Company Quick10K Filing
Quick10K
Steel Dynamics
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$32.42 223 $7,230
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-22 Other Events, Exhibits
8-K 2019-07-22 Earnings, Exhibits
8-K 2019-06-17 Other Events, Exhibits
8-K 2019-05-17 Other Events, Exhibits
8-K 2019-05-16 Shareholder Vote
8-K 2019-04-22 Earnings, Exhibits
8-K 2019-03-18 Other Events, Exhibits
8-K 2019-02-14 Other Events, Exhibits
8-K 2019-02-01 Other Events, Exhibits
8-K 2019-01-22 Other Events, Exhibits
8-K 2019-01-22 Other Events, Exhibits
8-K 2019-01-14 Other Events, Exhibits
8-K 2018-12-18 Other Events, Exhibits
8-K 2018-11-26 Other Events, Exhibits
8-K 2018-11-19 Other Events, Exhibits
8-K 2018-10-17 Earnings, Exhibits
8-K 2018-10-17 Officers, Amend Bylaw, Other Events, Exhibits
8-K 2018-09-18 Other Events, Exhibits
8-K 2018-09-17 Other Events, Exhibits
8-K 2018-09-04 Other Events, Exhibits
8-K 2018-08-20 Other Events, Exhibits
8-K 2018-07-23 Earnings, Exhibits
8-K 2018-06-29 Other Events, Exhibits
8-K 2018-06-28 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-06-26 Other Events, Exhibits
8-K 2018-06-15 Other Events, Exhibits
8-K 2018-06-12 Other Events, Exhibits
8-K 2018-05-17 Amend Bylaw, Shareholder Vote, Exhibits
8-K 2018-05-14 Other Events, Exhibits
8-K 2018-04-18 Earnings, Exhibits
8-K 2018-03-16 Other Events, Exhibits
8-K 2018-02-20 Other Events, Exhibits
8-K 2018-01-22 Earnings, Exhibits
TFX Teleflex 13,910
EQH AXA Equitable Holdings 10,820
KOS Kosmos Energy 2,650
CENT Central Garden & Pet 1,680
KREF KKR Real Estate Finance Trust 1,190
MLR Miller Industries 383
PLYM Plymouth Industrial REIT 99
SFDL Security Federal 0
YUMM Yummies 0
KIRY Kiewit Royalty Trust 0
STLD 2019-06-30
Note 1. Description of The Business and Significant Accounting Policies
Note 2. Acquisition - United Steel Supply, Llc
Note 3. Leases
Note 4. Earnings per Share
Note 5. Inventories
Note 6. Changes in Equity
Note 7. Derivative Financial Instruments
Note 8. Fair Value Measurements
Note 9. Commitments and Contingencies
Note 10. Segment Information
Note 11. Condensed Consolidating Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 stld-20190630ex311b3538f.htm
EX-31.2 stld-20190630ex3124df224.htm
EX-32.1 stld-20190630ex32158494e.htm
EX-32.2 stld-20190630ex32270f56d.htm

Steel Dynamics Earnings 2019-06-30

STLD 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

     Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the period

      ended June 30, 2019

OR

       Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 0-21719

Steel Dynamics, Inc.

(Exact name of registrant as specified in its charter)

Indiana

    

35-1929476

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

7575 West Jefferson Blvd, Fort Wayne, IN

46804

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (260) 969-3500

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock voting, $0.025 par value

STLD

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company (see definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act).

(Check one):

    

Large accelerated filer

    

Accelerated filer

    

Non-accelerated filer

Smaller reporting company  

Emerging growth company

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

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

As of August 1, 2019, Registrant had 219,613,147 outstanding shares of common stock.

Table of Contents

STEEL DYNAMICS, INC.

Table of Contents

PART I. Financial Information

Item 1.

Financial Statements:

Page

Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018

3

Consolidated Statements of Income for the three and six-month periods ended June 30, 2019 and 2018 (unaudited)

4

Consolidated Statements of Comprehensive Income for the three and six-month periods ended June 30, 2019 and 2018 (unaudited)

5

Consolidated Statements of Cash Flows for the three and six-month periods ended June 30, 2019 and 2018 (unaudited)

6

Notes to Consolidated Financial Statements (unaudited)

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

29

Item 4.

