Unformatted Attachment Preview
Customer commitment
Culture
Strategic growth
Innovation
Financial strength
RECORDS
in annual
steel
shipments
RECORDS
in annual
iron
shipments
RECORDS
in annual
metals-recycling
shipments
Total Steel Operations
Total iron units
Shipments of 5,842,694 tons
Shipments of 389,143 metric tons
Metals Recycling
Recycled ferrous metals
h10%over 2010
h33%over 2010
Engineered Bar
Products Division
Iron Dynamics
Shipments of 634,964 tons
h2%over 2010
SETTIN G
h12%over 2010
Shipments of 229,502 metric tons
Mesabi Nugget
Flat Roll Division
Shipments of 159,641 metric tons
Shipments of 2,770,466 tons
h137%over 2010
h5%over 2010
Shipments of 5,879,729 gross tons
h14%over 2010
Metals Recycling
Recycled nonferrous metals
Shipments of 1,066,648,000 pounds
h11%over 2010
Steel of West Virginia
Shipments of 297,902 tons
h27%over 2010
COVER: Finished round SBQ bars
from the Engineered Bar Products
Division at Pittsboro, Indiana,
2011 SUMMARY ANNUAL REPORT
are among the many value-added
steels SDI produces.
FORWARD-LOOKING STATEMENTS: This publication contains predictive statements about future events. These
statements are intended to be made as “forward-looking” within the safe-harbor protections of the Private Securities
Litigation Reform Act of 1995. Reference is made to the “risk factors” section in SDI’s most recent Form 10-K,
which describes the many factors and risks that may cause such predictive statements to turn out differently.
©2012 Steel Dynamics, Inc.
boss, mentor, colleague, friend.
1
A Tribute to Keith Busse
SDI Co-founder and Chairman of the Board
that SDI has refined over
impossible without the
the last 19 years.
unique employee-focused
Under Keith’s leadership,
Steel Dynamics has seen
remarkable growth and
culture Keith and his
partners created.
Over the years, Keith
Net sales
$ 6.3
$ 8.0 billion
Operating income
$ 365
$ 585 million
Net income
$ 141
$ 278 million
$ 0.64
$ 1.22
(attributable to SDI)
success in its short life.
especially enjoyed the
Net income per share
What began as a single
give-and-take of shop
Cash dividends per share
$ 0.30
$ 0.40
ffective January 1, 2012,
mill making flat-rolled
dinners, where he would
Keith Busse retired
steel has become a
speak—directly, forcefully,
Cash flow from operations
$ 169
$ 486 million
as Steel Dynamics’ Chief
diversified company,
and authoritatively— to
Total assets
$ 5.6
$ 6.0 billion
Executive Officer, turning
producing not just sheet
employees about SDI and
Capital expenditures
$ 133
$ 167 million
E
executive responsibilities
steel, but beams, rail,
its growth and whatever
for the company over to
bars, angles and shapes,
else was on his mind.
Mark Millett. Keith continues
and expanding to include
to serve as a board member
recycling of ferrous and
philanthropist, Keith
and Chairman of the Board
nonferrous materials,
spearheaded the creation
of Directors.
ironmaking, fabrication,
of the Steel Dynamics
and other steel-related
Foundation, which
and Dick Teets founded
endeavors. SDI became a
supports a wide variety
the company in 1993,
Fortune 500 company, the
of worthy causes —
Keith, Mark Millett,
As a civic leader and
(diluted)
Long-term debt (including current portion) $ 2.4
Steel shipments
5.3
(tons)
education, especially —
producer in the United
in communities where
Steel operating income per ton shipped* $ 86
in the low-cost production
States, and one of the most
employees work and live.
of high-quality steel.
efficient and profitable
Steel mill production
All three had previously
steelmakers in the world.
Steel operations segment
(tons) 4.7
Steel operations segment, excludes The Techs
friend: Keith leaves his
Ferrous metals shipments
(gross tons)
5.2
fellow employees an
Nonferrous metals shipments (pounds)
961
Steel fabrication shipments (tons)
164
Iron shipments
293
construction and operation
principal architect of SDI’s
enviable legacy, a broad
of the world’s first thin-slab
success, he is recognized
foundation upon which
casting mini-mill that
worldwide for his vision and
they can further build.
revolutionized the American
accomplishments. Of course,
All owe Keith Busse
steel industry — technology
all of this would have been
a debt of gratitude.
$8B
$4B
$2B
07
08
09
10
11
$0
Net income
$500M
$278M
$400M
$300M
$200M
$100M
07
(metric tons)
Iron Dynamics and Mesabi Nugget
Full-time employees
6,180
h 10%
h 36%
5.2 million h 11%
5.9 million h 14%
1,067 million h 11%
218 thousand h 32%
389 thousand h 33%
6,530
h 6%
08
09
10
11
Steel shipments (tons)
5.8 million
$0
8M
5.8M
$ 117
THE
For
2 Letter to shareholders
6 A financial perspective
8 A pattern of excellence
10 Customer commitment
12 Culture
14 Strategic growth
16 Innovation
18 Financial strength
20 Summary information
20 Corporate overview
profita ble,
22 Steel operations
24 Metals recycling and ferrous resources
25 Steel fabrication
26 Selected financial data
28 Adjusted EBITDA reconciliation
28 Map of locations
29 Investor information
Growth in revenues, 1996–2011
$10B
6M
4M
$8.0B
$8B
2M
07
08
09
10
11
0
Steel Operations operating income
per ton shipped*
$200
$117
$6B
$4B
$150
$100
$2B
$50
07
08
09
*Operating income per ton shipped excludes profit-sharing and amortization expenses related to the operating segment.
Please refer to the summary information starting on page 20 and Steel Dynamics, Inc.’s 2011 Form 10-K,
which is accompanying this report, for additional financial and operating information.
HIG H
$10B
$6B
$ 2.4 billion
operating data
2010
2011
fifth-largest carbon-steel
Not only was Keith the
$8.0B
RAISING
would become a leader
been instrumental in the
h 27%
h 60%
h 98%
h 91%
h 33%
h187%
h 7%
h 25%
with the goal that SDI
Boss, mentor, colleague,
Net sales
financial highlights
2010
2011
10
11
$0
$0
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
2
3
Rail-finishing
facility,Structural
and Rail Division,
Columbia City, Indiana.
MARK MILLETT
President and Chief Executive Officer
“
I’m excited and honored to be leading SDI forward and to build
upon our collective accomplishments. I’m convinced our unique
culture and remarkable team can drive even greater value for
our customers and shareholders.”
April 5, 2012
(Far right)
OmniSource retail
metals-recycling facility,
Jackson, Michigan.
To Our Shareholders:
I
n challenging times,
combined with loyal
of higher volumes and
industry peers for both
The Flat Roll Division
635,000 tons. The division’s
moderately, and we
operations shipped
Our metals-recycling
the true character of
customer support, drove
improving operating
our steelmaking and
increased market share
productivity and profitability
significantly increased
5.9 million gross tons of
operations also shipped
an organization becomes
significant achievement in
income in both our
metals-recycling operations.
as it leveraged recent
climbed. Exceptional quality,
our market share of railroad
ferrous scrap, 43 percent
record amounts of
increasingly visible.
what was still a challenging
steel and metals-
process improvements
value-added downstream
rail business. We shipped
of which supplied SDI’s
nonferrous metals,
Adversity amplifies
steel market.
recycling operations.
to achieve an annualized
processing, and a focus
117,000 tons of rail in 2011,
steel mills, while 57 percent
nearly 1.1 billion pounds.
We achieved 27 percent
Our 2011 production
milestones in 2011.
production capacity of more
on superior on-time
more than double the
supported our third-party
Almost 17 percent of these
annual growth in net sales
and shipping volumes
Our steel operations
than 3 million tons. A broad
delivery has resulted
55,000 tons shipped in 2010.
customers. In 2011,
shipments were copper, most
and nearly doubled net
increased in each of our
shipped a record
product portfolio allowed
in strong customer loyalty
of which was exported.
For the steel industry,
income in 2011. Net sales of
three operating segments
5.8 million tons, driven
and market-share gains.
Our metals-recycling
we opened or expanded
the division to run at an
10 retail facilities to increase
In the future, we anticipate
2011 was the second year
$8.0 billion grew by $1.7
when compared with
principally by record
Although the weak
the proportion of obsolete
directing much of this
of recovery from the steep
billion, from $6.3 billion in
annual ferrous and
2010, with record volumes
volumes at our Flat Roll
scrap we collect as higher-
copper-scrap flow to
recessionary decline in
2010, and were only one
being achieved in our
and Engineered Bar
margin retail material.
the SDI LaFarga, LLC,
steel demand. For SDI,
percent short of our record
steel and metals-recycling
Products divisions.
Our Engineered Bar
wide-flange beam business,
it was a year to once again
net sales achieved in 2008,
operations. We also
Our Engineered Bar
Products Division took
mill utilization in our
demonstrate our resilience
prior to the global economic
expanded operating
Products and Steel
advantage of robust demand
Structural and Rail Division
and the viability of our
crises. The year’s net income
margins in 2011 and
of West Virginia divisions
for its engineered special-
improved from 35 percent to
business model. Our
increased 98 percent, to
continued to show stronger
also achieved record
bar-quality (SBQ) steels to
49 percent, year-over-year, as
unique employee culture,
$278 million, as a result
operating metrics than our
annual operating income.
achieve record shipments of
demand for beams improved
strengths and weaknesses,
differentiating the strong
from the weak.
2011 operating RESULTS
We achieved many
expanded utilization rate of
96 percent, a much stronger
rate than that of the industry.
non-residential construction
market constrained the
platform achieved record
nonferrous shipping
volumes as we leveraged
copper-rod business that
improved market dynamics
In addition, upgrades to
through additional retail
some of our automobile
yards and increased
shredders increased
shredder capacity.
our processing capacity
At our Iron Dynamics
by approximately
facility, we achieved record
150,000 gross tons.
production of iron units.
Our metals-recycling
we expect to start up in the
second quarter of 2012.
