Steel Dynamics Inc 10-Q for FY2020 Q2

Steel Dynamics Inc (STLD)

10-Q 2020-08-10 For: 2020-06-30

Added on April 07, 2026

About this 10-Q

Steel Dynamics Inc filed this 10-Q on August 10, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $2.09B; down 24.4% from $2.77B a year earlier
Net income: $78.77M; down 60.0% from net income of $196.75M a year earlier
Diluted EPS: $0.36; down 58.6% from $0.87 a year earlier

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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)


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

Large accelerated filer ⌧	Accelerated filer ◻	Non-accelerated filer ◻

Smaller reporting company ☐	Emerging growth company ☐


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



	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



	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



	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						Weighted
			Average						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				-		960
Diluted earnings per share	$	262,836		212,701	$	1.24	$	398,630		223,741	$	1.78



	Stockholders of Steel Dynamics, Inc.
									Accumulated
					Additional				Other						Redeemable
	Common		Treasury		Paid-In		Retained		Comprehensive		Noncontrolling		Total		Noncontrolling
	Stock		Stock		Capital		Earnings		Loss		Interests		Equity		Interests
Balances at December 31, 2019	$	646	$	(1,525,113)	$	1,181,012	$	4,419,296	$	(7)	$	(154,593)	$	3,921,241	$	143,614
Dividends declared		-		-		-		(52,585)		-		-		(52,585)		-
Noncontrolling investors of USS		-		-		-		-		-		(7,504)		(7,504)		7,400
Share repurchases		-		(106,529)		-		-		-		-		(106,529)		-
Equity-based compensation		-		6,834		2,764		(169)		-		-		9,429		-
Net income		-		-		-		187,340		-		3,496		190,836		-
Other comprehensive loss, net of tax		-		-		-		-		37		-		37		-
Balances at March 31, 2020		646		(1,624,808)		1,183,776		4,553,882		30		(158,601)		3,954,925		151,014
Dividends declared		-		-		-		(52,591)		-		-		(52,591)		-
Noncontrolling investors of USS		-		-		-		-		-		(2,410)		(2,410)		1,400
Share repurchases		-		-		-		-		-		-		-		-
Equity-based compensation		-		953		7,838		(158)		-		-		8,633		-
Net income		-		-		-		75,496		-		3,269		78,765		-
Other comprehensive loss, net of tax		-		-		-		-		186		-		186		-
Balances at June 30, 2020	$	646	$	(1,623,855)	$	1,191,614	$	4,576,629	$	216	$	(157,742)	$	3,987,508	$	152,414



Commodity Futures	Long/Short	Metric Tons
Aluminum	Long	3,525
Aluminum	Short	4,475
Copper	Long	11,453
Copper	Short	19,493



		Asset Derivatives				Liability Derivatives
	Balance sheet	Fair Value				Fair Value
	location	June 30, 2020		December 31, 2019		June 30, 2020		December 31, 2019
Derivative instruments designated as hedges
Commodity futures	Other current assets	$	2,060	$	966	$	4,260	$	1,011

Derivative instruments not designated as hedges
Commodity futures	Other current assets		3,500		310		2,588		721
Total derivative instruments		$	5,560	$	1,276	$	6,848	$	1,732



			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
June 30, 2020
Short-term investments	$	69,546	$	-	$	69,546	$	-
Commodity futures – financial assets		5,560		-		5,560		-
Commodity futures – financial liabilities		6,848		-		6,848		-

December 31, 2019
Short-term investments	$	262,174	$	-	$	262,174	$	-
Commodity futures – financial assets		1,276		-		1,276		-
Commodity futures – financial liabilities		1,732		-		1,732		-



			Metals		Steel
For the three months ended	Steel		Recycling		Fabrication
June 30, 2020	Operations		Operations		Operations		Other			Eliminations			Consolidated

Net sales - disaggregated revenue
External	$	1,578,252	$	126,818	$	214,951	$	94,274		$	-		$	2,014,295
External Non-U.S.		49,775		29,764		300		171			-			80,010
Other segments		71,371		260,106		3,177		-			(334,654)			-
		1,699,398		416,688		218,428		94,445			(334,654)			2,094,305
Operating income (loss)		168,043		(8,715)		27,155		(32,089)	⁽¹⁾		4,456	⁽²⁾		158,850
Income (loss) before income taxes		151,012		(12,654)		25,959		(65,445)			4,173			103,045
Depreciation and amortization		60,686		12,170		2,737		3,128			-			78,721
Capital expenditures		301,179		3,821		2,364		2,352			-			309,716

As of June 30, 2020
Assets	$	5,533,365	$	867,866	$	397,070	$	1,718,951	⁽³⁾	$	(48,911)	⁽⁴⁾	$	8,468,341


Footnotes related to the three months ended June 30, 2020, segment results (in millions):

(1)	Corporate SG&A	$	(14.5)	(2)	Gross profit increase from intra-company sales	$	4.5
	Company-wide equity-based compensation		(9.7)
	Profit sharing		(8.2)
	Other, net		0.3
		$	(32.1)

(3)	Cash and equivalents	$	1,418.4	(4)	Elimination of intra-company receivables	$	(35.5)
	Short-term investments		69.5		Elimination of intra-company debt		(6.5)
	Accounts receivable		11.4		Other		(6.9)
	Inventories		26.9			$	(48.9)
	Property, plant and equipment, net		148.2
	Intra-company debt		6.5
	Other		38.1
		$	1,719.0


Footnotes related to the three months ended June 30, 2019, segment results (in millions):