Controls and Procedures

29

PART II. Other Information

30

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 3.

Defaults Upon Senior Securities

30

Item 4.

Mine Safety Disclosures

30

Item 5.

Other Information

30

Item 6.

Exhibits

31

Exhibit Index

31

Signature

32

Table of Contents

STEEL DYNAMICS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

June 30,

December 31,

2019

2018

Assets

(unaudited)

Current assets

Cash and equivalents

$

972,561

$

828,220

Short-term investments

114,154

228,783

Accounts receivable, net

1,069,061

1,040,220

Accounts receivable-related parties

3,818

3,536

Inventories

1,802,759

1,859,168

Other current assets

61,248

72,730

Total current assets

4,023,601

4,032,657

Property, plant and equipment, net

2,947,243

2,945,767

Intangible assets, net

256,302

270,328

Goodwill

526,462

429,645

Other assets

104,306

25,166

Total assets

$

7,857,914

$

7,703,563

Liabilities and Equity

Current liabilities

Accounts payable

$

516,109

$

536,743

Accounts payable-related parties

9,047

14,011

Income taxes payable

3,032

7,468

Accrued payroll and benefits

148,747

264,542

Accrued interest

25,509

25,526

Accrued expenses

151,161

146,613

Current maturities of long-term debt

72,131

24,234

Total current liabilities

925,736

1,019,137

Long-term debt

2,355,917

2,352,489

Deferred income taxes

457,784

435,838

Other liabilities

70,196

8,870

Total liabilities

3,809,633

3,816,334

Commitments and contingencies

Redeemable noncontrolling interests

139,930

111,240

Equity

Common stock voting, $.0025 par value; 900,000,000 shares authorized;

265,553,499 and 265,822,402 shares issued; and 219,797,547 and 225,272,174

shares outstanding, as of June 30, 2019 and December 31, 2018, respectively

645

645

Treasury stock, at cost; 45,755,952 and 40,550,228 shares,

as of June 30, 2019 and December 31, 2018, respectively

(1,354,157)

(1,184,243)

Additional paid-in capital

1,167,505

1,160,048

Retained earnings

4,250,419

3,958,320

Accumulated other comprehensive income

78

301

Total Steel Dynamics, Inc. equity

4,064,490

3,935,071

Noncontrolling interests

(156,139)

(159,082)

Total equity

3,908,351

3,775,989

Total liabilities and equity

$

7,857,914

$

7,703,563

See notes to consolidated financial statements.

3

Table of Contents

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)

Three Months Ended

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

Net sales

Unrelated parties

$

2,766,364

$

3,083,822

$

5,580,850

$

5,681,134

Related parties

4,151

6,703

7,100

13,266

Total net sales

2,770,515

3,090,525

5,587,950

5,694,400

Costs of goods sold

2,349,349

2,438,443

4,733,214

4,578,902

Gross profit

421,166

652,082

854,736

1,115,498

Selling, general and administrative expenses

106,250

101,031

217,288

207,462

Profit sharing

22,871

42,335

46,548

68,997

Amortization of intangible assets

7,013

6,829

14,026

13,755

Operating income

285,032

501,887

576,874

825,284

Interest expense, net of capitalized interest

32,321

31,512

63,443

63,408

Other income, net

(4,249)

(5,035)

(10,592)

(9,498)

Income before income taxes

256,960

475,410

524,023

771,374

Income tax expense

60,214

112,838

122,450

183,327

Net income

196,746

362,572

401,573

588,047

Net (income) loss attributable to noncontrolling interests

(2,444)

(123)

(2,943)

1,953

Net income attributable to Steel Dynamics, Inc.

$

194,302

$

362,449

$

398,630

$

590,000

Basic earnings per share attributable to Steel Dynamics,

Inc. stockholders

$

0.88

$

1.54

$

1.79

$

2.50

Weighted average common shares outstanding

221,505

235,617

222,781

236,120

Diluted earnings per share attributable to Steel Dynamics, Inc.

stockholders, including the effect of assumed conversions

when dilutive

$

0.87

$

1.53

$

1.78

$

2.49

Weighted average common shares and share equivalents outstanding

222,519

236,945

223,741

237,334

Dividends declared per share

$

0.2400

$

0.1875

$

0.4800

$

0.3750

See notes to consolidated financial statements.

