STEEL DYNAMICS INC - Quarter Report: 2017 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2017

	OR

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 0-21719



Steel Dynamics, Inc.
(Exact name of registrant as specified in its charter)

Indiana		35-1929476
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7575 West Jefferson Blvd, Fort Wayne, IN		46804
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (260) 969-3500

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company (see definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act).


(Check one):	Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐

	Smaller reporting company ☐	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No☒

As of November 1, 2017, Registrant had 236,951,784 outstanding shares of common stock.


STEEL DYNAMICS, INC. Table of Contents

PART I. Financial Information

Item 1.	Financial Statements:	Page

	Consolidated Balance Sheets as of September 30, 2017 (unaudited) and December 31, 2016	1

	Consolidated Statements of Income for the three and nine-month periods ended September 30, 2017 and 2016 (unaudited)	2

	Consolidated Statements of Cash Flows for the three and nine-month periods ended September 30, 2017 and 2016 (unaudited)	3

	Notes to Consolidated Financial Statements (unaudited)	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25

Item 4.	Controls and Procedures	25



	PART II. Other Information

Item 1.	Legal Proceedings	26

Item 1A.	Risk Factors	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3.	Defaults Upon Senior Securities	26

Item 4.	Mine Safety Disclosures	26

Item 5.	Other Information	26

Item 6.	Exhibits	27

	Signatures	28

STEEL DYNAMICS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)



	September 30,		December 31,
	2017		2016
Assets	(unaudited)
Current assets
Cash and equivalents	$	1,101,964	$	841,483
Accounts receivable, net		897,838		703,565
Accounts receivable-related parties		25,179		26,219
Inventories		1,487,516		1,275,211
Other current assets		59,648		83,197
Total current assets		3,572,145		2,929,675

Property, plant and equipment, net		2,708,777		2,787,215

Restricted cash		17,092		18,060
Intangible assets, net		263,357		283,977
Goodwill		388,518		393,351
Other assets		10,848		11,454
Total assets	$	6,960,737	$	6,423,732
Liabilities and Equity
Current liabilities
Accounts payable	$	512,290	$	382,126
Accounts payable-related parties		16,393		13,070
Income taxes payable		5,596		5,593
Accrued payroll and benefits		171,508		164,543
Accrued interest		49,380		30,295
Accrued expenses		128,701		113,556
Current maturities of long-term debt		182,661		3,632
Total current liabilities		1,066,529		712,815

Long-term debt		2,351,483		2,353,194
Deferred income taxes		461,399		448,375
Other liabilities		20,305		20,649
Total liabilities		3,899,716		3,535,033

Commitments and contingencies

Redeemable noncontrolling interests		111,240		111,240

Equity
Common stock voting, $.0025 par value; 900,000,000 shares authorized;
264,161,359 and 264,130,544 shares issued; and 236,951,784 and 243,785,485
shares outstanding, as of September 30, 2017 and December 31, 2016, respectively		641		641
Treasury stock, at cost; 27,209,575 and 20,345,059 shares,
as of September 30, 2017 and December 31, 2016 respectively		(650,210)		(416,829)
Additional paid-in capital		1,147,463		1,132,749
Retained earnings		2,606,831		2,210,459
Total Steel Dynamics, Inc. equity		3,104,725		2,927,020
Noncontrolling interests		(154,944)		(149,561)
Total equity		2,949,781		2,777,459
Total liabilities and equity	$	6,960,737	$	6,423,732

See notes to consolidated financial statements.

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016

Net sales
Unrelated parties	$	2,399,116	$	2,060,596	$	7,066,083	$	5,737,584
Related parties		44,266		40,714		136,235		128,929
Total net sales		2,443,382		2,101,310		7,202,318		5,866,513

Costs of goods sold		2,046,864		1,692,807		5,941,128		4,841,591
Gross profit		396,518		408,503		1,261,190		1,024,922

Selling, general and administrative expenses		97,056		95,185		298,422		279,899
Profit sharing		21,175		22,255		69,714		51,722
Amortization of intangible assets		7,272		7,208		22,120		21,359
Operating income		271,015		283,855		870,934		671,942

Interest expense, net of capitalized interest		34,177		36,199		102,019		109,888
Other expense (income), net		2,526		4,351		(4,968)		741
Income before income taxes		234,312		243,305		773,883		561,313

Income tax expense		83,300		88,892		271,258		205,139
Net income		151,012		154,413		502,625		356,174

Net loss attributable to noncontrolling interests		2,246		2,984		5,383		5,929
Net income attributable to Steel Dynamics, Inc.	$	153,258	$	157,397	$	508,008	$	362,103



Basic earnings per share attributable to Steel Dynamics,
Inc. stockholders	$	0.64	$	0.65	$	2.11	$	1.49

Weighted average common shares outstanding		239,066		243,761		241,117		243,539

Diluted earnings per share attributable to Steel Dynamics, Inc.
stockholders, including the effect of assumed conversions
when dilutive	$	0.64	$	0.64	$	2.09	$	1.48

Weighted average common shares and share equivalents outstanding		240,880		245,682		242,816		245,227

Dividends declared per share	$	0.155	$	0.140	$	0.465	$	0.420

See notes to consolidated financial statements.

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016

Operating activities:
Net income	$	151,012	$	154,413	$	502,625	$	356,174

Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization		75,210		74,190		224,068		222,970
Equity-based compensation		6,875		5,946		24,558		23,716
Deferred income taxes		3,284		18,478		17,849		53,879
Other adjustments		8,202		161		8,055		1,376
Changes in certain assets and liabilities:
Accounts receivable		(36,123)		29,384		(193,233)		(149,810)
Inventories		(67,285)		(76,013)		(211,726)		(102,339)
Other assets		(9,234)		694		(1,703)		11,855
Accounts payable		44,887		(49,171)		133,251		117,220
Income taxes receivable/payable		(12,929)		(7,421)		5,803		40,960
Accrued expenses		62,249		45,701		38,058		69,361
Net cash provided by operating activities		226,148		196,362		547,605		645,362

Investing activities:
Purchases of property, plant and equipment		(42,795)		(59,774)		(127,746)		(123,168)
Acquisition of business, net of cash acquired		(5,518)		(109,065)		(5,518)		(109,065)
Other investing activities		1,081		1,507		30,386		5,767
Net cash used in investing activities		(47,232)		(167,332)		(102,878)		(226,466)

Financing activities:
Issuance of current and long-term debt		450,215		12,911		501,448		97,018
Repayment of current and long-term debt		(294,913)		(9,999)		(331,339)		(95,253)
Dividends paid		(37,180)		(34,124)		(108,837)		(101,639)
Purchases of treasury stock		(99,085)		-		(237,154)		-
Other financing activities		(4,832)		1,005		(8,364)		5,435
Net cash provided by (used in) financing activities		14,205		(30,207)		(184,246)		(94,439)

Increase (decrease) in cash and equivalents		193,121		(1,177)		260,481		324,457
Cash and equivalents at beginning of period		908,843		1,052,666		841,483		727,032

Cash and equivalents at end of period	$	1,101,964	$	1,051,489	$	1,101,964	$	1,051,489


Supplemental disclosure information:
Cash paid for interest	$	13,530	$	26,225	$	80,155	$	97,605
Cash paid for income taxes, net	$	93,123	$	75,860	$	246,793	$	104,124

See notes to consolidated financial statements.

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Description of the Business and Significant Accounting Policies

Description of the Business

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

Steel Operations Segment. Steel operations include the company’s Butler Flat Roll Division, Columbus Flat Roll Division, The Techs galvanizing lines, Structural and Rail Division, Engineered Bar Products Division, Vulcan Threaded Products, Inc. – acquired August 1, 2016, Roanoke Bar Division, Steel of West Virginia, and Iron Dynamics, a liquid pig iron (scrap substitute) production facility that supplies solely the Butler Flat Roll Division. These operations include electric arc furnace steel mills, producing steel from ferrous scrap and scrap substitutes, utilizing continuous casting, automated rolling mills and numerous downstream coating and bar processing lines. Steel operations accounted for 73% and 74% of the company’s consolidated external net sales during the three months ended September 30, 2017 and 2016, respectively, and 73% and 72% of the company’s consolidated external net sales during the nine months ended September 30, 2017 and 2016, respectively.

Metals Recycling Operations Segment. Metals recycling operations consists solely of OmniSource Corporation (OmniSource), and includes both ferrous and nonferrous processing, transportation, marketing, brokerage, and consulting services. Metals recycling operations accounted for 14% and 15% of the company’s consolidated external net sales during the three months ended September 30, 2017 and 2016, respectively, and 15% of the company’s consolidated external net sales for the nine months ended September 30, 2017 and 2016.

