accounts of SDI, together with its wholly and majority-owned or controlled subsidiaries, after elimination of significant intercompany accounts and transactions. Noncontrolling interests represent the noncontrolling owners proportionate share in the equity, income, or losses of the companys majority-owned or controlled consolidated subsidiaries.
Use of Estimates. These 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 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; income taxes; unrecognized income 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 financial statements and notes should be read in conjunction with the audited financial statements and notes thereto included in the companys Annual Report on Form 10-K for the year ended December 31, 2012.
Goodwill. The companys goodwill is allocated to the following reporting units at March 31, 2013, and December 31, 2012, (in thousands):
|
|
March 31, |
|
December 31, |
| ||
OmniSource Metals Recycling/Ferrous Resources Segment |
|
$ |
563,163 |
|
$ |
564,793 |
|
The Techs Steel Segment |
|
142,783 |
|
142,783 |
| ||
Roanoke Bar Division Steel Segment |
|
29,041 |
|
29,041 |
| ||
New Millennium Building Systems Fabrication Segment |
|
1,925 |
|
1,925 |
| ||
|
|
$ |
736,912 |
|
$ |
738,542 |
|
OmniSource goodwill decreased $1.6 million from December 31, 2012 to March 31, 2013, in recognition of the 2013 tax benefit related to the amortization of the component of OmniSource tax-deductible goodwill in excess of book goodwill.
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 2. 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 companys basic earnings per share. Common share equivalents represent potentially dilutive stock options, restricted and deferred stock units, restricted shares, and dilutive shares related to the companys 5.125% convertible senior notes. Common share equivalents are excluded from the computation in periods in which they have an anti-dilutive effect. Options to purchase 3.0 million and 3.9 million shares were anti-dilutive at March 31, 2013 and 2012, respectively.
The following table presents a reconciliation of the numerators and the denominators of the companys basic and diluted earnings per share computations for net income attributable to Steel Dynamics, Inc. (in thousands, except per share data):
|
|
Three Months Ended March 31, |
| ||||||||||||||
|
|
2013 |
|
2012 |
| ||||||||||||
|
|
Net Income |
|
Shares |
|
Per Share |
|
Net Income |
|
Shares |
|
Per Share |
| ||||
Basic earnings per share |
|
$ |
48,215 |
|
219,995 |
|
$ |
0.22 |
|
$ |
45,675 |
|
218,996 |
|
$ |
0.21 |
|
Dilutive common share equivalents |
|
|
|
1,460 |
|
|
|
|
|
1,148 |
|
|
| ||||
5.125% convertible senior notes, net of tax |
|
2,358 |
|
16,632 |
|
|
|
2,358 |
|
16,382 |
|
|
| ||||
Diluted earnings per share |
|
$ |
50,573 |
|
238,087 |
|
$ |
0.21 |
|
$ |
48,033 |
|
236,526 |
|
$ |
0.20 |
|
Note 3. Inventories
Inventories are stated at lower of cost or market. Cost is determined using a weighted average method for scrap, and a first-in, first-out basis for all other inventory. Inventories consisted of the following (in thousands):
|
|
March 31, |
|
December 31, |
| ||
|
|
2013 |
|
2012 |
| ||
Raw materials |
|
$ |
526,280 |
|
$ |
594,388 |
|
Supplies |
|
277,400 |
|
278,494 |
| ||
Work in progress |
|
113,542 |
|
82,934 |
| ||
Finished goods |
|
252,937 |
|
246,691 |
| ||
Total inventories |
|
$ |
1,170,159 |
|
$ |
1,202,507 |
|
Note 4. Debt
On March 25, 2013, the company issued $400.0 million of 51/4% Senior Notes due 2023 (2023 Notes). Interest on the 2023 Notes is due semiannually on April 15 and October 15, with the first payment due on October 15, 2013. The 2023 Notes are redeemable at any time after April 15, 2018. The redemption price (expressed as a percentage of principal amount) is 102.625% during the period April 15, 2018 to April 14, 2019; 101.750% during the period April 15, 2019 to April 14, 2020; 100.875% during the period April 15, 2020 to April 14, 2021; and 100% on and after April 15, 2021, plus accrued interest to the redemption date. In addition, at any time before April 15, 2016, the company may redeem up to 35% of the principal amount of the 2023 Notes with the net cash proceeds from one or more sales of the companys common stock at a redemption price (expressed as a percentage of principal amount) of 105.250%, plus accrued interest to the redemption date. The 2023 Notes are unsecured and rank pari passu with all existing and future senior unsubordinated unsecured indebtedness and senior in right of payment to all subordinated indebtedness.
A portion of the proceeds from the issuance of the 2023 Notes was used to fund the March 25, 2013 purchase of $301.7 million (plus accrued interest) of the companys 63/4% Senior Notes due 2015 (2015 Notes) pursuant to a tender offer. As a result of the tender offer to purchase the 2015 Notes, the company recorded expenses of $2.0 million related to tender premiums, unamortized debt issuance costs write-off, and tender expenses, which is reflected in other expenses in the consolidated statement of income for the three months ended March 31, 2013. On April 9, 2013, the company used the remaining proceeds from the issuance of the 2023 Notes, along with available cash, to repay the remaining outstanding 2015 Notes due at a price of 100% of the principal amount of $198.3 million (plus accrued interest).
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 5. Changes in Equity
The following table provides 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 the noncontrolling interests (in thousands):
|
|
Stockholders of Steel Dynamics, Inc. |
|
|
|
|
|
|
| |||||||||||||
|
|
Common |
|
Additional |
|
Retained |
|
Treasury |
|
Noncontrolling |
|
Total |
|
Redeemable |
| |||||||
|
|
Stock |
|
Capital |
|
Earnings |
|
Stock |
|
Interests |
|
Equity |
|
Interests |
| |||||||
Balances at January 1, 2013 |
|
$ |
637 |
|
$ |
1,037,687 |
|
$ |
2,087,620 |
|
$ |
(720,479 |
) |
$ |
(27,623 |
) |
$ |
2,377,842 |
|
$ |
98,814 |
|
Proceeds from the exercise of stock options, including related tax effect |
|
2 |
|
7,612 |
|
|
|
|
|
|
|
7,614 |
|
|
| |||||||
Dividends declared |
|
|
|
|
|
(24,238 |
) |
|
|
|
|
(24,238 |
) |
|
| |||||||
Equity-based compensation and issuance of restricted stock |
|
|
|
2,906 |
|
|
|
1,403 |
|
|
|
4,309 |
|
|
| |||||||
Acquisition of noncontrolling interest |
|
|
|
(2,232 |
) |
|
|
|
|
2,232 |
|
|
|
|
| |||||||
Contributions from noncontrolling investors |
|
|
|
|
|
|
|
|
|
112 |
|
112 |
|
600 |
| |||||||
Distributions to noncontrolling investors |
|
|
|
|
|
|
|
|
|
(301 |
) |
(301 |
) |
|
| |||||||
Net income (loss) |
|
|
|
|
|
48,215 |
|
|
|
(6,963 |
) |
41,252 |
|
|
| |||||||
Balances at March 31, 2013 |
|
$ |
639 |
|
$ |
1,045,973 |
|
$ |
2,111,597 |
|
$ |
(719,076 |
) |
$ |
(32,543 |
) |
$ |
2,406,590 |
|
$ |
99,414 |
|
Note 6. Derivative Financial Instruments
The company is exposed to certain risks relating to its ongoing business operations. The company utilizes derivative instruments to mitigate interest rate risk, foreign currency exchange rate risk, and commodity margin risk. Interest rate swaps may be entered into to manage interest rate risk associated with the companys fixed and floating-rate borrowings. Forward exchange contracts on various foreign currencies may be entered into to manage foreign currency exchange rate risk as necessary. No interest rate swaps or significant forward exchange contracts on foreign currency existed for the periods presented. 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 metals (specifically aluminum, copper, nickel and silver). The company offsets fair value amounts recognized for derivative instruments executed with the same counterparty under master netting agreements. The company began to designate certain of its nonferrous metals, forward exchange futures contracts as fair value hedges of inventory and firm sales commitments in January 2013.
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 futures contracts, it means the company has more futures contracts sold than futures contracts purchased for the underlying commodity. The following summarizes the companys futures contract commitments as of March 31, 2013 (MT represents metric tons and Lbs represents pounds):
Commodity Futures |
|
Long/Short |
|
Total |
|
|
|
Aluminum |
|
Long |
|
2,950 |
|
MT |
|
Aluminum |
|
Short |
|
3,050 |
|
MT |
|
Copper |
|
Long |
|
2,813 |
|
MT |
|
Copper |
|
Short |
|
11,884 |
|
MT |
|
Nickel |
|
Short |
|
78 |
|
MT |
|
Silver |
|
Short |
|
686 |
|
Lbs |
|
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 6. Derivative Financial Instruments (Continued)
The following summarizes the location and amounts of the fair values and gains or losses related to derivatives included in the companys financial statements as of March 31, 2013, and December 31, 2012, and for the three-month periods ended March 31, 2013 and 2012 (in thousands):
|
|
Asset Derivatives |
|
Liability Derivatives |
| ||||||||||
|
|
|
|
Fair Value |
|
Fair Value |
| ||||||||
|
|
Balance sheet location |
|
March 31, |
|
December 31, |
|
March 31, |
|
December 31, |
| ||||
Derivative instruments designated as fair value hedges - |
|
|
|
|
|
|
|
|
|
|
| ||||
Commodity futures |
|
Other current assets |
|
$ |
3,417 |
|
|
|
$ |
(521 |
) |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative instruments not designated as hedges - |
|
|
|
|
|
|
|
|
|
|
| ||||
Commodity futures |
|
Other current assets |
|
$ |
2,296 |
|
$ |
4,024 |
|
$ |
(327 |
) |
$ |
(1,854 |
) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total derivative instruments |
|
|
|
$ |
5,713 |
|
$ |
4,024 |
|
$ |
(848 |
) |
$ |
(1,854 |
) |
|
|
Location of gain |
|
Amount of gain (loss) |
|
Hedged items |
|
Location of gain (loss) |
|
Amount of gain (loss) |
| |||||||
|
|
(loss) recognized in |
|
March 31, |
|
March 31, |
|
in fair value hedge |
|
recognized in income on |
|
March 31, |
|
March 31, |
| |||
Derivatives in fair value hedging relationships - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Commodity futures |
|
Cost of goods sold |
|
$ |
5,684 |
|
|
|
Firm commitments |
|
Cost of goods sold |
|
$ |
1,316 |
|
|
| |
|
|
|
|
|
|
|
|
Inventory |
|
Cost of goods sold |
|
(6,779 |
) |
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(5,463 |
) |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Derivatives not designated as hedging instruments - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Commodity futures |
|
Cost of goods sold |
|
$ |
2,401 |
|
$ |
(3,618 |
) |
|
|
|
|
|
|
|
| |
Derivatives accounted for as fair value hedges had ineffectiveness resulting in a gain of $221,000, and a gain excluded from hedge effectiveness testing of $2.3 million, that reduced cost of goods sold during the three month period ended March 31, 2013.