4
5
The liquid iron transferred
continued to provide a
operating teams have done
the risks associated with
development during the
integration of new metals-
growth that is coupled
status quo, seeking new
value, but we recognize
to our flat-roll mill continues
strong base load to the
in a challenging environment.
inventory value have too
recent years of economic
separation technologies,
with enhanced, consistent
SDI’s culture is one in
opportunities to enhance
that this is not a strategy
to be one of the key catalysts
Roanoke Bar Division that
Their performance in 2011
often led to a focus on
challenge. Significant
and the development of
margins. We’ll also continue
which each employee
products and services,
unto itself, but a result
for the mill’s increased
produces merchant-bar
is a continuing testament
short-term market price
increases in productive
new value-added ferrous
to leverage our existing
has a sense of ownership,
and increase productivity
of the future success
productivity. The combined
steel, helping Roanoke
to our business model—
fluctuations, both in raw
capacity have been
products to enhance margins.
facilities through capital-
accountability, loyalty, and
and quality.
of our business —
output of Iron Dynamics
maintain an 85 percent
our customer commitment,
materials and finished
achieved at our sheet
effective investment to
purpose — and the ability
and Mesabi Nugget, which
operating rate for the year.
our innovative low-cost
products. Although
mill, structural steel
expand organic growth.
to make contributions
continued its progress
NMBS initiated operation
operating culture, and
it’s important for us to
and rail mill, and our
in ramping up production
of three joist-fabrication
our diversified portfolio of
recognize and respond
engineered bar mill.
in 2011, now provides
facilities acquired in
value-added products. All
to such short-term market
our mills with an internal
2010. These facilities,
of this puts Steel Dynamics
trends, I’d like to emphasize
supply of iron units, making
located in the South and
in an enviable position to
that our focus at SDI is very
them self-sufficient and
southwestern United States,
take advantage of improved
much on the longer term.
obviating the need to
along with our existing
market conditions as and
purchase imported pig iron.
plants, now provide a
when they occur.
Our New Millennium
broad, nationwide footprint.
will be driven by providing
has maintained a proven
quality products and
expansion and ability to
well into the future
We are on a continued
track record of sustained
unsurpassed value
serve national accounts.
our record of profitable
path of responsible,
performance—consistently
to our customers.
growth through focus on:
strategic growth, in which
in excess of our metals-
we will strive to provide
industry peers.
in 2013 that will further
a wider range of SBQ bars.
investment and product
strength, Steel Dynamics
expansion to be completed
Products Division to supply
in raw-materials pricing and
In the end, our success
325,000-tons-per-year
latent value that we have
the phenomenal job our
economic weakness and
competencies to extend
A LONG-TERM VIEW
steel-fabrication business
on the job is paramount.
in our execution.
to leverage our core
of our Engineered Bar
built through capital
We intend to continue
During both periods of
through its geographic
excited to embrace the
In our industry, the volatility
to gain further market share
that have impact. Safety
in its planning and
and grow its profitability
add to the capabilities
I can’t stress enough
business is now positioned
• Financial Strength
We’ve announced a
As we look forward, we’re
Building Systems (NMBS)
Our steel-fabrication
• Culture
In keeping with the
entrepreneurial spirit that
• Customer Commitment
• Strategic Growth
sustained appreciation
On behalf of the
whole Steel Dynamics
flows through our company,
Making customer service
we’ll continue to assess
our highest priority means
opportunities for growth,
providing outstanding
In addition, our metals-
whether in new products,
products and services that
recycling platform is
new technologies, or new
exceed our customers’
improving its capabilities
investments—with a focus
expectations, anticipating
Innovation lies at the very
We aspire to financial
to thank our employees
through capacity expansion,
toward not only top-line
their future needs, and
heart and soul of SDI. We
success and to the
for all their hard work,
addition of retail facilities,
revenue growth, but
delivering greater value.
continually challenge the
appreciation of shareholder
dedication, and passion.
of cumulative shareholder
The importance of each
value, exceeding market
of these elements is
and peer performance.
discussed in greater
• Innovation
detail later in this report.
team, I’d like to thank
our loyal customers
and shareholders
for their continued
support. And I’d like
Sincerely,
Engineered Bar
Products Division,
Pittsboro, Indiana.
Mark Millett
President and CEO
6
7
THERESA WAGLER
Executive Vice President and Chief Financial Officer
“
Our financial strategy continues to include a commitment
to the maintainability of improved credit metrics, while
allowing for long-term sustainable growth and appropriate
levels of liquidity.”
long-term debt maturities
liquidity
$800M
$4B
$600M
$3B
$400M
$2B
$0
A financial perspective
2011
points in 2011 (excluding
sales
• The execution of a
Undrawn revolver
$1.6B
$200M
net
Cash and
commercial paper
$1B
12 13 14 15 16 post2016
$0
07 08 09 10
over 2010 results. We
or 40 percent, of our
$439 million during the
net debt to Adjusted
growth and production-
credit metrics, while
11
the impact of impairment
new senior secured
also effectively managed
7 / % Senior Notes
year, attaining a level
EBITDA improved from
efficiency projects for which
allowing for long-term
of $8.0 billion increased
charges recorded during
revolving credit facility
working capital during
due November 2012,
of nearly $1.6 billion
3.4 times to 2.4 times.
we anticipate appropriate
sustainable growth and
$1.7 billion, or 27 percent,
2010), as gross margins
in September, increasing
the year to minimize
which mitigated potential
at December 31, 2011.
Our interest coverage
future returns. We believe
appropriate levels of
over 2010 results, and
improved in each of our
the facility size from
its impact on free cash
refinancing risk later in
Funds that were available
ratio also improved year
that our resilient cash-flow
liquidity. This is achieved
were only one percent
reporting segments, and
$924 million to $1.1 billion.
flow. Our low-cost,
the year and reduced our
to us—after our minimum
over year from 3.8 times
generation capability,
through our unyielding
less than our record net
operating expenses related
Additionally, we gained
highly variable operating
minimum liquidity covenant
liquidity covenant*—
for 2010 to 4.9 times
coupled with our strong
focus on remaining a
sales for 2008, which
to amortization of intangible
improved economics
structure supports
from $850 million to
were $964 million.
for 2011.
capital structure —which
low-cost, highly efficient,
were achieved prior to
assets and other cost
for the company, and
continued strength
$570 million, thereby
has minimal secured
customer-centric, innovative
the global economic crises.
improvements were realized.
more flexible terms
in cash-flow generation.
increasing availability
borrowings — has the
metals company —
flexibility to sustain
optimizing our operating
our current operations
margins and maintaining
and to support future
our rich employee culture.
Although revenues
Record Liquidity
rebounded to nearly record
and Strong
levels, profitability margins—
Credit Statistics
while improved from 2010
and covenants.
38
on our revolver.
•T
he expansion of
Adjusted EBITDA†
Growth
improved $205 million,
Our annual 2011
or 32 percent, during the
capital investments were
our senior secured
At December 31, 2011,
year, allowing for additional
$167 million, and our
strengthening of our
credit facility through
we had no outstanding
strengthening in our credit
current cash allocation
Liquidity levels reached
cash generation from
the completion of a
borrowings on our revolving
statistics. Our ratio of total
plans for 2012 include
levels—did not increase
record heights during
operations, providing
$275 million term loan
credit facility. Taking into
debt to Adjusted EBITDA
additional investments
Our financial strategy
to the same degree. We
2011. The keys to our
$486 million of funding
in January 2012. The
consideration the January
improved from 3.7 times
of between $225 and
continues to include
achieved operating-margin
increase in available funds
during the year— a
net proceeds were used
2012 refinancing, our
at the end of 2010 to
$250 million, of which over
a commitment to the
Theresa Wagler
expansion of 132 basis
during the year included:
$317 million increase
to repay $280 million,
liquidity improved
2.8 times. Our current
70% are related to organic
maintainability of improved
Chief Financial Officer
• The significant
growth initiatives.
Sincerely,
*Our senior secured credit facility includes a minimum liquidity covenant, which requires us to maintain $150 million plus the amount outstanding on the 73/8% Senior Notes due 2012 as available
liquidity through maturity of the Notes. For instance, at December 31, 2011, taking into consideration the January 2012 refinancing, the minimum required liquidity would have been $570 million.
Adjusted EBITDA as defined in our senior secured credit facility represents our earnings before interest, taxes, depreciation, amortization, and certain other non-cash items. See the adjusted
†
EBITDA reconciliation from income (loss) before income taxes on page 28.
Innovation • CULTURE • Financial Strength • Customer commitment • Strategic Growth •
Innovation • CULTURE • Financial Strength • Customer commitment • Strategic Growth •
Innovation • CULTURE • Financial Strength • Customer commitment • Strategic Growth
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9
Setting a pattern of
excellence
Customer
Strategic
Financial
commitment
Culture
growth
Innovation
strength
Making customer service
SDI’s culture is one in
We are on a continued
Innovation lies at the very
During both periods of
our highest priority means
which each employee has
path of responsible,
heart and soul of SDI. We
economic weakness and
providing outstanding
a sense of ownership,
strategic growth, in which
continually challenge the
strength, Steel Dynamics
products and services that
accountability, loyalty, and
we will strive to provide
status quo, seeking new
has maintained a proven
exceed our customers’
purpose—and the ability
sustained appreciation
opportunities to enhance
track record of sustained
expectations, anticipating
to make contributions that
of cumulative shareholder
products and services,
performance—consistently
their future needs, and
have impact. Safety on
value, exceeding market
and increase productivity
in excess of our metals-
delivering greater value.
the job is paramount.
and peer performance.
and quality.
industry peers.
10
11
S
Railway bridge under repair, White River Junction, Vermont.
real-time information
special short-term customer
as a preferred supplier
systems yield accurate
requirements for the product.
not just because we provide
lead-time and shipping
A good example of this was
the highest-quality products
estimates. On-time
our ability, in September 2011,
and services, but also
production and shipments
following a bridge failure
because we view our
help us honor order promises.
caused by Hurricane Irene,
customers as our greatest
Flexible operations and
to ship an emergency order
priority—partners, really,
our responsive people
for 47 tons of steel beams
in our endeavors.
and systems permit us
to put an essential Vermont
Photo courtesy of Kevin Burkholder.
teel Dynamics stands
rail line back into
operation. Unable
to find the needed
beams regionally,
We design many of our
steel products to meet unique
SDI has developed a
Web-based tools that
contractors for the
top-notch technical-support
allow flat-roll customers
State of Vermont
infrastructure, and we
to directly access a variety
had conducted a
provide outstanding product-
of product and order data.
nationwide search
application and development
Our success — our
to respond to changing
for the product that led to
services. We’ve developed
shareholders’ success —
customer needs.
SDI. Thanks to our ability
powerful iPhone and iPad
is reliant upon that of
For some products having
to ship the beams from our
apps that enable our flat-roll
our customers. Through
Through rigorous monitoring
longer manufacturing cycle
inventory, work on the bridge
steel sales force to instantly
our passionate customer
of processes and product
times, we help our customers
could begin quickly — and,
answer customer queries
focus, our goal is to exceed
testing, we pay close
leverage volatility with
in less than a month, the
and check mill status and
customer expectations and
attention to quality. Our
in-process inventories that
bridge reopened to essential
lead times from anywhere.
deliver greater value than
process discipline and
can be finished to serve
freight traffic.