Steel Fabrication Operations Segment. Steel fabrication operations include the company’s New Millennium Building Systems’ joist and deck plants located throughout the United States, and in Northern Mexico. Revenues from these plants are generated from the fabrication of trusses, girders, steel joists and steel deck used within the non-residential construction industry. Steel fabrication operations accounted for 9% and 8% of the company’s consolidated external net sales during the three months ended September 30, 2017 and 2016, respectively, and 8% and 9% during the nine months ended September 30, 2017 and 2016, respectively.

Other. Other operations consists of subsidiary operations that are below the quantitative thresholds required for reportable segments and primarily consist of our idled Minnesota ironmaking operations and other smaller joint ventures. Also included in “Other” are certain unallocated corporate accounts, such as the company’s senior secured credit facility, senior notes, certain other investments and certain profit sharing expenses.

Significant Accounting Policies

Principles of Consolidation. The consolidated financial statements include the accounts of SDI, together with its wholly and majority-owned or controlled subsidiaries, after elimination of significant intercompany accounts and transactions. Noncontrolling interests represent the noncontrolling owner’s proportionate share in the equity, income, or losses of the company’s majority-owned or controlled consolidated subsidiaries.

Use of Estimates. These financial statements are prepared in conformity with accounting principles generally accepted in the United States, and accordingly, include amounts that require management to make estimates and assumptions that affect the amounts reported in the financial statements and in the notes thereto. Significant items subject to such estimates and assumptions include the carrying value of property, plant and equipment, intangible assets, and goodwill; valuation allowances for trade receivables, inventories and deferred income tax assets; unrecognized tax benefits; potential environmental liabilities; and litigation claims and settlements. Actual results may differ from these estimates and assumptions.

In the opinion of management, these financial statements reflect all normal recurring adjustments necessary for a fair presentation of the interim period results. These financial statements and notes should be read in conjunction with the audited financial statements and notes thereto included in the company’s Annual Report on Form 10-K for the year ended December 31, 2016.

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Description of the Business and Significant Accounting Policies (Continued)

Goodwill. The company’s goodwill is allocated to the following reporting units at September 30, 2017, and December 31, 2016, (in thousands):



	September 30,		December 31,
	2017		2016
Steel Operations Segment:
Columbus Flat Roll Division	$	19,682	$	19,682
The Techs		142,783		142,783
Vulcan Threaded Products		7,824		7,824
Roanoke Bar Division		29,041		29,041
Metals Recycling Operations Segment:
Butler Flat Roll Division, Structural and Rail Division, and
Engineered Bar Division		95,000		95,000
OmniSource		92,263		97,096
Steel Fabrication Operations Segment		1,925		1,925
	$	388,518	$	393,351

OmniSource goodwill decreased $4.8 million from December 31, 2016 to September 30, 2017, in recognition of the 2017 tax benefit related to the normal amortization of the component of OmniSource tax-deductible goodwill in excess of book goodwill.

Recently Adopted/Issued Accounting Standards

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (ASU 2015-11), which requires an entity to measure inventory at the lower of cost and net realizable value, rather than at the lower of cost or market. The company adopted ASU 2015-11 as required in the first quarter of 2017 on a prospective basis, and the adoption had no impact on its financial condition, results of operations, or cash flow.

In May 2014, the FASB issued ASU 2014-09, which is codified in ASC 606, Revenue Recognition – Revenue from Contracts with Customers, which amends the guidance in former ASC 605, Revenue Recognition. FASB has since issued clarifying guidance in the form of ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Consideration (Reporting Revenue Gross versus Net), ASU 2016-10, Revenue from Contract with Customers : Identifying Performance Obligations and Licensing, and ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients, collectively (ASC 606). The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 also requires additional disclosures to help users of financial statements better understand the nature, amount, timing, and potential uncertainty of revenue that is recognized. ASC 606 guidance is effective for annual and interim periods beginning after December 15, 2017, but can be early adopted for annual and interim periods ending after December 15, 2016, using a full retrospective or modified retrospective approach. The company is finalizing its adoption plan in which it has identified current revenue streams and analyzed those revenue streams pursuant to the new accounting requirements. The company will complete the adoption plan during the fourth quarter of 2017, including assessment of new required disclosures. Based on our analysis within the adoption plan completed to date, the company does not believe there will be significant change in the amount or timing of revenue recognized under the new standard, or significant changes required to the company’s functions, processes or systems. The company intends to adopt ASU 2014-09 effective January 1, 2018, using the modified retrospective approach.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842): which establishes a new lease accounting model that requires lessees to recognize a right of use asset and related lease liability for most leases having lease terms of more than 12 months (ASU 2016-02). Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. This new guidance is effective for annual and interim periods beginning after December 15, 2018, but can be early adopted. The company is currently evaluating the impact of the provisions of ASU 2016-02, including the timing of adoption.

Reclassifications

The company early adopted, effective December 31, 2016, Improvement to Employee Share-based Payment Accounting (ASU 2016-09). Cash paid to tax authorities from shares withheld to satisfy the company’s statutory income tax withholding obligation of $2.2 million were reclassified to financing activities from operating activities in the nine-month period ended September 30, 2016, statement of cash flows.

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 2. Earnings Per Share

Basic earnings per share is based on the weighted average shares of common stock outstanding during the period. Diluted earnings per share assumes the weighted average dilutive effect of common share equivalents outstanding during the period applied to the company’s basic earnings per share. Common share equivalents represent potentially dilutive restricted stock units, deferred stock units, stock options and other equity-based awards; and are excluded from the computation in periods in which they have an anti-dilutive effect. There were no anti-dilutive common share equivalents at or for the three and nine months ended September 30, 2017 and 2016.

The following tables present a reconciliation of the numerators and the denominators of the company’s basic and diluted earnings per share computations for the three and nine months ended September 30, 2017 and 2016 (in thousands, except per share data):



	Three Months Ended September 30,
	2017					2016
	Net Income		Shares	Per Share		Net Income		Shares	Per Share
	(Numerator)		(Denominator)	Amount		(Numerator)		(Denominator)	Amount
Basic earnings per share	$	153,258	239,066	$	0.64	$	157,397	243,761	$	0.65
Dilutive common share equivalents		-	1,814				-	1,921
Diluted earnings per share	$	153,258	240,880	$	0.64	$	157,397	245,682	$	0.64



	Nine Months Ended September 30,
	2017						2016
	Net Income		Shares		Per Share		Net Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount		(Numerator)		(Denominator)		Amount
Basic earnings per share	$	508,008		241,117	$	2.11	$	362,103		243,539	$	1.49
Dilutive common share equivalents		-		1,699				-		1,688
Diluted earnings per share	$	508,008		242,816	$	2.09	$	362,103		245,227	$	1.48

Note 3. Inventories

Inventories are stated at lower of cost or net realizable value. Cost is determined using a weighted average cost method for raw materials and supplies, and on a first-in, first-out, basis for other inventory. Inventory consisted of the following (in thousands):



	September 30,		December 31,
	2017		2016
Raw materials	$	677,187	$	515,924
Supplies		376,984		383,134
Work in progress		119,735		103,606
Finished goods		313,610		272,547
Total inventories	$	1,487,516	$	1,275,211

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 4. Debt

In September 2017, the company issued $350.0 million of 4.125% senior notes due 2025 (the "2025 Notes"), the proceeds of which, along with available cash, were used to fund the September 2017 tender to purchase at a redemption price of 103.563%, $182.9 million principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, of the company's 6.375% senior notes due 2022 (the "2022 Notes"), and the October 2017 call and repayment at a redemption price of 103.188% of the $167.1 million remaining outstanding principal amount of the 2022 Notes, plus accrued and unpaid interest to, but not including, the date of repayment. The $167.1 remaining outstanding principal amount is included in current maturities of long-term debt in the company’s September 30, 2017, balance sheet. The company recorded expenses related to tender premiums, write off of unamortized debt issuance costs, and other expenses of $8.0 million, which are reflected in other expenses in the consolidated statements of income for the three- and nine-months ended September 30, 2017. Additional call premiums of $6.6 million related to the October 2017 call and repayment will be recorded as other expenses in the consolidated statements of income for the three months and year ended

December 31, 2017.

Note 5. Changes in Equity

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



	Stockholders of Steel Dynamics, Inc.
					Additional								Redeemable
	Common		Treasury		Paid-In		Retained		Noncontrolling		Total		Noncontrolling
	Stock		Stock		Capital		Earnings		Interests		Equity		Interests
Balances at December 31, 2016	$	641	$	(416,829)	$	1,132,749	$	2,210,459	$	(149,561)	$	2,777,459	$	111,240
Dividends declared		-		-		-		(111,435)		-		(111,435)		-
Share repurchases		-		(237,154)		-		-		-		(237,154)		-
Equity-based compensation		-		3,773		14,714		(201)		-		18,286		-
Comprehensive and net income (loss)		-		-		-		508,008		(5,383)		502,625		-
Balances at September 30, 2017	$	641	$	(650,210)	$	1,147,463	$	2,606,831	$	(154,944)	$	2,949,781	$	111,240

Note 6. Derivative Financial Instruments

The company is exposed to certain risks relating to its ongoing business operations. The company utilizes derivative instruments to mitigate commodity margin risk, interest rate risk and foreign currency exchange rate risk. The company routinely enters into forward exchange traded futures and option contracts to manage the price risk associated with nonferrous metals inventory as well as purchases and sales of nonferrous metals (primarily aluminum and copper). The company offsets fair value amounts recognized for derivative instruments executed with the same counterparty under master netting agreements.