Note 7. Fair Value Measurements
FASB accounting standards provide a comprehensive framework for measuring fair value and set forth a definition of fair value and establish a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. Levels within the hierarchy are defined as follows:
· Level 1Unadjusted quoted prices for identical assets and liabilities in active markets;
· Level 2Quoted prices for similar assets and liabilities in active markets (other than those included in Level 1) which are observable for the asset or liability, either directly or indirectly; and
· Level 3Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 7. Fair Value Measurements (Continued)
The following table sets forth financial assets and liabilities measured at fair value in the consolidated balance sheets and the respective levels to which the fair value measurements are classified within the fair value hierarchy as of March 31, 2013, and December 31, 2012 (in thousands):
|
|
Total |
|
Quoted Prices in |
|
Significant |
|
Significant |
| ||||
March 31, 2013 |
|
|
|
|
|
|
|
|
| ||||
Commodity futures financial assets |
|
$ |
5,713 |
|
|
|
$ |
5,713 |
|
$ |
|
| |
Commodity futures financial liabilities |
|
848 |
|
|
|
848 |
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2012 |
|
|
|
|
|
|
|
|
| ||||
Investments in short-term commercial paper |
|
$ |
31,520 |
|
$ |
|
|
$ |
31,520 |
|
$ |
|
|
Commodity futures financial assets |
|
4,024 |
|
|
|
4,024 |
|
|
| ||||
Commodity futures financial liabilities |
|
1,854 |
|
|
|
1,854 |
|
|
| ||||
The carrying amounts of financial instruments including cash and equivalents approximate fair value. The fair values of short-term commercial paper and commodity futures and options contracts are estimated by the use of quoted market prices, estimates obtained from brokers, and other appropriate valuation techniques based on references available. The fair value of long-term debt, including current maturities, as determined by quoted market prices (Level 2), was approximately $2.4 billion and $2.3 billion (with a corresponding carrying amount in the consolidated balance sheets of $2.3 billion and $2.2 billion) at March 31, 2013 and December 31, 2012, respectively.
Note 8. 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.
The company is involved, along with eight other steel manufacturing companies, in a class action antitrust complaint filed in federal court in Chicago, Illinois in September 2008, which alleges a conspiracy to fix, raise, maintain and stabilize the price at which steel products were sold in the United States starting in 2005, by artificially restricting the supply of such steel products. All but one of the Complaints were brought on behalf of a purported class consisting of all direct purchasers of steel products between January 1, 2005, and the present. The other Complaint was brought on behalf of a purported class consisting of all indirect purchasers of steel products within the same time period. In addition, in December 2010, we and the other co-defendants were served with a substantially similar complaint in the Circuit Court of Cocke County, Tennessee, purporting to be on behalf of indirect purchasers of steel products in Tennessee. That case has been removed to the federal court in Chicago that is hearing the main complaint. All Complaints seek treble damages and costs, including reasonable attorney fees, pre- and post-judgment interest and injunctive relief. In January 2009, Steel Dynamics and the other defendants filed a Joint Motion to Dismiss all of the direct purchaser lawsuits, but this motion was denied in June 2009. Following a period of preliminary discovery relating to class certification matters, Plaintiffs filed their Motion for Class Certification in May 2012, and on February 28, 2013, Defendants filed their Joint Memorandum in Opposition to Plaintiffs Motion for Class Certification, together with joint motions to exclude the expert opinions of both of Plaintiffs two retained experts. Additional briefing is anticipated on all issues related to the pending motions. Due to the uncertain nature of litigation, we cannot presently determine the ultimate outcome of this litigation. However, we have determined, based on the information available at this time, that there is not presently a reasonable possibility (as that term is defined in ASC 450-20-20), that the outcome of these legal proceedings would have a material impact on our financial condition, results of operations, or liquidity.
Although not presently necessary or appropriate to make a dollar estimate of exposure to loss, if any, in connection with the above matter, we may in the future determine that a loss accrual is necessary. Although we may make loss accruals, if and as warranted, any amounts that we may accrue from time to time could vary significantly from the amounts we actually pay, due to inherent uncertainties and the inherent shortcomings of the estimation process, the uncertainties involved in litigation and other factors. Additionally, an adverse result could have a material effect on our financial condition, results of operations and liquidity.
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 9. Segment Information
The company has three reportable segments: steel operations, metals recycling and ferrous resources operations, and steel fabrication operations. These operations are described in Note 1 to the financial statements. Revenues included in the category Other are from subsidiary operations that are below the quantitative thresholds required for reportable segments and primarily consist of further processing, slitting, and sale of certain steel products and the resale of certain secondary and excess steel products. In addition, Other also includes certain unallocated corporate accounts, such as the companys senior secured credit facilities, senior notes and convertible senior notes, certain other investments, and certain profit sharing expenses.
The companys operations are primarily organized and managed by operating segment. 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 financial statements. Intra-segment and intra-company sales and any related profits are eliminated in consolidation. Refer to the companys Annual Report on Form 10-K for the year ended December 31, 2012, for more information related to the companys segment reporting. The companys segment results for the three-month periods ended March 31, 2013 and 2012 are as follows (in thousands):
For the three months ended |
|
|
|
Metals Recycling / |
|
Steel Fabrication |
|
|
|
|
|
|
| |||||
March 31, 2013 |
|
Steel Operations |
|
Ferrous Resources |
|
Operations |
|
Other |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
External |
|
$ |
1,011,195 |
|
$ |
557,611 |
|
$ |
93,797 |
|
$ |
19,371 |
|
|
|
$ |
1,681,974 |
|
External Non-U.S. |
|
50,117 |
|
63,517 |
|
|
|
88 |
|
|
|
113,722 |
| |||||
Other segments |
|
61,048 |
|
276,364 |
|
578 |
|
5,395 |
|
(343,385 |
) |
|
| |||||
|
|
1,122,360 |
|
897,492 |
|
94,375 |
|
24,854 |
|
(343,385 |
) |
1,795,696 |
| |||||
Operating income (loss) |
|
119,301 |
|
(9,824 |
) |
1,530 |
|
(16,439 |
)(1) |
1,664 |
(2) |
96,232 |
| |||||
Income (loss) before income taxes |
|
105,007 |
|
(17,854 |
) |
(76 |
) |
(26,092 |
) |
1,664 |
|
62,649 |
| |||||
Depreciation and amortization |
|
26,387 |
|
27,136 |
|
2,057 |
|
1,532 |
|
(51 |
) |
57,061 |
| |||||
Capital expenditures |
|
24,726 |
|
19,069 |
|
881 |
|
670 |
|
|
|
45,346 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
As of March 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Assets |
|
2,566,642 |
|
2,529,951 |
|
254,176 |
|
822,064 |
(3) |
(216,259 |
)(4) |
5,956,574 |
| |||||
Liabilities |
|
557,404 |
|
526,457 |
|
15,646 |
|
2,556,590 |
(5) |
(205,527 |
)(6) |
3,450,570 |
| |||||
Footnotes related to the three months ended March 31, 2013 segment results (in millions):
(1) Corporate SG&A |
|
$ |
(8.0 |
) |
(2) Gross profit increase from intra-company sales |
|
$ |
1.7 |
|
Company-wide equity-based compensation |
|
(3.2 |
) |
|
|
|
| ||
Profit sharing |
|
(5.9 |
) |
|
|
|
| ||
Other, net |
|
0.7 |
|
|
|
|
| ||
Total |
|
$ |
(16.4 |
) |
|
|
|
| |
|
|
|
|
|
|
|
| ||
(3) Cash and equivalents |
|
$ |
445.8 |
|
(4) Elimination of intra-company receivables |
