Company Quick10K Filing
Steel Dynamics
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 224 $6,793
10-Q 2019-10-31 Quarter: 2019-09-30
10-Q 2019-08-09 Quarter: 2019-06-30
10-Q 2019-05-10 Quarter: 2019-03-31
10-K 2019-02-27 Annual: 2018-12-31
10-Q 2018-11-07 Quarter: 2018-09-30
10-Q 2018-08-09 Quarter: 2018-06-30
10-Q 2018-05-09 Quarter: 2018-03-31
10-K 2018-02-27 Annual: 2017-12-31
10-Q 2017-11-09 Quarter: 2017-09-30
10-Q 2017-08-07 Quarter: 2017-06-30
10-Q 2017-05-08 Quarter: 2017-03-31
10-K 2017-02-28 Annual: 2016-12-31
10-Q 2016-11-09 Quarter: 2016-09-30
10-Q 2016-08-05 Quarter: 2016-06-30
10-Q 2016-05-06 Quarter: 2016-03-31
10-K 2016-02-26 Annual: 2015-12-31
10-Q 2015-11-06 Quarter: 2015-09-30
10-Q 2015-08-10 Quarter: 2015-06-30
10-Q 2015-05-11 Quarter: 2015-03-31
10-K 2015-03-02 Annual: 2014-12-31
10-Q 2014-11-10 Quarter: 2014-09-30
10-Q 2014-08-08 Quarter: 2014-06-30
10-Q 2014-05-08 Quarter: 2014-03-31
10-K 2014-03-03 Annual: 2013-12-31
10-Q 2013-11-08 Quarter: 2013-09-30
10-Q 2013-08-07 Quarter: 2013-06-30
10-Q 2013-05-09 Quarter: 2013-03-31
10-K 2013-02-27 Annual: 2012-12-31
10-Q 2012-11-07 Quarter: 2012-09-30
10-Q 2012-08-07 Quarter: 2012-06-30
10-Q 2012-05-09 Quarter: 2012-03-31
10-K 2012-02-27 Annual: 2011-12-31
10-Q 2011-11-08 Quarter: 2011-09-30
10-Q 2011-08-05 Quarter: 2011-06-30
10-Q 2011-05-06 Quarter: 2011-03-31
10-K 2011-02-23 Annual: 2010-12-31
10-Q 2010-11-05 Quarter: 2010-09-30
10-Q 2010-08-04 Quarter: 2010-06-30
10-Q 2010-05-07 Quarter: 2010-03-31
10-K 2010-02-22 Annual: 2009-12-31
8-K 2020-01-22 Earnings, Exhibits
8-K 2019-12-30 Leave Agreement, Exhibits
8-K 2019-12-16 Regulation FD, Exhibits
8-K 2019-12-09 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2019-12-03 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2019-11-22 Other Events, Exhibits
8-K 2019-09-17 Other Events, Exhibits
8-K 2019-08-26 Other Events, Exhibits
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 2019-03-01 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 2019-01-14 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
STLD 2019-09-30
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 ex-31d1.htm
EX-31.2 ex-31d2.htm
EX-32.1 ex-32d1.htm
EX-32.2 ex-32d2.htm

Steel Dynamics Earnings 2019-09-30

STLD 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
STLD 6,793 7,858 3,810 11,715 2,062 1,069 1,875 8,314 18% 4.4 14%
PKX 4,260 78,776,991 32,104,377 0 0 0 0 2,592 0%
ATI 3,537 5,549 3,411 4,143 617 195 358 4,793 15% 13.4 4%
X 2,621 11,291 6,979 14,464 1,689 1,005 1,386 4,284 12% 3.1 9%
CRS 2,244 3,188 1,668 2,380 445 167 364 2,767 19% 7.6 5%
WOR 2,219 2,511 1,562 3,760 480 163 340 2,880 13% 8.5 7%
GGB 2,145 51,281 25,342 0 0 0 0 2,139 0%
CMC 1,817 3,767 2,203 5,594 734 164 442 3,002 13% 6.8 4%
ROCK 1,272 907 277 1,011 231 59 102 1,190 23% 11.7 6%
MTL 833 317,625 550,820 0 0 0 0 833 0%

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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 September 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, $0.0025 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 October 28, 2019, Registrant had 215,452,169 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 September 30, 2019 (unaudited) and December 31, 2018

1

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

2

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

3

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

4

Notes to Consolidated Financial Statements (unaudited)

5

Item 2.

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

20

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

27

Item 4.

Controls and Procedures

27

PART II. Other Information

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3.

Defaults Upon Senior Securities

28

Item 4.

Mine Safety Disclosures

28

Item 5.

Other Information

28

Item 6.

