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Steel Dynamics 10-Q 2009

Table of Contents

 

 

 

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, 2009

 

 

 

 

 

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

 

35-1929476

(State or other jurisdiction of incorporation or organization)

 

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

 

 

 

6714 Pointe Inverness Way, Suite 200, Fort Wayne, IN

 

46804

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s 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 o   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

Non-accelerated filer o

 

 

 

 

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 May 5, 2009, Registrant had 182,187,461 outstanding shares of common stock.

 

 

 



Table of Contents

 

STEEL DYNAMICS, INC.

Table of Contents

 

 

 

Page

 

 

 

 

PART I. Financial Information

 

 

 

 

Item 1.

Financial Statements:

 

 

 

 

 

Consolidated Balance Sheets as of March 31, 2009 (unaudited) and December 31, 2008

1

 

 

 

 

Consolidated Statements of Operations for the three-month periods ended March 31, 2009 and 2008 (unaudited)

2

 

 

 

 

Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2009 and 2008 (unaudited)

3

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

4

 

 

 

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

22

 

 

 

 

PART II. Other Information

 

 

 

 

Item 1.

Legal Proceedings

23

 

 

 

Item 1A.

Risk Factors

23

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

23

 

 

 

Item 3.

Defaults Upon Senior Securities

23

 

 

 

Item 4.

Submission of Matters to a Vote of Security Holders

23

 

 

 

Item 5.

Other Information

23

 

 

 

Item 6.

Exhibits

23

 

 

 

 

Signatures

25

 



Table of Contents

 

STEEL DYNAMICS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

 

 

 

March 31,

 

December 31,

 

 

 

2009

 

2008

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and equivalents

 

$

16,067

 

$

16,233

 

Accounts receivable, net

 

335,715

 

453,011

 

Accounts receivable-related parties

 

26,124

 

49,921

 

Inventories, net

 

833,074

 

1,023,235

 

Deferred income taxes

 

26,631

 

23,562

 

Income taxes receivable

 

93,475

 

86,321

 

Other current assets

 

35,725

 

57,632

 

Total current assets

 

1,366,811

 

1,709,915

 

 

 

 

 

 

 

Property, plant and equipment, net

 

2,108,657

 

2,072,857

 

 

 

 

 

 

 

Restricted cash

 

16,217

 

18,515

 

Intangible assets, net

 

551,489

 

614,786

 

Goodwill

 

812,161

 

770,438

 

Other assets

 

70,744

 

67,066

 

Total assets

 

$

4,926,079

 

$

5,253,577

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

239,355

 

$

259,742

 

Accounts payable-related parties

 

4,559

 

3,651

 

Accrued expenses

 

91,547

 

148,627

 

Accrued interest

 

58,191

 

30,874

 

Accrued payroll and benefits

 

39,492

 

34,303

 

Accrued profit sharing

 

56

 

62,561

 

Senior secured revolving credit facility, due 2012

 

231,000

 

366,000

 

Current maturities of long-term debt

 

65,450

 

65,223

 

Total current liabilities

 

729,650

 

970,981

 

 

 

 

 

 

 

Long-term debt

 

 

 

 

 

Senior secured term A loan, due 2012

 

487,700

 

503,800

 

7 3/8% senior notes, due 2012

 

700,000

 

700,000

 

6 3/4% senior notes, due 2015

 

500,000

 

500,000

 

7 3/4% senior notes, due 2016

 

500,000

 

500,000

 

Other long-term debt

 

30,314

 

15,361

 

 

 

2,218,014

 

2,219,161

 

 

 

 

 

 

 

Deferred income taxes

 

373,712

 

365,496

 

Other liabilities

 

65,759

 

65,626

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Common stock voting, $.0025 par value; 900,000,000 shares authorized; 218,771,002 and 218,733,363 shares issued; and 182,130,997 and 181,820,012 shares outstanding, as of March 31, 2009 and December 31, 2008, respectively

 

545

 

545

 

Treasury stock, at cost; 36,640,005 and 36,913,351 shares, as of March 31, 2009 and December 31, 2008, respectively

 

(734,083

)

(737,319

)

Additional paid-in capital

 

544,971

 

541,686

 

Other accumulated comprehensive loss

 

(1,073

)

(1,411

)

Retained earnings

 

1,714,310

 

1,820,385

 

Total Steel Dynamics, Inc. stockholders’ equity

 

1,524,670

 

1,623,886

 

Noncontrolling interests

 

14,274

 

8,427

 

Total stockholders’ equity

 

1,538,944

 

1,632,313

 

Total liabilities and stockholders’ equity

 

$

4,926,079

 

$

5,253,577

 

 

See notes to consolidated financial statements.

 

1



Table of Contents

 

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2009

 

2008

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

Unrelated parties

 

$

787,810

 

$

1,814,083

 

Related parties

 

26,840

 

88,122

 

Total net sales

 

814,650

 

1,902,205

 

 

 

 

 

 

 

Costs of goods sold

 

855,277

 

1,554,896

 

Gross profit (loss)

 

(40,627

)

347,309

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

57,320

 

64,865

 

Profit sharing

 

(42

)

18,507

 

Amortization of intangible assets

 

15,698

 

11,530

 

Total selling, general and administrative expenses

 

72,976

 

94,902

 

 

 

 

 

 

 

Operating income (loss)

 

(113,603

)

252,407

 

 

 

 

 

 

 

Interest expense, net capitalized interest

 

36,251

 

29,807

 

Other income, net

 

(748

)

(7,806

)

Income (loss) before income taxes

 

(149,106

)

230,406

 

 

 

 

 

 

 

Income taxes (benefit)

 

(59,332

)

87,374

 

 

 

 

 

 

 

Net income (loss)

 

(89,774

)

143,032

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling interests

 

(1,912

)

475

 

 

 

 

 

 

 

Net income (loss) attributable to Steel Dynamics, Inc.

