Steel Dynamics Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

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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, 2020

☐ 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).

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 July 31, 2020, Registrant had 210,364,813 outstanding shares of common stock.

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STEEL DYNAMICS, INC.

Table of Contents


PART I. Financial Information

Item 1.	Financial Statements:	Page

	Consolidated Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019	1

	Consolidated Statements of Income for the three and six-month periods ended June 30, 2020 and 2019 (unaudited)	2

	Consolidated Statements of Comprehensive Income for the three and six-month periods ended June 30, 2020 and 2019 (unaudited)	3

	Consolidated Statements of Cash Flows for the three and six-month periods ended June 30, 2020 and 2019 (unaudited)	4

	Notes to Consolidated Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22

Item 4.	Controls and Procedures	23



	PART II. Other Information

Item 1.	Legal Proceedings	24

Item 1A.	Risk Factors	24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3.	Defaults Upon Senior Securities	25

Item 4.	Mine Safety Disclosures	25

Item 5.	Other Information	25

Item 6.	Exhibits	26

Exhibit Index		26

Signature		28

Table of Contents

STEEL DYNAMICS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)



	June 30,		December 31,
	2020		2019
Assets	(unaudited)
Current assets
Cash and equivalents	$	1,496,458	$	1,381,460
Short-term investments		69,546		262,174
Accounts receivable, net		841,593		841,378
Accounts receivable-related parties		2,463		2,958
Inventories		1,567,017		1,689,043
Other current assets		39,043		76,012
Total current assets		4,016,120		4,253,025

Property, plant and equipment, net		3,587,450		3,135,886

Intangible assets, net		313,520		327,901
Goodwill		451,220		452,915
Other assets		100,031		106,038
Total assets	$	8,468,341	$	8,275,765
Liabilities and Equity
Current liabilities
Accounts payable	$	696,845	$	509,687
Accounts payable-related parties		5,087		3,657
Income taxes payable		25,411		2,014
Accrued payroll and benefits		148,055		208,287
Accrued interest		11,859		18,292
Accrued expenses		154,243		175,405
Current maturities of long-term debt		73,926		89,356
Total current liabilities		1,115,426		1,006,698

Long-term debt		2,636,722		2,644,988
Deferred income taxes		503,034		484,169
Other liabilities		73,237		75,055
Total liabilities		4,328,419		4,210,910

Commitments and contingencies

Redeemable noncontrolling interests		152,414		143,614

Equity
Common stock voting, $.0025 par value; 900,000,000 shares authorized;
266,072,787 and 266,072,787 shares issued; and 210,364,813 and 214,502,639
shares outstanding, as of June 30, 2020 and December 31, 2019, respectively		646		646
Treasury stock, at cost; 55,707,974 and 51,570,148 shares,
as of June 30, 2020 and December 31, 2019, respectively		(1,623,855)		(1,525,113)
Additional paid-in capital		1,191,614		1,181,012
Retained earnings		4,576,629		4,419,296
Accumulated other comprehensive income (loss)		216		(7)
Total Steel Dynamics, Inc. equity		4,145,250		4,075,834
Noncontrolling interests		(157,742)		(154,593)
Total equity		3,987,508		3,921,241
Total liabilities and equity	$	8,468,341	$	8,275,765

See notes to consolidated financial statements.

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STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019

Net sales
Unrelated parties	$	2,092,964	$	2,766,364	$	4,664,508	$	5,580,850
Related parties		1,341		4,151		4,897		7,100
Total net sales		2,094,305		2,770,515		4,669,405		5,587,950

Costs of goods sold		1,809,874		2,349,349		3,969,745		4,733,214
Gross profit		284,431		421,166		699,660		854,736

Selling, general and administrative expenses		109,299		106,250		222,197		217,288
Profit sharing		9,092		22,871		30,546		46,548
Amortization of intangible assets		7,190		7,013		14,381		14,026
Operating income		158,850		285,032		432,536		576,874

Interest expense, net of capitalized interest		27,702		32,321		55,721		63,443
Other (income) expense, net		28,103		(4,249)		25,514		(10,592)
Income before income taxes		103,045		256,960		351,301		524,023

