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, 2004 |
OR
 |
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number 0-21719
Steel Dynamics, Inc.
(Exact name of registrant as specified in its charter)
Indiana (State or other jurisdiction of incorporation or organization) |
35-1929476 (I.R.S. Employer Identification No.) |
6714 Pointe Inverness Way, Suite 200, Fort Wayne, IN (Address of principal executive offices) |
46804 (Zip Code) |
Registrant’s telephone number, including area code: (260) 459-3553
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 is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.
Yes No
As of August 4, 2004, Registrant had 49,615,159 outstanding shares of Common Stock.
STEEL DYNAMICS, INC.
Table of Contents
PART I. Financial Information
| Item 1 | Consolidated Financial Information: |
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| Page | ||||
| 1 | ||||
| 2 | ||||
| 3 | ||||
| 4 | ||||
| Item 2. | 10 | |||
| Item 3. | 12 | |||
| Item 4. | 13 | |||
| PART II. Other Information | ||||
| Item 1. | 13 | |||
| Item 4. | 13 | |||
| Item 6. | 14 | |||
| 15 | ||||
STEEL DYNAMICS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| June 30, 2004 |
December 31, 2003 |
||||||
| (unaudited) | |||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash and equivalents
|
$ | 38,441 | $ | 65,430 | |||
Accounts receivable,
net
|
171,034 | 100,933 | |||||
Accounts receivable-related
parties
|
28,120 | 25,090 | |||||
Inventories
|
280,170 | 184,496 | |||||
Deferred taxes
|
12,563 | 23,217 | |||||
Other current
assets
|
18,105 | 8,769 | |||||
Total current
assets
|
548,433 | 407,935 | |||||
Property,
plant and equipment, net
|
1,018,005 | 1,001,116 | |||||
Restricted
cash
|
4,215 | 2,636 | |||||
Other
assets
|
33,301 | 36,752 | |||||
Total assets
|
$ | 1,603,594 | $ | 1,448,439 | |||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts payable
|
$ | 120,961 | $ | 42,698 | |||
Accounts payable-related
parties
|
– | 36,628 | |||||
Accrued interest
|
14,862 | 11,312 | |||||
Other accrued
expenses
|
57,722 | 46,678 | |||||
Current maturities
of long-term debt
|
5,000 | 15,988 | |||||
Total current
liabilities
|
198,545 | 153,304 | |||||
Long-term
debt including unamortized bond premium of $7,991 and
$8,834 as of June 30 2004 and December 31 2003 respectively |
563,287 | 591,586 | |||||
Deferred
taxes
|
137,647 | 115,703 | |||||
Minority
interest
|
1,823 | 613 | |||||
Commitments
and contingencies
|
|||||||
Stockholders’ equity:
|
|||||||
Common
stock voting, $.01 par value; 100,000,000 shares authorized;
51,824,065 and 51,011,839 shares issued; and 49,446,939 and 48,645,246 shares outstanding as of June 30 2004 and December 31 2003 respectively |
517 | 509 | |||||
Treasury
stock at cost; 2,377 126 and 2,366,593 shares at June 30 2004 and December
31 2003 respectively
|
(28,908 | ) | (28,670 | ) | |||
Additional paid-in
capital
|
376,945 | 362,328 | |||||
Retained earnings
|
356,508 | 257,254 | |||||
Other accumulated
comprehensive loss
|
(2,410 | ) | (4,188 | ) | |||
Total stockholders’ equity
|
702,652 | 587,233 | |||||
Total liabilities
and stockholders’ equity
|
$ | 1,603,954 | $ | 1,448,439 | |||
See notes to consolidated financial statements
1
STEEL DYNAMICS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
| Three
Months Ended June 30, |
Six
Months Ended June 30, |
||||||||||||
| 2004 | 2003 | 2004 | 2003 | ||||||||||
Net sales: |
|||||||||||||
Unrelated parties |
$ | 474,317 | $ | 187,342 | $ | 809,983 | $ | 389,488 | |||||
Related parties |
51,340 | 31,290 | 99,819 | 64,648 | |||||||||
Total net sales |
525,657 | 218,632 | 909,802 | 454,136 | |||||||||
Cost of goods sold |
382,459 | 186,724 | 685,014 | 372,693 | |||||||||
Gross profit |
143,198 | 31,908 | 224,788 | 81,443 | |||||||||
Selling, general and administrative expenses |
28,082 | 14,682 | 51,132 | 29,657 | |||||||||
Operating income |
115,116 | 17,226 | 173,656 | 51,786 | |||||||||
Interest expense |
10,592 | 8,938 | 20,096 | 18,104 | |||||||||
Other income |
(3,143 | ) | (399 | ) | (5,246 | ) | (250 | ) | |||||
Income before income taxes |
107,667 | 8,687 | 158,806 | 33,932 | |||||||||
Income taxes |
40,375 | 3,257 | 59,552 | 12,724 | |||||||||
Net income |
$ | 67,292 | $ | 5,430 | $ | 99,254 | $ | 21,208 | |||||
Basic earnings per share |
$ | 1.36 | $ | .11 | $ | 2.02 | $ | .45 | |||||
Weighted average common shares outstanding |
49,340 | 47,650 | 49,143 | 47,625 | |||||||||
Diluted earnings per share, including effect of assumed conversions |
$ | 1.20 | $ | 11 | $ | 1.78 | $ | .44 | |||||
Weighted average common shares and share equivalents outstanding |
56,545 | 47,853 | 56,379 | 47,820 | |||||||||
See notes to consolidated financial statements.