This complements powerful
our competitors.
customer requirements.
Our customers are our most important partners. Making customer service our highest
priority means providing outstanding products and services that exceed our customers’
expectations, anticipating their future needs, and delivering greater value.
12
13
O
model that allows
fairly, by communicating
are the force that
disciplined autonomy
openly and acting upon
creates and sustains
and front-line decision
employees’ ideas and
value for the company,
making, while fostering
addressing their
our customers, and
an entrepreneurial
concerns, we foster
our shareholders.
spirit. We hold people
trust and respect.
From the beginning,
CULTURE
Melt shop pulpit, Flat Roll Division, Butler, Indiana.
ur employees
accountable, understand
SDI also places
we’ve hired energetic,
when mistakes are
great emphasis on
positive-spirited
made, but strive for
employee training
individuals who
excellence. We build
and development
have the right mindset
employee ownership
to sustain current
and talent to drive
through inclusion
performance and to
innovation and success.
and collaboration; we
develop human resources
than in all employees’
accident. Meeting that
We’ve placed them
welcome and encourage
for company growth.
concern for on-the-job
challenge would entail
in an incentivized
creativity and ingenuity.
We provide employees
safety. We strive for zero
close communication,
with opportunities for
accidents each day.
recognition of potential
environment where
SDI maintains a
their compensation
flat, lean organizational
personal growth through
To reach that goal
hazards, and strict
is based on their
structure that minimizes
education. We also
requires constant effort.
adherence to all safety
performance and the
bureaucracy, enhances
have strong internship
company’s resulting
the flow of ideas between
programs to attract the
melting manager at
shop team had just
profitability. And they
managers and workers,
best recent graduates.
our Butler, Indiana,
one lost-time accident
have excelled.
and increases accessibility
mill challenged his team
in 2010, and achieved
SDI is built on a
decentralized business
Nowhere is our
Late in 2009, the
programs. The melt
to top management.
unparalleled team
to go an entire calendar
its goal of zero lost-time
By treating people
spirit also more obvious
year without a lost-time
accidents in 2011.
Our highly productive, low-cost operations are driven by a unique company culture
in which all have a sense of ownership, accountability, loyalty, and purpose, and can
make contributions that have impact. Our employees propel us forward with their spirit,
innovation, determination, and ever-present desire to improve, grow, and succeed.
14
15
G
Shipping bay, Engineered Bar Products Division, Pittsboro, Indiana.
rowth is the
develop a richer product
on special-bar-quality
lifeblood of
mix and services that
(SBQ) products, the mill
Steel Dynamics.
add value to our products.
became profitable soon
We constantly look
We’ll maintain our focus
after production began
for ways to provide
on containing and
under SDI ownership
our customers new
reducing costs, sustaining
in 2004. We later added
and better products,
our superior operating
a finishing facility to
to grow our business and
culture, retaining our
become a “one-stop
make it more profitable.
low-cost advantage,
shop,” providing not just
and striving
the steel, but processes
to enhance
and services that added
our margin
value to our products.
in every
segment.
Our
In 2011, the bar mill
capacity by more than
with customers as
set records for annual
50 percent. We’ll also
their preferred supplier.
operating income,
expand its finishing
As we do so, we’ll be
Engineered
production, and
capabilities, further
mindful that diversity
Bar Products
shipments. Its customers
increasing our higher-
of product offerings
Division at Pittsboro,
encouraged us to expand
margin, value-added
and end-market sectors
steelmaking through the
Indiana, is an example
our product offerings
product offerings.
has helped reduce our
expansion of our existing
of a strategic acquisition
to meet all their SBQ
In the future,
exposure in any given
facilities, the introduction
that has been very
needs, and this led us
we’ll continue to focus
area. It has also brought
of new products, and
successful, and greatly
to initiate a $76 million
on the prime engines
us higher margins
through acquisitions.
enhanced by adding
expansion that will
of our success. We’ll also
in tough economic
higher-margin products
increase the mill’s
look to develop even more
times, and maximum
to the mix. Concentrating
annual production
long-lasting relationships
opportunity in good.
We’ve grown in
Moving forward, we’ll
strive to continue to
We are on a continued path of responsible, strategic growth, in which we will strive
to provide sustained appreciation of cumulative shareholder value, exceeding market
and peer performance.
16
17
S
IN N OVATION
Paint line, Flat Roll Division, Jeffersonville, Indiana.
teel Dynamics
customer applications.
steel company operates
was born of a spirit
After developing a
a paint line integral to
of entrepreneurialism
type of galvanized
a mill. Why not? A study
and innovation. The
steel specially suited for
team quickly concluded
idea was to take a
stamping steel garage
the idea was sound and
technology — thin-slab
doors, using a proprietary
the economics were right.
casting— and, through
“post-anneal” process,
In a little over a year, the
innovation, to refine that
our team observed that
Butler paint line began
technology and take it
customers were shipping
operation, employing
to a higher level. SDI has
it in volume to “roll
the latest technologies
long since accomplished
coaters”— companies
to produce high-quality,
that at our Flat Roll
specializing in applying
painted steels cost-
Division at Butler,
various colors of paint
effectively and in
made up 18 percent of
creating lucrative
Indiana. It has become
to coils of sheet steel.
an environmentally
the Flat Roll Division’s
business opportunities.
friendly way.
shipments.
Whether it is new
one of the most productive
Soon we asked the
and profitable flat-roll
question: Why not add
The Butler paint
mini-mills in the world.
a paint line at our mill?
line soon became so
we work with our
processes, energy
SDI would control all the
successful that in 2008
customers to develop
savings, or any other
our metallurgists have
elements of the process,
a second paint line
innovative product and
area where creative ideas
formulated unique alloyed
eliminating multi-vendor
was installed at our
service solutions. As in
can make a difference —
and finished steels
and logistics issues and
Jeffersonville, Indiana,
the paint line example,
we encourage our
to meet the stringent
assuring product quality.
galvanizing operation.
these efforts often add
employees to “think
specifications of specific
No other North American
Last year painted steel
customer value while
outside the box.”
On the product side,
Across the company,
products, business
Innovation lies at the very heart and soul of Steel Dynamics. We continually
challenge the status quo, seeking new opportunities to enhance products and
services, and create technologies to increase productivity and quality.
18
19
S
teel Dynamics’
generation of best-in-class
financial strength
returns on invested capital
maintain strong credit
is evidenced by its strong
throughout the business
statistics and appropriate
current liquidity level of
cycle has provided excellent
liquidity, which includes
$1.6 billion, coupled with
access to capital markets
a long-term preference
its ability to efficiently
and a strong, flexible
of net leverage* of less
generate strong cash flows.
capital structure. Our
than 3.0 times.
During both periods
balance sheet is aligned
of economic weakness and
appropriately to support
• A commitment to
• A preference to fund
and to elicit superior
returns on dollars spent.
• A current focus on
utilizing free cash flows
for strategic growth
both current operations
has maintained a proven
and adaptable to support
track record of sustained
further growth initiatives.
operating MARGIN
20%
$600M
15%
$486M
$400M
10%
7%
$200M
5%
capital investments
through free cash flow
strength, Steel Dynamics
cash flow from operations
$800M
initiatives and some
debt reduction.
$0
07 08 09 10 11
To encourage and reward
0%
07 08 09 10
11
structure—our steel
superior performance,
and metals-recycling
while aligning employee
cost structures are over
interests with those of
85% variable and our
our shareholders, we
fabrication operations
offer pay-for-performance
over 70%— coupled with
compensation that is linked
our vertically integrated
• An effort to minimize
to the safe production of
operating platforms, we
the impact of working
quality products and the
have a uniquely efficient
in excess of our metals-
framework under which
capital movement through
effective and efficient use
ability to generate strong
industry peers. Our
we operate aims to sustain
effectively managing
of our resources.
cash flow both in periods
reputation for prudent
our financial strength
customer receivables
use of capital and the
and adaptability:
and inventory balances.
performance—consistently
The financial
Given our highly
variable, low-cost operating
of economic weakness
and strength.
Our future financial success is not a strategy, but a result. It is driven
by the support of our customers, our employee culture, and the timely delivery
of preferred products.
*Total debt less cash and equivalents, and short-term commercial paper investments as a percentage of pretax earnings before interest, depreciation, amortization,
and certain other non-cash adjustments.
summary information
20
21
summary information
CORPORATE OVERVIEW
$9B
net sales ( n )
increased
$600M
$8.0B
$6B
27%
Net income ( l )
increased
$278M
$3B
98%
$200M
from 2010.
$0
400
$0
07
08
09
10
08
Net debt ( n ) —
or total debt
6
less 200
cash
and
5
commercial
4
paper—
totaled
3
$1.92billion at
year-end
2011.
1
00
09
10
11
$3B
6x
$1.9B 4x
$2B
2.4x
$1B
$0
11
2x
07
08
09
11
10
0x
The ratio
of net debt
to adjusted
ebitda*( l )
improved to
2.4x
in 2011.
Operating margin
EBITDA margin †
20%
20%
15%
15%
10%
10%
7%
3.0
0%
2.5
$10B
$8.0B
$8B
$6B
$4B
$2B
10
11
$0
96
100%
50%
0%
97
98
99
00
01
02
03
04
05
06
07
08
09
10
STEEL
FABRICATION
10%
5%
5%
07
08
09
10
11
0%
07
08
09
10
3%
STEEL
OPERATIONS
61%
—— Other 1%
11
METALS
RECYCLING AND
FERROUS RESOURCES
2.0
1.5
1.0
$400M
0.5
$300M
0.0
$167M
$200M
$100M
Growth in revenues, 1996–2011
2011 revenues as a percent of external sales
by operating segment:
By a number of measures, SDI leads the U.S. steel
industry in profitability.
60%
$300M
$0
07
$585M
$600M
from 2010.
$400M
Operating
income increased
from
2010,
driven primarily by significant
margin improvement within
steel operations.
$900M600
$0
Long-term
profitable
growth
has been our
deep-seated
objective since
the start-up of
operations in 1996.
07
08
09
10
11
$6.0B
$6B
$4B
07
08
09
10
No external sales are currently associated
with ferrous resources. About 70% of our
2011 metals-recycling sales were external.
35%
2011 operating income by operating segment*
… while our
total assets
have grown to nearly
$6 billion.