Income tax expense		24,280		60,214		81,700		122,450
Net income		78,765		196,746		269,601		401,573

Net income attributable to noncontrolling interests		(3,269)		(2,444)		(6,765)		(2,943)
Net income attributable to Steel Dynamics, Inc.	$	75,496	$	194,302	$	262,836	$	398,630



Basic earnings per share attributable to Steel Dynamics,
Inc. stockholders	$	0.36	$	0.88	$	1.24	$	1.79

Weighted average common shares outstanding		210,343		221,505		211,798		222,781

Diluted earnings per share attributable to Steel Dynamics, Inc.
stockholders, including the effect of assumed conversions
when dilutive	$	0.36	$	0.87	$	1.24	$	1.78

Weighted average common shares and share equivalents outstanding		211,378		222,519		212,701		223,741

Dividends declared per share	$	0.25	$	0.24	$	0.50	$	0.48

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,
	2020		2019		2020		2019

Net income	$	78,765	$	196,746	$	269,601	$	401,573
Other comprehensive income (loss) - net unrealized gain (loss) on
cash flow hedging derivatives, net of income tax		186		(52)		223		(223)
Comprehensive income		78,951		196,694		269,824		401,350

Comprehensive income attributable to noncontrolling interests		(3,269)		(2,444)		(6,765)		(2,943)
Comprehensive income attributable to Steel Dynamics, Inc.	$	75,682	$	194,250	$	263,059	$	398,407

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,
	2020		2019		2020		2019

Operating activities:
Net income	$	78,765	$	196,746	$	269,601	$	401,573

Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization		78,721		80,911		158,980		161,085
Equity-based compensation		9,520		9,080		27,364		24,388
Deferred income taxes		14,634		11,550		20,561		23,641
Other adjustments		4,728		(564)		4,464		164
Changes in certain assets and liabilities:
Accounts receivable		154,352		70,624		280		9,562
Inventories		77,521		64,941		122,026		104,410
Other assets		11,137		7,292		9,596		7,593
Accounts payable		69,523		(58,484)		121,119		(55,278)
Income taxes receivable/payable		7,993		(36,428)		60,378		13,422
Accrued expenses		(20,884)		15,805		(97,078)		(147,534)
Net cash provided by operating activities		486,010		361,473		697,291		543,026

Investing activities:
Purchases of property, plant and equipment		(309,716)		(85,120)		(527,251)		(139,556)
Purchases of short-term investments		-		(49,465)		(149,359)		(99,142)
Proceeds from maturities of short-term investments		149,648		109,034		341,988		213,771
Acquisition of business, net of cash and restricted cash acquired		-		-		-		(93,412)
Other investing activities		803		913		1,321		1,277
Net cash used in investing activities		(159,265)		(24,638)		(333,301)		(117,062)

Financing activities:
Issuance of current and long-term debt		1,099,774		125,222		1,316,035		246,456
Repayment of current and long-term debt		(1,103,814)		(133,875)		(1,339,571)		(249,146)
Dividends paid		(52,584)		(53,503)		(104,065)		(95,742)
Purchases of treasury stock		-		(93,136)		(106,529)		(177,444)
Other financing activities		(8,763)		(12)		(14,915)		(5,732)
Net cash used in financing activities		(65,387)		(155,304)		(249,045)		(281,608)

Increase in cash, cash equivalents, and restricted cash		261,358		181,531		114,945		144,356
Cash, cash equivalents, and restricted cash at beginning of period		1,240,984		797,248		1,387,397		834,423

Cash, cash equivalents, and restricted cash at end of period	$	1,502,342	$	978,779	$	1,502,342	$	978,779


Supplemental disclosure information:
Cash paid for interest	$	59,668	$	53,981	$	68,453	$	62,587
Cash paid for income taxes, net	$	1,430	$	84,516	$	1,948	$	86,355

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, 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 coating and processing lines. Steel operations accounted for 78% and 76% of the company’s consolidated external net sales during the three months ended June 30, 2020 and 2019, and 76% of the company's consolidated external net sales during the six months ended June 30, 2020 and 2019.