 

$

(87,862

)

$

142,557

 

 

 

 

 

 

 

Basic earnings (loss) per share attributable to Steel Dynamics, Inc. stockholders

 

$

(.48

)

$

.75

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

182,000

 

189,039

 

 

 

 

 

 

 

Diluted earnings (loss) per share attributable to Steel Dynamics, Inc. stockholders, including the effect of assumed conversions when dilutive

 

$

(.48

)

$

.72

 

 

 

 

 

 

 

Weighted average common shares and share equivalents outstanding

 

182,000

 

199,317

 

 

 

 

 

 

 

Dividends declared per share

 

$

.10

 

$

.10

 

 

See notes to consolidated financial statements.

 

2



Table of Contents

 

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2009

 

2008

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

Net income (loss) attributable to Steel Dynamics, Inc.

 

$

(87,862

)

$

142,557

 

 

 

 

 

 

 

Adjustments to reconcile net income (loss) attributable to Steel Dynamics, Inc. to net cash provided by operating activities

 

 

 

 

 

Depreciation and amortization

 

56,963

 

53,212

 

Equity-based compensation

 

8,579

 

3,929

 

Deferred income taxes

 

7,695

 

(973

)

(Gain) loss on disposal of property, plant and equipment

 

(272

)

14

 

Noncontrolling interests

 

(1,912

)

475

 

Changes in certain assets and liabilities

 

 

 

 

 

Accounts receivable

 

141,093

 

(185,793

)

Inventories

 

193,097

 

9,575

 

Other assets

 

17,825

 

2,633

 

Accounts payable

 

(34,054

)

114,515

 

Income taxes payable

 

(4,107

)

72,608

 

Accrued expenses

 

(82,350

)

844

 

Net cash provided by operating activities

 

214,695

 

213,596

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Purchases of property, plant and equipment

 

(74,338

)

(93,764

)

Purchases of securities

 

 

(20,373

)

Other investing activities

 

(3,223

)

1,329

 

Net cash used in investing activities

 

(77,561

)

(112,808

)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Issuance of current and long-term debt

 

237,059

 

218,000

 

Repayment of current and long-term debt

 

(358,666

)

(233,214

)

Debt issuance costs

 

(453

)

(1,946

)

Issuance of common stock (net of expenses) and proceeds from exercise of stock options, including related tax effect

 

(2,058

)

7,177

 

Purchase of treasury stock

 

 

(46,128

)

Contribution from noncontrolling investor

 

5,000

 

 

Dividends paid

 

(18,182

)

(14,274

)

Net cash used in financing activities

 

(137,300

)

(70,385

)

 

 

 

 

 

 

Increase (decrease) in cash and equivalents

 

(166

)

30,403

 

Cash and equivalents at beginning of period

 

16,233

 

28,486

 

 

 

 

 

 

 

Cash and equivalents at end of period

 

$

16,067

 

$

58,889

 

 

 

 

 

 

 

Supplemental disclosure information:

 

 

 

 

 

Cash paid for interest

 

$

11,984

 

$

11,385

 

Cash paid for federal and state income taxes, net of refunds

 

$

(55,430

)

$

1,387

 

 

See notes to consolidated financial statements.

 

3



Table of Contents

 

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

Note 1.  Description of the Business, Significant Accounting Policies, and Recent Accounting Pronouncements

 

Description of the Business

 

Steel Dynamics, Inc. (SDI), together with its subsidiaries (the company), is a domestic manufacturer of steel products. The company has three reporting segments: steel operations, metals recycling and ferrous resources operations, and steel fabrication operations.

 

Steel Operations.  Steel operations include the company’s 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 company’s 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 58% of the company’s net sales during the three-month periods ended March 31, 2009 and 2008, respectively.

 

Metals Recycling and Ferrous Resources Operations. Metals recycling and ferrous resources operations primarily are composed of the company’s steel scrap procurement and processing locations, operated through the company’s wholly-owned subsidiary, OmniSource Corporation (OmniSource), as well as Iron Dynamics (IDI), the company’s iron-substitute production facility. In addition, the impact related to the construction of the Mesabi Nugget iron-making facility and future mining operations in Hoyt Lakes, Minnesota is also included in this segment.  Metals recycling and ferrous resources operations accounted for approximately 33% and 37% of the company’s net sales during the three-month periods ended March 31, 2009 and 2008, respectively.

 

Steel Fabrication Operations.  Steel fabrication operations represent the company’s New Millennium Building Systems plants located throughout the eastern United States. 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 7% and 4% of the company’s net sales during the three-month periods ended March 31, 2009 and 2008, respectively.

 

Significant Accounting Policies

 

Principles of Consolidation. The consolidated financial statements include the accounts of SDI, together with its subsidiaries, after elimination of significant intercompany accounts and transactions.  Noncontrolling interest represents the minority shareholders’ proportionate share in the equity or income of the company’s 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; unrecognized tax benefits; potential environmental liabilities, 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 company’s Annual Report on Form 10-K for the year ended December 31, 2008.

