STEEL DYNAMICS INC. 2013 ANNUAL REPORT | IGNITING THE POSSIBILITIES STEEL DYNAMICS INC. 2013 ANNUAL REPORT STEELDYNAMICS.COM STEEL DYNAMICS INC. 2013 ANNUAL REPORT SAFETY CUSTOMER COMMITMENT SUPERIOR CULTURE STRATEGIC GROWTH INNOVATION FINANCIAL STRENGTH 2013 ANNUAL REPORT INVESTOR INFORMATION ANNUAL MEETING STOCKHOLDER MARKET May 15, 2014 RECORDS INFORMATION 9:00 a.m. Eastern Computershare Trust Company, N.A. The company’s stock trades on the Calhoun Ballroom P.O. Box 43078 NASDAQ Global Select Market Grand Wayne Convention Center Providence, Rhode Island 02940-3078 under the symbol STLD. 120 West Jefferson Boulevard (877) 282-1168 Fort Wayne, Indiana 46802 www.computershare.com INVESTOR CORPORATE OFFICES INFORMATION 7575 West Jefferson Boulevard Investor Relations Fort Wayne, Indiana 46804 (260) 969-3500 (260) 969-3500 [email protected] www.steeldynamics.com FINANCIAL SUMMARY 2013 BOARD OF DIRECTORS 01 A MESSAGE FROM MARK MILLETT 02 Employee Directors Non-Employee Directors A MESSAGE FROM THERESA WAGLER 06 MARK D. MILLETT KEITH E. BUSSE TRACI M. DOLAN JAMES C. MARCUCCILLI STEEL Co-founder Co-founder Retired President and CEO WHO WE ARE 08 President and CEO Chairman Former Chief Administrative Officer STAR Financial Bank METALS RECYCLING Steel Dynamics, Inc. Steel Dynamics, Inc. ExactTarget, Inc. 18 BRADLEY S. SEAMAN From our entrepreneurial culture and focus on safety to the STEEL FABRICATION RICHARD P. TEETS, JR. JOHN C. BATES PAUL B. EDGERLEY Managing Director 24 customer relationships we cultivate to our strategic growth Co-founder Co-founder Managing Director Tricor Pacific Capital, Inc. Executive Vice President President and CEO Bain Capital Partners, LLC plan, innovation and low-cost platforms, our success is ENVIRONMENTAL RESPONSIBILITY 28 Steel Dynamics, Inc. Heidtman Steel Products, Inc. GABRIEL L. SHAHEEN driven by many essential elements. When our people bring SOCIAL RESPONSIBILITY DR. JÜRGEN KOLB President and CEO these elements together, we become an unstoppable force. 30 FRANK D. BYRNE, M.D. Retired GLS Capital Ventures, LLC President Former member Partner, NxtStar Ventures, LLC St. Mary’s Hospital Management Board Part of SSM Health Care Salzgitter, AG (In Memory) JAMES A. TRETHEWEY EXECUTIVE OFFICERS Above, left to right MARK D. MILLETT RICHARD P. TEETS, JR. CHRISTOPHER A. GRAHAM JOHN SHIPE KIM JEFF DETRO WILLIAM TOLE GREG JENKINS Machinist KREISCHER Machinist Nonferrous Plant 2 Manager Plant Manager President and Chief Executive Officer Executive Vice President Vice President Flat Roll Division Locomotive Shop Leadman Flat Roll Division OmniSource OmniSource President and COO of Steel Operations President and COO of Fabrication Operations Flat Roll Division Fort Wayne, IN Bourbon, IN RUSSELL B. RINN LIZ EMENHISER ADAM DAVID MILK ZACH SHERIDAN PATTY SNYDER Executive Vice President THERESA E. WAGLER Inside Sales ZIMMERMAN Inside Sales Inside Sales Customer Service President and COO of OmniSource Corporation Executive Vice President Flat Roll Division Inside Sales Flat Roll Division Flat Roll Division Representative and Chief Financial Officer Flat Roll Division Flat Roll Division SELECTED FINANCIAL D ATA 2013 2012 2011 2010 2009 2008 (millions of dollars, except share amounts) Net Sales $ 7,373 $ 7,290 $ 7,998 $ 6,301 $ 3,959 $ 8,081 Operating Income $ 387 $ 391 $ 585 $ 365 $ 120 $ 846 Net Income (loss) Attributable to SDI $ 189 $ 164 $ 278 $ 141 $ (8) $ 463 Cash Flow from Operations $ 312 $ 446 $ 486 $ 169 $ 446 $ 770 Capital Expenditures $ 187 $ 224 $ 167 $ 133 $ 330 $ 412 Total Assets $ 5,933 $ 5,815 $ 5,979 $ 5,590 $ 5,130 $ 5,254 Long-term Debt (including current portion) $ 2,108 $ 2,202 $ 2,380 $ 2,387 $ 2,223 $ 2,650 Net Debt (long-term debt less cash and short-term investments) $ 1,712 $ 1,795 $ 1,905 $ 2,200 $ 2,214 $ 2,634 Net Income (loss) per Diluted Share $ 0.83 $ 0.73 $ 1.22 $ 0.64 $ (0.04) $ 2.38 Shares Outstanding (thousands) 222,867 219,523 218,874 217,575 216,000 181,820 Dividends Declared per Share $ 0.440 $ 0.400 $ 0.400 $ 0.300 $ 0.325 $ 0.400 SELECTED OPERATING D ATA 2013 2012 2011 2010 2009 2008 Steel Operations Shipments (thousands of tons) 6,120 5,833 5,843 5,296 4,046 5,609 Metals Recycling: Ferrous Shipments (thousands of gross tons) 5,506 5,647 5,880 5,180 3,631 4,959 Ferrous Shipments to SDI (thousands of gross tons) 2,423 2,587 2,565 2,161 1,435 2,027 Nonferrous Shipments (millions of pounds) 1,052 1,051 1,067 961 780 912 Steel Fabrication Operations Shipments (thousands of tons) 367 295 218 164 145 287 Number of Full-time Employees 6,870 6,670 6,530 6,180 5,990 6,652 Operating Income Margin 5.2% 5.4% 7.3% 5.8% 3.0% 10.5% Operating Income per Ton Shipped* (Steel Operations) $ 86 $ 88 $ 117 $ 86 $ 51 $ 155 * Operating income excludes profit-sharing costs and amortization related to the operating segment. 