Exhibits

29

Exhibit Index

29

Signature

30

Table of Contents

STEEL DYNAMICS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

September 30,

December 31,

2019

2018

Assets

(unaudited)

Current assets

Cash and equivalents

$

1,146,007

$

828,220

Short-term investments

69,529

228,783

Accounts receivable, net

983,515

1,040,220

Accounts receivable-related parties

3,431

3,536

Inventories

1,767,020

1,859,168

Other current assets

50,818

72,730

Total current assets

4,020,320

4,032,657

Property, plant and equipment, net

3,031,731

2,945,767

Intangible assets, net

249,598

270,328

Goodwill

540,913

429,645

Other assets

100,685

25,166

Total assets

$

7,943,247

$

7,703,563

Liabilities and Equity

Current liabilities

Accounts payable

$

518,909

$

536,743

Accounts payable-related parties

9,720

14,011

Income taxes payable

2,074

7,468

Accrued payroll and benefits

181,785

264,542

Accrued interest

47,945

25,526

Accrued expenses

162,692

146,613

Current maturities of long-term debt

82,150

24,234

Total current liabilities

1,005,275

1,019,137

Long-term debt

2,355,243

2,352,489

Deferred income taxes

468,248

435,838

Other liabilities

70,126

8,870

Total liabilities

3,898,892

3,816,334

Commitments and contingencies

Redeemable noncontrolling interests

143,614

111,240

Equity

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

265,553,499 and 265,822,402 shares issued; and 215,740,572 and 225,272,174

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

645

645

Treasury stock, at cost; 49,812,927 and 40,550,228 shares,

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

(1,469,078)

(1,184,243)

Additional paid-in capital

1,175,512

1,160,048

Retained earnings

4,349,523

3,958,320

Accumulated other comprehensive income

39

301

Total Steel Dynamics, Inc. equity

4,056,641

3,935,071

Noncontrolling interests

(155,900)

(159,082)

Total equity

3,900,741

3,775,989

Total liabilities and equity

$

7,943,247

$

7,703,563

See notes to consolidated financial statements.

1

Table of Contents

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Net sales

Unrelated parties

$

2,523,279

$

3,220,891

$

8,104,129

$

8,902,025

Related parties

3,566

2,656

10,666

15,922

Total net sales

2,526,845

3,223,547

8,114,795

8,917,947

Costs of goods sold

2,167,006

2,537,466

6,900,220

7,116,368

Gross profit

359,839

686,081

1,214,575

1,801,579

Selling, general and administrative expenses

107,242

102,614

324,530

310,076

Profit sharing

17,848

45,304

64,396

114,301

Amortization of intangible assets

6,704

6,591

20,730

20,346

Operating income

228,045

531,572

804,919

1,356,856

Interest expense, net of capitalized interest

31,339

31,560

94,782

94,968

Other income, net

(4,545)

(7,103)

(15,137)

(16,601)

Income before income taxes

201,251

507,115

725,274

1,278,489

Income tax expense

48,643

109,209

171,093

292,536

Net income

152,608

397,906

554,181

985,953

Net (income) loss attributable to noncontrolling interests

(1,560)

469

(4,503)

2,422

Net income attributable to Steel Dynamics, Inc.

$

151,048

$

398,375

$

549,678

$

988,375

Basic earnings per share attributable to Steel Dynamics,

Inc. stockholders

$

0.69

$

1.70

$

2.49

$

4.20

Weighted average common shares outstanding

217,873

234,208

221,145

235,483

Diluted earnings per share attributable to Steel Dynamics, Inc.

stockholders, including the effect of assumed conversions

when dilutive

$

0.69

$

1.69

$

2.47

$

4.17

Weighted average common shares and share equivalents outstanding

219,109

235,649

222,197

236,772

Dividends declared per share

$

0.2400

$

0.1875

$

0.7200

$

0.5625

See notes to consolidated financial statements.

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Table of Contents

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Net income

$

152,608

$

397,906

$

554,181

$

985,953

Other comprehensive income (loss) - net unrealized gain (loss) on

cash flow hedging derivatives, net of income tax expense (benefit)

(39)

63

(262)

(42)

Comprehensive income

152,569

397,969

553,919

985,911

Comprehensive (income) loss attributable to noncontrolling interests

(1,560)

469

(4,503)

2,422

Comprehensive income attributable to Steel Dynamics, Inc.

$

151,009

$

398,438

$

549,416

$

988,333

See notes to consolidated financial statements.

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STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Operating activities:

Net income

$

152,608

$

397,906

$

554,181

$

985,953

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization

79,470

81,383

240,555

236,638

Equity-based compensation

8,841

7,978

33,229

28,860

Deferred income taxes

11,311

23,899

34,952

45,437

Other adjustments

(1,116)

312

(952)

197

Changes in certain assets and liabilities:

Accounts receivable

85,633

(48,024)

95,195

(330,307)

Inventories

35,479

(69,885)

139,889

(240,908)

Other assets

39

(6,429)

7,632

(7,164)

Accounts payable

1,111

(14,883)

(54,167)

100,368

Income taxes receivable/payable

6,293

(31,127)

19,715

55,414

Accrued expenses

64,533

79,310

(83,001)

49,920

Net cash provided by operating activities

444,202

420,440

987,228

924,408

Investing activities:

Purchases of property, plant and equipment

(154,131)

(70,668)

(293,687)

(176,477)

Purchases of short-term investments

(34,884)

(35,000)

(134,026)

(125,000)

Proceeds from maturities of short-term investments

79,508

10,000

293,279

10,000

Acquisition of business, net of cash and restricted cash acquired

(3,694)