(1)	Corporate SG&A	$	(18.0)	(2)	Gross profit increase from intra-company sales	$	4.5
	Company-wide equity-based compensation		(8.4)
	Profit sharing		(21.3)
	Other, net		(1.5)
		$	(49.2)



	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)


	June 30,		December 31,
	2020		2019
Raw materials	$	589,122	$	686,831
Supplies		483,323		498,298
Work in progress		150,139		154,669
Finished goods		344,433		349,245
Total inventories	$	1,567,017	$	1,689,043



	Three Months Ended June 30,					Six Months Ended June 30,
	2020		% Change		2019	2020		% Change	2019
Net sales:
Steel Operations Segment	$	1,699,398	(22)%	$	2,188,185	$	3,715,550	(15)%	$	4,388,350
Metals Recycling Operations Segment		416,688	(37)%		656,766		1,045,427	(25)%		1,393,811
Steel Fabrication Operations Segment		218,428	(10)%		241,424		439,869	(6)%		470,093
Other		94,445	(5)%		99,762		215,135	1%		213,258
		2,428,959			3,186,137		5,415,981			6,465,512
Intra-company		(334,654)			(415,622)		(746,576)			(877,562)
	$	2,094,305	(24)%	$	2,770,515	$	4,669,405	(16)%	$	5,587,950

Operating income (loss):
Steel Operations Segment	$	168,043	(42)%	$	291,411	$	456,437	(24)%	$	600,489
Metals Recycling Operations Segment		(8,715)	(214)%		7,619		(3,187)	(113)%		24,581
Steel Fabrication Operations Segment		27,155	(11)%		30,664		56,318	10%		51,287
Other		(32,089)	35%		(49,153)		(78,444)	26%		(106,073)
		154,394			280,541		431,124			570,284
Intra-company		4,456			4,491		1,412			6,590
	$	158,850	(44)%	$	285,032	$	432,536	(25)%	$	576,874



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

Total shipments	2,518,019	(9)%	2,769,358	5,365,201	(2)%	5,453,769
Intra-segment shipments	(257,219)		(280,024)	(510,696)		(527,427)
Steel Operations Segment shipments	2,260,800	(9)%	2,489,334	4,854,505	(1)%	4,926,342

External shipments	2,152,856	(10)%	2,386,851	4,648,020	(2)%	4,734,060



			Metals		Steel
For the six months ended	Steel		Recycling		Fabrication
June 30, 2020	Operations		Operations		Operations		Other			Eliminations			Consolidated

Net sales - disaggregated revenue
External	$	3,438,837	$	361,651	$	435,886	$	214,616		$	-		$	4,450,990
External Non-U.S.		130,896		86,788		300		431			-			218,415
Other segments		145,817		596,988		3,683		88			(746,576)			-
		3,715,550		1,045,427		439,869		215,135			(746,576)			4,669,405
Operating income (loss)		456,437		(3,187)		56,318		(78,444)	⁽¹⁾		1,412	⁽²⁾		432,536
Income (loss) before income taxes		424,567		(8,349)		53,877		(119,685)			891			351,301
Depreciation and amortization		123,113		24,142		5,485		6,240			-			158,980
Capital expenditures		494,452		22,044		6,453		4,302			-			527,251


Footnotes related to the six months ended June 30, 2020, segment results (in millions):

(1)	Corporate SG&A	$	(31.7)	(2)	Gross profit increase from intra-company sales	$	1.4
	Company-wide equity-based compensation		(17.9)
	Profit sharing		(29.5)
	Other, net		0.7
		$	(78.4)


Footnotes related to the six months ended June 30, 2019, segment results (in millions):

(1)	Corporate SG&A	$	(40.6)	(2)	Gross profit increase from intra-company sales	$	6.6
	Company-wide equity-based compensation		(17.4)
	Profit sharing		(44.3)
	Other, net		(3.8)
		$	(106.1)

HIDDEN_ROW
Articles of Incorporation

3.1	Amended and Restated Articles of Incorporation of Steel Dynamics, Inc., reflecting all amendments thereto through May 17, 2018, incorporated herein by reference from Exhibit 3.1e to our Form 10-Q filed August 9, 2018.

3.2	Amended and Restated Bylaws of Steel Dynamics, Inc., reflecting all amendments thereto through October 17, 2018, incorporated herein by reference from Exhibit 3.2d to our Form 10-Q filed November 7, 2018.

Executive Officer Certifications

31.1*	Certification of Chief Executive Officer required by Item 307 of Regulation S-K as promulgated by the Securities and Exchange Commission and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*	Certification of Chief Financial Officer required by Item 307 of Regulation S-K as promulgated by the Securities and Exchange Commission and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*	Certification of Chief Executive Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*	Certification of Chief Financial Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Instruments Defining the Rights of Security Holders, Including Indentures

4.35	Second Supplemental Indenture, dated as of June 5, 2020, relating to our issuance of $400 million 2.400% Notes due 2025 and $500 million 3.250% Notes due 2031, between Steel Dynamics, Inc. and Wells Fargo Bank, National Association, as Trustee, incorporated herein by reference from Exhibit 4.2 to our Form 8-K filed June 5, 2020.

4.36	Form of 2.400% Notes due 2025 (included in Exhibit 4.35), incorporated herein by reference from Exhibit 4.3 to our Form 8-K filed June 5, 2020.

4.37	Form of 3.250% Notes due 2031 (included in Exhibit 4.35), incorporated herein by reference from Exhibit 4.4 to our Form 8-K filed June 5, 2020.

Other

95**	Mine Safety Disclosures.

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August 10, 2020

		STEEL DYNAMICS, INC.

	By:	/s/ Theresa E. Wagler
		Theresa E. Wagler
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)