|
$ |
(49.4 |
) |
Deferred income taxes |
|
23.5 |
|
Elimination of intra-company debt |
|
(156.0 |
) | ||
Property, plant and equipment, net |
|
74.8 |
|
Other |
|
(10.9 |
) | ||
Debt issuance costs, net |
|
31.3 |
|
Total |
|
$ |
(216.3 |
) | |
Intra-company debt |
|
156.0 |
|
|
|
|
| ||
Other |
|
90.7 |
|
|
|
|
| ||
Total |
|
$ |
822.1 |
|
|
|
|
| |
|
|
|
|
|
|
|
| ||
(5) Accounts payable |
|
$ |
38.8 |
|
(6) Elimination of intra-company payables |
|
$ |
(49.7 |
) |
Income taxes payable |
|
13.4 |
|
Elimination of intra-company debt |
|
(156.0 |
) | ||
Accrued interest |
|
19.1 |
|
Other |
|
0.2 |
| ||
Debt |
|
2,247.1 |
|
Total |
|
$ |
(205.5 |
) | |
Deferred income taxes |
|
213.8 |
|
|
|
|
| ||
Other |
|
24.4 |
|
|
|
|
| ||
Total |
|
$ |
2,556.6 |
|
|
|
|
|
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 9. Segment Information (Continued)
For the three months ended |
|
Steel Operations |
|
Metals Recycling / |
|
Steel Fabrication |
|
Other |
|
Eliminations |
|
Consolidated |
| ||||||
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
External |
|
$ |
1,135,912 |
|
$ |
634,134 |
|
$ |
74,892 |
|
$ |
20,732 |
|
$ |
|
|
$ |
1,865,670 |
|
External Non-U.S. |
|
50,808 |
|
65,466 |
|
|
|
96 |
|
|
|
116,370 |
| ||||||
Other segments |
|
47,759 |
|
411,520 |
|
4 |
|
3,262 |
|
(462,545 |
) |
|
| ||||||
|
|
1,234,479 |
|
1,111,120 |
|
74,896 |
|
24,090 |
|
(462,545 |
) |
1,982,040 |
| ||||||
Operating income (loss) |
|
137,308 |
|
4,163 |
|
(2,668 |
) |
(16,862 |
)(1) |
(2,125 |
)(2) |
119,816 |
| ||||||
Income (loss) before income taxes |
|
119,078 |
|
(4,273 |
) |
(4,184 |
) |
(40,040 |
) |
(2,125 |
) |
68,456 |
| ||||||
Depreciation and amortization |
|
26,084 |
|
26,074 |
|
1,848 |
|
1,617 |
|
(51 |
) |
55,572 |
| ||||||
Capital expenditures |
|
5,948 |
|
37,906 |
|
1,168 |
|
533 |
|
|
|
45,555 |
| ||||||
As of March 31, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Assets |
|
2,677,623 |
|
2,610,476 |
|
231,284 |
|
712,673 |
(3) |
(188,429 |
)(4) |
6,043,627 |
| ||||||
Liabilities |
|
494,177 |
|
574,598 |
|
14,542 |
|
2,732,432 |
(5) |
(178,607 |
)(6) |
3,637,142 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Footnotes related to the three months ended March 31, 2012 segment results (in millions):
(1) Corporate SG&A |
|
$ |
(7.6 |
) |
(2) Gross profit reduction from intra-company sales |
|
$ |
(2.1 |
) |
Company-wide equity-based compensation\ |
|
(3.7 |
) |
|
|
|
| ||
Profit sharing |
|
(6.5 |
) |
|
|
|
| ||
Other, net |
|
0.9 |
|
|
|
|
| ||
|
|
$ |
(16.9 |
) |
|
|
|
| |
(3) Cash and equivalents |
|
$ |
278.2 |
|
(4) Elimination of intra-company receivables |
|
$ |
(27.9 |
) |
Investments in short-term commercial paper |
|
65.0 |
|
Elimination of intra-company debt |
|
(149.6 |
) | ||
Deferred income taxes |
|
26.1 |
|
Other |
|
(10.9 |
) | ||
Property, plant and equipment, net |
|
84.6 |
|
|
|
$ |
(188.4 |
) | |
Debt issuance costs, net |
|
24.0 |
|
|
|
|
| ||
Intra-company debt |
|
149.6 |
|
|
|
|
| ||
Other |
|
85.2 |
|
|
|
|
| ||
|
|
$ |
712.7 |
|
|
|
|
| |
(5) Accounts payable |
|
$ |
29.2 |
|
(6) Elimination of intra-company payables |
|
$ |
(27.9 |
) |
Income taxes payable |
|
14.6 |
|
Elimination of intra-company debt |
|
(149.6 |
) | ||
Accrued interest |
|
54.5 |
|
Other |
|
(1.1 |
) | ||
Debt |
|
2,333.6 |
|
|
|
$ |
(178.6 |
) | |
Deferred income taxes |
|
213.1 |
|
|
|
|
| ||
Other |
|
87.4 |
|
|
|
|
| ||
|
|
$ |
2,732.4 |
|
|
|
|
|
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 10. Condensed Consolidating Information
Certain 100%-owned subsidiaries of SDI have fully and unconditionally guaranteed all of the indebtedness relating to the issuance of the companys senior notes due 2014, 2015, 2019, 2020, 2022 and 2023. Following are the companys condensed consolidating financial statements, including the guarantors, which present the financial position, results of operations and cash flows of (i) SDI (in each case, reflecting investments in its consolidated subsidiaries under the equity method of accounting), (ii) the guarantor subsidiaries of SDI, (iii) the non-guarantor subsidiaries of SDI, and (iv) the eliminations necessary to arrive at the information on a consolidated basis. The following statements should be read in conjunction with the accompanying consolidated financial statements and the companys Annual Report on Form 10-K for the year ended December 31, 2012.
Condensed Consolidating Balance Sheets (in thousands)
|
|
|
|
|
|
Combined |
|
Consolidating |
|
Total |
| |||||
As of March 31, 2013 |
|
Parent |
|
Guarantors |
|
Non-Guarantors |
|
Adjustments |
|
Consolidated |
| |||||
Cash and equivalents |
|
$ |
441,989 |
|
$ |
22,546 |
|
$ |
13,326 |
|
$ |
|
|
$ |
477,861 |
|
Investments in short-term commercial paper |
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts receivable, net |
|
290,332 |
|
874,233 |
|
25,813 |
|
(437,077 |
) |
753,301 |
| |||||
Inventories |
|
604,370 |
|
482,512 |
|
88,668 |
|
(5,391 |
) |
1,170,159 |
| |||||
Other current assets |
|
51,597 |
|
8,443 |
|
6,298 |
|
(18,718 |
) |
47,620 |
| |||||
Total current assets |
|
1,388,288 |
|
1,387,734 |
|
134,105 |
|
(461,186 |
) |
2,448,941 |
| |||||
Property, plant and equiment, net |
|
1,018,938 |
|
657,918 |
|
558,130 |
|
(2,573 |
) |
2,232,413 |
| |||||
Intangible assets, net |
|
|
|
408,832 |
|
|
|
|
|
408,832 |
| |||||
Goodwill |
|
|
|
736,912 |
|
|
|
|
|
736,912 |
| |||||
Other assets, including investments in subs |
|
2,745,488 |
|
25,784 |
|
8,724 |
|
(2,650,520 |
) |
129,476 |
| |||||
Total assets |
|
$ |
5,152,714 |
|
$ |
3,217,180 |
|
$ |
700,959 |
|
$ |
(3,114,279 |
) |
$ |
5,956,574 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable |
|
$ |
186,419 |
|
$ |
232,442 |
|
$ |
63,767 |
|
$ |
(71,996 |
) |
$ |
410,632 |
|
Accrued expenses |
|
104,882 |
|
91,586 |
|
10,179 |
|
(34,174 |
) |
172,473 |
| |||||
Current maturities of long-term debt |
|
215,991 |
|
300 |
|
41,517 |
|
(26,226 |
) |
231,582 |
| |||||
Total current liabilities |
|
507,292 |
|
324,328 |
|
115,463 |
|
(132,396 |
) |
814,687 |
| |||||
Long-term debt |
|
2,033,955 |
|
|
|
198,695 |
|
(163,436 |
) |
2,069,214 |
| |||||
Other liabilities |
|
172,334 |
|
2,067,830 |
|
49,376 |
|
(1,722,871 |
) |
566,669 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Redeemable noncontrolling interest |
|
|
|
|
|
99,414 |
|
|
|
99,414 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Common stock |
|
639 |
|
33,896 |
|
18,121 |
|
(52,017 |
) |
639 |
| |||||
Treasury stock |
|
(719,076 |
) |
|
|
|
|
|
|
(719,076 |
) | |||||
Additional paid-in-capital |
|
1,045,973 |
|
117,737 |
|
479,648 |
|
(597,385 |
) |
1,045,973 |
| |||||
Retained earnings (deficit) |
|
2,111,597 |
|
673,389 |
|
(227,215 |
) |
(446,174 |
) |
2,111,597 |
| |||||
Total Steel Dynamics, Inc. equity |
|
2,439,133 |
|
825,022 |
|
270,554 |
|
(1,095,576 |
) |
2,439,133 |
| |||||
Noncontrolling interests |
|
|
|
|
|
(32,543 |
) |
|
|
(32,543 |
) | |||||
Total equity |
|
2,439,133 |
|
825,022 |
|
238,011 |
|
(1,095,576 |
) |
2,406,590 |
| |||||
Total liabilities and equity |
|
$ |
5,152,714 |
|
$ |
3,217,180 |
|
$ |
700,959 |
|
$ |
(3,114,279 |
) |
$ |
5,956,574 |
|
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 10. Condensed Consolidating Information (Continued)
|
|
|
|
|
|
Combined |
|
Consolidating |
|
Total |
| |||||
As of December 31, 2012 |
|
Parent |
|
Guarantors |
|
Non-Guarantors |
|
Adjustments |
|
Consolidated |
| |||||
Cash and equivalents |
|
$ |
322,707 |
|
$ |
41,675 |
|
$ |
11,535 |
|
$ |
|
|
$ |
375,917 |
|
Investments in short-term commercial paper |
|
31,520 |
|
|
|
|
|
|
|
31,520 |
| |||||
Accounts receivable, net |
|
277,428 |
|
772,868 |
|
11,293 |
|
(419,226 |
) |
642,363 |
| |||||
Inventories |
|
564,882 |
|
536,331 |
|
107,422 |
|
(6,128 |
) |
1,202,507 |
| |||||
Other current assets |
|
51,268 |
|
7,253 |
|
4,006 |
|
(18,609 |
) |
43,918 |
| |||||
Total current assets |
|
1,247,805 |
|
1,358,127 |
|
134,256 |
|
(443,963 |
) |
2,296,225 |
| |||||
Property, plant and equiment, net |
|
1,017,587 |
|
664,332 |
|
551,903 |
|
(2,624 |
) |
2,231,198 |
| |||||
Intangible assets, net |
|
|
|
416,635 |
|
|
|
|
|
416,635 |
| |||||
Goodwill |
|
|
|
738,542 |
|
|
|
|
|
738,542 |
| |||||
Other assets, including investments in subs |
|
2,768,360 |
|
30,862 |
|
9,189 |
|