 

Uncertain Tax Positions.  The company files income tax returns in the U.S. federal jurisdiction and in various state jurisdictions. The state of Indiana completed its examination of the calendar years 2000 through 2005 in the third quarter of 2008. The company paid additional taxes of $20.7 million as a result of the examinations.  This amount was recorded as an unrecognized tax benefit when the company adopted Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48) on January 1, 2007. It is reasonably possible that the amount of unrecognized tax benefits could change in the next twelve months as a result of state income tax audits. Based on current audits in process, the payment of additional taxes could be in an amount from zero to $2.0 million during 2009, primarily related to state nexus issues. With few exceptions, the company is no longer subject to federal, state and local income tax examinations by tax authorities for years ended before 2005.

 

Included in the amount of unrecognized tax benefits at March 31, 2009, are potential benefits of $37.1 million that, if recognized, would affect the company’s effective tax rate. The company recognizes interest and penalties related to its tax contingencies on a net-of-tax basis in income tax expense. During the three months ended March 31, 2009, the company recognized interest of $329,000, net of tax, and benefits of $29,000. At March 31, 2009, the company had $7.5 million accrued for the payment of interest and penalties.

 

4



Table of Contents

 

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

Comprehensive Income (Loss) Attributable to Steel Dynamics, Inc.  The components of comprehensive income (loss) are summarized in the following table (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2009

 

2008

 

Net income (loss) attributable to Steel Dynamics, Inc.

 

$

(87,862

)

$

142,557

 

Unrealized loss on available-for-sale securities, net of tax

 

 

(1,761

)

Unrealized gain on interest rate swap, net of tax

 

338

 

 

Comprehensive income (loss) attributable to Steel Dynamics, Inc.

 

$

(87,524

)

$

140,796

 

 

Other accumulated comprehensive loss consisted of the following (in thousands):

 

 

 

March 31,

 

December 31,

 

 

 

2009

 

2008

 

Unrealized loss on interest rate swap

 

$

(1,745

)

$

(2,294

)

Tax effect

 

672

 

883

 

Total other accumulated comprehensive loss

 

$

(1,073

)

$

(1,411

)

 

Recent Accounting Pronouncements.

 

On January 1, 2009, the company adopted Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, (SFAS 157) as it relates to nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value in the financial statements on at least an annual basis. SFAS 157 defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (GAAP), and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions. The adoption of SFAS 157, as it relates to nonfinancial assets and nonfinancial liabilities, had no impact on the company’s financial statements for the three months ended March 31, 2009. The provisions of SFAS 157 will be applied at such time a fair value measurement of a nonfinancial asset or nonfinancial liability is required, which may result in a fair value that is materially different than would have been calculated prior to the adoption of SFAS 157.

 

On January 1, 2009, the company adopted SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133, (SFAS 161). SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities, including (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS 133), and (iii) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Other than the required disclosures, the adoption of SFAS 161 had no impact on the company’s financial statements.

 

On January 1, 2009, the company adopted SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51, (SFAS 160). SFAS 160 amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This standard defines a noncontrolling interest, previously called a minority interest, as the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. SFAS 160 requires, among other items, that a noncontrolling interest be included in the consolidated balance sheets within equity separate from the parent’s equity; consolidated net income to be reported at amounts inclusive of both the parent’s and noncontrolling interest’s shares and, separately, the amounts of consolidated net income attributable to the parent and noncontrolling interest all on the consolidated statements of income; and if a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be measured at fair value and a gain or loss be recognized in net income based on such fair value. The presentation and disclosure requirements of SFAS 160 were applied retrospectively. The adoption of SFAS 160 did not have a material impact on the company’s financial statements.

 

On January 1, 2009, the company adopted SFAS No. 141 (revised 2007), Business Combinations, (SFAS 141(R)), which replaces SFAS No. 141, Business Combinations, (SFAS 141) but retains the fundamental requirements in SFAS 141, including that the purchase method be used for all business combinations and for an acquirer to be identified for each business combination. This standard defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control instead of the date that the consideration is transferred. SFAS 141(R) requires an acquirer in a business combination, including business combinations achieved in stages (step acquisition), to recognize the assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. It also requires the recognition of assets acquired and liabilities assumed arising from certain contractual contingencies as of the acquisition date, measured at their acquisition-date fair values. Additionally, SFAS 141(R) requires acquisition-related costs to be expensed in the period in which the costs are incurred and the services are received instead of including such costs as part of the acquisition price. The adoption of SFAS 141(R) had no impact on the company’s financial statements.

 

5



Table of Contents

 

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

On January 1, 2009, the company adopted Financial Accounting Standards Board (FASB) Staff Position (FSP) No. FAS 142-3, Determination of the Useful Life of Intangible Assets, (FSP FAS 142-3). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets, (SFAS 142) in order to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R) and other GAAP. The adoption of FSP FAS 142-3 had no impact on the company’s financial statements.

 

On January 1, 2009, the company adopted FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, (FSP EITF 03-6-1). FSP EITF 03-6-1 states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The adoption of FSP EITF 03-6-1 had no impact on the company’s financial statements.