Commodity Futures Contracts. If the company is “long” on futures contracts, it means the company has more futures contracts purchased than futures contracts sold for the underlying commodity. If the company is “short” on a futures contract, it means the company has more futures contracts sold than futures contracts purchased for the underlying commodity. The following summarizes the company’s futures contract commitments as of September 30, 2017:



Commodity Futures	Long/Short	Metric Tons
Aluminum	Long	1,275
Aluminum	Short	2,250
Copper	Long	4,251
Copper	Short	21,727

The following summarizes the location and amounts of the fair values reported on the company’s balance sheets as of September 30, 2017, and December 31, 2016, and gains and losses related to derivatives included in the company’s statement of income for the three and nine months ended September 30, 2017 and 2016 (in thousands):

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 6. Derivative Financial Instruments (Continued)



	Asset Derivatives					Liability Derivatives
	Balance sheet	Fair Value				Fair Value
	location	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
Derivative instruments designated
as fair value hedges
Commodity futures	Other current assets	$	2,576	$	2,910	$	396	$	1,300

Derivative instruments not designated
as hedges
Commodity futures	Other current assets		1,573		1,150		497		783
Total derivative instruments		$	4,149	$	4,060	$	893	$	2,083

The fair value of the above derivative instruments along with required margin deposit amounts with the same counterparty under master netting arrangements totaled $6.0 million at September 30, 2017, and $3.2 million at December 31, 2016, are reflected in other current assets in the consolidated balance sheets.

Amount of gain (loss) recognized

Location of gain

Amount of gain (loss) recognized

Location of gain

in income on derivatives

(loss) recognized

in income on related hedged items

(loss) recognized

for the three months ended

Hedged items in

in income on

for the three months ended

in income on

September 30,

fair value hedge

related hedged

September 30,

derivatives

2017

2016

relationships

items

2017

2016

Derivatives in fair value

hedging relationships

Commodity futures

Costs of goods sold

4,122

826

Firm commitments

Costs of goods sold

(1,711)

(793)

Inventory

Costs of goods sold

(1,330)

(177)

Derivatives not designated

(3,041)

(970)

as hedging instruments

Commodity futures

Costs of goods sold

(10,566)

(638)

Amount of gain (loss) recognized

Location of gain

Amount of gain (loss) recognized

Location of gain

in income on derivatives

(loss) recognized

in income on related hedged items

(loss) recognized

for the nine months ended

Hedged items in

in income on

for the nine months ended

in income on

September 30,

fair value hedge

on related

September 30,

derivatives

2017

2016

relationships

hedged items

2017

2016

Derivatives in fair value

hedging relationships

Commodity futures

Costs of goods sold

571

1,281

Firm commitments

Costs of goods sold

995

(2,223)

Inventory

Costs of goods sold

179

642

Derivatives not designated

1,174

(1,581)

as hedging instruments

Commodity futures

Costs of goods sold

(12,528)

(394)

Derivatives accounted for as fair value hedges had ineffectiveness resulting in losses of $35,000 and $84,000 during the three-month periods ended September 30, 2017 and 2016, respectively; and a gain of $62,000 and loss of $175,000 during the nine-month periods ended September 30, 2017 and 2016, respectively. Gains excluded from hedge effectiveness testing of $1.1 million decreased cost of goods sold during the three-month period ended September 30, 2017, and losses excluded from hedge effectiveness testing of $60,000 increased costs of goods sold during the three-month period ended September 30, 2016. Gains of $1.7 million decreased costs of goods sold during the nine-month period ended September 30, 2017, and losses of $125,000 increased costs of goods sold during the nine month period ended September 30, 2016.

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 7. Fair Value Measurements

FASB accounting standards provide a comprehensive framework for measuring fair value and sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. Levels within the hierarchy are defined as follows:

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

Level 2—Quoted prices for similar assets and liabilities in active markets (other than those included in Level 1) which are observable for the asset or liability, either directly or indirectly; and

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

The following table sets forth financial assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheet and the respective levels to which the fair value measurements are classified within the fair value hierarchy as of September 30, 2017, and December 31, 2016 (in thousands):



			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
September 30, 2017
Commodity futures – financial assets	$	4,149	$	-	$	4,149	$	-
Commodity futures – financial liabilities		893		-		893		-

December 31, 2016
Commodity futures – financial assets	$	4,060	$	-	$	4,060	$	-
Commodity futures – financial liabilities		2,083		-		2,083		-

The carrying amounts of financial instruments including cash and equivalents approximate fair value. The fair values of commodity futures contracts are estimated by the use of quoted market prices, estimates obtained from brokers, and other appropriate valuation techniques based on references available. The fair value of long-term debt, including current maturities, as determined by quoted market prices (Level 2), was approximately $2.6 billion and $2.5 billion at September 30, 2017 and December 31, 2016, respectively (with a corresponding carrying amount in the consolidated balance sheet of $2.5 and $2.4 billion at September 30, 2017, and December 31, 2016, respectively).

Note 8. Commitments and Contingencies

The company is involved in various routine litigation matters, including administrative proceedings, regulatory proceedings, governmental investigations, environmental matters, and commercial and construction contract disputes, none of which are expected to have a material impact on our financial condition, results of operations, or liquidity.

Note 9. Segment Information

The company’s operations are primarily organized and managed by reportable operating segments, which are steel operations, metals recycling operations, and steel fabrication operations. The segment operations are more fully described in Note 1 to these financial statements. Operating segment performance and resource allocations are primarily based on operating results before income taxes. The accounting policies of the reportable segments are consistent with those described in Note 1 to these financial statements. Intra‑segment sales and any related profits are eliminated in consolidation. Amounts included in the category “Other” are from subsidiary operations that are below the quantitative thresholds required for reportable segments and primarily consist of our Minnesota ironmaking operations and several small joint ventures. In addition, “Other” also includes certain unallocated corporate accounts, such as the company’s senior secured credit facility, senior notes, certain other investments and certain profit sharing expenses.

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 9. Segment Information (Continued)

The company’s segment results are as follows (in thousands):



			Metals		Steel
For the three months ended	Steel		Recycling		Fabrication
September 30, 2017	Operations		Operations		Operations		Other			Eliminations			Consolidated

Net Sales
External	$	1,700,707	$	301,422	$	211,271	$	101,057		$	-		$	2,314,457
External Non-U.S.		82,098		46,793		34		-			-			128,925
Other segments		65,321		360,982		89		116			(426,508)			-
		1,848,126		709,197		211,394		101,173			(426,508)			2,443,382
Operating income (loss)		276,547		17,624		21,862		(44,326)	(1)		(692)			271,015
Income (loss) before income taxes		255,539		16,020		20,199		(56,754)			(692)			234,312
Depreciation and amortization		57,644		12,020		2,866		2,680			-			75,210
Capital expenditures		31,654		8,589		1,524		1,028			-			42,795

As of September 30, 2017
Assets	$	4,353,904	$	1,032,018	$	381,931	$	1,346,968	(2)	$	(154,084)	(3)	$	6,960,737


	Footnotes related to the three months ended September 30, 2017, segment results (in millions):

(1)	Corporate SG&A	$	(12.1)	(3)	Elimination of intra-company receivables	$	(130.4)
	Company-wide equity-based compensation		(6.8)		Elimination of intra-company debt		(10.7)
	Profit sharing		(20.2)		Other		(13.0)
	Other, net		(5.2)			$	(154.1)
		$	(44.3)

(2)	Cash and equivalents	$	1,065.9
	Accounts receivable		14.0
	Inventories		42.8
	Property, plant and equipment, net		162.4
	Intra-company debt		10.7
	Other		51.2
		$	1,347.0

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 9. Segment Information (Continued)



			Metals		Steel
For the three months ended	Steel		Recycling		Fabrication
September 30, 2016	Operations		Operations		Operations		Other			Eliminations		Consolidated

Net Sales
External	$	1,502,726	$	260,518	$	177,341	$	60,282		$	-	$	2,000,867
External Non-U.S.		54,776		45,574		88		5			-		100,443
Other segments		70,384		259,171		1,211		1,108			(331,874)		-
		1,627,886		565,263		178,640		61,395			(331,874)		2,101,310
Operating income (loss)		307,553		6,154		17,744		(47,687)	(1)		91		283,855
Income (loss) before income taxes		285,131		2,437		15,645		(59,999)			91		243,305
Depreciation and amortization		53,456		13,836		2,848		4,101			(51)		74,190
Capital expenditures		49,200		9,506		747		321			-		59,774


Footnotes related to the three months ended September 30, 2016, segment results (in millions):