(2,675,595 |
) |
132,816 |
| |||||
Total assets |
|
$ |
5,033,752 |
|
$ |
3,208,498 |
|
$ |
695,348 |
|
$ |
(3,122,182 |
) |
$ |
5,815,416 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable |
|
$ |
150,191 |
|
$ |
219,415 |
|
$ |
56,472 |
|
$ |
(65,981 |
) |
$ |
360,097 |
|
Accrued expenses |
|
144,719 |
|
98,484 |
|
9,877 |
|
(33,131 |
) |
219,949 |
| |||||
Current maturities of long-term debt |
|
14,237 |
|
300 |
|
52,595 |
|
(37,501 |
) |
29,631 |
| |||||
Total current liabilities |
|
309,147 |
|
318,199 |
|
118,944 |
|
(136,613 |
) |
609,677 |
| |||||
Long-term debt |
|
2,140,958 |
|
|
|
169,223 |
|
(137,575 |
) |
2,172,606 |
| |||||
Other liabilities |
|
178,182 |
|
2,087,957 |
|
41,581 |
|
(1,751,243 |
) |
556,477 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Redeemable noncontrolling interest |
|
|
|
|
|
98,814 |
|
|
|
98,814 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Common stock |
|
637 |
|
33,896 |
|
18,121 |
|
(52,017 |
) |
637 |
| |||||
Treasury stock |
|
(720,479 |
) |
|
|
|
|
|
|
(720,479 |
) | |||||
Additional paid-in-capital |
|
1,037,687 |
|
117,737 |
|
476,677 |
|
(594,414 |
) |
1,037,687 |
| |||||
Retained earnings (deficit) |
|
2,087,620 |
|
650,709 |
|
(200,389 |
) |
(450,320 |
) |
2,087,620 |
| |||||
Total Steel Dynamics, Inc. equity |
|
2,405,465 |
|
802,342 |
|
294,409 |
|
(1,096,751 |
) |
2,405,465 |
| |||||
Noncontrolling interests |
|
|
|
|
|
(27,623 |
) |
|
|
(27,623 |
) | |||||
Total equity |
|
2,405,465 |
|
802,342 |
|
266,786 |
|
(1,096,751 |
) |
2,377,842 |
| |||||
Total liabilities and equity |
|
$ |
5,033,752 |
|
$ |
3,208,498 |
|
$ |
695,348 |
|
$ |
(3,122,182 |
) |
$ |
5,815,416 |
|
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 10. Condensed Consolidating Information (Continued)
Condensed Consolidating Statements of Operations (in thousands)
For the Three Months Ended, |
|
|
|
|
|
Combined |
|
Consolidating |
|
Total |
| |||||
March 31, 2013 |
|
Parent |
|
Guarantors |
|
Non-Guarantors |
|
Adjustments |
|
Consolidated |
| |||||
Net sales |
|
$ |
827,201 |
|
$ |
2,015,487 |
|
$ |
66,370 |
|
$ |
(1,113,362 |
) |
$ |
1,795,696 |
|
Costs of goods sold |
|
706,387 |
|
1,914,058 |
|
95,941 |
|
(1,096,954 |
) |
1,619,432 |
| |||||
Gross profit (loss) |
|
120,814 |
|
101,429 |
|
(29,571 |
) |
(16,408 |
) |
176,264 |
| |||||
Selling, general and administrative |
|
28,686 |
|
53,992 |
|
2,138 |
|
(4,784 |
) |
80,032 |
| |||||
Operating income (loss) |
|
92,128 |
|
47,437 |
|
(31,709 |
) |
(11,624 |
) |
96,232 |
| |||||
Interest expense, net of capitalized interest |
|
22,046 |
|
12,039 |
|
1,701 |
|
(1,157 |
) |
34,629 |
| |||||
Other (income) expense, net |
|
(820 |
) |
(200 |
) |
(1,183 |
) |
1,157 |
|
(1,046 |
) | |||||
Income (loss) before income taxes and equity in net income of subsidiaries |
|
70,902 |
|
35,598 |
|
(32,227 |
) |
(11,624 |
) |
62,649 |
| |||||
Income taxes |
|
11,394 |
|
12,919 |
|
699 |
|
(3,615 |
) |
21,397 |
| |||||
|
|
59,508 |
|
22,679 |
|
(32,926 |
) |
(8,009 |
) |
41,252 |
| |||||
Equity in net loss of subsidiaries |
|
(11,293 |
) |
|
|
|
|
11,293 |
|
|
| |||||
Net loss attributable to noncontrolling interests |
|
|
|
|
|
6,963 |
|
|
|
6,963 |
| |||||
Net income (loss) attributable to Steel Dynamics, Inc. |
|
$ |
48,215 |
|
$ |
22,679 |
|
$ |
(25,963 |
) |
$ |
3,284 |
|
$ |
48,215 |
|
For the Three Months Ended, |
|
Parent |
|
Guarantors |
|
Combined |
|
Consolidating |
|
Total |
| |||||
Net sales |
|
$ |
913,193 |
|
$ |
2,308,156 |
|
$ |
46,835 |
|
$ |
(1,286,144 |
) |
$ |
1,982,040 |
|
Costs of goods sold |
|
785,567 |
|
2,198,898 |
|
63,894 |
|
(1,267,583 |
) |
1,780,776 |
| |||||
Gross profit (loss) |
|
127,626 |
|
109,258 |
|
(17,059 |
) |
(18,561 |
) |
201,264 |
| |||||
Selling, general and administrative |
|
27,566 |
|
54,555 |
|
2,459 |
|
(3,132 |
) |
81,448 |
| |||||
Operating income (loss) |
|
100,060 |
|
54,703 |
|
(19,518 |
) |
(15,429 |
) |
119,816 |
| |||||
Interest expense, net of capitalized interest |
|
27,217 |
|
13,606 |
|
1,710 |
|
(1,421 |
) |
41,112 |
| |||||
Other (income) expense, net |
|
10,769 |
|
(1,064 |
) |
(877 |
) |
1,420 |
|
10,248 |
| |||||
Income (loss) before income taxes and equity in net income of subsidiaries |
|
62,074 |
|
42,161 |
|
(20,351 |
) |
(15,428 |
) |
68,456 |
| |||||
Income taxes (benefit) |
|
15,870 |
|
16,134 |
|
353 |
|
(5,678 |
) |
26,679 |
| |||||
|
|
46,204 |
|
26,027 |
|
(20,704 |
) |
(9,750 |
) |
41,777 |
| |||||
Equity in net loss of subsidiaries |
|
(4,427 |
) |
|
|
|
|
4,427 |
|
|
| |||||
Net loss attributable to noncontrolling interests |
|
|
|
|
|
3,898 |
|
|
|
3,898 |
| |||||
Net income (loss) attributable to Steel Dynamics, Inc. |
|
$ |
41,777 |
|
$ |
26,027 |
|
$ |
(16,806 |
) |
$ |
(5,323 |
) |
$ |
45,675 |
|
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 10. Condensed Consolidating Information (Continued)
Condensed Consolidating Statements of Cash Flows (in thousands)
For the Three Months Ended, |
|
|
|
|
|
Combined |
|
Consolidating |
|
Total |
| |||||
March 31, 2013 |
|
Parent |
|
Guarantors |
|
Non-Guarantors |
|
Adjustments |
|
Consolidated |
| |||||
Net cash provided by (used in) operating activities |
|
$ |
29,373 |
|
$ |
14,903 |
|
$ |
(17,530 |
) |
$ |
2,964 |
|
$ |
29,710 |
|
Net cash used in investing activities |
|
(8,837 |
) |
(11,985 |
) |
(6,805 |
) |
16,215 |
|
(11,412 |
) | |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Issuance of long term debt |
|
400,425 |
|
|
|
23,980 |
|
(15,144 |
) |
409,261 |
| |||||
Repayments of long term debt |
|
(304,471 |
) |
(1,203 |
) |
(9,836 |
) |
9,819 |
|
(305,691 |
) | |||||
Other |
|
2,792 |
|
(20,844 |
) |
11,982 |
|
(13,854 |
) |
(19,924 |
) | |||||
Net cash provided by (used in) financing activities |
|
98,746 |
|
(22,047 |
) |
26,126 |
|
(19,179 |
) |
83,646 |
| |||||
Increase (decrease) in cash and equivalents |
|
119,282 |
|
(19,129 |
) |
1,791 |
|
|
|
101,944 |
| |||||
Cash and equivalents at beginning of period |
|
322,707 |
|
41,675 |
|
11,535 |
|
|
|
375,917 |
| |||||
Cash and equivalents at end of period |
|
$ |
441,989 |
|
$ |
22,546 |
|
$ |
13,326 |
|
$ |
|
|
$ |
477,861 |
|
For the Three Months Ended, |
|
|
|
|
|
Combined |
|
Consolidating |
|
Total |
| |||||
March 31, 2012 |
|
Parent |
|
Guarantors |
|
Non-Guarantors |
|
Adjustments |
|
Consolidated |
| |||||
Net cash provided by (used in) operating activities |
|
$ |
(31,015 |
) |
$ |
58,900 |
|
$ |
(7,596 |
) |
$ |
1,132 |
|
$ |
21,421 |
|
Net cash used in investing activities |
|
(3,436 |
) |
(40,889 |
) |
(21,708 |
) |
18,614 |
|
(47,419 |
) | |||||
Net cash provided by (used in) financing activities |
|
7,330 |
|
(8,721 |
) |
14,183 |
|
(19,746 |
) |
(6,954 |
) | |||||
Increase (decrease) in cash and equivalents |
|
(27,121 |
) |
9,290 |
|
(15,121 |
) |
|
|
(32,952 |
) | |||||
Cash and equivalents at beginning of period |
|
301,073 |
|
58,699 |
|
30,989 |
|
|
|
390,761 |
| |||||
Cash and equivalents at end of period |
|
$ |
273,952 |
|
$ |
67,989 |
|
$ |
15,868 |
|
$ |
|
|
$ |
357,809 |
|
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This report contains some predictive statements about future events, including statements related to in the steel and recycled metals markets, our revenues, costs of purchased materials, future profitability and earnings, and the operation of new or existing facilities. These statements are intended to be made as forward-looking, subject to many risks and uncertainties, within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. Some factors that could cause such forward-looking statements to turn out differently than anticipated include: (1) the effects of a recurrent slowing in industrial demand; (2) changes in economic conditions, either generally or in any of the steel or scrap-consuming sectors which affect demand for our products, including the strength of the non-residential and residential construction, automotive, appliance, and other steel-consuming industries; (3) fluctuations in the cost of key raw materials (including steel scrap, iron units, and energy costs) and our ability to pass-on any cost increases; (4) the impact of domestic and foreign import price competition; (5) risks and uncertainties involving product and/or technology development; and (6) occurrences of unexpected plant outages or equipment failures.