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STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

Net income

$

196,746

$

362,572

$

401,573

$

588,047

Other comprehensive loss - net unrealized loss on cash flow

hedging derivatives, net of income tax benefit

(52)

(105)

(223)

(105)

Comprehensive income

196,694

362,467

401,350

587,942

Comprehensive (income) loss attributable to noncontrolling interests

(2,444)

(123)

(2,943)

1,953

Comprehensive income attributable to Steel Dynamics, Inc.

$

194,250

$

362,344

$

398,407

$

589,895

See notes to consolidated financial statements.

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STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

Operating activities:

Net income

$

196,746

$

362,572

$

401,573

$

588,047

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization

80,911

79,120

161,085

155,255

Equity-based compensation

9,080

8,041

24,388

20,882

Deferred income taxes

11,550

11,993

23,641

21,538

Other adjustments

(564)

(145)

164

(115)

Changes in certain assets and liabilities:

Accounts receivable

70,624

(163,465)

9,562

(282,283)

Inventories

64,941

(90,312)

104,410

(171,023)

Other assets

7,292

(630)

7,593

(735)

Accounts payable

(58,484)

48,919

(55,278)

115,251

Income taxes receivable/payable

(36,428)

22,579

13,422

86,541

Accrued expenses

15,805

47,361

(147,534)

(29,390)

Net cash provided by operating activities

361,473

326,033

543,026

503,968

Investing activities:

Purchases of property, plant and equipment

(85,120)

(55,203)

(139,556)

(105,809)

Purchases of short-term investments

(49,465)

(50,000)

(99,142)

(90,000)

Proceeds from maturities of short-term investments

109,034

-

213,771

-

Acquisition of business, net of cash and restricted cash acquired

-

(396,409)

(93,412)

(396,409)

Other investing activities

913

657

1,277

886

Net cash used in investing activities

(24,638)

(500,955)

(117,062)

(591,332)

Financing activities:

Issuance of current and long-term debt

125,222

124,571

246,456

217,629

Repayment of current and long-term debt

(133,875)

(118,089)

(249,146)

(231,123)

Dividends paid

(53,503)

(44,268)

(95,742)

(81,065)

Purchases of treasury stock

(93,136)

(49,145)

(177,444)

(118,414)

Other financing activities

(12)

(3,144)

(5,732)

(8,324)

Net cash used in financing activities

(155,304)

(90,075)

(281,608)

(221,297)

Increase (decrease) in cash, cash equivalents, and restricted cash

181,531

(264,997)

144,356

(308,661)

Cash, cash equivalents, and restricted cash at beginning of period

797,248

991,421

834,423

1,035,085

Cash, cash equivalents, and restricted cash at end of period

$

978,779

$

726,424

$

978,779

$

726,424

Supplemental disclosure information:

Cash paid for interest

$

53,981

$

53,226

$

62,587

$

61,855

Cash paid for income taxes, net

$

84,516

$

79,995

$

86,355

$

78,950

See notes to consolidated financial statements.

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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 reportable segments: steel operations, metals recycling operations, and steel fabrication operations.

Steel Operations Segment. Steel operations include the company’s Butler Flat Roll Division, Columbus Flat Roll Division, The Techs galvanizing lines, Heartland Flat Roll Division, United Steel Supply (acquired 75% equity interest March 1, 2019), Structural and Rail Division, Engineered Bar Products Division, Vulcan Threaded Products, Inc., Roanoke Bar Division, Steel of West Virginia, and Iron Dynamics, a liquid pig iron (scrap substitute) production facility that supplies solely the Butler Flat Roll Division. These operations include electric arc furnace steel mills, producing steel from ferrous scrap and scrap substitutes, utilizing continuous casting, automated rolling mills, with several downstream coating and bar processing lines. Steel operations accounted for 76% and 75% of the company’s consolidated external net sales during the three and six-month periods ended June 30, 2019 and 2018, respectively.