$2B
$0
Capital
expenditures
continue to focus
on projects having
a high rate of return …
Steel operations
$668 million
Steel fabrication
(7) million
Metals recycling
$95 million
Ferrous resources
(40) million
Metals recycling and ferrous resources
$55 million
11
11
n Steel operations
n Steel fabrication
n Metals recycling and
ferrous resources
Company and employee
interests are Aligned.
Our highly incentivized workforce
excels in productivity.
Percent of external sales by operating segment — SDI expanded into metals recycling with the acquisition of OmniSource in 2007.
*Adjusted EBITDA, represents our earnings before interest, taxes, depreciation, amortization, and certain other non-cash items. See a reconciliation from earnings before taxes on page 28.
*Throughout
†
6,530
full-time employees
at year-end 2011.
this summary information section on pages 21 through 25, operating income of segments excludes profit-sharing and amortization expenses related to the operating segment.
See EBITDA as presented in the adjusted EBITDA reconciliation from income (loss) before income taxes on page 28.
summary information
22
$9B
steel operations
23
$600M
DICK TEETS
Executive Vice President for Steelmaking,
President
$6B and COO of Steel Operations $400M
“
Operating income for
our steel operations in
2011 continued to improve,
$6B
segment
sales ( n )
increased
28%
from 2010.
$900M
$5.1B
$668M
$4B
$600M
$2B
$300M
reaching $668 million. We
$3B
achieved record shipments
$0
07
08
09
10
about the potential for additional growth using
existing capacity as the economy improves.”
$0
07
08
09
10
5.8M
6M
Value-added
steels
accounted
for
60%
of steel
segment
sales
in 2011,
$3.1 billion of
the $5.1 billion
total.
0
08
09
10
11
Structural 12%
6.4M
6M
Rail 2%
MILL CAPACITY
Sheet 42%
Shapes 5%
5.2M
Special-bar-quality
11%
VALUE-ADDED
STEELS
MILL STEEL PRODUCTION
2M
72%
0
07
08
09
10
6.4million
tons per year,
providing SDI
with increased
market opportunity
as the economy
improves.
4M
of SDI’s flat-rolled steel sales
were of higher-value finished sheet steel.
*Operating
07
Steel
Production
capacity‡ ( n )
has grown
incrementally to
Innovation
extends SDI’s
product line.
2% RAIL Structural and Rail Division
—— SPECIALTY SHAPES Steel of West Virginia
5%
9% — MERCHANT BAR
Roanoke Bar Division
5.8million
tons.
BY PRODUCT
TYPE /DIVISION
Steel service
centers,
distributors
and fabricators
accounted for
11% — SBQ/MBQ STEEL
Engineered Bar Products Division
13% — STRUCTURAL STEEL
Structural and Rail Division
FLAT-ROLLED SHEET—— 48%
Flat Roll Division
Flat rolled sHEET
accounted for
12%
64%
—— FLAT-ROLLED SHEET
The Techs
60%
BY DISTRIBUTION
CHANNEL
of 2011 steel
shipments.
Steel service centers — 59%
and distributors
tons in 2011.
2M
STANDARD
STEELS
$0
5.8 million
11
Sheet 17%
11
steel shipments†
were a record
4M
Merchant Bar
8%
48%
2011 STEEL SHIPMENTS
$200M
at three of our mills last year, and we’re excited
$0
Segment
Operating
income* ( l )
increased
from 2010.
*
Other
3%
summary information
Energy
Automotive —
14%
9%
Only SDI produces
Galvalume® corrosionresistant steel in wide
widths preferred by steelsiding manufacturers.
36% — Direct sales
— Other transportation
6%
Construction 33%
6%
BY END
MARKET †
DIVERSE END
Metal buildings — 12%
MARKETS†
reduce our
Light commercial and —— 11%
dependence on residential construction
10%
Heavy construction —
any single industry
or customer.
of SDI’s
2011 steel
shipments.
5%
— Appliance/HVAC
6%
— Steel fabricators
— Agriculture
— Mining
4%
3% — Heavy
equipment
Uniquely in North
America, Steel Dynamics
rolls extra-long, highquality AREMA Standard
rail — 240 feet in length.
— Other
manufacturing
19%
Diversified mix of steel products includes
1 hot-rolled sheet 2 painted flat roll 3 specialty-bar-quality rounds 4 merchant bars 5 wide-flange beams 6 rail 7 rebar 8 specialty steel
11
In 2011, Mill Utilization ( n )
of SDI’s five steel mills increased to
82%
income excludes profit-sharing and amortization expenses related to the operating segment.
1
† End-market
2
3
4
5
6
7
8
percentages shown are best estimates. Because nearly two-thirds of our steel shipments go through a distribution channel, and because service centers and distributors
†
Steel shipments includes The Techs.
do not typically provide to us the details of their customer and end-market sales, we have estimated these sales. Our estimates are based on knowledge of types of products sold for
‡
Steel mill annual production capacity and utilization include only SDI’s five steel mills. The Techs, which is excluded from steel mill production, has the capacity to coat
specific applications and on assessments by the sales and marketing staffs of our steel-product divisions. This accounts for the large percentage of shipments categorized as “other
an additional 1 million tons per year.
manufacturing,” some of which could actually belong in other defined categories.
summary information
24
25
metals recycling and ferrous resources
steel fabrication
ferrous shipments
RUSS RINN
(gross tons)
nonferrous shipments (pounds)
1.1B
Iron units sufficient to meet
the needs of our steel mills
are now produced internally.
Executive Vice President of
Metals Recycling, President and
COO of OmniSource Corporation
6M
“
At OmniSource we’re
4M
0.8B
500,000
Iron
Units
500,000
2M
0.4B
400,000
400,000
focusing on increasing
profit margins—
summary information
5.9M
1.2B
Produced
New Millennium’s three new western
plants ( ) introduce coast-to-coast
market coverage.
(metric tons)
389,000
by expanding retail
scrap collection, increasing the throughput
of our shredders, producing value-added
ferrous
products, and improving
the
$9B
$600M
recovery of nonferrous metals.”
$4.2B
$4B
Segment
sales ( n )
increased
$150M
$400M
$200M
$3B
$6B
$2B
$100M
$55M
$1B
from 2010.
$50M
$3B
$0
31%
07†
07†
08
43%
09
07†
11
10
$0
09
10
$125M
$5B
$3.9B
$4B
$100M
$95M
$75M
$3B
$50M
$2B
$25M
$0
New downstream
07
08
09
10
processing
facilities
are designed
to improve
recycling margins.
$0
08
$0
11
09
was acquired October 26, 2007.
10
11
10
Omnisource 2011 NeT sales
$3.9billion
70%
of OmniSource’s
2011 net sales went to
external customers ( n ).
Internal sales ( n ) accounted for the rest.
Ferrous scrap
Gamma Tech units at three
OmniSource facilities in the
Midwest reduce residual
metals to produce highervalue ferrous shredded scrap.
0
0
$9B
positioning for future
07
07
08
08
09
09
10
10
11
11
growth. The three plants
we bought, upgraded,
Iron Units consumed
customers nationwide
and restarted provide
(percent)
$9B
SEGMENT
sales$80M
(n)
increased
$300M
$6B
$400M
07
07
08
08
09
09
10
11
10 $100M
11
87%
07
08
09
10
11
Hope, Arkansas
Atlanta
Kernersville
Wellford
Spartanburg
Anderson
Clinton
Columbia
Greenwood
Athens
Smithfield
Fayetteville
Raeford
Wilmington
Lumberton
Swainsboro
Fitzgerald
Lake City, Florida
$0
$3B
08
$0
08
09
10
1 joists
11
2 decking
1
2
11
Shipments
(tons)
$80M
$400M
$276M
300,000
218,000
$300M
$40M
$200M
$40M
150,000
$100M
$20M
75,000
56%
09
10
$200M
$0
07
New
Millennium
Products
$60M
$20M
from 2010.
07
of iron units
consumed in
2011 were supplied internally ( n ).
$0
Montvale
Rocky Mount
Charlotte
Greenville
Liberty
and gain market share.”
$600M
$200M
$200M
$0
Jeffersonville
Cherryville
a new presence to serve
$400M
25%$400M
25%
$3B
Mansfield
Elizabethton
Johnson City
Winston-Salem
Juarez, Mexico
Together, Iron Dynamics ( n ) and Mesabi
Nugget ( n ) supplied 390,000 metric tons
of iron units in 2011.
0%
0%
New Haven
Fort Wayne Lima
St. Marys
Marion
Muncie
Greencastle
progress in 2011
50%
50%
NONFERROUS scrap
The new SDI LaFarga
operation in Indiana
will produce secondary
copper rod from
shredded copper scrap.
Kokomo
Indianapolis
Adrian
Elkhart
Goshen
Auburn Toledo
Defiance
Salem, Virginia
“
We’ve made great
75%
75%
$6B
Munster
Bourbon
Peru
Normal
St. Louis
Executive Vice President of Business
Development, President and COO of
New Millennium Building Systems
$600M
100%
100%
11
Sturgis
South Bend
Butler, Indiana
Fallon, Nevada
Gary heasley
200,000
200,000
OmniSource Operating income* ( l ) was
throttled in 2011 by costs to acquire scrap feedstock.
income excludes profit-sharing and amortization expenses related to the operating segment.
† OmniSource
09
300,000
300,000
100,000
100,000
$0
11
08
0
of OmniSource’s 2011 ferrous scrap
shipments went to SDI steel mills ( n ).
$1B
SEgMENT Operating income*(l) was negatively
impacted by Mesabi Nugget start-up in 2010 and 2011.
*Operating
0
$200M
08
Burlington
Bay City
Warren
Sterling Heights
Howell
Jonesville
Jackson Ecorse
Kalamazoo
Belvidere
$0
$0
07
08
09
Operating
-$20M LOSS* ( l ) narrowed
in 2011 while starting up new plants.
*Operating
10
11
$60M
$0
-$7M
225,000
07
08
09
-$20M
loss excludes profit-sharing and amortization expenses related to the operating
segment. 2010 operating loss of $25 million included a $13 million impairment charge.
10
11
0
-75,000
07
08
09
summary information
26
27
summary information
Selected Financial Data
T
he following table sets forth the selected consolidated financial and operating data of Steel Dynamics, Inc. The selected consolidated financial
and operating data as of and for each of the years in the five-year period ended December 31, 2011, were derived from our audited consolidated
financial statements. You should read the following data in conjunction with Management’s Discussion and Analysis of Financial Condition and Results
of Operations and our consolidated financial statements and notes appearing in our accompanying Form 10-K for the period ended December 31, 2011.