More specifically, we refer you to the sections titled Special Note Regarding Forward-Looking Statements and Risk Factors in our annual report on Form 10-K for the year ended December 31, 2012, as well as in other reports which we file with the Securities and Exchange Commission, for a more detailed discussion of some of the many factors, variable risks and uncertainties that could cause actual results to differ materially from those we may have expected or anticipated. These reports are available publicly on the SEC web site, www.sec.gov, and on our web site, www.steeldynamics.com. Forward-looking or predictive statements we make are based upon information and assumptions, concerning our businesses and the environments in which they operate, which we consider reasonable as of the date on which these statements are made. Due to the foregoing risks and uncertainties however, as well as, matters beyond our control which can affect forward-looking statements, you are cautioned not to place undue reliance on these predictive statements, which speak only as of the date of this report. We undertake no duty to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Operating Statement Classifications
Net Sales. Net sales from our operations are a factor of volumes shipped, product mix and related pricing. We charge premium prices for certain grades of steel, product dimensions, certain smaller volumes, and for value-added processing or coating of the steel products. Except for our steel fabrication operations segment, we recognize revenue from sales and the allowance for estimated costs associated with returns from these sales at the time the title of the product is transferred to the customer. Provision is made for estimated product returns and customer claims based on estimates and actual historical experience. Net sales from steel fabrication operations are recognized from construction contracts utilizing a percentage-of-completion method, which is based on the percentage of steel consumed to date as compared to the estimated total steel required for each contract.
Costs of Goods Sold. Our costs of goods sold represent all direct and indirect costs associated with the manufacture of our products. The principal elements of these costs are scrap and scrap substitutes (which represent the most significant single component of our consolidated costs of goods sold), steel, direct and indirect labor and related benefits, alloys, zinc, transportation and freight, repairs and maintenance, utilities (most notably electricity and natural gas), and depreciation.
Selling, General and Administrative Expenses. Selling, general and administrative expenses consist of all costs associated with our sales, finance and accounting, and administrative departments. These costs include, among other items, labor and related benefits, professional services, insurance premiums, property taxes, profit sharing, and amortization of intangible and other assets.
Interest Expense, net of Capitalized Interest. Interest expense consists of interest associated with our senior credit facilities and other debt net of interest costs that are required to be capitalized during the construction period of certain capital investment projects.
Other Expense (Income), net. Other income consists of interest income earned on our temporary cash deposits and investments; any other non-operating income activity, including gains on certain short-term investments; and income from non-consolidated investments accounted for under the equity method. Other expense consists of any non-operating costs, such as certain financing expenses.
Overview
Net income was $48.2 million, or $0.21 per diluted share, during the first quarter of 2013, compared with net income of $45.7 million, or $0.20 per diluted share, during the first quarter of 2012, and net income of $60.6 million, or $0.27 per diluted share, during the fourth quarter of 2012. Our net sales decreased $186.3 million, or 9%, to $1.8 billion in the first quarter of 2013 versus the first quarter of 2012, while net sales increased $90.7 million, or 5%, versus the fourth quarter of 2012. Our gross profit percentage was 10% during both the first quarter of 2013 and 2012, and 11% during the fourth quarter of 2012.
First quarter 2013 external steel shipments decreased 1% as compared to the first quarter of 2012 (with total sheet products shipments increasing 7% and long products shipments decreasing 5%), and external ferrous scrap shipments decreased 4% and external nonferrous scrap shipments decreased 5%. Conversely, steel fabrication external shipments increased 28% in the first quarter of 2013 compared to the same period in 2012. Operating income decreased 20% to $96.2 million in the first quarter 2013, as compared to the same period in 2012, primarily due to reduced operating income of $18.0 million from our steel operations as product pricing decreased more than raw material costs.
Comparing the first quarter of 2013 to the fourth quarter of 2012, external steel shipments also decreased 1% and external ferrous scrap shipments increased 19%, while external nonferrous scrap shipments increased 12%. Steel fabrication continued its trend of increasing external shipments, showing a 1% sequential quarter gain. Consolidated quarterly operating income increased 1% sequentially, due primarily to increased volumes across all our operating segments. Within steel operations, increased long products volumes more than offset weaker sheet steel shipments and slightly lower steel metal spreads. Within metals recycling operations, increased volumes were more than offset by decreased metal margins.
Segment Operating Results 2013 vs. 2012 (dollars in thousands)
|
|
Three Months Ended |
|
Fourth |
|
Linked |
| |||||||
|
|
March 31, |
|
Quarter |
|
Quarter |
| |||||||
|
|
2013 |
|
% |
|
2012 |
|
2012 |
|
% |
| |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Net sales |
|
|
|
|
|
|
|
|
|
|
| |||
Steel |
|
$ |
1,122,360 |
|
(9 |
)% |
$ |
1,234,479 |
|
$ |
1,106,900 |
|
1 |
% |
Metals recycling and ferrous resources |
|
897,492 |
|
(19 |
)% |
1,111,120 |
|
789,852 |
|
14 |
% | |||
Steel fabrication |
|
94,375 |
|
26 |
% |
74,896 |
|
98,301 |
|
(4 |
)% | |||
Other |
|
24,854 |
|
3 |
% |
24,090 |
|
20,708 |
|
20 |
% | |||
|
|
2,139,081 |
|
|
|
2,444,585 |
|
2,015,761 |
|
|
| |||
Intra-company |
|
(343,385 |
) |
|
|
(462,545 |
) |
(310,760 |
) |
|
| |||
Consolidated |
|
$ |
1,795,696 |
|
(9 |
)% |
$ |
1,982,040 |
|
$ |
1,705,001 |
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
| |||
Operating income (loss) |
|
|
|
|
|
|
|
|
|
|
| |||
Steel |
|
$ |
119,301 |
|
(13 |
)% |
$ |
137,308 |
|
$ |
114,808 |
|
4 |
% |
Metals recycling and ferrous resources |
|
(9,824 |
) |
(336 |
)% |
4,163 |
|
(5,603 |
) |
(75 |
)% | |||
Steel fabrication |
|
1,530 |
|
157 |
% |
(2,668 |
) |
1,448 |
|
6 |
% | |||
Other |
|
(16,439 |
) |
3 |
% |
(16,862 |
) |
(17,535 |
) |
6 |
% | |||
|
|
94,568 |
|
(22 |
)% |
121,941 |
|
93,118 |
|
2 |
% | |||
Eliminations |
|
1,664 |
|
|
|
(2,125 |
) |
1,811 |
|
|
| |||
Consolidated |
|
$ |
96,232 |
|
(20 |
)% |
$ |
119,816 |
|
$ |
94,929 |
|
1 |
% |
Steel Operations
|
Steel Operations. Steel operations consist of our five electric-arc furnace mini-mills, producing steel from steel scrap, utilizing continuous casting, automated rolling mills, and various downstream finishing facilities, including The Techs operations. Collectively, our steel operations sell directly to end users and service centers. These products are used in numerous industry sectors, including the automotive, construction, commercial, transportation, agriculture and industrial machinery markets. In the first quarter of 2013 and 2012, our steel operations accounted for 59% and 60%of our external net sales, respectively. Operating income for the steel segment decreased $18.0 million, or 13%, to $119.3 million in the first quarter of 2013, compared to the same period of 2012. While total shipments increased 1% gross margin, and thus operating income, decreased 11%primarily due to an $87 decrease in average segment selling prices per ton shipped versus only a $66 per ton decrease in average ferrous scrap cost melted in the first quarter of 2013, as compared to the first quarter of 2012.