 

The company adopted FSP 107-1, Disclosures About Fair Value of Financial Instruments, as of March 31, 2009. FSP 107-1 requires disclosures about fair value of all financial instruments for interim reporting periods. The applicable disclosures are included in Note 8 to the company’s financial statements included in this filing. The adoption of FSP 107-1 had no impact on the company’s financial statements.

 

Note 2.  Acquisition.

 

On June 9, 2008, the company completed its acquisition of Recycle South, one of the nation’s largest, privately-held, regional scrap metal recycling companies, headquartered in Spartanburg, South Carolina.  OmniSource (which already owned 25% of Recycle South), acquired the remaining 75% equity interest for a purchase price of approximately $376.3 million.  The company paid approximately $236.6 million in cash, including transaction costs, and issued 3,938,000 shares of Steel Dynamics, Inc. common stock valued at $139.8 million.  In addition, the company assumed $144.9 million of net debt, of which approximately $142.8 million was repaid upon the closing of the acquisition. The cash portion of the acquisition was funded from the company’s available cash which included proceeds from the issuance of the $500 million 7¾% senior notes due April 2016.  The company valued the common stock issued at $35.49 per share based on the average stock price of the company’s common stock during the two days before and after the date the acquisition was agreed to and announced (May 8, 2008).

 

The company purchased Recycle South to expand its metals recycling business. Recycle South provides a significant presence in the southeastern United States through its 22 locations within North Carolina, South Carolina and Georgia.  Recycle South’s consolidated operating results have been reflected in the company’s financial statements since June 9, 2008, in the metals recycling and ferrous resources reporting segment.

 

The purchase price of $376.3 million for the remaining 75% equity interest in Recycle South, combined with the 25% interest owned pursuant to the OmniSource acquisition, results in an aggregate purchase price of $501.8 million.  During the first quarter of 2009, the company adjusted the initial purchase price allocation to reflect additional refinement in valuation of the acquisition. The following allocation of the purchase price is still preliminary, and is subject to adjustments based on further determination of actual acquisition costs and the fair values, lives, and amortization methods of the acquired assets, assumed liabilities and identifiable intangible assets (in thousands):

 

 

 

December 31,
2008

 

Adjustments

 

March 31,
2009

 

Current assets

 

$

213,513

 

$

 

$

213,513

 

Property, plant & equipment

 

94,484

 

4,919

 

99,403

 

Intangible assets

 

155,000

 

(48,000

)

107,000

 

Goodwill

 

272,355

 

42,880

 

315,235

 

Other assets

 

5,406

 

 

5,406

 

Total assets acquired

 

740,758

 

(201

)

740,557

 

 

 

 

 

 

 

 

 

Current liabilities, excluding debt

 

94,015

 

(201

)

93,814

 

Debt

 

144,947

 

 

144,947

 

Total liabilities assumed

 

238,962

 

(201

)

238,761

 

 

 

 

 

 

 

 

 

Net assets acquired

 

$

501,796

 

$

 

$

501,796

 

 

Preliminary goodwill and intangible assets of $315.2 million and $107.0 million, respectively, were recorded as a result of the acquisition. The goodwill is deductible for tax purposes.

 

6



Table of Contents

 

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

The preliminary valuation of identifiable intangible assets related to the acquisition consisted of the following (in thousands):

 

 

 

Amount

 

Useful Life

 

Customer relationships

 

$

21,000

 

20 years

 

Scrap generator relationships

 

57,000

 

20 years

 

Trademarks

 

16,000

 

3 years

 

Covenants not to compete

 

13,000

 

5 years

 

 

 

$

107,000

 

 

 

 

The company utilizes an accelerated amortization methodology for customer and scrap generator relationships in order to follow the pattern in which the economic benefits of the intangible assets are anticipated to be consumed.  Finite-lived trademarks and covenants not to compete are amortized using a straight line methodology. The related aggregate amortization expense recognized for the three-month period ended March 31, 2009 was $7.3 million.  The estimated intangible asset amortization expense related to the total acquisition of Recycle South for the next five years and thereafter follows (in thousands):

 

2009 (including January 1 to March 31)

 

$

18,367

 

2010

 

14,883

 

2011

 

11,361

 

2012

 

9,394

 

2013

 

7,277

 

Thereafter

 

41,714

 

Total

 

$

102,996

 

 

Unaudited Pro Forma Information.  The following unaudited pro forma information is presented below as if the acquisition of Recycle South (effective on June 9, 2008) had occurred as of January 1, 2008 (in thousands, except per share amounts):

 

 

 

Three Months Ended

 

 

 

March 31, 2008

 

 

 

 

 

Net sales

 

$

2,071,091

 

Net income attributable to Steel Dynamics, Inc.

 

149,752

 

 

 

 

 

Basic earnings per share attributable to Steel Dynamics, Inc. stockholders

 

$

.78

 

Diluted earnings per share attributable to Steel Dynamics, Inc. stockholders

 

.74

 

 

The information presented above is for information purposes only and is not necessarily indicative of the actual results that could have occurred had the acquisition been consummated at January 1, 2008, nor is it necessarily indicative of future operating results of the combined companies under the ownership and management of the company.  The pro forma results reflect the inclusion of the acquired operations of Recycle South for the three-month period ended March 31, 2008, The actual results of Recycle South for the three-month period ended March 31, 2009 are included in the consolidated results of the company.