Metals Recycling Operations Segment. Metals recycling operations consists solely of OmniSource, LLC (OmniSource), and includes both ferrous and nonferrous processing, transportation, marketing, brokerage, and scrap management services. Metals recycling operations accounted for 12% and 14% of the company’s consolidated external net sales during the three and six-month periods ended June 30, 2019 and 2018, respectively.

Steel Fabrication Operations Segment. Steel fabrication operations include the company’s New Millennium Building Systems’ joist and deck plants located throughout the United States, and in Northern Mexico. Revenues from these plants are generated from the fabrication of trusses, girders, steel joists and steel deck used within the non-residential construction industry. Steel fabrication operations accounted for 9% and 7% of the company’s consolidated external net sales during the three-month periods ended June 30, 2019 and 2018, respectively, and 8% and 7% of the company’s consolidated external net sales during the six-month periods ended June 30, 2019 and 2018, respectively.

Other. Other operations consists of subsidiary operations that are below the quantitative thresholds required for reportable segments and primarily consist of smaller joint ventures, and the idle Minnesota ironmaking operations. Also included in “Other” are certain unallocated corporate accounts, such as the company’s senior secured credit facility, senior notes, certain other investments and certain profit sharing expenses.

Significant Accounting Policies

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

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

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

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

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

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

Note 2. Acquisition – United Steel Supply, LLC

On March 1, 2019, the company purchased 75% of the equity interest of United Steel Supply, LLC (USS) for cash consideration of $93.4 million, subject to customary actual working capital purchase price adjustments. Additionally, the company has an option to purchase, and the sellers have the option to require the company to purchase, the remaining 25% equity interest of USS in the future. Headquartered in Austin, Texas, USS is a leading distributor of painted Galvalume® flat roll steel used for roofing and siding applications, with distribution centers strategically located in Mississippi, Indiana, Arkansas, and Oregon. USS provides the company a new, complementary distribution channel and connects it to a rapidly growing industry segment with customers that do not traditionally purchase steel directly from a steel producer. USS’s operating results from and after March 1, 2019, are reflected in the company’s financial statements in the steel operations reporting segment.

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 2. Acquisition – United Steel Supply, LLC (Continued)

The aggregate purchase price was preliminarily allocated to the opening balance sheet of USS as of March 1, 2019. The following initial allocation of the purchase price (in thousands) is preliminary based on the information available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed. The accounting for the acquisition has not yet been completed because the company has not finalized the working capital purchase price adjustment or valuations of the acquired assets, assumed liabilities and identifiable intangible assets, if any, including goodwill.

p

Current assets, net of cash acquired

$

94,156

Property, plant & equipment

7,388

Intangible assets and goodwill

98,512

Total assets acquired

200,056

Liabilities assumed

77,954

Redeemable noncontrolling interest

28,690

Net cash consideration

$

93,412

Note 3. Leases

In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842) and its subsequent corresponding updates; which established a new lease accounting model that requires lessees to recognize a right-of-use asset and related lease liability for most leases having lease terms of more than 12 months. The company adopted ASC 842 effective January 1, 2019, using the optional transition method, thereby applying the new guidance at the effective date, without retrospective application to prior periods. The company elected practical expedients permitted under the transition guidance which allowed the company to not reassess under the new standard its prior conclusions regarding lease identification and classification. The company elected to use hindsight when determining the lease term. The company also elected the short-term lease exemption, and did not recognize right-of-use assets and lease liabilities for short-term leases, those with lease commencement date terms of 12 months or less. The company recognized right-of-use assets and lease liabilities of $76.3 million, with no impact on retained earnings, in the consolidated balance sheet on January 1, 2019, and the standard did not have a significant impact on the company’s operating results or cash flows for the three and six-month periods ended June 30, 2019.