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 7% and 12% of the company’s consolidated external net sales during the three months ended June 30, 2020 and 2019, respectively, and 10% and 12% of the company’s consolidated external net sales during the six months ended June 30, 2020 and 2019, 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 9% of the company’s consolidated external net sales during the three months ended June 30, 2020 and 2019, respectively and 9% and 8% of the company’s consolidated external net sales during the six months ended June 30, 2020 and 2019, 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 unsecured 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 or controlled subsidiaries, after elimination of intercompany accounts and transactions. Noncontrolling and redeemable noncontrolling interests represent the noncontrolling owner’s proportionate share in the equity, income, or losses of the company’s majority-owned or 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; allowances for credit losses 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, 2019.

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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 and equivalents 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 $5.9 million, $5.5 million, $5.9 million, $6.2 million, $5.8 million, and $6.2 million at June 30, 2020, March 31, 2020, December 31, 2019, June 30, 2019, March 31, 2019, and December 31, 2018, 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 June 30, 2020, and December 31, 2019, (in thousands):



	June 30,		December 31,
	2020		2019

Steel Operations Segment	$	272,133	$	272,133
Metals Recycling Operations Segment		177,162		178,857
Steel Fabrication Operations Segment		1,925		1,925
	$	451,220	$	452,915

Metals Recycling Operations Segment goodwill decreased $1.7 million from December 31, 2019 to June 30, 2020, in recognition of the 2020 tax benefit related to the normal amortization of the component of OmniSource tax-deductible goodwill in excess of book goodwill.

Credit Losses

ASU 2016-13, Financial Instruments - Credit Losses and its subsequent corresponding updates (ASC 326), requires an entity to use a forward-looking expected loss model versus the incurred loss model for most financial instruments, including accounts receivable. The company adopted ASC 326 effective January 1, 2020, using the modified retrospective transition method, with no impact on the company’s financial position, results of operations or cash flows.

The company is exposed to credit risk in the event of nonpayment of accounts receivable by customers. The company mitigates its exposure to credit risk, which it generally extends on an unsecured basis, by performing ongoing credit evaluations and taking further action if necessary, such as requiring letters of credit or other security interests to support the customer receivable. The allowance for credit losses for accounts receivable is based on the company’s reasonable estimate of known credit risks and historical experience, adjusted for current and anticipated economic and other pertinent factors affecting the company’s customers, that may differ from historical experience. Customer accounts receivable are written off when all collection efforts have been exhausted and the amounts are deemed uncollectible.

At June 30, 2020, we reported $844.1 million of accounts receivable, net of allowances for credit losses of $7.7 million. Changes in the allowance were not material for the three and six-month periods ended June 30, 2020.

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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 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, 2020 and 2019.



	Three Months Ended June 30,
	2020						2019
			Weighted						Weighted
			Average						Average
	Net Income		Shares		Per Share		Net Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount		(Numerator)		(Denominator)		Amount
Basic earnings per share	$	75,496		210,343	$	0.36	$	194,302		221,505	$	0.88
Dilutive common share equivalents		-		1,035				-		1,014
Diluted earnings per share	$	75,496		211,378	$	0.36	$	194,302		222,519	$	0.87