You should also read the following information in conjunction with the data in the table on the following page:
• On June 9, 2008,
• On October 26, 2007,
• On July 2, 2007,
• For purposes of calculating
• For purposes of
we completed the
we completed the
we completed the
our “ratio of earnings to
calculating our
acquisition of Recycle
acquisition of OmniSource
acquisition of The Techs,
fixed charges,” earnings
“operational working
South, a privately held,
Corporation, a privately
three flat-rolled-steel
consist of earnings from
capital” for all periods
regional scrap-metal
held scrap-metal
galvanizing facilities.
continuing operations
presented, we consider
recycling company
recycling and trading
The Techs operations
before income taxes,
amounts invested
located in the
company. OmniSource
are reflected in our steel
extraordinary items and
in trade receivables
southeastern United
operations are reflected
operating segment.
before adjustments for
and inventories,
States. Recycle South
in our metals recycling
noncontrolling interests,
less current liabilities
operations are reflected
and ferrous resources
adjusted for the portion of
other than income
in our metals recycling
operating segment.
fixed charges deducted
taxes payable and
and ferrous resources
from these earnings,
debt as reported
operating segment.
plus amortization of
on our consolidated
capitalized interest.
balance sheets.
Fixed charges consist
of interest on all
indebtedness, including
capitalized interest, and
amortization of debt
issuance costs.
Year ended december 31,
2011
2010
2009
2008
2007
Operating data
Net sales
$ 7,997,500
$ 6,300,887
$ 3,958,806
$ 8,080,521
$ 4,384,844
Gross profit 931,518 675,666 399,076
1,231,259 915,694
Operating income 584,820 364,753 119,531 846,368 690,745
Net income (loss) 265,692 129,599 (11,019) 454,514 394,157
Net income (loss) attributable to Steel Dynamics, Inc.
278,120
140,709
(8,184)
463,386
394,566
Basic earnings (loss) per share
$
Weighted average common shares outstanding
Diluted earnings (loss) per share
$
Weighted average common shares
and share equivalents outstanding
Dividends declared per share
$
Other Financial data
Capital expenditures
$
Ratio of earnings to fixed charges
1.27
$
218,471
1.22
$
.65
$
216,760
.64
$
(.04) $
200,704
(.04) $
2.45
$
189,140
2.38
$
2.12
186,321
2.01
235,992
.400
$
234,717
.300
$
200,704
.325
$
194,586
.400
$
196,805
.300
167,007
$
3.40x
133,394
$
2.20x
330,052
$
.78x
412,497
$
5.44x
395,198
9.37x
Other data
Shipments
Steel operations (tons) 5,842,694 5,295,852 4,045,787 5,608,898 5,550,207
Metals recycling and ferrous resources
Ferrous metals (gross tons) 5,879,729 5,179,812 3,631,102 4,958,518
973,891
Nonferrous metals (thousands of pounds) 1,066,648
961,288
780,084
911,832
137,417
Mesabi Nugget (metric tons)
159,641
67,485
—
—
—
Iron Dynamics (metric tons)
229,502
225,545
201,897
232,593
223,805
Steel fabrication operations (tons) 217,838 164,431 145,259 286,612 276,836
Steel operations production (tons) 5,931,833 5,413,093 4,187,526 5,584,019 5,471,314
Shares outstanding (in thousands) 218,874 217,575 216,000 181,820 190,324
Number of employees 6,530 6,180 5,990 6,652 5,940
Balance sheet data
Cash and equivalents, and commercial paper
$
475,591
$
186,513
$
9,008
$
16,233
$
28,486
Operational working capital
1,276,916
1,189,086 857,708 990,516
1,035,027
Net property, plant and equipment 2,193,745 2,213,333 2,254,050 2,072,857 1,652,097
Total assets 5,979,226 5,589,934 5,129,872 5,253,577 4,519,453
Long-term debt (including current maturities) 2,380,100 2,386,821 2,222,754 2,650,384 2,029,845
Equity 2,299,900 2,076,835 2,003,265 1,632,313 1,540,234
summary information
28
29
Investor information
Adjusted ebitda reconciliation*
Year ended december 31,
In millions
2007
2008
2009
2010
2011
Income (loss) before income taxes
$
630
$
735
$
(18)
$
213
$
424
Interest expense 55 145 141 170 177
Interest income
(2)
(3)
(1)
(4)
(5)
Depreciation 126 162 159 171 177
Amortization 12 41 53 46 40
Loss attributable to noncontrolling interests
–
9
3
12
13
EBITDA
$
Unrealized hedging (gains) losses
$
Inventory valuation adjustments
Equity-based compensation
Asset impairment losses
Adjusted EBITDA*
$
821
$
1,089
4
$
–
10
–
835
$
1,182
337
$
608
$
$
404
$
643
$
18
15
14
10
17
16
(4)
9
17
–
848
to EBITDA are as defined in our senior secured credit facility.
STOCKHOLDER RECORDS
Computershare Trust
Company, N.A.
P.O. Box 43078
Providence, Rhode Island
02940-3078
(877) 282-1168
www.computershare.com
INVESTOR INFORMATION
Investor Relations
(260) 969-3500
investor@steeldynamics.com
CORPORATE OFFICES
7575 West Jefferson Boulevard
Fort Wayne, Indiana 46804
(260) 969-3500
(260) 969-3590 fax
www.steeldynamics.com
MARKET INFORMATION
The company’s stock trades
on the NASDAQ Global
Select Market under the
symbol STLD.
2011 Board of directors
executive offiCers
Employee Directors
Non-employee Directors
Mark D. Millett
Co-founder
President and CEO
Steel Dynamics, Inc.
Keith E. Busse
Co-founder
Chairman
Steel Dynamics, Inc.
Mark D. Millett
President and CEO
Richard P. Teets, Jr.
Executive Vice President
for Steelmaking
Gary E. Heasley
Executive Vice President
of Business Development
President and COO
of Steel Operations
Richard P. Teets, Jr.
Co-founder
Executive Vice President
Steel Dynamics, Inc.
John C. Bates
President and CEO
Heidtman Steel Products, Inc.
President and COO of New
Millennium Building Systems
Theresa E. Wagler
Executive Vice President
and Chief Financial Officer
metals recycling
OmniSource Corporation 9 Head office, Fort Wayne, Indiana.
Over 80 locations
in the Midwest and southeastern United States.
Frank D. Byrne, M.D.
President
St. Mary’s Hospital
Medical Center
Madison, Wisconsin
ferrous resources
Iron Dynamics 10 Butler, Indiana.
Mesabi Nugget 11 Hoyt Lakes, Minnesota.
Mining Resources 12 Chisholm, Minnesota.
Paul B. Edgerley
Managing Director
Bain Capital, Inc.
steel fabrication
New Millennium Building Systems 13 Head office, Fort Wayne, Indiana.
Plants in 14 Butler, Indiana, 15 Salem, Virginia, 16 Lake City, Florida,
17 Hope, Arkansas, 18 Fallon, Nevada, and 19 Juarez, Mexico.
*Adjustments
ANNUAL MEETING
May 17, 2012
9 a.m. Eastern
Calhoun Ballroom
Grand Wayne Convention Center
120 West Jefferson Boulevard
Fort Wayne, Indiana 46802
826
Steel operations
Flat Roll Division 1 Butler and 2 Jeffersonville, Indiana.
Structural and Rail Division 3 Columbia City, Indiana.
Engineered Bar Products Division 4 Pittsboro, Indiana.
Roanoke Bar Division 5 Roanoke, Virginia.
Steel of West Virginia 6 Huntington, West Virginia, and 7 Memphis, Tennessee.
The Techs 8 Pittsburgh, Pennsylvania.
11
12
19
$
38
$
(35)
$
2
$
37
85
6
18 17 14
–
–
13
steel dynamics operations
13
summary information
Richard J. Freeland
Chairman
Pizza Hut of Fort Wayne, Inc.
Dr. Jürgen Kolb
Retired
Former member of
Executive Office
Salzgitter, AG
James Marcuccilli
President and CEO
STAR Financial Bank
Gabriel L. Shaheen
Partner
NxtStar Ventures, LLC
Vice Chairman
Horace Mann Educators
Corporation
In memoriam
Joseph D. Ruffolo
Principal
Ruffolo Benson, LLC
Russell B. Rinn
Executive Vice President
of Metals Recycling
President and COO of
OmniSource Corporation
www.steeldynamics.com
Steel Dynamics
Roanoke Bar Division
where standard carbon-steel
merchant bar products
are produced
elements of success
From our entrepreneurial culture and focus on safety to the customer relationships we cultivate to our strategic
growth plan, innovation and low-cost platforms, our success is driven by many different, essential elements.
When our people bring these elements together, we become an unstoppable force.
02
06
contents
A message from
Mark Millett
A message from
Theresa Wagler
Financial summary
01
Steel
08
Metals recycling and ferrous resources
12
Minnesota operations
14
Steel fabrication
16
Front Cover: Steel Dynamics Steel West Virginia employees
An entrepreneurial
culture is found
throughout Steel Dynamics
Financial summary
Selected Financial Data (millions of dollars, except share amounts)
2012
Net Sales
$
Operating Income
$
Net Income (loss) Attributable to SDI
$
Cash Flow from Operations
$
Capital Expenditures
Total Assets
2011
7,290
2010
2009
2008
$
7,998
$
6,301
$
3,959
$
8,081
391 $
585
$
365
$
120
$
846
164 $
278
$
141
$
(8)
$
463
486
$
169
$
446
$
770
446
$
$
224
$
167
$
133
$
330
$
412
$
5,815
$
5,979
$
5,590
$
5,130
$
5,254
Long-term Debt (including current portion)
$
2,202
$
2,380
$
2,387
$
2,223
$
2,650
Net Debt (long-term debt less cash and short-term investments)
$
1,795
$
1,905
$
2,200
$
2,214
$
2,634
Net Income (loss) per Diluted Share
$
0.73
$
1.22
$
0.64
$
(0.04)
$
Year-end Shares Outstanding (thousands)
Dividends Declared per Share
219,523
$
Selected Operating Data
0.400
218,874
$
2012
0.400
217,575
$
2011
0.300
216,000
$
2010
0.325
2.38
181,820
$
2009
0.400
2008
Steel Operations Shipments (thousands of tons)
5,833
5,843
5,296
4,046
5,609
Metals Recycling: Ferrous Shipments (thousands of gross tons)
5,647
5,880
5,180
3,631
4,959
Ferrous Shipments to SDI (thousands of gross tons)
2,587
2,565
2,161
1,435
2,027
Nonferrous Shipments (millions of pounds)
1,051
1,067
961
780
912
Steel Fabrication Operations Shipments (thousands of tons)
295
218
164
145
287
6,670
6,530
6,180
5,990
Number of Full-time Employees
Operating Income Margin
Operating Income per Ton Shipped* (Steel Operations)
5.4%
$
88
$
7.3%
117
5.8%
$86
3.0%
$51
$
6,652
10.5%
155
* Operating income excludes profit-sharing costs and amortization related to the operating segment.