The company has operating leases relating principally to transportation and other equipment, and some real estate. The company determines if an arrangement contains a lease at inception, which generally occurs when the arrangement identifies a specific asset that the company has the right to direct the use of and obtain substantially all of the economic benefit from use of the identified asset. Certain of our lease agreements contain rent escalation clauses (including fixed and index-based escalations), and options to extend or terminate the lease. For purposes of calculating operating lease obligations under the standard, the company’s lease terms include options to extend the lease when it is reasonably certain that the company will exercise such option. The company uses its incremental borrowing rate at lease commencement to determine the present value of lease payments. The incremental borrowing rate is the rate of interest the company could borrow on a collateralized basis over a similar term with similar payments. Operating lease expense is recognized on a straight-line basis over the lease term.

Operating lease right-of-use assets and lease obligations included in the consolidated balance sheet at June 30, 2019, are as follows (in thousands):

Right of use assets under operating leases:

Other assets - noncurrent

$

77,868

Lease obligations under operating leases:

Accrued liabilities

$

17,405

Other liabilities - noncurrent

60,751

$

78,156

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 3. Leases (Continued)

The weighted average remaining lease term for our operating leases is 6.4 years and the weighted-average discount rate is 4.0% as of June 30, 2019. Future operating lease liabilities as of June 30, 2019, for the next five years and thereafter are as follows (in thousands):

2019 - for the remaining six months

$

10,285

2020

18,986

2021

16,086

2022

12,551

2023

9,494

Thereafter

21,809

Total undiscounted cash flows

89,211

Less imputed interest

(11,055)

Lease obligations under operating leases

$

78,156

Operating lease expense included in the consolidated statements of income was $5.1 million and $9.8 million for the three and six-month periods ended June 30, 2019, respectively. Cash paid related to operating lease obligations was $5.1 million and $9.9 million for the three and six-month periods ended June 30, 2019, respectively. Variable lease costs were not material for the three and six-month periods ended June 30, 2019. Short-term lease expense included in the consolidated statements of income was $5.4 million and $9.8 million for the three and six-month periods ended June 30, 2019, respectively. Right-of-use assets obtained in exchange for new operating lease liabilities during the three and six-month periods ended June 30, 2019 were $9.9 million.

Note 4. Earnings Per Share

Basic earnings per share is based on the weighted average shares of common stock outstanding during the period. Diluted earnings per share assumes the weighted average dilutive effect of common share equivalents outstanding during the period applied to the company’s basic earnings per share. Common share equivalents represent potentially dilutive restricted stock units, deferred stock units, restricted stock, and performance awards, and are excluded from the computation in periods in which they have an anti-dilutive effect. There were no anti-dilutive common share equivalents as of or for the three and six-month periods ended June 30, 2019 and 2018.

Three Months Ended June 30,

2019

2018

Weighted

Weighted

Average

Average

Net Income

Shares

Per Share

Net Income

Shares

Per Share

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount

Basic earnings per share

$

194,302

221,505

$

0.88

$

362,449

235,617

$

1.54

Dilutive common share equivalents

-

1,014

-

1,328

Diluted earnings per share

$

194,302

222,519

$

0.87

$

362,449

236,945

$

1.53

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 4. Earnings Per Share (Continued)

Six Months Ended June 30,

2019

2018

Weighted

Weighted

Average

Average

Net Income

Shares

Per Share

Net Income

Shares

Per Share

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount

Basic earnings per share

$

398,630

222,781

$

1.79

$

590,000

236,120

$

2.50

Dilutive common share equivalents

-

960

-

1,214

Diluted earnings per share

$

398,630

223,741

$

1.78

$

590,000

237,334

$

2.49

Note 5. Inventories

Inventories are stated at lower of cost or net realizable value. Cost is determined using a weighted average cost method for raw materials and supplies, and on a first-in, first-out basis for other inventory. Inventory consisted of the following (in thousands):

June 30,

December 31,

2019

2018

Raw materials

$

784,415

$

810,766

Supplies

471,957

436,828

Work in progress

149,580

195,224

Finished goods

396,807

416,350

Total inventories

$

1,802,759

$

1,859,168

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 6. Changes in Equity

The following tables provide a reconciliation of the beginning and ending carrying amounts of total equity, equity attributable to stockholders of Steel Dynamics, Inc., and equity and redeemable amounts attributable to noncontrolling interests (in thousands) for the three and six-month periods ended June 30, 2019 and 2018:

Stockholders of Steel Dynamics, Inc.