Steel Operations Shipments (net tons)
|
|
Three Months Ended |
|
|
Fourth |
|
|
| |||||
|
|
March 31, |
|
|
Quarter |
|
|
| |||||
|
|
2013 |
|
|
|
2012 |
|
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flat Roll Division |
|
704,290 |
|
|
|
658,505 |
|
|
|
713,770 |
|
|
|
The Techs |
|
151,137 |
|
|
|
144,615 |
|
|
|
180,451 |
|
|
|
Sheet products |
|
855,427 |
|
58 |
% |
803,120 |
|
55 |
% |
894,221 |
|
61 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structural and Rail Division |
|
280,897 |
|
|
|
261,006 |
|
|
|
262,441 |
|
|
|
Engineered Bar Products Division |
|
112,821 |
|
|
|
157,489 |
|
|
|
98,858 |
|
|
|
Roanoke Bar Division |
|
139,950 |
|
|
|
151,296 |
|
|
|
127,952 |
|
|
|
Steel of West Virginia |
|
80,707 |
|
|
|
77,212 |
|
|
|
73,581 |
|
|
|
Long products |
|
614,375 |
|
42 |
% |
647,003 |
|
45 |
% |
562,832 |
|
39 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shipments |
|
1,469,802 |
|
|
|
1,450,123 |
|
|
|
1,457,053 |
|
|
|
Intra-segment shipments |
|
(32,090 |
) |
(2 |
%) |
(28,057 |
) |
(2 |
%) |
(31,665 |
) |
(2 |
%) |
Segment shipments |
|
1,437,712 |
|
|
|
1,422,066 |
|
|
|
1,425,388 |
|
|
|
Intra-company shipments |
|
(93,280 |
) |
(6 |
%) |
(66,119 |
) |
(5 |
%) |
(71,107 |
) |
(5 |
%) |
External shipments |
|
1,344,432 |
|
|
|
1,355,947 |
|
|
|
1,354,281 |
|
|
|
Sheet Products. Our Flat Roll Division sells a broad range of sheet steel products, such as hot rolled, cold rolled and coated steel products, including a large variety of specialty products such as light gauge hot rolled, galvanized, Galvalume® and painted products. The Techs operations, comprised of three galvanizing lines, also sells specialized galvanized sheet steels used in non-automotive applications. Sheet products represented 58% of total steel shipments in the first quarter of 2013, as compared to 55% in the first quarter of 2012.
Long Products. Our Structural and Rail Division sells structural steel beams and pilings to the construction market, and also sells standard-grade rail to the railroad industry. Our Engineered Bar Products Division primarily sells engineered, special-bar-quality and merchant bar quality rounds, and round-cornered squares. Our Roanoke Bar Division primarily sells merchant steel products, including angles, plain rounds, flats and channels. Steel of West Virginia primarily sells merchant beams, channels and specialty structural steel sections.
Net sales for the steel segment decreased $112.1 million, or 9%, in the first quarter of 2013 when compared to the first quarter of 2012, as total shipments increased 1%and average selling prices decreased 10%, or $87 per ton. There was also a shift in sales mix as sheet product shipments increased 7% and long product shipments decreased 5%, due primarily to lower volumes at the Engineered Bar Products Division.
Metallic raw materials used in our electric arc furnaces represent our single most significant manufacturing cost. Our metallic raw material cost per net ton consumed in our steel operations decreased $66 in the first quarter of 2013, compared with the first quarter of 2012. During the first quarter of 2013 and 2012, respectively, our metallic raw material costs represented 65% and 69% of our steel operations manufacturing costs, excluding the operations of The Techs, which purchases, rather than produces, the steel it further processes.
Metals Recycling and Ferrous Resources Operations
|
Metals Recycling and Ferrous Resources Operations. This operating segment primarily includes our metals recycling operations (OmniSource); our liquid pig iron production facility, Iron Dynamics (IDI); and our Minnesota iron operations. Our metals recycling and ferrous resources operations segment accounted for 35% of our external net sales in both the first quarter of 2013 and 2012. Operating income for the metals recycling and ferrous resources operations segment decreased $14.0 million compared to the first quarter of 2012, due primarily to the use and write-down of higher cost raw material inventory at our Minnesota iron operations, and decreased product pricing at our IDI facility.
Metals Recycling and Ferrous Resources Operations Shipments
|
|
Three Months Ended |
|
Fourth |
| ||
|
|
March 31, |
|
Quarter |
| ||
|
|
2013 |
|
2012 |
|
2012 |
|
Ferrous metal (gross tons) |
|
|
|
|
|
|
|
Total |
|
1,342,929 |
|
1,582,840 |
|
1,238,143 |
|
Intra-segment |
|
(1,969 |
) |
(1,787 |
) |
(1,248 |
) |
Segment shipments |
|
1,340,960 |
|
1,581,053 |
|
1,236,895 |
|
Intra-company |
|
(551,921 |
) |
(761,980 |
) |
(572,045 |
) |
External shipments |
|
789,039 |
|
819,073 |
|
664,850 |
|
|
|
|
|
|
|
|
|
Nonferrous metals (thousands of pounds) |
|
|
|
|
|
|
|
Total and segment shipments |
|
279,656 |
|
291,636 |
|
251,080 |
|
Intra-company |
|
(3,529 |
) |
(1,958 |
) |
(3,456 |
) |
External shipments |
|
276,127 |
|
289,678 |
|
247,624 |
|
|
|
|
|
|
|
|
|
Minnesota iron nuggets (metric tons) intra-company |
|
59,685 |
|
46,230 |
|
36,481 |
|
|
|
|
|
|
|
|
|
Iron Dynamics (metric tons) intra-company |
|
64,685 |
|
56,628 |
|
57,117 |
|
Metals Recycling. Our metals recycling operations represent our metals sourcing and processing operations and are the most significant source of net sales in this segment. These operations sell ferrous metals to steel mills and foundries, and nonferrous metals, such as copper, brass, aluminum and stainless steel to, among others, ingot manufacturers, copper refineries and mills, smelters, and specialty mills. Our metals recycling operations represented 93% and 95% of this segments net sales during the first quarter of 2013 and 2012, respectively.
During the first quarter of 2013, metals recycling recorded sales of $835.0 million on shipments of 1.3 million gross tons of ferrous metals and 279.7 million pounds of nonferrous metals, compared with sales of $1.1 billion on shipments of 1.6 million gross tons of ferrous and 291.6 million pounds of nonferrous metals during the same period in 2012. During the first quarter of 2013 and 2012, the metals recycling operations provided approximately 43% and 52%, respectively, of the steel scrap purchased by our steel mills. This represented 41% and 48% of the metals recycling operations ferrous shipments for the first quarter of 2013 and 2012, respectively. Sales prices of ferrous metals decreased 17% in the first quarter of 2013 versus the same period in 2012, while nonferrous sales prices increased 1% for the same periods.
Operating income for metals recycling increased $682,000 in the first quarter of 2013 to $19.5 million compared to the first quarter of 2012 despite decreased volumes, due to a 6% increase in ferrous metal margins and decreased operating expenses.
Ferrous Resources. Our ferrous resources operations consist of our two ironmaking initiatives: Iron Dynamics and our Minnesota iron operations. IDI primarily produces liquid pig iron, which is used as a scrap substitute raw material exclusively at our Flat Roll Division. Our Minnesota iron operations consists of Mesabi Nugget, (owned 81% by us); our planned future iron mining operations which is currently in the permitting process, Mesabi Mining; and, our iron tailings operations, Mining Resources (owned 80% by us). The construction of the Mesabi Nugget facility was completed in 2009, and initial production of iron nuggets commenced January 2010. Since that time, we have continued to refine this pioneering production process and changed equipment configurations to increase production, improve quality, and increase plant availability. A planned six-week outage in the fall of 2012 was used to complete the groundwork necessary for the implementation of further improvements which are being made in the second quarter of 2013. These modifications are expected to improve production volume. The facilitys designed annual production capacity is 500,000 metric tons. In the first quarter of 2013 and 2012, Mesabi Nugget produced 60,000 and 46,000 metric tons of iron-nuggets, respectively, for use by our own steel mills. Our iron tailings operation, Mining Resources, started operations in September of 2012 and expects to be at full capacity during the first half of 2013. This operation provides iron ore tailings to be concentrated for use by Mesabi Nugget as low-cost iron concentrate in the nugget production process. This is critical to our Minnesota operations as we will now be able to benefit from the use of lower-cost iron concentrate rather than much higher priced third-party material. Losses from our Minnesota iron operations reduced our net income in the first quarter of 2013 by approximately $13.8 million, $4.2 million more than in the first quarter of 2012.
Steel Fabrication Operations
|
Our steel fabrication operations represent the companys New Millennium Building Systems plants located throughout the United States and Northern Mexico. Revenues from these plants are generated from the fabrication of trusses, girders, steel joists and steel decking used within the non-residential construction industry. Steel fabrication operations accounted for 5% and 4% of our external net sales during the first quarter of 2013 and 2012, respectively. The segment achieved operating income of $1.5 million in the first quarter of 2013, compared to a $2.7 million loss in the first quarter of 2012. Modest selling price decreases were more than offset by higher shipments, improved metal margins, and reduced conversion costs.
Net sales for the segment increased $19.5 million, or 26%, in the first quarter of 2013 compared to the first quarter of 2012, as volumes increased 29%. However, the segments average selling price per ton shipped decreased $28, or 2%, during the same period. Increased first quarter 2013 shipments were the result of continued modest improvement in the non-residential construction market and market share gains.
The purchase of various steel products is the largest single cost of production for our steel fabrication operations. During the first quarter of 2013 and 2012, the cost of steel products purchased represented 69% and 70% of the total cost of manufacturing for our steel fabrication operations, respectively; while the average cost of steel consumed decreased in the first quarter of 2013, as compared to the same period in 2012, by $65 per ton.
First Quarter Consolidated Results 2013 vs. 2012
Selling, General and Administrative Expenses. Selling, general and administrative expenses (including profit sharing and amortization of intangible assets) were $80.0 million during the first quarter of 2013, as compared to $81.4 million during the first quarter of 2012, a decrease of $1.4 million, or 2%. Our selling, general and administrative expenses represented 4% of our total net sales during both the first quarter of 2013 and 2012. The decrease in our selling, general and administrative expenses during the first quarter of 2013 as compared to the same period in 2012 was due primarily to decreased profit sharing and performance-based compensation, consistent with the lower levels of profitability in the first quarter of 2013.