2
STEEL DYNAMICS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Three Months Ended June 30, |
Six Months ended June 30, |
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| 2004 | 2003 | 2004 | 2003 | ||||||||||
Operating activities: |
|||||||||||||
Net income |
$ | 67,292 | $ | 5,430 | $ | 99,254 | $ | 21,208 | |||||
Adjustments to reconcile net income to net cash |
|||||||||||||
provided by operating activities: |
|||||||||||||
Depreciation and amortization |
23,629 | 16,643 | 42,408 | 32,919 | |||||||||
Deferred income taxes |
20,930 | 6,186 | 32,598 | 11,430 | |||||||||
Loss on disposal of property, plant and equipment |
31 | — | 175 | 59 | |||||||||
Minority interest |
562 | 24 | 1,211 | (627 | ) | ||||||||
Changes in certain assets and liabilities: |
|||||||||||||
Accounts receivable |
(34,558 | ) | 9,706 | (73,131 | ) | 6,240 | |||||||
Inventories |
(44,181 | ) | (5,740 | ) | (95,674 | ) | (20,220 | ) | |||||
Other assets |
(2,360 | ) | (2,549 | ) | (10,764 | ) | (1,855) | ||||||
Accounts payable |
(7,628 | ) | (450 | ) | 41,635 | 15,680 | |||||||
Accrued expenses |
19,700 | 4,427 | 16,370 | (6,490 | ) | ||||||||
Net cash provided by operating activities |
43,417 | 33,677 | 54,082 | 58,344 | |||||||||
Investing activities: |
|||||||||||||
Purchases of property, plant and equipment |
(30,755 | ) | (23,670 | ) | (54,660 | ) | (61,105 | ) | |||||
Other investing activities |
— | 8 | — | (8,283) | |||||||||
Net cash used in investing activities |
(30,755 | ) | (23,662 | ) | (54,660 | ) | (69,388 | ) | |||||
Financing activities: |
|||||||||||||
Issuance of long-term debt |
134,182 | 26,768 | 164,121 | 48,480 | |||||||||
Repayments of long-term debt |
(169,749 | ) | (28,482 | ) | (203,408 | ) | (49,900 | ) | |||||
Issuance of common stock, net of expenses and proceeds |
|||||||||||||
and tax benefits from exercise of stock options |
4,539 | 663 | 14,625 | 1,670 | |||||||||
Purchase of treasury stock |
— | — | (238 | ) | (176) | ||||||||
Debt issuance costs |
(1,487 | ) | (277 | ) | (1,511 | ) | (1,320 | ) | |||||
Net cash used in financing activities |
(32,515 | ) | (1,328 | ) | (26,411 | ) | (1,246 | ) | |||||
Increase (decrease) in cash and equivalents |
(19,853 | ) | 8,687 | (26,989 | ) | (12,290 | ) | ||||||
Cash and equivalents at beginning of period |
58,294 | 3,241 | 65,430 | 24,218 | |||||||||
Cash and equivalents at end of period |
$ | 38,441 | $ | 11,928 | $ | 38,441 | $ | 11,928 | |||||
Supplemental disclosure of cash flow information: |
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Cash paid for interest |
$ | 5,420 | $ | 7,052 | $ | 20,345 | $ | 22,684 | |||||
Cash paid for federal and state income taxes |
$ | 11,850 | $ | 6,860 | $ | 11,927 | $ | 7,474 | |||||
See notes to consolidated financial statements.
3
STEEL DYNAMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Accounting
Policies |
Principles of Consolidation. The consolidated financial statements include the accounts of Steel Dynamics, Inc. (SDI), together with its subsidiaries after elimination of significant intercompany accounts and transactions. Minority 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; valuation allowances for trade receivables, inventories and deferred income tax assets; 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 included in the company’s Annual Report on Form 10-K for the year ended December 31, 2003.
Stock-Based Compensation. At June 30, 2004, the company had three incentive stock option plans and accounted for these plans under the recognition and measurement principles of Accounting Standards Board APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Under APB 25, no stock-based employee compensation cost related to the incentive stock option plans is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.
The following table illustrates the effect on net income and earnings per share if the company had applied the fair value recognition provisions of FAS 123 to its stock-based employee compensation for the three and six-month periods ended June 30 (in thousands, except per share data):
| Three Months Ended |
Six Months Ended |
||||||||||||
| 2004 | 2003 | 2004 | 2003 | ||||||||||
Net income, as reported |
$ | 67,292 | $ | 5,430 | $ | 99,254 | $ | 21,208 | |||||
Stock-based employee compensation expense, using the fair value based method, net of related tax effect |
(714 | ) | (544 | ) | (1,430 | ) | (1,127 | ) | |||||
Net income, pro forma |
$ | 66,578 | $ | 4,886 | $ | 97,824 | $ | 20,081 | |||||
Basic earnings per share: |
|||||||||||||
As reported |
$ | 1.36 | $ | .11 | $ | 2.02 | |||||||