1 2013 ANNUAL REPORT M ARK MILLETT President and Chief Executive Officer LETTER TO SHAREHOLDERS We continue to drive toward maximizing opportunities to effectively perform through all market cycles, maintaining sustainable differentiation from our peers. We will continue to assess opportunities for growth, not only for the benefit of top-line revenue improvement, but more importantly, for the growth and consistency of profit margins. On behalf of the whole Steel Dynamics team, I’d like to thank our loyal customers and shareholders for their continued support of our company. And my heartfelt thanks to our remarkable employees for your passion and dedication to excellence. We are uniquely well-positioned to capitalize on the significant growth opportunities that lie ahead. Igniting Possibilities – the theme of this year’s annual report, characterizes the power of our strategic growth activities, further positioning us to leverage the full complement of our existing assets and future capital investment, while exploiting innovative technology, creating meaningful value for our customers, and most importantly, sustaining our uniquely exceptional operating culture. Our 2013 performance produced solid financial results in an improved, yet still challenging steel environment. The U.S. economy continued to improve, consumer confidence trended favorably and unemployment slowly declined as businesses began to experience the benefits of an economic recovery. Several steel-consuming sectors began to strengthen, including automotive, manufactured goods, energy and construction, increasing demand for high-quality steel. Yet, at the same time, the economic en- vironment struggled across Europe, the Middle East and Asia as they continued to battle inconsistent growth resulting in weaker steel consumption. The associated global excess in steelmaking capacity effectively constrained domestic profit margins. While these challenges created highly competitive market conditions in the metals industry, our employees performed incredibly well, driving financial metrics that were at the top of our peer group. Our 2013 net sales of $7.4 billion and operating income of $387 million were similar to those achieved in 2012, despite record steel volumes, as our product sales prices declined to a greater extent than our raw material costs. However, our 2013 pretax income increased 29% to $263 million as a result of capital structure improvements. During 2013, we successfully constructed two key organic growth projects we announced in 2012 – expansions at our Engineered Bar Products Division and Structural and Rail Division – further broadening our product portfolio of value-added, high-quality steel prod- ucts. We also optimized and leveraged our existing assets by increasing productivity throughout our steel operations, enhancing margin opportunities within our metals recycling platform, and gaining market share for our fabrication operations. 2 PB 2013 OPERATING RES ULTS 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 entrepreneurial culture is at the core of our success. Employees are passionate about delivering quality products and providing excellent service to our customers. Our common goal – consistently achieving excellence in all we do – is reflected in the esprit de corps that permeates Steel Dynamics. Whether driving toward industry-leading safety performance results, implementing innovative technology in our manufacturing processes, or ensuring we consistently meet customers’ needs, our employees vigorously pursue excellence. N ET SALES OPERATING I NCOME Billions of dollars Millions of dollars 13 7.4 13 387 12 7.3 12 391 11 8.0 11 585 10 6.3 10 365 09 4.0 09 120 08 8.1 08 846 PRETAX I NCOME Without Noncontrolling Interests NET INCOME (LOSS) PER DILUTED SHARE Millions of dollars In dollars 13 289 7.372 13 0.83 12 225 7.29 12 0.73 11 437 7.998 11 1.22 10 225 6.301 10 0.64 09 - 15 09 - 0.043.959 08 744 08 2.38 Steel Our steel operations achieved several production records during 2013, and achieved record annual shipments of 6.1 million tons, surpassing our previous record of 5.8 million tons shipped in 2011 and 2012. Notably, our Flat Roll Division set annual records for both production and shipping volumes, performing as one of the most efficient, lowest-cost sheet mills in the world. Operating income for our steel operations in 2013 was $504 million, slightly higher than the $496 million earned in 2012. As mentioned, higher shipments were offset by a decline in steel metal margin. Downward pressures on selling prices related to global excess production capacity, outpaced declines in our raw material costs. In spite of this, our steel operations achieved a mill utilization rate higher than the industry. While the industry reported a 77% capacity utilization rate for 2013, our steel mills achieved 88%. We are able to consistently achieve higher rates as a result of our diversified produce portfolio, emphasis on higher value-added offerings and a consistent focus on our customers.