(1)	Corporate SG&A	$	(12.6)
	Company-wide equity-based compensation		(6.1)
	Profit sharing		(21.0)
	Other, net		(8.0)
		$	(47.7)



			Metals		Steel
For the nine months ended	Steel		Recycling		Fabrication
September 30, 2017	Operations		Operations		Operations		Other			Eliminations		Consolidated

Net Sales
External	$	5,025,310	$	910,830	$	603,140	$	281,091		$	-	$	6,820,371
External Non-U.S.		237,070		144,750		127		-			-		381,947
Other segments		183,374		1,067,770		244		1,065			(1,252,453)		-
		5,445,754		2,123,350		603,511		282,156			(1,252,453)		7,202,318
Operating income (loss)		895,008		51,968		65,735		(141,406)	(1)		(371)		870,934
Income (loss) before income taxes		830,865		46,674		61,171		(164,456)			(371)		773,883
Depreciation and amortization		170,125		37,048		8,743		8,152			-		224,068
Capital expenditures		101,939		18,539		5,748		1,520			-		127,746


Footnotes related to the nine months ended September 30, 2017, segment results (in millions):

(1)	Corporate SG&A	$	(37.9)
	Company-wide equity-based compensation		(23.5)
	Profit sharing		(66.8)
	Other, net		(13.2)
		$	(141.4)

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 9. Segment Information (Continued)



			Metals		Steel
For the nine months ended	Steel		Recycling		Fabrication
September 30, 2016	Operations		Operations		Operations		Other			Eliminations			Consolidated

Net Sales
External	$	4,068,688	$	769,260	$	527,859	$	210,358		$	-		$	5,576,165
External Non-U.S.		172,694		117,299		167		188			-			290,348
Other segments		178,190		756,613		2,415		3,603			(940,821)			-
		4,419,572		1,643,172		530,441		214,149			(940,821)			5,866,513
Operating income (loss)		712,939		20,014		73,230		(125,186)	(1)		(9,055)	(2)		671,942
Income (loss) before income taxes		645,189		10,300		67,175		(152,296)			(9,055)			561,313
Depreciation and amortization		159,614		42,666		8,431		12,413			(154)			222,970
Capital expenditures		103,202		17,068		1,918		980			-			123,168


Footnotes related to the nine months ended September 30, 2016, segment results (in millions):

(1)	Corporate SG&A	$	(38.5)	(2)	Gross profit decrease from intra-company sales	$	(9.1)
	Company-wide equity-based compensation		(20.4)
	Profit sharing		(47.7)
	Other, net		(18.6)
		$	(125.2)

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 10. Condensed Consolidating Information

Certain 100% owned subsidiaries of SDI have fully and unconditionally guaranteed all of the indebtedness relating to the issuance of the company’s senior unsecured notes due 2021, 2023, 2024, 2025 and 2026. Following are the company’s condensed consolidating financial statements, including the guarantors, which present the financial position, results of operations, and cash flows of (i) SDI (in each case, reflecting investments in its consolidated subsidiaries under the equity method of accounting), (ii) the guarantor subsidiaries of SDI, (iii) the non-guarantor subsidiaries of SDI, and (iv) the eliminations necessary to arrive at the information on a consolidated basis. The following statements should be read in conjunction with the accompanying consolidated financial statements and the company’s Annual Report on Form 10-K for the year ended December 31, 2016.



Condensed Consolidating Balance Sheets (in thousands)
					Combined		Consolidating		Total
As of September 30, 2017	Parent		Guarantors		Non-Guarantors		Adjustments		Consolidated
Cash and equivalents	$	1,064,499	$	32,968	$	4,497	$	-	$	1,101,964
Accounts receivable, net		294,753		1,450,968		48,082		(870,786)		923,017
Inventories		669,076		754,526		72,990		(9,076)		1,487,516
Other current assets		36,828		21,404		5,124		(3,708)		59,648
Total current assets		2,065,156		2,259,866		130,693		(883,570)		3,572,145
Property, plant and equipment, net		873,015		1,634,215		201,547		-		2,708,777
Intangible assets, net		-		231,838		31,519		-		263,357
Goodwill		-		380,695		7,823		-		388,518
Other assets, including investments in subs		2,611,965		7,060		5,578		(2,596,663)		27,940
Total assets	$	5,550,136	$	4,513,674	$	377,160	$	(3,480,233)	$	6,960,737

Accounts payable	$	196,177	$	348,347	$	106,208	$	(122,049)	$	528,683
Accrued expenses		224,156		251,694		9,437		(130,102)		355,185
Current maturities of long-term debt		167,840		-		40,482		(25,661)		182,661
Total current liabilities		588,173		600,041		156,127		(277,812)		1,066,529
Long-term debt		2,324,240		-		172,243		(145,000)		2,351,483
Other liabilities		(467,002)		983,737		27,238		(62,269)		481,704
Total liabilities		2,445,411		1,583,778		355,608		(485,081)		3,899,716

Redeemable noncontrolling interests		-		-		111,240		-		111,240

Common stock		641		1,727,859		14,908		(1,742,767)		641
Treasury stock		(650,210)		-		-		-		(650,210)
Additional paid-in-capital		1,147,463		128,076		791,196		(919,272)		1,147,463
Retained earnings (deficit)		2,606,831		1,073,961		(740,848)		(333,113)		2,606,831
Total Steel Dynamics, Inc. equity		3,104,725		2,929,896		65,256		(2,995,152)		3,104,725
Noncontrolling interests		-		-		(154,944)		-		(154,944)
Total equity		3,104,725		2,929,896		(89,688)		(2,995,152)		2,949,781
Total liabilities and equity	$	5,550,136	$	4,513,674	$	377,160	$	(3,480,233)	$	6,960,737

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 10. Condensed Consolidating Information (Continued)



					Combined		Consolidating		Total
As of December 31, 2016	Parent		Guarantors		Non-Guarantors		Adjustments		Consolidated
Cash and equivalents	$	766,685	$	54,677	$	20,121	$	-	$	841,483
Accounts receivable, net		229,148		1,257,245		23,689		(780,298)		729,784
Inventories		587,319		639,148		58,696		(9,952)		1,275,211
Other current assets		45,049		36,062		4,447		(2,361)		83,197
Total current assets		1,628,201		1,987,132		106,953		(792,611)		2,929,675
Property, plant and equipment, net		899,370		1,679,751		208,094		-		2,787,215
Intangible assets, net		-		251,919		32,058		-		283,977
Goodwill		-		385,527		7,824		-		393,351
Other assets, including investments in subs		2,769,884		7,335		5,832		(2,753,537)		29,514
Total assets	$	5,297,455	$	4,311,664	$	360,761	$	(3,546,148)	$	6,423,732

Accounts payable	$	141,089	$	265,764	$	89,659	$	(101,316)	$	395,196
Accrued expenses		198,085		220,917		8,793		(113,808)		313,987
Current maturities of long-term debt		674		700		29,347		(27,089)		3,632
Total current liabilities		339,848		487,381		127,799		(242,213)		712,815
Long-term debt		2,324,298		-		168,566		(139,670)		2,353,194
Other liabilities		(293,711)		1,219,444		42,482		(499,191)		469,024
Total liabilities		2,370,435		1,706,825		338,847		(881,074)		3,535,033

Redeemable noncontrolling interests		-		-		111,240		-		111,240

Common stock		641		1,727,859		14,908		(1,742,767)		641
Treasury stock		(416,829)		-		-		-		(416,829)
Additional paid-in-capital		1,132,749		128,076		779,678		(907,754)		1,132,749
Retained earnings (deficit)		2,210,459		748,904		(734,351)		(14,553)		2,210,459
Total Steel Dynamics, Inc. equity		2,927,020		2,604,839		60,235		(2,665,074)		2,927,020
Noncontrolling interests		-		-		(149,561)		-		(149,561)
Total equity		2,927,020		2,604,839		(89,326)		(2,665,074)		2,777,459
Total liabilities and equity	$	5,297,455	$	4,311,664	$	360,761	$	(3,546,148)	$	6,423,732

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 10. Condensed Consolidating Information (Continued)



Condensed Consolidating Statements of Operations (in thousands)

For the three months ended,					Combined		Consolidating		Total
September 30, 2017	Parent		Guarantors		Non-Guarantors		Adjustments		Consolidated
Net sales	$	946,136	$	2,641,067	$	161,556	$	(1,305,377)	$	2,443,382
Costs of goods sold		763,310		2,402,670		157,564		(1,276,680)		2,046,864
Gross profit		182,826		238,397		3,992		(28,697)		396,518
Selling, general and administrative		51,464		74,151		4,896		(5,008)		125,503
Operating income (loss)		131,362		164,246		(904)		(23,689)		271,015
Interest expense, net of capitalized interest		18,831		14,481		3,181		(2,316)		34,177
Other (income) expense, net		2,660		(2,492)		42		2,316		2,526
Income (loss) before income taxes and
equity in net income of subsidiaries		109,871		152,257		(4,127)		(23,689)		234,312
Income taxes		35,309		55,183		1,169		(8,361)		83,300
		74,562		97,074		(5,296)		(15,328)		151,012
Equity in net income of subsidiaries		78,696		-		-		(78,696)		-
Net loss attributable to noncontrolling interests		-		-		2,246		-		2,246
Net income (loss) attributable to Steel Dynamics, Inc.	$	153,258	$	97,074	$	(3,050)	$	(94,024)	$	153,258