(37,589)

(97,106)

(433,998)

Other investing activities

2,746

576

4,023

1,462

Net cash used in investing activities

(110,455)

(132,681)

(227,517)

(724,013)

Financing activities:

Issuance of current and long-term debt

128,230

110,041

374,686

327,670

Repayment of current and long-term debt

(119,988)

(115,039)

(369,134)

(346,162)

Dividends paid

(52,751)

(44,081)

(148,493)

(125,146)

Purchases of treasury stock

(114,950)

(74,965)

(292,394)

(193,379)

Other financing activities

(1,527)

-

(7,259)

(8,324)

Net cash used in financing activities

(160,986)

(124,044)

(442,594)

(345,341)

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

172,761

163,715

317,117

(144,946)

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

978,779

726,424

834,423

1,035,085

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

$

1,151,540

$

890,139

$

1,151,540

$

890,139

Supplemental disclosure information:

Cash paid for interest

$

9,115

$

8,643

$

71,702

$

70,498

Cash paid for income taxes, net

$

29,794

$

119,802

$

116,149

$

198,752

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 77% of the company’s consolidated external net sales during the three months ended September 30, 2019 and 2018, respectively, and 76% and 75% during the nine months ended September 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 11% and 12% of the company’s consolidated external net sales during the three months ended September 30, 2019 and 2018, respectively, and 12% and 14% during the nine months ended September 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 10% and 8% of the company’s consolidated external net sales during the three months ended September 30, 2019 and 2018, respectively, and 9% and 8% of the company’s consolidated external net sales during the nine months ended September 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 $5.5 million, $6.2 million, $6.2 million, $5.8 million, $6.0 million, and $6.4 million at September 30, 2019, June 30, 2019, December 31, 2018, September 30, 2018, June 30, 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 at September 30, 2019, and December 31, 2018, (in thousands):

September 30,

December 31,

2019

2018

Steel Operations Segment

$

359,283

$

245,473

Metals Recycling Operations Segment

179,705

182,247

Steel Fabrication Operations Segment

1,925

1,925

$

540,913

$

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 $113.8 million of goodwill has been recorded in the Steel Operations Segment at September 30, 2019. Metals Recycling Operations segment goodwill decreased $2.5 million from December 31, 2018 to September 30, 2019, in recognition of the 2019 tax benefit related to the normal amortization of the component of 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, and it’s subsequent corresponding updates: 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 anticipates adopting ASU 2016-13 on January 1, 2020. The company is working through its adoption plan to evaluate policies, processes and systems to determine 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, plus a customary working capital transaction purchase price adjustment of $3.7 million in September 2019. 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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Table of Contents

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, and updated in September 2019 upon the final working capital adjustment, as presented below. The following allocation of the purchase price (in thousands) is preliminary based on the information available 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 valuations of identifiable intangible assets, if any, and thus goodwill. The company anticipates finalizing the valuation of identifiable intangible assets by December 31, 2019.

September 30,

2019 Allocation

Adjustments

Initial Allocation

Current assets, net of cash acquired

$

86,236

$

(7,784)

$

94,020

Property, plant & equipment

7,388

-

7,388

Intangible assets and goodwill

113,810

11,892

101,918

Total assets acquired

207,434

4,108

203,326

Liabilities assumed

77,954

(3,270)

81,224

Redeemable noncontrolling interest

32,374

3,684

28,690

Net cash consideration

$

97,106

$

3,694

$

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 nine-month periods ended September 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 September 30, 2019, are as follows (in thousands):

Right of use assets under operating leases:

Other assets - noncurrent

$

74,843

Lease obligations under operating leases:

Accrued liabilities

$

17,202

Other liabilities - noncurrent

57,946

$

75,148

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Table of Contents

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 3. Leases (Continued)

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

2019 - for the remaining three months

$

19,954

2020

17,120

2021

13,719

2022

10,636

2023

7,506

Thereafter

17,095

Total undiscounted cash flows

86,030

Less imputed interest

(10,882)

Lease obligations under operating leases

$

75,148

Operating lease expense included in the consolidated statements of income was $5.2 million and $15.0 million for the three and nine months ended September 30, 2019, respectively. Cash paid related to operating lease obligations was $5.2 million and $15.1 million for the three and nine months ended September 30, 2019, respectively. Variable lease costs were not material for the three and nine months ended September 30, 2019. Short-term lease expense included in the consolidated statements of income was $5.0 million and $14.8 million for the three and nine months ended September 30, 2019, respectively. Right-of-use assets obtained in exchange for new operating lease liabilities during the three and nine months ended September 30, 2019 were $1.4 million and $11.3 million, respectively.

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 nine-month periods ended September 30, 2019 and 2018.

Three Months Ended September 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

$

151,048

217,873

$

0.69

$

398,375

234,208

$

1.70

Dilutive common share equivalents

-

1,236

-

1,441

Diluted earnings per share

$

151,048

219,109

$

0.69

$

398,375

235,649

$

1.69

8

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 4. Earnings Per Share (Continued)

Nine Months Ended September 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

$