Description of the Business and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

Description of the Business and Significant Accounting Policies

Principles of Consolidation

Principles of Consolidation. The consolidated financial statements include the accounts of SDI, together with its wholly- and majority-owned/controlled subsidiaries, after elimination of intercompany accounts and transactions. Noncontrolling interests represent the noncontrolling owner’s proportionate share in the equity, income, or losses of the company’s majority-owned/controlled consolidated subsidiaries.

Use of Estimates

Use of Estimates. These consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, and accordingly, include amounts that require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and in the notes thereto. Significant items subject to such estimates and assumptions include the carrying value of property, plant and equipment, intangible assets, and goodwill; valuation allowances for trade receivables, inventories and deferred income tax assets; unrecognized tax benefits; potential environmental liabilities; and litigation claims and settlements. Actual results may differ from these estimates and assumptions.

In the opinion of management, these financial statements reflect all normal recurring adjustments necessary for a fair presentation of the interim period results. These consolidated financial statements and notes should be read in conjunction with the audited financial statements and notes thereto included in the company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Cash and Equivalents And Restricted Cash

Cash and Equivalents, and Restricted Cash

Cash and equivalents include all highly liquid investments with a maturity of three months or less at the date of acquisition. Restricted cash is primarily funds held in escrow as required by various insurance and government organizations. The balance of cash, cash equivalents and restricted cash in the consolidated statements of cash flows includes restricted cash of $6.2 million, $5.8 million, $6.2 million, $6.0 million, $5.6 million, and $6.4 million at June 30, 2019, March 31, 2019, December 31, 2018, June 30, 2018, March 31, 2018 and December 31, 2017, respectively, which are recorded in Other Assets (noncurrent) in the company’s consolidated balance sheets.

Goodwill

Goodwill

The company’s goodwill consisted of the following reporting units at June 30, 2019, and December 31, 2018, (in thousands):

	June 30,		December 31,
	2019		2018
Steel Operations Segment
Columbus Flat Roll Division	$	19,682	$	19,682
The Techs		142,783		142,783
Heartland Flat Roll Division		46,143		46,143
United Steel Supply		98,512		-
Vulcan Threaded Products		7,824		7,824
Roanoke Bar Division		29,041		29,041
Metals Recycling Operations Segment – OmniSource		180,552		182,247
Steel Fabrication Operations Segment – New Millennium Building Systems		1,925		1,925
	$	526,462	$	429,645

The company acquired a 75% equity interest in United Steel Supply on March 1, 2019 (refer to Note 2 Acquisition – United Steel Supply, LLC), resulting in a preliminary purchase price allocation in which $98.5 million of goodwill has been recorded. OmniSource goodwill decreased $1.7 million from December 31, 2018 to June 30, 2019, in recognition of the 2019 tax benefit related to the normal amortization of the component of OmniSource tax-deductible goodwill in excess of book goodwill.

Recently Issued Accounting Standards

Recently Issued Accounting Standards

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