1
Steel Dynamics, Inc. 2012 annual report
Elements of Success
letter to our shareholders
I
want to first offer a sincere thanks
benefits. We have a solid strategic frame-
to our customers for their business
work in place that focuses on growing our
partnership over the past year and to our
business in spite of the macro environment
shareholders for their continued confidence in
we cannot control. We are optimizing and
our company. To our team at Steel Dynamics,
leveraging our existing assets. We approved
my heartfelt thanks for your passion and dedi-
three key capital projects for our steel opera-
cation to excellence.
tions that will increase our ability to deliver
While many hoped 2012 would bring a
steadily improving economy, the combination
of global economic and political uncertainty
from Mark MilletT
operating environment.
One of our initiatives in 2012 was further
and dampen global steel demand. Though
strengthening the company’s balance sheet
the metals industry remains challenging, our
to be even more flexible to support future
talented team once again achieved a perfor-
growth. We are financially prepared to
mance of which I am proud.
implement growth plans in a prudent manner
Our 2012 revenues of $7.3 billion were
however, they still were our third highest
year. The real challenge of 2012 presented
itself in our sales margins—2012 operating
Steel Dynamics has a strong
financial foundation and
an incredible team that will
exploit opportunities, putting
us in an excellent position
for growth. Our low-cost
position is driven by the fact
that we have state-of-the-art
facilities and technology, but
even more importantly, we
have a culture that leverages
that technology.
while improving our already low-cost
continued to suppress consumer confidence
less than the $8.0 billion achieved in 2011;
President and
Chief Executive Officer
value-added, high-quality products,
income was $391 million, compared to
$585 million in the prior year. The driver was
steel margins, specifically sheet steel margins,
as the weakened global economy dampened
demand and encouraged import activity, and
our raw material pricing did not decline in
lockstep with sales prices.
Despite the macroeconomic environment
surrounding us, we seized opportunities in
2012. We entered new markets, gained
market share, introduced new product capabilities and identified several growth projects
which are expected to have meaningful future
2
to ensure our invested capital will bring appropriate returns to our shareholders.
2012 Operating Results
We continue to outperform our industry peers
on a number of key business measures,
including operating margin, EBITDA margin
and for our steel operations, operating
income per ton shipped. We remain focused
on being the lowest-cost metals producer
in the industry. Our culture underlies our
success. Our customers and shareholders
see the results, and our employees thrive
on it. We encourage and reward the esprit
de corps that permeates everything we do.
From top-class safety practices, to achieving
on-time, quality deliveries, our employees at
every division and in every job demonstrate
passion for success.
Employees at the
Roanoke Bar
Division
stand ready
Steel Our steel operations shipped 5.8
for the year, SDI’s steel mills operated at
Fabrication Our Fabrication business
million tons of steel in 2012, which con-
82%. We are able to consistently achieve
turned the corner, with three consecutive
tinues to be well above pre-recessionary
higher rates as a result of our diversified
profitable quarters in 2012. We imple-
levels, and only 10,000 tons less than
product portfolio, emphasis on higher,
mented changes earlier in the year that
the volume achieved in our record year
value-added offerings and consistent focus
yielded efficiencies and improved
of 2011. As mentioned, 2012 operat-
on the customer.
productivity, resulting in positive full-year
ing income for our steel operations was
significantly lower as steel margins were
compressed. The downward pressure on
steel margins was due to two primary
factors: a continued weakness in the U.S.
economy which translated into a weaker
demand for steel and steel products, and
a downward pressure on selling prices
that outpaced declines in our raw material
costs, causing compressed margins. An
oversupplied domestic steel market resulted from increased import activity, coupled
with the current capacity overhang given
the weaker demand environment.
In spite of this, our steel operations
achieved a mill utilization rate higher
than the industry. While the industry
reported a 75% capacity utilization rate
Metals Recycling and Ferrous
Resources Our Metals Recycling and
Ferrous Resources operations experienced
a fickle year, driven by fluctuations in both
export and domestic steel mill demand.
Despite compressed margins, our metals
operating income of $2.1 million. The
employees entered new markets, grew
our customer footprint from a regional
to a national focus, increased sales and
dramatically optimized the business to be
more competitive.
recycling operations were still able to
Key Initiatives We approved key
outperform their peers, while also synergisti-
growth projects in 2012 to add to our
cally working with our steel mills in the
long-term growth and profitability. In
supply of low-cost, high-quality raw material.
February 2012, we announced plans
Our Minnesota operations made note-
to expand our engineered, special-bar-
worthy progress. With some innovative
quality (SBQ) steel mill. When the expan-
approaches, we implemented a series of
sion is complete, the mill’s production
changes that have already dramatically
capacity will increase 52%. This growth
improved the quality of our iron nuggets,
initiative affords us and our customers
with anticipated improvement in produc-
numerous advantages: we further diversify
tion rates as we proceed through 2013.
our product offerings to include high-
3
Steel Dynamics, Inc. 2012 annual report
Elements of Success
From Mark
quality, smaller diameter rounds, we become
It also provides a high-quality, value-added
New technology at our metals recycling
a single-source for a broad range of SBQ
product for our customers.
locations in Toledo, Ohio, and Indianapolis,
Working to control our costs as far into the
Indiana, will recover more higher-margin
supply chain as possible, we achieved a
copper, nickel and stainless steel. We’ve also
pivotal milestone for our Minnesota operations
made capital improvements to existing retail
by constructing a facility that will allow us to
yards, and opened new yards that will help
supply low-cost iron concentrate to our iron
us acquire a greater supply of higher-margin
nugget operations, which has been
obsolete scrap.
consuming much more expensive, market-
We reopened two steel fabrication plants
priced third-party concentrate up to this point.
acquired in Hope, Arkansas, and Fallon,
products and services to our customers, and
we improve the cost-efficiency at our Structural and Rail Division, through increased
utilization related to the supply of semifinished product to our SBQ steel mill. The
two locations, working together, creatively
leverage our assets, use our technology
wisely and collectively maximize the
company’s financial performance.
In November 2012, we announced an
exciting new project using leading-edge
technology developed by our Structural and
Rail Division team to manufacture premium
railroad rail. The state-of-the-art heat-treating
system air-quenches the rail heads, making
them harder and more wear-resistant. The
technology further diversifies our product
mix, and increases the utilization of our
Structural and Rail Division through
We also improved both the productivity
of our Minnesota iron nugget facility and
the quality of the product. We are working
toward increasing equipment availability to
consistently sustain operating rates of 1,000
metric tons per day. In order to reach our
designed production capacity of between
Nevada, expanding the national footprint
of our New Millennium Building Systems
business. Because every product made is
custom-engineered, the business remains
focused on customer service and is poised
to take full advantage when the construction
industry recovery begins.
1,250 and 1,400 metric tons per day,
We achieved outstanding performance as
we plan to make additional improvements
measured by our customers on the 2012
in the second quarter of 2013.
Jacobson Steel Satisfaction Survey. Our steel
mills received admirable performance ratings.
non-residential market cycles.
Results of this survey attest to our drive to provide superior customer service and value.
Our Focus on Safety Nothing is more important than creating and maintaining a safe work environment for every employee. While our
business success is judged by its results, those results could not be achieved without the dedication and hard work of our employees. Even though
our present safety record is better than industry averages, our goal is higher. We are aiming for a zero-incident environment, and our
focus on safety in 2012 produced some remarkable results:
Our Jackson metals recycling and Minnesota
The steel processing teams at The Techs
Nearly 50% of our metals recycling locations
iron nugget facilities achieved zero lost work
achieved a perfect safety record – attaining
were accident-free the entire year. The Michi-
days for the second consecutive year.
a full year with no recordable injuries.
gan division had zero recordable injuries,
a tremendous achievement.
4
Millions of dollars
Millions of dollars
In dollars
Operating income
Net income (Loss)
Net income (Loss) Per diluted share
$391
2012
2011
2009
2011
$585
$365
2010
$164
2012
2009
$120
$846
2008
Billions of dollars
$(8)
2009
$463
2008
$6.3
$4.0
2008
2009
$1.22
2010
$141
$8.1
Net sales
2011
$278
2010
$0.73
2012
2010
$0.64
$(0.04)
$2.38
2008
$8.0
$7.3
2011
2012
Beyond the safety programs instituted last year
nine months following. These are two critical
I’m optimistic about 2013 and beyond.
and to be instituted in the future, achieving a
sectors to not only the steel industry, but to the
We continue to drive toward maximizing
zero-accident performance record depends on
U.S. economy and job creation. Additionally,
opportunities to effectively and efficiently
maintaining a culture where every employee is
corporate America has significant cash
perform through the cycle and maintain
engaged and taking responsibility for creating
reserves that are waiting to be invested, and
sustainable differentiation from our peers.
and maintaining a safe working environment.
access to funds from lenders at historically
We will continue to assess opportunities
This is an ongoing focus for us and one we
low interest rates. Longer term, as America
for growth, not only top-line revenue growth,
continue to monitor, assess and refine.
becomes energy-independent with the inex-
but growth that will enhance and provide
pensive shale gas reserves, and the domestic
consistency to margins. Thanks to the dedi-
workplace is recognized as one of the most
cation and integrity of our employees, the
efficient and effective places to do business,
confidence of our customers and the support
companies will relocate to the U.S. In fact,
of our shareholders, we look forward
it has already begun. We are uniquely posi-
to continuing our superior performance
tioned to benefit from this economic growth.
in the future.
Looking Ahead I am expectant—for us
and for America. The automotive and manufacturing industries remain strong. There has
clearly been upward momentum in the residential construction arena, and nonresidential
construction historically mimics the sector six to
Sincerely,
Mark Millett
President and Chief Executive Officer
5
Steel Dynamics, Inc. 2012 annual report
Elements of Success
letter to our shareholders
C
from Theresa Wagler
Executive Vice President
and Chief Financial Officer
“Our overall financial
strategy is to be the safest,
lowest-cost metals producer
of diversified high-quality,
value-added products, creating the highest margins.