For the three months ended,					Combined		Consolidating		Total
September 30, 2016	Parent		Guarantors		Non-Guarantors		Adjustments		Consolidated
Net sales	$	845,585	$	2,258,466	$	96,409	$	(1,099,150)	$	2,101,310
Costs of goods sold		647,983		2,016,874		100,470		(1,072,520)		1,692,807
Gross profit (loss)		197,602		241,592		(4,061)		(26,630)		408,503
Selling, general and administrative		52,995		72,605		4,134		(5,086)		124,648
Operating income (loss)		144,607		168,987		(8,195)		(21,544)		283,855
Interest expense, net of capitalized interest		17,818		17,741		2,847		(2,207)		36,199
Other (income) expense, net		2,342		3,937		(4,135)		2,207		4,351
Income (loss) before income taxes and
equity in net income of subsidiaries		124,447		147,309		(6,907)		(21,544)		243,305
Income taxes		40,242		55,684		797		(7,831)		88,892
		84,205		91,625		(7,704)		(13,713)		154,413
Equity in net income of subsidiaries		73,192		-		-		(73,192)		-
Net loss attributable to noncontrolling interests		-		-		2,984		-		2,984
Net income (loss) attributable to Steel Dynamics, Inc.	$	157,397	$	91,625	$	(4,720)	$	(86,905)	$	157,397

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 10. Condensed Consolidating Information (Continued)



For the nine months ended,					Combined		Consolidating		Total
September 30, 2017	Parent		Guarantors		Non-Guarantors		Adjustments		Consolidated
Net sales	$	2,797,557	$	7,827,981	$	449,902	$	(3,873,122)	$	7,202,318
Costs of goods sold		2,241,936		7,054,938		432,657		(3,788,403)		5,941,128
Gross profit (loss)		555,621		773,043		17,245		(84,719)		1,261,190
Selling, general and administrative		164,061		226,153		15,253		(15,211)		390,256
Operating income (loss)		391,560		546,890		1,992		(69,508)		870,934
Interest expense, net of capitalized interest		55,353		44,245		9,494		(7,073)		102,019
Other (income) expense, net		(4,463)		(7,305)		(273)		7,073		(4,968)
Income (loss) before income taxes and
equity in net income of subsidiaries		340,670		509,950		(7,229)		(69,508)		773,883
Income taxes		106,036		184,891		4,651		(24,320)		271,258
		234,634		325,059		(11,880)		(45,188)		502,625
Equity in net income of subsidiaries		273,374		-		-		(273,374)		-
Net loss attributable to noncontrolling interests		-		-		5,383		-		5,383
Net income (loss) attributable to Steel Dynamics, Inc.	$	508,008	$	325,059	$	(6,497)	$	(318,562)	$	508,008



For the nine months ended,					Combined		Consolidating		Total
September 30, 2016	Parent		Guarantors		Non-Guarantors		Adjustments		Consolidated
Net sales	$	2,297,389	$	6,322,158	$	271,694	$	(3,024,728)	$	5,866,513
Costs of goods sold		1,823,408		5,676,265		286,486		(2,944,568)		4,841,591
Gross profit (loss)		473,981		645,893		(14,792)		(80,160)		1,024,922
Selling, general and administrative		145,596		212,613		9,352		(14,581)		352,980
Operating income (loss)		328,385		433,280		(24,144)		(65,579)		671,942
Interest expense, net of capitalized interest		53,842		54,493		7,558		(6,005)		109,888
Other (income) expense, net		(2,137)		8,012		(11,139)		6,005		741
Income (loss) before income taxes and
equity in net income of subsidiaries		276,680		370,775		(20,563)		(65,579)		561,313
Income taxes (benefit)		89,210		139,958		(63)		(23,966)		205,139
		187,470		230,817		(20,500)		(41,613)		356,174
Equity in net income of subsidiaries		174,633		-		-		(174,633)		-
Net loss attributable to noncontrolling interests						5,929				5,929
Net income (loss) attributable to Steel Dynamics, Inc.	$	362,103	$	230,817	$	(14,571)	$	(216,246)	$	362,103

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 10. Condensed Consolidating Information (Continued)


Condensed Consolidating Statements of Cash Flows (in thousands)

For the nine months ended,					Combined		Consolidating		Total
September 30, 2017	Parent		Guarantors		Non-Guarantors		Adjustments		Consolidated

Net cash provided (used in) by operating activities	$	126,267	$	434,450	$	(17,762)	$	4,650	$	547,605
Net cash used in investing activities		(48,799)		(50,975)		(7,006)		3,902		(102,878)
Net cash provided by (used in) financing activities		220,346		(405,184)		9,144		(8,552)		(184,246)
Increase (decrease) in cash and equivalents		297,814		(21,709)		(15,624)		-		260,481
Cash and equivalents at beginning of period		766,685		54,677		20,121		-		841,483
Cash and equivalents at end of period	$	1,064,499	$	32,968	$	4,497	$	-	$	1,101,964



For the nine months ended,					Combined		Consolidating		Total
September 30, 2016	Parent		Guarantors		Non-Guarantors		Adjustments		Consolidated

Net cash provided by operating activities	$	282,918	$	358,657	$	52	$	3,735	$	645,362
Net cash used in investing activities		(143,427)		(81,983)		(3,935)		2,879		(226,466)
Net cash provided by (used in) financing activities		196,242		(297,596)		13,529		(6,614)		(94,439)
Increase (decrease) in cash and equivalents		335,733		(20,922)		9,646		-		324,457
Cash and equivalents at beginning of period		636,877		81,976		8,179		-		727,032
Cash and equivalents at end of period	$	972,610	$	61,054	$	17,825	$	-	$	1,051,489

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This report contains some predictive statements about future events, including statements related to conditions in the steel and metallic scrap markets, Steel Dynamics’ revenues, costs of purchased materials, future profitability and earnings, and the operation of new or existing facilities. These statements, which we generally precede or accompany by such typical conditional words as "anticipate," "intend," "believe," "estimate," "plan," "seek," "project" or "expect," or by the words "may," "will," or "should," are intended to be made as “forward-looking,” subject to many risks and uncertainties, within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These statements speak only as of this date and are based upon information and assumptions, which we consider reasonable as of this date, concerning our businesses and the environments in which they operate. Such predictive statements are not guarantees of future performance, and we undertake no duty to update or revise any such statements. Some factors that could cause such forward-looking statements to turn out differently than anticipated include: (1) the effects of uncertain economic conditions; (2) cyclical and changing industrial demand; (3) changes in conditions in any of the steel or scrap-consuming sectors of the economy which affect demand for our products, including the strength of the non-residential and residential construction, automotive, appliance, pipe and tube, and other steel-consuming industries; (4) fluctuations in the cost of key raw materials (including steel scrap, iron units, and energy costs) and our ability to pass on any cost increases; (5) the impact of domestic and foreign import price competition; (6) unanticipated difficulties in integrating or starting up new or acquired businesses; (7) risks and uncertainties involving product and/or technology development; and (8) occurrences of unexpected plant outages or equipment failures.

More specifically, we refer you to our more detailed explanation of these and other factors and risks that may cause such predictive statements to turn out differently, as set forth under the headings Special Note Regarding Forward-Looking Statements and Risk Factors, in our most recent Annual Report on Form 10-K for the year ended December 31, 2016, in our quarterly reports on Form 10-Q or in other reports which we from time to time file with the Securities and Exchange Commission. These reports are available publicly on the Securities and Exchange Commission website, www.sec.gov, and on our website, www.steeldynamics.com under “Investors – SEC Filings.”

Description of the Business

We are one of the largest domestic steel producers and metal recyclers in the United States based on current estimated steelmaking and coating capacity of 11 million tons and actual metals recycling volumes. The primary source of revenues are from the manufacture and sale of steel products, processing and sale of recycled ferrous and nonferrous metals, and fabrication and sale of steel joists and deck products. We have three reportable segments: steel operations, metals recycling operations, and steel fabrication operations.

Operating Statement Classifications

Net Sales. Net sales from our operations are a factor of volumes shipped, product mix and related pricing. We charge premium prices for certain grades of steel, product dimensions, certain smaller volumes, and for value-added processing or coating of the steel products. Except for the steel fabrication operations, we recognize revenues from sales and the allowance for estimated returns and claims from these sales at the time the title of the product transfers, upon shipment. Provision is made for estimated product returns and customer claims based on historical experience. If the historical data used in the estimates does not reflect future returns and claims trends, additional provision may be necessary. Our steel fabrication operations recognizes revenues from construction contracts utilizing a percentage of completion methodology based on steel tons used on completed units to date as a percentage of estimated total steel tons required for each contract.