 

Note 3.  Earnings Per Share

 

The company computes and presents earnings per common share in accordance with FASB Statement No. 128, 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, in addition to the above, the weighted average dilutive effect of common share equivalents outstanding during the period.  Common share equivalents represent dilutive stock options and dilutive shares related to the company’s convertible subordinated debt and are excluded from the computation in periods in which they have an anti-dilutive effect.

 

7



Table of Contents

 

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED

 

The following table presents a reconciliation of the numerators and the denominators of the company’s basic and diluted earnings per share computations for net income (loss) attributable to Steel Dynamics, Inc. (in thousands, except per share data):

 

 

 

Three Months Ended March 31,

 

 

 

2009

 

2008

 

 

 

Net Loss
(Numerator)

 

Shares
(Denominator)

 

Per Share
Amount

 

Net Income
(Numerator)

 

Shares
(Denominator)

 

Per Share
Amount

 

Basic earnings per share

 

$

(87,862

)

182,000

 

$

(.48

)

$

142,557

 

189,039

 

$

.75

 

Dilutive stock option effect

 

 

 

 

 

 

1,516

 

 

 

Convertible subordinated 4.0% notes

 

 

 

 

 

212

 

8,762

 

 

 

Diluted earnings per share

 

$

(87,862

)

182,000

 

$

(.48

)

$

142,769

 

199,317

 

$

.72

 

 

As of March 31, 2009, all of the company’s convertible subordinated 4.0% notes have been converted. Options to purchase 2.1 million shares were anti-dilutive at March 31, 2009.  No options were excluded at March 31, 2008.

 

Note 4.  Inventories

 

Inventories are stated at lower of cost or market.  Cost is determined principally on a first-in, first-out basis.  The inventories at March 31, 2009 reflect a lower of cost or market reserve of $83.3 million. The Company recorded lower of cost or market adjustments of $36.6 million to certain inventories at December 31, 2008. Inventory consisted of the following, of which all ferrous materials residing at both the steel and metals recycling operations are included in raw materials (in thousands):

 

 

 

March 31,

 

December 31,

 

 

 

 

 

 

 

 

 

 

 

2009

 

2008

 

 

 

 

 

 

 

 

 

Raw materials

 

$

380,652

 

$

554,815

 

 

 

 

 

 

 

 

 

Supplies

 

235,952

 

224,710

 

 

 

 

 

 

 

 

 

Work-in-progress

 

43,289

 

57,489

 

 

 

 

 

 

 

 

 

Finished goods

 

173,181

 

186,221

 

 

 

 

 

 

 

 

 

Total inventories, net

 

$

833,074

 

$

1,023,235

 

 

 

 

 

 

 

 

 

 

Note 5.  Long-Term Debt

 

Senior Secured Credit Facility

 

The company’s senior secured credit agreement contains financial covenants and other covenants that limit or restrict the company’s 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. The company’s ability to borrow funds within the terms of the revolver is dependent upon its continued compliance with its financial covenants and other covenants contained in the senior secured credit agreement. The financial covenants state that the company must maintain at all times an interest coverage ratio of not less than 2.00:1.00 and must maintain a total debt to consolidated last-twelve-months trailing EBITDA (earnings before interest, taxes, depreciation, amortization, and certain other non-cash transaction adjustments as defined in the credit agreement) ratio of not more than 5.00:1.00. If the total debt to EBITDA ratio exceeds 3.50:1.00, then the ability of the company to make restricted payments as defined in the credit agreement (which includes cash dividends to stockholders and share purchases, among other things), is limited to $25 million per quarter.

 

The company was in compliance with these covenants at March 31, 2009, with an interest coverage ratio of 5.41 and total debt to EBITDA ratio of 2.81.  However, based on the current economic environment and the company’s outlook, the company believes it may be in violation of its financial covenants during 2009, which if not resolved, could also constitute a cross default under other debt instruments. The company is considering a number of alternatives to address this situation, including but not limited to obtaining a waiver from its bank group. The company may incur additional costs related to these alternatives.

 

8



Table of Contents

 

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

Note 6. Changes in Stockholders’ Equity

 

The following table provides a reconciliation of the beginning and ending carrying amounts of total stockholders’ equity, equity attributable to stockholders of Steel Dynamics, Inc. and equity attributable to the noncontrolling interests (in thousands):

 

 

 

 

 

Stockholders of Steel Dynamics, Inc.

 

 

 

 

 

 

 

Common

 

Additional Paid-In

 

Retained

 

Other
Accumulated
Comprehensive

 

Treasury

 

Noncontrolling

 

 

 

Total

 

Stock

 

Capital

 

Earnings

 

Income (Loss)

 

Stock

 

Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at January 1, 2009

 

$

1,632,313

 

$

545

 

$

541,686

 

$

1,820,385

 

$

(1,411

)

$

(737,319

)

$

8,427

 

Issuance of common stock (net of expenses) and proceeds from exercise of stock options, including related tax effect

 

(2,058

)

 

(2,058

)

 

 

 

 

Dividends declared

 

(18,213

)

 

 

(18,213

)

 

 

 

Contributions from noncontrolling investor

 

5,000

 

 

 

 

 

 

5,000

 

Tax adjustment to noncontrolling interest

 

2,759

 

 

 

 

 

 

2,759

 

Equity-based compensation

 

8,579

 

 

5,343

 

 

 

3,236

 

 

Comprehensive income and net loss attributable to Steel Dynamics, Inc.