Through our superior operating culture, experienced
and impassioned employee
base and performance-based
incentive programs, we
will continue to focus on
best-in-class financial and
operating performance.”
hallenging conditions in the metals
Our annual 2012 capital investments were
industry continued throughout
$224 million, and our current capital
2012. Despite only a 9% decline in year-over-
allocation plans for 2013 include additional
year revenues, our operating income
investments of between $200 and $225
decreased 33%, to $391 million. Although
million, of which over 70% are related to
our conversion costs remained among the low-
organic growth and production efficiency
est in the industry, our selling values decreased
projects for which we anticipate appropri-
more quickly than our raw material costs,
ate future returns. These investments include
resulting in this margin compression. However,
the engineered special-bar-quality (SBQ)
the team’s unyielding focus on remaining
rolling mill expansion ($76 million) and
a low-cost, highly efficient, customer-centric
premium rail air-quenching technology
metals company resulted in another year of
installation ($27 million), both of which
best-in-class financial and operating perfor-
are expected to be completed in the fourth
mance when compared to our industry peers.
quarter of 2013. We prefer funding capital
Our performance supported strong cash flow
investments through free cash flow when
from operations and resulting liquidity levels.
possible. Our cash flow generation is
Liquidity levels remained at near-record highs
strong because of the variability of our cost
during 2012. At December 31, 2012, we
structure and the focus on keeping supply-
had $1.5 billion of funds available to us,
chain inventories at a minimum, such as
comprised of our undrawn $1.1 billion
reducing the amount of ferrous scrap
revolving credit facility and $407 million
material maintained at the steel mills.
of cash and short-term investments.
Our financial framework also includes the
Given both the strength of the capital
preference for maintaining net leverage
markets and historically favorable interest
below three times throughout the market
rate environment, we opportunistically
cycle. On an adjusted basis, we did just
refinanced over $1.0 billion of our debt,
that during 2012. We believe additional
or just less than half of our outstanding
debt repayment could further ease this
balances. We were able to elongate and
objective, and intend to further reduce debt
stagger our debt maturities while reducing
in 2013, while maintaining sufficient liquid-
our overall interest burden by approximately
ity for growth. Adjusted EBITDA* for 2012
$20 million annually. We also reduced
was $621 million. Our net debt, defined
debt by $178 million to further improve
as total debt less cash and short-term invest-
our credit profile throughout the business
ments, was $1.8 billion, resulting in net
cycle, supporting our financial framework
debt to Adjusted EBITDA* of 2.9 times.
guidelines, which included debt reduction
while maintaining appropriate liquidity
for current operations and future growth
opportunities.
6
* Adjusted EBITDA represents our earnings before interest, taxes,
depreciation, amortization, and certain other non-cash items.
See the reconciliation on page 20.
Liquidity
Net Debt and ratio of net debt
Millions of dollars
to adjusted EBITDA
$3.0
$1,400
$2.5
$407
$1,000
$1,085
$1.8
2.9
$2.0
14%
SDI
6.0
12%
Peer Group
5.0
10%
4.0
8%
$1.5
3.0
$1.0
2.0
$600
$0.5
1.0
$400
$0
$800
08
09
10 11
12
Available Bank
Revolver
Cash and Shortterm Investments
08
09
10
11
12
Ratio
$1,200
Billions of dollars
$1,600
EBITDA Margin (%)*
Ratio of Net Debt to Adjusted EBITDA
5.5%
6%
4%
2%
0
0
Total Debt less Cash and Short-Term Investments
8.2%
-2%
08
09
10
11
12
* EBITDA is calculated as earnings before interest, taxes, depreciation, and amortization. Peer Group includes Nucor, US Steel, AK
Steel and Commercial Metals Company
Outstanding debt maturities
As We look to 2013, we are optimistic as we anticipate:
Millions of dollars
$1,124
$1,200
• The completion of two compelling organic investments related to our engineered
special-bar-quality (SBQ) expansion and premium rail product addition, both
$1,000
of which are expected to be completed in the fourth quarter of 2013
$800
$600
• Improvements from our Minnesota operations, as we expect increased production
$400
and utilize our own lower-cost iron ore concentrate
$200
• An improving domestic economy
$0
13
14
15
16
17 After
• Reduced interest burden related to our 2012 refinancing and debt
repayment initiatives
Capital investments Millions of dollars
Our overall financial strategy is to be the safest and lowest-cost metals producer of highquality, value-added products, creating the highest margins. Through our superior operating
culture, experienced employee base and performance-based incentive programs, we are
uniquely positioned to take advantage of each opportunity. Our growth must be additive to
margins, counter-cyclical where possible, and be in areas where our culture of performance-
$24
$20
$56
based incentive compensation and ownership can thrive.
Sincerely,
$61
$63
Theresa Wagler
Executive Vice President and Chief Financial Officer
Steel Operations
25%
Metals Recycling
28%
Completion of Iron Concentrate Facility
27%
Completion of Copper Rod Facility
9%
Other
11%
7
Steel Dynamics, Inc. 2012 annual report
Elements of Success
A Steel Will
Steel of West Virginia
surpassed 550 days and
nearly two million man-hours
without a lost-time injury.
Dick teets
Executive Vice President for Steelmaking,
President and COO of Steel Operations
“While we continued to experience
a challenging market in 2012, we
set production and shipping records
at some of our steelmaking facilities
and maintained higher utilization
rates than the industry average. We
remain focused on differentiating
our products and services in the
marketplace and continue to invest
in developing new high-quality,
high-value products that our customers want and need. The investments we continue to make in our
steel operations will help us further
achieve that differentiation.”
Steel | Strategic Growth
Progress at Engineered Bar Products Division
As part of our strategic growth plan, we continually apply innovative ways to leverage existing assets and diversify our product portfolio. Our Engineered Bar Products Division (EBD)
presents a unique organic growth opportunity for the company. By adding a second rolling
mill and making numerous enhancements to the facility’s current rolling mill, we can increase
the plant’s capacity to produce engineered, special-bar-quality (SBQ) steel bars and expand
our product diversity with high-quality, smaller-diameter rounds.
8
In 2012, we began a $76 million expansion that will increase
the mill’s production by 52%, from 625,000 tons to 950,000
tons per year. Additional improvements in material handling and
staging and an expansion of the mill’s bar finishing capabilities
for non-destructive testing of finished bars will potentially double
its inspection capacity.
Seeking the most advanced technology available, EBD’s engineer-
Finished SBQ bars at
the Engineered
Bar Products
Division.
ing and rolling teams evaluated state-of-the-art equipment from
four major global suppliers. The equipment selected will help us
efficiently produce the most precise product possible and maintain the plant’s production flexibility, both of which will enhance
our relationships with customers.
The plant expansion will improve our cost-efficiency by increasing
capacity utilization at our Structural and Rail Division, which will
supply EBD with semi-finished product for its new rolling mill.
Establishing a symbiotic relationship between the two plants allows
us to optimize both assets and maximize our return on investment.
Our efforts to create an even stronger, more adaptable capital structure support projects such as the expansion that effectively leverage
our assets. At completion during the fourth quarter of this year, our
Engineered Bar Products Division will rank among the largest singlesite SBQ production facilities in North America, giving customers a
single source of high-quality, value-added products.
Gauging success
Steel Dynamics operates some of the most technologically
advanced steel mills in the country. Cutting-edge technology
helps us deliver higher-quality products to our customers, realize
production efficiencies and provide value-added products.
The Flat Roll Division
in Butler, Ind., consistently
maintains great on-time
delivery and very short
lead times.
In 2012, we installed new shape and profile gauges in the
hot mill at our Flat Roll Division. These gauges help control the
thickness and width of our steel products, which in turn provides
greater yield, or performance, for our customers. Steel is sold
by weight, so it’s always associated with a thickness or width
tolerance. With this new technology, the mill holds even tighter
product tolerances, so we provide more linear footage to customers at the same weight, allowing them to create more out of our
coil. This, along with the fact that the mill consistently achieves
over 90% on-time delivery, well above industry average, makes
us a preferred supplier.
9
Steel Dynamics, Inc. 2012 annual report
Elements of Success
A Steel Will
Steel | Innovation
Tough as rails
Our strategic growth plan directs us to leverage existing facilities
and adapt innovative technologies that diversify our product
portfolio and enhance its quality. Our culture thrives on applying
cutting-edge technologies that help us realize greater success and
provide solutions to our customers’ challenges.
The Structural
and Rail Division
is one of the key growth
projects that will
provide high-quality,
value-added products.
As our rail customers struggle to update an antiquated system throughout the country, they need a product that can hold up longer in the
most severe applications, reducing their cost of rail maintenance and
replacement. In response, our Structural and Rail Division developed
state-of-the-art technology that air-quenches the heads of rails to make
them harder, stronger and more wear-resistant.
The air-quenched rails give us the potential to become the
pre-eminent rail manufacturer for rail quality, end straightness and
dimensional control in North America. This technology brings added
value to our products and diversifies the mill’s product portfolio,
helping it weather the variability of nonresidential steel demand.
Construction of the new system, a nearly $27 million investment,
has already begun. When complete at the end of this year, it will
be capable of producing up to 350,000 tons of hardened plain
carbon steel rails as well as standard-strength rails, which the
division currently manufactures. The capability to produce 320-foot
rail makes the division the only U.S. manufacturer of long rail and
our customers’ single resource for all lengths of rail.
Our employees
at every division and
in every job demonstrate
passion for success.
Our strategic growth plan directs us to
leverage e xisting facilities and adapt
innovative technologies that diversify our
product portfolio and enhance its quality.
10
Steel Sales by end market
Steel Segment
Steel Sales by product type
$4.7B
$505M
$5.0
$1,000
$4.0
$800
$3.0
$600
$2.0
$400
$1.0
$200
$0
Construction
40%
$1,200
08
Steel Sales
09
10
11
12
Millions of dollars
Billions of dollars
$6.0
$0
Steel operating income*
* Operating income excludes profit-sharing costs
and amortization related to the operating segment.
Steel operations metrics
9%
Flat-rolled Sheet - Flat Roll Division
47%
Light Commercial & Residential
25%
Flat-rolled Sheet - The Techs
11%
Heavy Construction
6%
15%
Automotive
16%
Structural Steel - Structural
& Rail Division
Heavy Equipment
5%
Rail - Structural & Rail Division
2%
Other Transportation
3%
9%
Agriculture
5%
SBQ/MBQ Steel - Engineered
Bar Products Division
Mining
2%
Merchant Bar - Roanoke
Bar Division
10%
Appliance/HVAC
6%
5%
Other Manufacturing
20%
Specialty Shapes - Steel
of West Virginia
Energy
7.5
81% 56% 73%
82% 82%
6.0
Millions of tons
Metal Buildings
4.5
3.0
1.5
0
08 09 10 11 12
3%
excess Capacity
Steel Mill utilization % (a)
Steel Production
(a)
Total Steel Shipments
Calculated as SDI steel operation (excluding
The Techs) with an estimated annual steelmaking
capacity of 6.42 million tons.