Interest Expense, net of Capitalized Interest. During the first quarter of 2013, gross interest expense decreased $6.0 million to $35.4 million, and capitalized interest increased $487,000, to $791,000, when compared to the same period in 2012. The interest capitalization that occurred during these periods resulted from the interest required to be capitalized with respect to construction activities at our various operating segments. The decrease in gross interest expense is due to debt repayment of $175 million during the third quarter of 2012 in conjunction with our refinancing activities, which also reduced our overall cost of debt and extended our maturity schedule. We anticipate further reductions in gross interest expense in 2013, as a result of additional refinancing activities and debt repayments of $100.0 million during March and April 2013.
Other Expense (Income), net. Other income was $1.0 million during the first quarter of 2013, as compared to expense of $10.2 million during the same period in 2012. First quarter 2012 results included $13.9 million of charges related to the partial tender of our 73/8% Senior Notes, and first quarter 2013results included $2.0 million of charges related to the partial tender of our 63/4% Senior Notes.
Income Taxes. During the first quarter of 2013, our income tax expense was $21.4 million, as compared to $26.7 million during the same period in 2012. Our effective income tax rate before noncontrolling interests was 34.2% and 39.0%, during the first quarter of 2013 and 2012, respectively. The lower effective tax rate in the first quarter of 2013 is due to a favorable adjustment related to 2012 research and development tax credits that were enacted into the tax code in January 2013.
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 in compliance 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, issuances of common stock, long-term borrowings and state and local grants.
Working Capital. Trade receivables increased $110.9 million during the first quarter of 2013 related to increased sales, when compared to the fourth quarter of 2012. Total inventories decreased $32.3 million, or 3%, to $1.2 billion. Our raw materials, primarily steel scrap inventories, decreased by approximately $68.1 million during the first quarter of 2013, with scrap volumes decreasing by 53,000 gross tons (8%), and costs per gross ton decreasing 8%. Our work-in-process and finished goods inventories increased $36.9 million, with volumes increasing by 77,000 tons. Our trade payables and general accruals increased $6.6 million, or 1%, during the first quarter of 2013, as trade payables were higher due to higher production levels, while 2012 profit sharing and bonus amounts were paid in the first quarter of 2013.
Capital Investments. During the first quarter of 2013, we invested $45.3 million in property, plant and equipment, of which over half related to announced growth or expansion projects at three of our steel mills and OmniSource. We estimate total capital expenditures for 2013 to be in the range of $200 to $225 million.
Capital Resources and Long-term Debt. On March 25, 2013, we issued $400.0 million of 51/4% Senior Notes due 2023 (2023 Notes). Interest on the 2023 Notes is due semiannually on April 15 and October 15, with the first payment due on October 15, 2013. The 2023 Notes are redeemable at any time after April 15, 2018. The redemption price (expressed as a percentage of principal amount) is 102.625% during the period April 15, 2018 to April 14, 2019; 101.750% during the period April 15, 2019 to April 14, 2020; 100.875% during the period April 15, 2020 to April 14, 2021; and 100% on and after April 15, 2021, plus accrued interest to the redemption date. In addition, at any time before April 15, 2016, we may redeem up to 35% of the principal amount of the 2023 Notes with the net cash proceeds from one or more sales of our common stock at a redemption price (expressed as a percentage of principal amount) of 105.250%, plus accrued interest to the redemption date. The 2023 Notes are unsecured and rank pari passu with all existing and future senior unsubordinated unsecured indebtedness and senior in right of payment to all subordinated indebtedness.
A portion of the proceeds from the issuance of the 2023 Notes was used to fund the March 25, 2013 purchase of $301.7 million (plus accrued interest) of our 6 3/4% Senior Notes due 2015 (2015 Notes) pursuant to a tender offer. As a result of the tender offer to purchase the 2015 Notes, we recorded expenses of $2.0 million related to tender premiums, unamortized debt issuance costs write-off, and tender expenses, which is reflected in other expenses in the consolidated statement of income for the quarter ended March 31, 2013. On April 9, 2013, we used the remaining proceeds from the issuance of the 2023 Notes, along with available cash, to repay the remaining outstanding 2015 Notes due at a price of 100% of the principal amount of $198.3 million (plus accrued interest). As a result of this refinancing activity, our overall outstanding debt decreased $100.0 million, we extended and laddered our debt maturities, and we reduced our overall effective interest rate.
While total outstanding debt at March 31, 2013, of $2.3 billion was $98.6 million higher than at December 31, 2012, after consideration of the refinancing completed on April 9, 2013, total debt decreased by $99.7 million. Post the debt payment on April 9, 2013, our total long-term debt to capitalization ratio, representing our long-term debt, including current maturities, divided by the sum of our long-term debt, redeemable noncontrolling interest, and our total stockholders equity, decreased to 45.6%, as compared to 47.1% at December 31, 2012.
We have a senior secured credit facility (Facility) that matures in September 2016 which provides for a $1.1 billion revolver (Revolver). Subject to certain conditions, we have the opportunity to increase the Revolver capacity by an additional $125.0 million. The Facility is guaranteed by certain of our subsidiaries and is secured by substantially all of our accounts receivable and inventories and pledges of shares of our wholly owned subsidiaries capital stock. The Revolver is available to fund working capital, capital expenditures, and other general corporate purposes.
The outstanding balance on the Revolver must be the lesser of $1.1 billion less other applicable commitments such as letters of credit and other secured debt, as defined within the Facility or the sum of 85% of our eligible accounts receivable and 65% of our eligible inventories, less other applicable commitments. At March 31, 2013, we had $1.1 billion of availability on the Revolver, $14.0 million of outstanding letters of credit and other obligations which reduce availability, and no outstanding borrowings.
The Facility contains financial covenants and other covenants that limit or restrict our ability to make capital expenditures; incur indebtedness; permit liens on property; enter into transactions with affiliates; make restricted payments or investments; enter into mergers, acquisitions or consolidations; conduct asset sales; pay dividends or distributions and enter into other specified transactions and activities. Our ability to borrow funds within the terms of the revolver is dependent upon our continued compliance with the financial and other covenants.
The financial covenants under our Facility state that we must maintain an interest coverage ratio of not less than 2.50:1.00. Our interest coverage ratio is calculated by dividing our last-twelve trailing months (LTM) consolidated adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and certain other non-cash transactions as allowed in our Facility) by our LTM gross interest expense. In addition, a net debt (as defined in the Facility) to consolidated LTM adjusted EBITDA ratio (leverage ratio) of not more than 5.00:1.00 must be maintained. If the net debt to EBITDA ratio exceeds 3.50:1:00 at any time, our ability to make restricted payments as defined in the credit agreement (which includes cash dividends to stockholders and share purchases, among other things), is limited. At March 31, 2013, our interest coverage ratio and net debt leverage ratio were 4.17:1.00 and 3.13:1.00, respectively. We were therefore in compliance with these covenants at March 31, 2013, and we anticipate we will continue to be in compliance during the remainder of the year.
Cash Dividends. We declared cash dividends of $24.2 million, or $0.11 per common share, during the first quarter of 2013, a 10% increase over the $0.10 per common share, or $21.9 million, dividends declared during the first quarter of 2012. We paid cash dividends of $22.0 million and $21.9 million during the first quarter of 2013 and 2012, respectively. Our board of directors approves the payment of dividends on a quarterly basis. During the remainder of 2013, we anticipate maintaining our current level of quarterly dividends; however, the determination to pay cash dividends in the future will be at the discretion of our board of directors, after taking into account various factors, including our financial condition, results of operations, outstanding indebtedness, current and anticipated cash needs and growth plans. In addition, the terms of our senior secured revolving credit agreement and the indenture relating to our senior notes may restrict the amount of cash dividends we can pay.
Other. Our ability to meet our debt service obligations and reduce our total debt will depend upon our future performance which, in turn, will depend upon general economic, financial and business conditions, along with competition, legislation and regulatory factors that are largely beyond our control. In addition, we cannot assure you that our operating results, cash flow, access to credit markets and capital resources will be sufficient for repayment of our indebtedness in the future. We believe that based upon current levels of operations and anticipated growth, cash flow from operations, together with other available sources of funds, including additional borrowings under our senior secured credit agreement through its term, which expires in September 2016, will be adequate for the next twelve months for making required payments of principal and interest on our indebtedness, funding working capital requirements, and anticipated capital expenditures.
Other Matters
Inflation. We believe that inflation has not had a material effect on our results of operations.
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, that compliance with current environmental laws and regulations is not likely to have a materially 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, such as the impact of United States government or various governmental agencies introducing regulatory changes in response to the potential of climate change.
Critical Accounting Policies and Estimates
No material changes have occurred to the indicated critical accounting policies and estimates as disclosed in our 2012 Annual Report on Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
In the normal course of business, we are exposed to interest rate changes. Our objectives in managing exposure to interest rate changes are to limit the impact of these rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we primarily use interest rate swaps to manage net exposure to interest rate changes related to our portfolio of borrowings. We did not have any interest rate swaps during the three month periods ended March 31, 2013 or 2012.
Commodity Risk
In the normal course of business we are exposed to the market risk and price fluctuations related to the sale of steel products and to the purchase of raw materials used in our operations, such as metallic raw materials, electricity, natural gas, iron concentrate, fuel and zinc. Our risk strategy associated with product sales has generally been to obtain competitive prices for our products and to allow operating results to reflect market price movements dictated by supply and demand.