 

(89,436

)

 

 

(87,862

)

338

 

 

(1,912

)

Balances at March 31, 2009

 

$

1,538,944

 

$

545

 

$

544,971

 

$

1,714,310

 

$

(1,073

)

$

(734,083

)

$

14,274

 

 

Note 7.  Derivative Financial Instruments

 

Financial Accounting Standards Board Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (FAS 133) requires companies to recognize all of their derivative instruments as either assets or liabilities in the balance sheet at fair value. The accounting for changes in fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship, and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge or a cash flow hedge.

 

The company is exposed to certain risks relating to its ongoing business operations. The primary risks mitigated by using derivative instruments by the company are commodity margin risk, interest rate risk, and foreign currency exchange rate risk. Forward contracts on various commodities are entered into to manage the price risk associated with forecasted purchases and sales of non-ferrous materials from the company’s metals recycling and ferrous resources operations. Interest rate swaps are entered into to manage interest rate risk associated with the company’s fixed and floating-rate borrowings. Forward exchange contracts on various foreign currencies are entered into to manage the foreign currency exchange rate risk as necessary.

 

In accordance with FAS 133, the company designated its interest rate swap as a cash flow hedge of floating-rate borrowings. Forward contracts on various commodities and forward exchange contracts on various foreign currencies are not designated as hedging instruments.

 

Cash Flow Hedging Strategy.  For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings (e.g., in “interest expense” when the hedged transactions are interest cash flows associated with floating-rate borrowings). The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (i.e., the ineffectiveness portion), or hedge components excluded from the assessment of effectiveness, are recognized in the statement of operations during the current period.

 

9



Table of Contents

 

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

Commodity futures contracts.  The following summarizes the company’s commodity futures contract commitments as of March 31, 2009 (MT represents metric tons and Lbs represents pounds):

 

Commodity

 

Long/Short

 

Total

 

Aluminum

 

Long

 

10,425

MT

Aluminum

 

Short

 

9,600

MT

Copper

 

Long

 

14,413

MT

Copper

 

Short

 

5,803

MT

Nickel

 

Long

 

138

MT

Nickel

 

Short

 

954

MT

Silver

 

Short

 

1,029

Lbs

 

The following summarizes the location and amounts of the fair values and gains related to derivatives included in the company’s financial statements as of March 31, 2009 and December 31, 2008, and for the three-month periods ended March 31, 2009 and 2008 (in thousands):

 

 

 

Location in Consolidated Balance Sheets

 

Fair Value
March 31, 2009

 

Fair Value
December 31, 2008

 

Commodity futures net liability

 

Accrued expenses

 

$

18,816

 

$

38,371

 

Interest rate swap liability

 

Accrued expenses

 

1,745

 

2,294

 

 

 

 

 

 

 

 

 

 

 

Location in Consolidated Statements of Operations

 

Gain for
Period Ended
March 31, 2009

 

Gain for
Period Ended
March 31, 2008

 

Commodity futures contracts

 

Costs of goods sold

 

$

19,555

 

$

7,400

 

Interest rate swap

 

Other comprehensive income

 

549

 

 

 

Note 8.  Fair Value Measurements

 

FASB Statement No. 157 (FAS 157), Fair Value Measurements, provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements.  Specifically, FAS 157 sets forth a definition of fair value and establishes 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.  FAS 157 defines levels within the hierarchy as follows:

 

·             Level 1—Unadjusted quoted prices for identical assets and liabilities in active markets;

·             Level 2—Quoted 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 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

The following table sets forth financial assets and liabilities measured at fair value in the consolidated balance sheet and the respective levels to which the fair value measurements are classified within the fair value hierarchy as of March 31, 2009, and December 31, 2008 (in thousands):

 

 

 

March 31,
2009

 

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

Commodity futures — financial assets

 

$

8,970

 

$

 

$

8,970

 

$

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap

 

$

1,745

 

$

 

$

1,745

 

$

 

Commodity futures

 

27,786

 

 

27,786

 

 

Financial liabilities

 

$

29,531

 

$

 

$

29,531

 

$

 

 

10



Table of Contents

 

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

December 31,
2008

 

Quoted Prices in Active Markets
for Identical
Assets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

Commodity futures — financial assets

 

$

15,866

 

$

 

$

15,866

 

$

 

 

 

 

 

 

 

 

 

 

Interest rate swap

 

$

2,294

 

$

 

$

2,294

 

$

 

Commodity futures

 

54,237

 

 

54,237

 

 

Financial liabilities

 

$

56,531

 

$

 

$

56,531

 

$

 

 

The fair value of long-term debt, including current maturities, was approximately $2.0 billion and $2.1 billion at March 31, 2009, and December 31, 2008, respectively.

 

Note 9.  Commitments and Contingencies

 

On February 1, 2008, the company was sued by Prime Eagle Group Limited (Plaintiff), a corporation with its principal place of business in Thailand, alleging damages in excess of $1.1 billion, arising out of Steel Dynamics’ activities in providing consulting services to a Thailand-based steel company, Nakornthai Strip Mill Public Company, Limited (NSM) in its operational start-up in 1998. On April 30, 2008, Steel Dynamics filed a Motion to Dismiss the lawsuit, and on February 23, 2009, the court dismissed the complaint with prejudice and denied the plaintiffs leave to amend their complaint. The Plaintiff has appealed this dismissal.