Steel | Safety
Steel | Customer Relationships/Commitment
A state of mind that saves
Our customers have spoken
To us, safety is more than a set of rules and processes. It’s more than
One way we achieve sustainable differentiation in the marketplace
a checkbox. It’s a mindset, a culture that permeates every one of our
is through the exceptional level of customer service and partnership
facilities. We’re relentless in our drive down to reach zero incidents,
we provide. We continually expand our product portfolio and
and this company-wide dedication to safety resulted in remarkable
improve quality to exceed customers’ expectations, anticipate
achievements in 2012.
their future needs and deliver greater value.
One of those achievements was realized at Steel of West Virginia,
This commitment to superior customer service was showcased by
our longest-operating mill. As a result of capital investments in safety
our performance on the 2012 Jacobson Steel Satisfaction Survey,
equipment and the dedication of a great team, the mill has surpassed
an independent, third-party customer satisfaction survey of all
550 days and nearly two million man-hours without
major steel customers in the United States and Canada. The survey
a lost-time injury for the first time in its history.
measures product quality, price competitiveness, on-time delivery,
Steel of West Virginia serves niche markets by providing value-added
e-commerce, outside sales representation, inside sales support,
specialty steel products that meet customers’ individual needs.
total customer service and overall satisfaction.
Because they custom-fabricate steel products, employees at the mill
Our facilities were named satisfaction leaders in Overall
frequently handle the steel, unlike traditional mills.
Satisfaction, Inside Sales and Quality in the categories of Sheet
This poses a safety challenge that we’ve addressed by employing
Producer, Bar/Structurals, SBQ and Beams. This recognition
no-touch tools whenever possible. Steel of West Virginia is one
highlights our commitment to enhancing relationships with
of our many facilities that achieved impressive safety records
our customers and becoming their preferred supplier.
in 2012, a model for what can be achieved when safety remains
top of mind every day.
11
Steel Dynamics, Inc. 2012 annual report
Elements of Success
Mettle tested
Our Metals Recycling
and Ferrous Resources
operations continue to
outperform their peers.
Russ Rinn
EVP of Metals Recycling, President
and COO of OmniSource Corporation
“We continually look at opportunities to expand our presence in our
current markets and increase our
profit margins. By making improvements to existing collection sites and
opening new ones, we’ll be able to
acquire a greater supply of highermargin obsolete scrap.”
Metals Recycling and Ferrous Resources
SAFETY & VERTICAL INTEGRATION
Steel is the most-recycled material in the world. In North America alone, 80 million tons of
steel are recycled annually. Our metals-recycling operation, OmniSource, is one of the largest metals-recycling companies in the country, providing the steel industry with quality ferrous
recycled metals. One of the ways SDI maintains our position as a low-cost steel producer is
by controlling part of our supply of recycled metals, which not only gives us a hedge against
volatile raw materials markets, but also allows tighter control of inventory.
12
In 2012, we took several actions to
mitigate some of the macro supply-and-demand dynamics in today’s metals recycling
industry. First, we expanded our retail
Nearly 50% of theMetals
Recycling operations
were accident-free
throughout 2012.
yard network to gain a greater supply of
higher-margin obsolete scrap and made
capital investments to existing retail yards.
This effort will help us capture more of the
market, while also providing greater customer service. Our entrepreneurial retail
facilities develop business in their areas,
expanding our footprint as a result.
We also invested in cutting-edge technology used in the recovery of auto shredder
residue (ASR) at our Toledo and Indianapolis locations. It allows us to recover
Metals recycling net sales and operating income
more copper, nickel and stainless steel to
reduce our yield loss.
Billions of dollars
12-15 million automobiles reach the end
of their useful lives in the U.S., and the
steel industry recovers millions of tons of
$3.0
Millions of dollars
recycling efforts. Each year, approximately
$200
$72M
$3.5
critical role as we intensify our automobile
$150
$2.5
$2.0
$100
$1.5
$1.0
$50
$0.5
steel from them. Since about 75% can be
$0
recycled, these vehicles provide significant
$0
08
value and return on investment while also
09
10
Sales to steel operations
External Sales
helping increase our profit margins.
11
12
Operating Income*
* Operating income excludes profit-sharing costs and
amortization related to the operating segment.
Metals recycling & ferrous
2012 Ferrous scrap shipments
2012 Nonferrous scrap shipments
resources
Thousands of gross tons
Millions of pounds
$4.5
$4.0
$3.5
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$0
$3.6B
$(12)M
$180
$130
$80
$30
$(20)
08
09
Net Sales
10
11
12
Operating Income
5,647
6,000
Millions of dollars
Billions of dollars
$3.4B
$4.0
Investment in ASR technology plays a
1,200
5,000
1,000
4,000
800
3,000
600
2,000
400
1,000
200
0
08
09
10
11
12
Gross Tons
Gross Tons
Sold Internally
Sold Externally
0
1,051
08
09
10
11
12
Nonferrous Shipments
Generally, approximately 45% of sales are to SDI steel mills.
13
Steel Dynamics, Inc. 2012 annual report
Elements of Success
fortifying our future
A unique technolgy
extracts iron ore
concentrate
from tailings basins.
Minnesota Operations
To remain the lowest-cost metals producer, we continually seek innovative ways to improve
our margins and control variability—even in light of challenges out of our control, such
as the economy. We tackled such a challenge with our Minnesota operations, whose
profitability relies, in part, on our own supply of iron ore concentrate. The company’s
originally anticipated mining operation was to supply that iron ore concentrate; however,
a delay in securing mining permits posed a substantial obstacle.
14
Immediately, our team began pursuing
other options. The result? We partnered
in a joint venture using an innovative
technology, perfectly suited to our needs.
The process extracts valuable iron ore
concentrate from iron ore tailings basins,
Mining Resources
the waste left over from decades of
processing that began in the 1890s and
intensified during WWI and WWII.
The joint venture began operations in
September 2012. We now have our own
supply of low-cost iron ore concentrate—the
primary raw material used in our Minnesota
nugget production process. We will have
the capability to process up to three million
metric tons of tailings per year to produce
about one million metric tons of high-quality
iron ore concentrate. This self-sufficiency
allows us to reduce working capital
requirements and reduce susceptibility
to the volatile raw materials market.
Aerial view of the
Mining Resources
concentrator building
Our joint venture
operation began in 2012.
15
Steel Dynamics, Inc. 2012 annual report
Elements of Success
d y n a m i c d e t e r m i n at i o n
Gary Heasley
New Millennium
Building Systems
continued to penetrate
new markets and achieved
a dramatic growth
in tons in 2012.
EVP of Business Development, President and
COO of New Millennium Building Systems
“We continue to enter new markets and grow our market share,
establishing a nationwide presence.
As a result, we’ve experienced
a dramatic growth in tons and
improved profitability. We remain
very customer-centric as we take
on a troubled market and work to
transform our business to be even
more competitive in today’s world.”
Steel Fabrication
STRATEGIC GROWTH/SUPERIOR OPERATING CULTURE/CUSTOMER RELATIONSHIPS
New Millennium Building Systems demonstrates both the creativity of our employees and the
outstanding results achievable with a superior operating culture and a strategic growth plan.
After acquiring three idled manufacturing facilities in Hope, Arkansas; Fallon, Nevada; and
Juarez, Mexico in 2010, we immediately established a western sales force and opened the
Juarez plant. As we worked to expand our footprint and create greater demand, we opened
the Hope and Fallon plants in 2012.
16
Every product made at New Millennium
Building Systems is custom-engineered,
making it a very customer-centric business.
All three plants were completely modernized to meet the demand
of increased sales, gain greater efficiencies, enhance product
quality, increase production and provide superior customer service. In 2012, New Millennium delivered a positive operating income in an anemic non-residential construction market, as a result
of our efforts to gain greater market share and volume, and our
employees’ passion to deliver world-class products and service.
Butler, Indiana
Fallon, Nevada
Salem, Virginia
Hope, Arkansas
Juarez, Mexico
Steel Fabrication
Lake City, Florida
Steel Fabrication shipments
$371M
$300
$30
300
$20
250
$10
$0
$200
$(10)
$100
$(20)
08
09
10
11
200
150
100
50
0
$(30)
$0
Sales
Millions of dollars
Millions of dollars
$400
295
Thousands of tons
$2M
12
08
Operating income*
09
10
11
12
Steel fabrication shipments
* Operating income excludes profit-sharing costs
and amortization related to the operating segment.
17
Steel Dynamics, Inc. 2012 annual report
elements of success
On our best day, we hold true to the elements that bind us together. We strive to make every day our best
day for our customers, our shareholders and our employees. This is the determination that runs throughout
every part of Steel Dynamics.
18
The Steel Dynamics Roanoke
Bar Division stocks a wide
selection of bar products.
19
Steel Dynamics, Inc. 2012 annual report
Elements of Success
a d d i t i o n a l i n f o r m at i o n
Millions of dollars
Adjusted EBITDA Reconciliation
2012
Earnings Before Taxes
$
2011
204
$
2010
424
2009
$
213
170
2008
$
(18)
141
$
735
145
Interest Expense
159
177
Interest Income
(5)
(5)
(4)
(1)
(3)
Depreciation
180
177
171
159
162
Amortization
36
40
46
53
41
Noncontrolling Interests
21
13
12
3
9
EBITDA
$
Unrealized Hedging (Gains)/Losses
595
$
(3)
$
$
826
(4)
$
608
$
2
$
$
337
(35)
$
1,089
$
38
Inventory Valuation
6
9
6
85
37
Equity-based Compensation
12
17
14
17
18
Asset Impairment
-
Adjusted EBITDA
$
11
621
$
848
$
13
643
$
404
Steel Dynamics continues to maximize opportunities with an
entrepreneurial spirit that flows throughout the company. With
this superior operating culture, we will continue to strategically
move forward to shape our future.
20
$
1,182
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012
Commission File Number 0-21719
29MAR201218114101
Steel Dynamics, Inc.
(Exact name of registrant as specified in its charter)
Indiana
35-1929476
(State or other jurisdiction of
(IRS Employer
incorporation or organization)
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
Name of each exchange on which registered
Common Stock, $.0025 par value
Nasdaq Global Select Stock Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes No
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 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 No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
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 the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer’’ and ‘‘smaller
reporting company’’ in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated file
Non-accelerated filer
Smaller reporting company
(Do not check if a
smaller reporting company.)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes No
The aggregate market value of the voting stock held by non-affiliates of the registrant computed by reference to the
pri...