Costs of Goods Sold. Our costs of goods sold represent all direct and indirect costs associated with the manufacture of our products. The principal elements of these costs are scrap and scrap substitutes (which represent the most significant single component of our consolidated costs of goods sold), steel, direct and indirect labor and related benefits, alloys, zinc, transportation and freight, repairs and maintenance, electricity, and depreciation.

Selling, General and Administrative Expenses. Selling, general and administrative expenses consist of all costs associated with our sales, finance and accounting, and administrative departments. These costs include, among other items, labor and related benefits, professional services, insurance premiums, property taxes, company-wide profit sharing, and amortization of intangible assets.

Interest Expense, net of Capitalized Interest. Interest expense consists of interest associated with our senior credit facilities and other debt net of interest costs that are required to be capitalized during the construction period of certain capital investment projects.

Other Expense (Income), net. Other income consists of interest income earned on our temporary cash deposits and investments; any other non-operating income activity, including income from non-consolidated investments accounted for under the equity method. Other expense consists of any non-operating costs, such as certain acquisition and financing expenses.

Results Overview

Consolidated operating income decreased $12.8 million, or 5%, to $271.0 million for the third quarter 2017, compared to the third quarter 2016. Third quarter 2017 net income attributable to Steel Dynamics, Inc. decreased $4.1 million, or 3%, to $153.3 million, compared to the third quarter 2016.

Consolidated operating income increased $199.0 million, or 30%, to $870.9 million for the first nine months of 2017, compared to $671.9 million for the first nine months of 2016. First nine months 2017 net income attributable to Steel Dynamics, Inc. increased $145.9 million, or 40%, to $508.0 million, compared to the first nine months of 2016.

Our consolidated results for the third quarter and first nine months of 2017 benefited from continued strong demand primarily for our sheet and special-bar-quality steel products coupled with continued low customer inventory levels. However, increased import levels continued hindering the ability of domestic steel prices to keep pace with raw material costs. Decreased scrap volumes for our metals recycling operations were offset by improved pricing and ferrous metal spreads and reduced operating expenses, resulting in significantly increased operating income during the 2017 third quarter and year-to-date periods compared to the same periods in 2016. The non-residential construction market remained strong, resulting in record quarterly shipments for our steel fabrication operations for the third straight quarter.

Segment Operating Results 2017 vs. 2016 (dollars in thousands)



	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		% Change		2016	2017		% Change	2016
Net sales:
Steel Operations Segment	$	1,848,126	14%	$	1,627,886	$	5,445,754	23%	$	4,419,572
Metals Recycling Operations Segment		709,197	25%		565,263		2,123,350	29%		1,643,172
Steel Fabrication Operations Segment		211,394	18%		178,640		603,511	14%		530,441
Other		101,173	65%		61,395		282,156	32%		214,149
		2,869,890			2,433,184		8,454,771			6,807,334
Intra-company		(426,508)			(331,874)		(1,252,453)			(940,821)
	$	2,443,382	16%	$	2,101,310	$	7,202,318	23%	$	5,866,513

Operating income (loss):
Steel Operations Segment	$	276,547	(10)%	$	307,553	$	895,008	26%	$	712,939
Metals Recycling Operations Segment		17,624	186%		6,154		51,968	160%		20,014
Steel Fabrication Operations Segment		21,862	23%		17,744		65,735	(10)%		73,230
Other		(44,326)	7%		(47,687)		(141,406)	(13)%		(125,186)
		271,707			283,764		871,305			680,997
Intra-company		(692)			91		(371)			(9,055)
	$	271,015	(5)%	$	283,855	$	870,934	30%	$	671,942

Steel Operations Segment

Steel Operations Segment. Steel operations consist of our six electric arc furnace steel mills, producing steel from ferrous scrap and scrap substitutes, utilizing continuous casting, automated rolling mills and eleven downstream steel coating lines, and several bar processing lines, as well as Iron Dynamics, our liquid pig iron production facility that supplies solely the Butler Flat Roll Division. Our steel operations sell directly to end-users, steel fabricators, and service centers. These products are used in numerous industry sectors, including the construction, automotive, manufacturing, transportation, heavy and agriculture equipment, and pipe and tube (including OCTG) markets. Steel operations accounted for 73% and 74% of our consolidated external net sales during the third quarter of 2017 and 2016, respectively, and 73% and 72% of our consolidated external net sales during the first nine months of 2017 and 2016, respectively.

Sheet Steel Products. Our sheet steel products operations consist of Butler and Columbus Flat Roll Divisions, and downstream coating lines. These operations sell a broad range of sheet steel products, consisting of hot roll, cold roll and coated steel products, including a wide variety of specialty products, such as light gauge hot roll, galvanized, Galvalume®, and painted products. The Techs is comprised of three galvanizing lines which sell specialized galvanized sheet steels used in primarily non-automotive applications.

Long Products. Our Structural and Rail Division sells structural steel beams and pilings to the construction market, as well as standard‑grade and premium rail to the railroad industry. Our Engineered Bar Products Division primarily sells engineered special-bar-quality, merchant-bar-quality, round‑cornered squares, and smaller-diameter engineered round bars. Vulcan Threaded Products produces threaded rod products and also cold drawn and heat treated bar. Our Roanoke Bar Division primarily sells merchant steel products, including angles, merchant rounds, flats and channels, and reinforcing bar. Steel of West Virginia primarily sells beams, channels and specialty steel sections.

Steel Operations Segment Shipments (tons):



	Three Months Ended September 30,			Nine Months Ended September 30,
	2017	% Change	2016	2017	% Change	2016

Total shipments	2,458,992	8%	2,271,230	7,362,636	5%	7,039,801
Intra-segment shipments	(88,211)		(65,438)	(279,567)		(216,217)
Steel Operations Segment Shipments	2,370,781	7%	2,205,792	7,083,069	4%	6,823,584

External shipments	2,279,228	8%	2,104,219	6,830,877	5%	6,517,253

Segment Results 2017 vs. 2016

Overall domestic steel demand remained strong, but elevated levels of steel imports persisted during the quarter, hindering the ability for domestic steel prices to keep pace with raw material costs. Steel operations segment shipments increased 7% in the third quarter 2017, as compared to the same period in 2016, driven by improved flat roll and engineered bar shipments. Demand from the construction sector continues to improve, and energy has shown a continued positive demand trend. Demand has also improved for heavy off-road equipment and more general industrial manufacturing. Conversely, demand from the domestic automotive sectors has softened somewhat, but still remains near historically high levels. Our steel mill utilization rate averaged 92% for the third quarter 2017, as compared to 85% in the third quarter 2016. Sheet steel average selling prices increased 4% in the third quarter 2017 compared to the same period in 2016, while long products rose 8%. Net sales for the steel operations increased 14% in the third quarter 2017, when compared to the same period in 2016, due to an increase of $39 per ton, or 5%, in average selling prices combined with a 7% increase in steel operations shipments. Net sales for the steel operations increased 23% in the first nine months of 2017, when compared to the same period in 2016, due to a 4% increase in steel operations segment shipments combined with an increase of $118 per ton, or 18%, in average selling prices. The increase in shipments and pricing for the first nine months of 2017 was the result of much stronger markets in the first and third quarters 2017, compared to the same periods in 2016.

Metallic raw materials used in our electric arc furnaces represent our single most significant steel manufacturing cost, generally comprising approximately 60% of our steel operations’ manufacturing costs, excluding the operations of The Techs and Vulcan, which purchase, rather than produce, the steel they further process. Our metallic raw material cost per net ton consumed in our steel operations increased $55, or 22%, in the third quarter 2017, compared to the same period in 2016, consistent with overall increased domestic scrap pricing. In the first nine months of 2017, our metallic raw material cost per net ton consumed increased $70, or 32%, compared to the same period in 2016.

Operating income for the steel operations decreased 10%, to $276.5 million, in the third quarter 2017, compared to the same period in 2016, due to a 3% decrease in metal spread (which we define as the difference between average selling prices and the cost of ferrous scrap consumed) more than offsetting increased steel shipments. Operating income for the first nine months 2017 increased 26%, to $895.0 million, compared to the first nine months of 2016, due to an 11% expansion of steel segment operations metal spread, coupled with a 4% increase in steel shipments.

Metals Recycling Operations Segment

Metals Recycling Operations Segment. Metals recycling operations consists solely of OmniSource and includes both ferrous and nonferrous scrap metal processing, transportation, marketing, brokerage, and consulting services strategically located primarily in close proximity to our steel mills and other end-user scrap consumers throughout the eastern half of the United States. In addition, OmniSource designs, installs, and manages customized scrap management programs for industrial manufacturing companies at hundreds of locations throughout North America. Our steel mills utilize a large portion (61% - 63% for the periods presented) of the ferrous scrap sold by OmniSource as raw material in our steelmaking operations, and the remainder is sold to other consumers, such as other steel manufacturers and foundries. Our metals recycling operations accounted for 14% and 15% of our consolidated external net sales during the third quarter of 2017 and 2016, respectively, and 15% for each of the first nine months of 2017 and 2016.