 

On September 17, 2008, Steel Dynamics, Inc. was served with a class action antitrust complaint alleging violations of Section 1 of the Sherman Act, brought by Standard Iron Works of Scranton, Pennsylvania, against Steel Dynamics and eight other steel manufacturing companies.  The Complaint, filed in the United States District Court for the Northern District of Illinois in Chicago, alleges that the defendants conspired to fix, raise, maintain and stabilize the price at which steel products were sold in the United States by artificially restricting the supply of such steel products.  Six additional lawsuits, each of them materially similar to the original, have also been filed in the same federal court, each of them likewise seeking similar class certification.  All but one of the Complaints purport to be brought on behalf of a class consisting of all purchasers of steel products directly from the defendants between January 1, 2005 and the present.  The other Complaint purports to be brought on behalf of a class consisting of all indirect purchasers of steel products from the defendants within the same time period.  All Complaints seek treble damages and costs, including reasonable attorney fees, pre- and post-judgment interest and injunctive relief.  On January 2, 2009, the defendants in these cases filed a Joint Motion to Dismiss all of the lawsuits. On January 30, 2009, the plaintiffs filed their response to the Motion to Dismiss, and on February 20, 2009, the defendants filed their reply.  Although the company believes that the lawsuits are without merit and plans to aggressively defend these actions, the company cannot presently predict the outcome of this litigation or make any judgment with respect to its potential exposure, if any.

 

On March 18, 2009, Steel Dynamics, Inc., together with its Chairman and Chief Executive Officer, Keith E. Busse, and John Bates, a member of its board of directors, were served with a complaint, captioned Panasuk v. Steel Dynamics, Inc., et al., Civil Action No. 1109cv0066, filed in the United States District Court for the Northern District of Indiana, Fort Wayne Division, and purporting to represent a class of purchasers of Steel Dynamics common stock between January 26, 2009 and March 11, 2009.  The complaint alleges securities fraud in connection with the company’s issuance of certain earnings guidance and seeks damages in an unspecified amount.  The company believes that the complaint is without merit and will appropriately defend its interests.

 

Note 10.  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 “All 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, “All Other” also includes certain unallocated corporate accounts, such as the company’s senior secured credit facilities, senior notes, certain other investments, and certain profit sharing expenses.

 

The company’s 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.  Refer to the company’s Annual Report on Form 10-K for the year ended December 31, 2008, for more information related to the company’s segment reporting.  Inter-segment sales and any related profits are eliminated in consolidation. The company’s segment results for the three-month periods ended March 31 are as follows (in thousands):

 

11



Table of Contents

 

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

For the three months ended

 

 

 

Metals Recycling /

 

Steel Fabrication

 

 

 

 

 

 

 

March 31, 2009

 

Steel Operations

 

Ferrous Resources

 

Operations

 

Other

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

External

 

$

488,140

 

$

222,399

 

$

60,785

 

$

11,107

 

$

 

$

782,431

 

External Non-U.S.

 

16,902

 

15,307

 

 

10

 

 

32,219

 

Other segments

 

22,072

 

58,702

 

22

 

1,057

 

(81,853

)

 

 

 

527,114

 

296,408

 

60,807

 

12,174

 

(81,853

)

814,650

 

Operating income (loss)

 

(68,914

)

(24,466

)

3,000

 

(13,546)

(1)

(9,677)

(2)

(113,603

)

Income (loss) before income taxes

 

(85,900

)

(34,189

)

1,354

 

(19,367

)

(11,004

)

(149,106

)

Depreciation and amortization

 

24,692

 

29,808

 

1,757

 

706

 

 

56,963

 

Capital expenditures

 

31,088

 

43,664

 

(466

)

52

 

 

74,338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

2,303,344

 

2,099,817

 

180,322

 

505,615

(3)

(163,019)

(4)

4,926,079

 

Liabilities

 

199,811

 

184,708

 

10,706

 

3,132,625

(5)

(140,715)

(6)

3,387,135

 

 


Footnotes related to March 31, 2009 segment results (in millions):

 

(1)

Corporate SG&A

 

$

11.4

 

 

Other expenses

 

2.1

 

 

 

 

$

13.5

 

 

 

 

 

 

(2)

Margin impact from inter-company sales

 

$

(9.7

)

 

 

 

 

 

(3)

Deferred tax asset

 

$

313.7

 

 

Income taxes receivable

 

92.6

 

 

Debt issuance costs

 

18.0

 

 

Other

 

81.3

 

 

 

 

$

505.6

 

 

 

 

 

 

(4)

Elimination of inter-company receivables

 

$

(20.0

)

 

Deferred taxes elimination

 

(112.8

)

 

Other

 

(30.2

)

 

 

 

$

(163.0

)

 

 

 

 

 

(5)

Debt

 

$

2,483.1

 

 

Deferred taxes

 

493.6

 

 

Other

 

155.9

 

 

 

 

$

3,132.6

 

 

 

 

 

 

(6)

Deferred taxes elimination

 

$

(111.0

)

 

Intercompany debt

 

(26.4

)

 

Other

 

(3.3

)

 

 

$

(140.7

)

 

For the three months ended

 

 

 

Metals Recycling /

 

Steel Fabrication

 

 

 

 

 

 

 

March 31, 2008

 

Steel Operations

 

Ferrous Resources

 

Operations

 

Other

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

External

 

$

1,135,817

 

$

566,181

 

$

78,457

 

$

33,608

 

$

 

$

1,814,063

 

External Non-U.S.