Six Months Ended June 30,

2020

2019

Weighted

Average

Net Income

Shares

Per Share

Net Income

Shares

Per Share

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount

Basic earnings per share

262,836

211,798

1.24

398,630

222,781

1.79

Dilutive common share equivalents

903

Price	29.38	EPS	4
Shares	222	P/E	8
MCap	6,528	P/FCF	7
Net Debt	1,348	EBIT	1,114
TEV	7,877	TEV/EBIT	7
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-08-10
10-Q	2020-03-31	Filed 2020-05-11
10-K	2019-12-31	Filed 2020-02-27
10-Q	2019-09-30	Filed 2019-10-31
10-Q	2019-06-30	Filed 2019-08-09
10-Q	2019-03-31	Filed 2019-05-10
10-K	2018-12-31	Filed 2019-02-27
10-Q	2018-09-30	Filed 2018-11-07
10-Q	2018-06-30	Filed 2018-08-09
10-Q	2018-03-31	Filed 2018-05-09
10-K	2017-12-31	Filed 2018-02-27
10-Q	2017-09-30	Filed 2017-11-09
10-Q	2017-06-30	Filed 2017-08-07
10-Q	2017-03-31	Filed 2017-05-08
10-K	2016-12-31	Filed 2017-02-28
10-Q	2016-09-30	Filed 2016-11-09
10-Q	2016-06-30	Filed 2016-08-05
10-Q	2016-03-31	Filed 2016-05-06
10-K	2015-12-31	Filed 2016-02-26
10-Q	2015-09-30	Filed 2015-11-06
10-Q	2015-06-30	Filed 2015-08-10
10-Q	2015-03-31	Filed 2015-05-11
10-K	2014-12-31	Filed 2015-03-02
10-Q	2014-09-30	Filed 2014-11-10
10-Q	2014-06-30	Filed 2014-08-08
10-Q	2014-03-31	Filed 2014-05-08
10-K	2013-12-31	Filed 2014-03-03
10-Q	2013-09-30	Filed 2013-11-08
10-Q	2013-06-30	Filed 2013-08-07
10-Q	2013-03-31	Filed 2013-05-09
10-K	2012-12-31	Filed 2013-02-27
10-Q	2012-09-30	Filed 2012-11-07
10-Q	2012-06-30	Filed 2012-08-07
10-Q	2012-03-31	Filed 2012-05-09
10-K	2011-12-31	Filed 2012-02-27
10-Q	2011-09-30	Filed 2011-11-08
10-Q	2011-06-30	Filed 2011-08-05
10-Q	2011-03-31	Filed 2011-05-06
10-K	2010-12-31	Filed 2011-02-23
10-Q	2010-09-30	Filed 2010-11-05
10-Q	2010-06-30	Filed 2010-08-04
10-Q	2010-03-31	Filed 2010-05-07
10-K	2009-12-31	Filed 2010-02-22

8-K	2020-08-21	Other Events, Exhibits
8-K	2020-08-03	Other Events, Exhibits
8-K	2020-07-20	Earnings, Exhibits
8-K	2020-06-29	Leave Agreement
8-K	2020-06-18
8-K	2020-06-03
8-K	2020-05-22
8-K	2020-05-08
8-K	2020-04-20
8-K	2020-03-18
8-K	2020-03-02
8-K	2020-02-20
8-K	2020-01-22
8-K	2019-12-30
8-K	2019-12-16
8-K	2019-12-09
8-K	2019-12-03
8-K	2019-11-22
8-K	2019-10-16
8-K	2019-09-17
8-K	2019-08-26
8-K	2019-07-22
8-K	2019-07-22
8-K	2019-06-17
8-K	2019-05-17
8-K	2019-05-16
8-K	2019-04-22
8-K	2019-03-18
8-K	2019-03-01
8-K	2019-02-14
8-K	2019-02-01
8-K	2019-01-22
8-K	2019-01-14
8-K	2018-12-18
8-K	2018-11-26
8-K	2018-11-19
8-K	2018-10-17
8-K	2018-10-17
8-K	2018-09-18
8-K	2018-09-17
8-K	2018-09-04
8-K	2018-08-20
8-K	2018-07-23
8-K	2018-06-29
8-K	2018-06-28
8-K	2018-06-26
8-K	2018-06-15
8-K	2018-06-12
8-K	2018-05-17
8-K	2018-05-14
8-K	2018-04-18
8-K	2018-03-16
8-K	2018-02-20
8-K	2018-01-22

EX-31.1	stld-20200630xex31d1.htm
EX-31.2	stld-20200630xex31d2.htm
EX-32.1	stld-20200630xex32d1.htm
EX-32.2	stld-20200630xex32d2.htm
EX-95	stld-20200630xex95.htm

STLD 10Q Quarterly Report

Steel Dynamics Earnings 2020-06-30