Metals Recycling Operations Shipments:



	Three Months Ended September 30,			Nine Months Ended September 30,
	2017	% Change	2016	2017	% Change	2016
Ferrous metal (gross tons)
Total	1,219,582	(2)%	1,243,277	3,780,958	(3)%	3,894,755
Inter-company	(756,899)		(774,779)	(2,366,355)		(2,383,223)
External shipments	462,683	(1)%	468,498	1,414,603	(6)%	1,511,532

Nonferrous metals (thousands of pounds)
Total	261,716	(7)%	280,107	815,763	(2)%	828,715
Inter-company	(37,316)		(25,185)	(107,863)		(83,741)
External shipments	224,400	(12)%	254,922	707,900	(5)%	744,974

Segment Results 2017 vs. 2016

Metals recycling operations operating income in the third quarter 2017 of $17.6 million was 186% higher than the third quarter 2016 operating income of $6.2 million, due to improvements in ferrous and nonferrous metal spread (which we define as the difference between average selling prices and the cost of purchased scrap), and reduced operating costs. Net sales increased 25% in the third quarter 2017 as compared to the same period in 2016, driven by increased pricing, which more than offset decreased shipments. Overall domestic steel mill utilization was 75% in the third quarter of 2017, compared to 70% in the same 2016 period. Ferrous shipments to our own steel mills decreased by 2% in the third quarter 2017, compared to the same period in 2016. Ferrous scrap average selling prices increased 30% during the third quarter 2017 compared to the same period in 2016, while nonferrous average selling prices increased 36% compared to the same period in 2016, resulting in ferrous metal spread increasing 11%, and nonferrous metal spread increasing 2%.

Metals recycling operations operating income in the first nine months of 2017 of $52.0 million was 160% higher than the first nine months 2016 operating income of $20.0 million, due to increased selling prices resulting in a 17% improvement in ferrous metal spread, and reduced operating expenses. Net sales increased 29% in the first nine months of 2017 as compared to the same period in 2016, driven by increased pricing for both ferrous and nonferrous products, which increased 40% and 27%, respectively, during the first nine months of 2017 compared to the same period in 2016.

Steel Fabrication Operations Segment

Steel fabrication operations include our New Millennium Building Systems’ joist and deck plants located throughout the United States and in Northern Mexico. Revenues from these plants are generated from the fabrication of steel joists, trusses, girders and steel deck used within the non-residential construction industry. Steel fabrication operations accounted for 9% and 8% of our consolidated external net sales during the third quarter of 2017 and 2016, respectively, and 8% and 9% during the first nine months of 2017 and 2016, respectively.

Segment Results 2017 vs. 2016

The overall non-residential construction market has continued to remain strong, demonstrating a positive growth profile, as our fabrication operations achieved a third consecutive quarterly shipments record in the third quarter of 2017. Net sales for the steel fabrication operations increased $32.8 million, or 18%, during the third quarter 2017, compared to the same period in 2016, as shipments increased 13%, while average selling prices increased $64 per ton, or 5%. Net sales for the segment increased $73.1 million, or 14%, in the first nine months of 2017, compared to the first nine months of 2016, as volumes increased 7% and selling prices increased 6%. Our steel fabrication operations continue to realize strength in order activity and resulting shipments, as we continue to leverage our national operating footprint to sustain and improve market share, and market demand continues to improve.

The purchase of various steel products is the largest single cost of production for our steel fabrication operations, generally representing approximately two-thirds of the total cost of manufacturing. The average cost of steel consumed increased by 12% in the third quarter 2017, as compared to the same period in 2016, while average selling prices increased only 5%, resulting in metal spread (which we define as the difference between average selling prices and the cost of purchased steel) declining 2%. However, operating income increased 23% to $21.9 million in the third quarter 2017 compared to the same period in 2016, as increased shipments more than offset metal spread contraction. Segment operating income of $65.7 million in the first nine months of 2017 decreased 10%, from $73.2 million in the first nine months of 2016, despite a 7% increase in shipments, as metal spreads decreased 7% year over year.

Other Operations

Other operations consists of subsidiary operations that are below the quantitative thresholds required for reportable segments and primarily consist of our idled Minnesota ironmaking operations and smaller joint ventures. Also included in “Other” are certain unallocated corporate accounts, such as the company’s senior secured credit facility, senior notes, certain other investments and certain profit sharing expenses.

Third Quarter Consolidated Results 2017 vs. 2016

Selling, General and Administrative Expenses. Selling, general and administrative expenses (including profit sharing and amortization of intangible assets) of $125.5 million during the third quarter 2017 were consistent with the $124.6 million during the third quarter 2016, representing approximately 5.1% and 5.9% of net sales, respectively.

Interest Expense, net of Capitalized Interest. During the third quarter 2017, interest expense decreased 6% to $34.2 million from $36.2 million during the same period in 2016, due primarily to the December 2016 refinancing of $400.0 million of 6.125% senior notes due 2019 with 5.000% senior notes due 2026. In addition, in December 2016 we repaid the remaining $228.1 million of outstanding Senior Term Loan debt, which was set to mature on November 14, 2019.

Income Tax Expense. During the third quarter 2017, our income tax expense was $83.3 million at an effective income tax rate of 35.6%, as compared to $88.9 million at an effective income tax rate of 36.5%, during the third quarter 2016. The lower effective tax rate in 2017 is due

primarily to additional permanent tax benefit items, most notably the 2017 domestic manufacturing deduction, resulting from increases in taxable income.

First Nine Months Consolidated Results 2017 vs. 2016

Selling, General and Administrative Expenses. Selling, general and administrative expenses (including profit sharing and amortization of intangible assets) of $390.3 million during the first nine months of 2017 increased 11% from $353.0 million during the first nine months of 2016, representing approximately 5.4% and 6.0% of net sales, respectively. The increase in the first nine months 2017 expenses compared to the same period in 2016 is due most notably to increased performance-based incentive compensation, including profit sharing, associated with our increased profitability.

Interest Expense, net of Capitalized Interest. During the first nine months of 2017, interest expense decreased $7.9 million to $102.0 million, when compared to the same period in 2016. The decrease in interest expense is due primarily to the December 2016 refinancing of $400.0 million of 6.125% senior notes due 2019 with 5.000% senior notes due 2026. In addition, in December 2016 we repaid the remaining $228.1 million of outstanding Senior Term Loan debt, which was set to mature on November 14, 2019.

Income Tax Expense. During the first nine months of 2017, our income tax expense was $271.3 million at an effective income tax rate of 35.1%, as compared to $205.1 million at an effective income tax rate of 36.5%, during the first nine months of 2016. The lower effective tax rate in 2017 is due primarily to additional permanent tax benefit items, most notably the 2017 domestic manufacturing deduction, resulting from increases in taxable income.

Liquidity and Capital Resources

Capital Resources and Long‑term Debt. Our business is capital intensive and requires substantial expenditures for, among other things, the purchase and maintenance of equipment used in our steel, metals recycling, and steel fabrication operations, and to remain in compliance with environmental laws. Our short-term and long-term liquidity needs arise primarily from working capital requirements, capital expenditures, principal and interest payments related to our outstanding indebtedness, dividends to our shareholders, and acquisitions. We have met these liquidity requirements primarily with cash provided by operations and long-term borrowings, and we also have availability under our Revolver. Our liquidity at September 30, 2017, is as follows (in thousands):



	Cash and equivalents*	$	934,750
	Revolver availability		1,188,121
	Total liquidity	$	2,122,871

* Adjusted to reflect the October 13, 2017, repayment of the remaining $167.1 million 6.375% Senior Notes due 2022.

Our total outstanding debt remained relatively unchanged during the first nine months of 2017 at $2.4 billion (adjusted to reflect the October 13, 2017, repayment of the remaining $167.1 million 6.375% Senior Notes due 2022). Our total adjusted long-term debt to capitalization ratio (representing our long-term debt, including current maturities, divided by the sum of our long-term debt, redeemable noncontrolling interests, and our total stockholders’ equity) was 43.9% at September 30, 2017, compared to 44.9% at December 31, 2016.

In September 2017, we issued $350.0 million of 4.125% senior notes due 2025 (the "2025 Notes"), the proceeds of which, along with available cash, were used to fund the September 2017 tender to purchase at a redemption price of 103.563%, $182.9 million principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, of our 6.375% senior notes due 2022 (the "2022 Notes"), and the October 2017 call and repayment at a redemption price of 103.188% of the $167.1 million remaining outstanding principal amount of the 2022 Notes, plus accrued and unpaid interest to, but not including, the date of repayment. The $167.1 remaining outstanding principal amount is included in current maturities of long-term debt in our September 30, 2017, balance sheet.