 

47,512

 

40,578

 

 

52

 

 

88,142

 

Other segments

 

73,473

 

197,005

 

66

 

367

 

(270,911

)

 

 

 

1,256,802

 

803,764

 

78,523

 

34,027

 

(270,911

)

1,902,205

 

Operating income (loss)

 

234,557

 

47,176

 

3,644

 

(24,674

)

(8,296

)

252,407

 

Income (loss) before income taxes

 

220,113

 

46,041

 

2,248

 

(29,700

)

(8,296

)

230,406

 

Depreciation and amortization

 

33,992

 

16,820

 

1,835

 

565

 

 

53,212

 

Capital expenditures

 

64,372

 

22,273

 

5,237

 

1,882

 

 

93,764

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

2,661,670

 

1,764,120

 

221,521

 

308,314

 

(134,013

)

4,821,612

 

Liabilities

 

392,461

 

317,812

 

12,678

 

2,596,919

 

(114,315

)

3,205,555

 

 

Note 11.  Condensed Consolidating Information

Certain 100%-owned subsidiaries of SDI have fully and unconditionally guaranteed all of the indebtedness relating to the issuance of the company’s senior notes due 2012, 2015, and 2016. Following are the company’s 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 for the company on a consolidated basis.  The following statements should be read in conjunction with the accompanying consolidated financial statements and the company’s Annual Report on Form 10-K for the year ended December 31, 2008.

 

12



Table of Contents

 

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

Condensed Consolidating Balance Sheets (in thousands)

 

 

 

 

 

 

 

Combined

 

Consolidating

 

Total

 

 

 

Parent

 

Guarantors

 

Non-Guarantors

 

Adjustments

 

Consolidated

 

As of March 31, 2009

 

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

 

$

609

 

$

14,414

 

$

1,044

 

$

 

$

16,067

 

Accounts receivable, net

 

148,206

 

439,392

 

5,605

 

(231,364

)

361,839

 

Inventories, net

 

494,628

 

309,999

 

20,627

 

7,820

 

833,074

 

Other current assets

 

164,785

 

23,621

 

316

 

(32,891

)

155,831

 

Total current assets

 

808,228

 

787,426

 

27,592

 

(256,435

)

1,366,811

 

Property, plant and equipment, net

 

1,190,594

 

747,607

 

170,456

 

 

2,108,657

 

Intangible assets, net

 

 

551,489

 

 

 

551,489

 

Goodwill

 

 

812,161

 

 

 

812,161

 

Other assets, including investments in subs

 

2,797,868

 

287,650

 

9,139

 

(3,007,696

)

86,961

 

Total assets

 

$

4,796,690

 

$

3,186,333

 

$

207,187

 

$

(3,264,131

)

$

4,926,079

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

106,739

 

$

129,645

 

$

27,535

 

$

(20,005

)

$

243,914

 

Accrued expenses

 

110,637

 

123,868

 

915

 

(46,134

)

189,286

 

Current maturities of long-term debt

 

296,179

 

271

 

14,907

 

(14,907

)

296,450

 

Total current liabilities

 

513,555

 

253,784

 

43,357

 

(81,046

)

729,650

 

Long-term debt

 

2,202,892

 

63

 

48,620

 

(33,561

)

2,218,014

 

Other liabilities

 

367,929

 

2,344,584

 

8,067

 

(2,281,109

)

439,471

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

545

 

19,753

 

7,833

 

(27,586

)

545

 

Treasury stock

 

(734,083

)

 

 

 

(734,083

)

Additional paid-in capital

 

544,971

 

117,753

 

105,000

 

(222,753

)

544,971

 

Other accumulated comprehensive loss

 

(1,073

)

 

 

 

 

(1,073

)

Retained earnings

 

1,901,954

 

450,396

 

(19,964

)

(618,076

)

1,714,310

 

Total Steel Dynamics, Inc. stockholders’ equity

 

1,712,314

 

587,902

 

92,869

 

(868,415

)

1,524,670

 

Noncontrolling interests

 

 

 

14,274

 

 

14,274

 

Total stockholders’ equity

 

1,712,314

 

587,902

 

107,143

 

(868,415

)

1,538,944

 

Total liabilities and stockholders’ equity

 

$

4,796,690

 

$

3,186,333

 

$

207,187

 

$

(3,264,131

)

$

4,926,079

 

 

 

 

 

 

 

 

Combined

 

Consolidating

 

Total

 

 

 

Parent

 

Guarantors

 

Non-Guarantors

 

Adjustments

 

Consolidated

 

As of December 31, 2008

 

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

 

$

1,389

 

$

11,514

 

$

3,330

 

$

 

$

16,233

 

Accounts receivable, net

 

266,709

 

461,366

 

8,410

 

(233,553

)

502,932

 

Inventories

 

612,731

 

369,412

 

23,408

 

17,684

 

1,023,235

 

Other current assets

 

126,969

 

46,949

 

351

 

(6,754

)

167,515

 

Total current assets

 

1,007,798

 

889,241

 

35,499

 

(222,623

)

1,709,915

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

1,186,317

 

751,904

 

134,636

 

 

2,072,857

 

Intangible assets, net

 

 

614,786

 

 

 

614,786

 

Goodwill