Our risk strategy associated with the purchase of raw materials utilized within our operations has generally been to make some commitments with suppliers relating to future expected requirements for certain commodities such as electricity, natural gas and its transportation, iron concentrate, fuel, and zinc. Certain of these commitments contain provisions which require us to take or pay for specified quantities without regard to actual usage for periods of up to 39 months for physical commodity requirements and for up to 8 years for commodity transportation requirements. We also purchase electricity consumed at our Flat Roll Division pursuant to a contract which extends through December 2014. The contract designates 160 hours annually as interruptible service and establishes an agreed fixed-rate energy charge per Mill/kWh consumed for each year through the expiration of the agreement. At March 31, 2013, no material changes had occurred related to these commodity risks from the information disclosed in our Annual Report on Form 10-K for the year ended December 31, 2012. We utilized such take or pay requirements during the past three years under these contracts. We believe that production requirements will be such that consumption of the products or services purchased under these commitments will occur in the normal production process.
We have certain fixed price contracts with various customers and suppliers for future delivery of nonferrous metals. Our risk strategy has been to enter into base metal financial contracts with the goal to protect the profit margin, within certain parameters, that was contemplated when we entered into the transaction with the customer or supplier. At March 31, 2013, we had a cumulative unrealized gain associated with these financial contracts of $4.9 million, substantially all of which have a settlement date within the next twelve months. We believe the customer and supplier contracts associated with the financial contracts will be fully consummated.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2013. The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the companys management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of March 31, 2013, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective.
(b) Changes in Internal Controls Over Financial Reporting. No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended March 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
We are involved in various routine litigation matters, including administrative proceedings, regulatory proceedings, governmental investigations, environmental matters, and commercial and construction contract disputes.
We are also involved, along with eight other steel manufacturing companies, in a class action antitrust complaint filed in federal court in Chicago, Illinois in September 2008, which alleges a conspiracy to fix, raise, maintain and stabilize the price at which steel products were sold in the United States starting in 2005, by artificially restricting the supply of such steel products. All but one of the Complaints were brought on behalf of a purported class consisting of all direct purchasers of steel products between January 1, 2005, and the present. The other Complaint was brought on behalf of a purported class consisting of all indirect purchasers of steel products within the same time period. In addition, in December 2010, we and the other co-defendants were served with a substantially similar complaint in the Circuit Court of Cocke County, Tennessee, purporting to be on behalf of indirect purchasers of steel products in Tennessee. That case has been removed to the federal court in Chicago that is hearing the main complaint. All Complaints seek treble damages and costs, including reasonable attorney fees, pre- and post-judgment interest and injunctive relief. In January 2009, Steel Dynamics and the other defendants filed a Joint Motion to Dismiss all of the direct purchaser lawsuits, but this motion was denied in June 2009. Following a period of preliminary discovery relating to class certification matters, Plaintiffs filed their Motion for Class Certification in May 2012, and on February 28, 2013, Defendants filed their Joint Memorandum in Opposition to Plaintiffs Motion for Class Certification, together with joint motions to exclude the expert opinions of both of Plaintiffs two retained experts. Additional briefing is anticipated on all issues related to the pending motions. Due to the uncertain nature of litigation, we cannot presently determine the ultimate outcome of this litigation. However, we have determined, based on the information available at this time, that there is not presently a reasonable possibility (as that term is defined in ASC 450-20-20), that the outcome of these legal proceedings would have a material impact on our financial condition, results of operations, or liquidity.
Although not presently necessary or appropriate to make a dollar estimate of exposure to loss, if any, in connection with the above matter, we may in the future determine that a loss accrual is necessary. Although we may make loss accruals, if and as warranted, any amounts that we may accrue from time to time could vary significantly from the amounts we actually pay, due to inherent uncertainties and the inherent shortcomings of the estimation process, the uncertainties involved in litigation and other factors. Additionally, an adverse result could have a material effect on our financial condition, results of operations and liquidity.
No material changes have occurred to the indicated risk factors as disclosed in our 2012 Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
The information required to be furnished pursuant to Item 4 concerning mine safety disclosure matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95 to this Quarterly Report.
None.
Executive Officer Certifications | |||
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31.1* |
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Certification of Principal Executive Officer required by Item 307 of Regulation S-K as promulgated by the Securities and Exchange Commission and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2* |
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Certification of Principal Financial Officer required by Item 307 of Regulation S-K as promulgated by the Securities and Exchange Commission and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1* |
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Certification of Chief Executive Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2* |
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Certification of Chief Financial Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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Other | |||
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95* |
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Mine Safety Disclosures. |
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XBRL Documents | |||
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101.INS* |
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XBRL Instance Document |
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101.SCH* |
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XBRL Taxonomy Extension Schema Document |
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101.CAL* |
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XBRL Taxonomy Extension Calculation Document |
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101.LAB* |
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XBRL Taxonomy Extension Label Document |
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101.PRE* |
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XBRL Taxonomy Presentation Document |
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101.DEF* |
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XBRL Taxonomy Definition Document |
* Filed concurrently herewith
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
May 9, 2013
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STEEL DYNAMICS, INC. | |
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By: |
/s/ Theresa E. Wagler |
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Theresa E. Wagler |
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Executive Vice President and Chief Financial Officer |
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(Principal Accounting Officer) |
EXHIBIT 31.1
CERTIFICATION
I, Mark D. Millett, certify that:
1. I have reviewed this quarterly report for the period ended March 31, 2013, on Form 10-Q of Steel Dynamics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
/s/ Mark D. Millett |
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Mark D. Millett |
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Principal Executive Officer |
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May 9, 2013 |
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EXHIBIT 31.2
CERTIFICATION
I, Theresa E. Wagler, certify that:
1. I have reviewed this quarterly report for the period ended March 31, 2013, on Form 10-Q of Steel Dynamics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
/s/ Theresa E. Wagler |
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Theresa E. Wagler |
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Executive Vice President and Principal Financial Officer |
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May 9, 2013 |
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EXHIBIT 32.1
Chief Executive Officer Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Steel Dynamics, Inc. (the Company) on Form 10-Q for the period ended March 31, 2013 (the Report), as filed with the Securities and Exchange Commission on the date hereof, I, Mark D. Millett, Chief Executive Officer of Steel Dynamics, Inc., certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Mark D. Millett |
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Mark D. Millett |
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Chief Executive Officer |
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May 9, 2013 |
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A signed original of this written statement required by Section 906 has been provided to Steel Dynamics, Inc. and will be retained by Steel Dynamics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
Principal Financial Officer Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Steel Dynamics, Inc. (the Company) on Form 10-Q for the period ended March 31, 2013 (the Report), as filed with the Securities and Exchange Commission on the date hereof, I, Theresa E. Wagler, Chief Financial Officer of Steel Dynamics, Inc., certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Theresa E. Wagler |
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Theresa E. Wagler |
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Executive Vice President and Chief Financial Officer |
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May 9, 2013 |
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A signed original of this written statement required by Section 906 has been provided to Steel Dynamics, Inc. and will be retained by Steel Dynamics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 95
Mine Safety Disclosures
This exhibit contains information concerning mine safety matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act about certain citations, orders and notices issued under the Federal Mine Safety and Health Act of 1977 (Mine Act) by the federal Mine Safety and Health Administration (MSHA) for our operations for the three months ended March 31, 2013.
THREE MONTHS ENDED MARCH 31, 2013
Mine or Operating Name / |
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Section |
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Section |
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Section |
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Section |
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Section |
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Total Dollar |
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Legal |
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Legal |
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Legal |
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MSHA Identification Number |
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(#) |
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(#) |
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(#) |
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(#) |
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(#) |
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($) |
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(#) |
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(#) |
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(#) |
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Mesabi Nugget Delaware, LLC |
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5 |
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$ |
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1 |
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78 |
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21-03689 |
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Mining Resources, LLC |
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1 |
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$ |
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4 |
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21-03775 |
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Although Mesabi Nugget Delaware, LLC (Mesabi Nugget), an affiliate of Steel Dynamics, Inc., is not a mining operation, the MSHA claims jurisdiction over Mesabi Nuggets operations regarding the production of iron nuggets via a production process that utilizes iron concentrate and coal as input raw materials. Similarly, Mining Resources, LLC (Mining Resources), an affiliate of Steel Dynamics, Inc., is not a mining operation, however MSHA claims jurisdiction over Mining Resources operations regarding the extraction of iron tailings from previously developed stockpiles or water-filled tailings basins, to be concentrated for use by Mesabi Nugget as a low-cost iron concentrate to the nugget production process. Therefore, this disclosure relating to Mesabi Nugget and Mining Resources is being submitted by Steel Dynamics, Inc.
The MSHA citations and orders set forth in the table above are those that were issued by MSHA and received by Mesabi Nugget and Mining Resources during the three months ended March 31, 2013. In addition, the table above sets forth the total dollar amount of assessments proposed by MSHA during three months ended March 31, 2013. The dollar amount of MSHA assessments proposed does not include assessments on those citations or orders that were received by Mesabi Nugget or Mining Resources after March 31, 2013.
The information in the table above does not reflect any subsequent changes in the level of severity of a citation or order, or changes in the value of an assessment that occurred during the time period presented in the table above (or that may occur after the time period covered in the table above) as a result of proceedings conducted in accordance with MSHA rules. For purposes of legal actions disclosures in the table above, any citation contested in any form or manner with MSHA is considered a legal action for reporting purposes.
During the period covered by this report, no written notices were received from MSHA of a pattern, or the potential to have a pattern, of violations of mandatory health or safety standards that are of such a nature as could have significantly and substantially contributed to the cause and effect of mine health or safety hazards under Section 104(e) of the Mine Act, and there were no mining related fatalities.
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Commitments and Contingencies (Details)
|
3 Months Ended | |
---|---|---|
Mar. 31, 2013
item
Complaint
|
Sep. 30, 2008
Company
|
|
Commitments and Contingencies | ||
Number of other steel manufacturing companies also served with a class action antitrust complaint | 8 | |
Number of the complaints not brought on behalf of steel product purchasers | 1 | |
Number of Plaintiffs' retained experts | 2 |
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