Our November 2014 senior secured credit facility (Facility), which provides a $1.2 billion Revolver, matures November 2019. Subject to certain conditions, we have the opportunity to increase the Revolver size by at least $750.0 million. The Facility is guaranteed by certain of our subsidiaries; and is secured by substantially all of our and our wholly-owned subsidiaries’ receivables and inventories, and by pledges of all shares of our wholly-owned subsidiaries’ capital stock or other equity interests, and intercompany debt held by us as collateral. The Revolver is available to fund working capital, capital expenditures, and other general corporate purposes. The Facility contains financial covenants and other covenants pertaining to our ability (which may under certain circumstances be limited) to make capital expenditures; incur indebtedness; permit liens on property; enter into transactions with affiliates; make restricted payments or investments; enter into mergers, acquisitions or consolidations; conduct asset sales; pay dividends or distributions, or enter into other specified transactions and activities. Our ability to borrow funds within the terms of the Revolver is dependent upon our continued compliance with the financial and other covenants. At September 30, 2017, we had $1.2 billion of availability on the Revolver, $11.9 million of outstanding letters of credit and other obligations which reduce availability, and there were no borrowings outstanding.

The financial covenants under our Facility state that we must maintain an interest coverage ratio of not less than 2.50:1.00. Our interest coverage ratio is calculated by dividing our last-twelve-months (LTM) consolidated adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and certain other non-cash transactions as allowed in the Facility) by our LTM gross interest expense, less amortization of financing fees. In addition, a net debt (as defined in the Facility) to consolidated LTM adjusted EBITDA (net debt leverage ratio) of not more than 5.00:1.00 must be maintained. If the net debt leverage ratio exceeds 3.50:1:00 at any time, our ability to make certain payments as defined in the Facility (which includes cash dividends to stockholders and share purchases, among other things), is limited. At September 30, 2017, our interest coverage ratio and net debt leverage ratio were 10.22:1.00 and 1.49:1.00, respectively. We were, therefore, in compliance with these covenants at September 30, 2017, and we anticipate we will continue to be in compliance during the next twelve months.

Working Capital. We generated cash flow from operations of $547.6 million in the first nine months of 2017. Operational working capital (representing amounts invested in trade receivables and inventories, less current liabilities other than income taxes payable and debt) increased $230.9 million to $1.5 billion at September 30, 2017. Increases in volumes, pricing and profitability resulted in increased accounts receivable, and related increases in inventory, which were only partially offset by related increases in accounts payable.

Capital Investments. During the first nine months of 2017, we invested $127.7 million in property, plant and equipment, primarily within our steel operations segment, compared with $123.2 million invested during the same period in 2016.

Cash Dividends. As a reflection of continued confidence in our current and future cash flow generation ability and financial position, we increased our quarterly cash dividend by 11% to $0.155 per share in the first quarter 2017 (from $0.140 per share in 2016), resulting in declared cash dividends of $111.4 million during the first nine months of 2017, compared to $102.3 million during the same period in 2016. We paid cash dividends of $108.8 million and $101.6 million during the first nine months of 2017 and 2016, respectively. Our board of directors, along with executive management, approves the payment of dividends on a quarterly basis. The determination to pay cash dividends in the future is at the discretion of our board of directors, after taking into account various factors, including our financial condition, results of operations, outstanding indebtedness, current and anticipated cash needs and growth plans. In addition, the terms of our Facility and the indentures relating to our senior notes may restrict the amount of cash dividends we can pay.

Other. In 2016, the board of directors authorized a share repurchase program of up to $450 million of our common stock. Under the share repurchase program, purchases will take place as and when we determine in open market or private transactions made based upon the market price of our common stock, the nature of other investment opportunities or growth projects, our cash flows from operations, and general economic conditions. The share repurchase program does not require us to acquire any specific number of shares, and may be modified, suspended, extended or terminated by us at any time. We acquired 7.0 million shares of our common stock for $237.2 million in the first nine months of 2017 pursuant to this program. See Part II Other Information, Item 2 Unregistered Sales of Equity Securities and Use of Proceeds for additional information.

Our ability to meet our debt service obligations and reduce our total debt will depend upon our future performance which, in turn, will depend upon general economic, financial and business conditions, along with competition, legislation and regulatory factors that are largely beyond our control. In addition, we cannot assure that our operating results, cash flows, access to credit markets and capital resources will be sufficient for repayment of our indebtedness in the future. We believe that based upon current levels of operations and anticipated growth, cash flows from operations, together with other available sources of funds, including if necessary borrowings under our Revolver through its term, will be adequate for the next twelve months for making required payments of principal and interest on our indebtedness, funding working capital requirements, and anticipated capital expenditures.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Risk

In the normal course of business we are exposed to the market risk and price fluctuations related to the sale of our products and to the purchase of raw materials used in our operations, such as metallic raw materials, electricity, natural gas and its transportation services, fuel, air products, and zinc. Our risk strategy associated with product sales has generally been to obtain competitive prices for our products and to allow operating results to reflect market price movements dictated by supply and demand.

Our risk strategy associated with the purchase of raw materials utilized within our operations has generally been to make some commitments with suppliers relating to future expected requirements for some commodities such as electricity, natural gas and its transportation services, fuel, air products, and zinc. Certain of these commitments contain provisions which require us to “take or pay” for specified quantities without regard to actual usage for periods of up to 4 years for physical commodity requirements and commodity transportation requirements, and for up to 12 years for air products. We utilized such “take or pay” requirements during the past three years under these contracts, except for certain air products at our Minnesota ironmaking operations which were idled in May 2015. We believe that production requirements will be such that consumption of the products or services purchased under these commitments will occur in the normal production process, other than certain air products related to our Minnesota ironmaking operations during the idle period. We also purchase electricity consumed at our Butler Flat Roll Division pursuant to a contract which extends through December 2017. The contract designates 160 hours annually as “interruptible service” and establishes an agreed fixed-rate energy charge per Mill/kWh consumed for each year through the expiration of the agreement.

In our metals recycling operations, we have certain fixed price contracts with various customers and suppliers for future delivery of nonferrous metals. Our risk strategy has been to enter into base metal financial contracts with the goal to protect the profit margin, within certain parameters, that was contemplated when we entered into the transaction with the customer or vendor. At September 30, 2017, we had a cumulative unrealized gain associated with these financial contracts of $3.3 million, substantially all of which have a settlement date within the next twelve months. We believe the customer contracts associated with the financial contracts will be fully consummated.

ITEM 4.CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2017. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of September 30, 2017, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective.

(b) Changes in Internal Controls Over Financial Reporting. No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended September 30, 2017, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

We are involved in various routine litigation matters, including administrative proceedings, regulatory proceedings, governmental investigations, environmental matters, and commercial and construction contract disputes, none of which are expected to have a material impact on our financial condition, results of operations, or liquidity.

We may also be involved from time to time in various governmental investigations, regulatory proceedings or judicial actions seeking remediation under federal, state and local environmental laws and regulations. The United States EPA has conducted such investigations and proceedings involving us, in some instances along with state environmental regulators, under various environmental laws, including RCRA, CERCLA, the Clean Water Act and the Clean Air Act. Some of these matters have resulted in fines or penalties, for which a total of $420,000 is recorded in our financial statements as of September 30, 2017.

ITEM 1A.RISK FACTORS

No material changes have occurred to the indicated risk factors as disclosed in our Annual Report on Form 10-K for the year ended
December 31, 2016.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We purchased the following equity securities registered by us pursuant to Section 12 of the Exchange Act during the three months ended
September 30, 2017.


Period	Total Number of Shares Purchased	Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Program (1)		Maximum Dollar Value of Shares That May Yet be Purchased Under the Program (in thousands) (1)
Quarter ended September 30, 2017

July 1 - 31	-		$	-		-		$	286,897
August 1 - 31	947,396			34.41		947,396			254,296
September 1 - 30	1,973,694			33.69		1,973,694			187,812
	2,921,090					2,921,090

(1)

On October 18, 2016, we announced that our board of directors had authorized a share repurchase program of up to $450.0 million of our common stock. Our board of directors cancelled the previously authorized program with respect to which no shares had been repurchased for a number of years.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Information normally required to be furnished, in Exhibit 95 to this Quarterly Report, pursuant to Item 4 concerning mine safety disclosure matters, if applicable, by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104), is not included in this report, as there are no applicable mine safety disclosure matters to report for the three months ended September 30, 2017. Accordingly, there is no Exhibit 95 attached to this report.

ITEM 5.OTHER INFORMATION

None.


ITEM 6.		EXHIBITS

Articles of Incorporation

3.2c*		Amended and Restated Bylaws of Steel Dynamics, Inc., reflecting amended and replaced Article XI, made as of September 25, 2017, and effective only upon approval and adoption by stockholders, at the 2018 Annual Meeting of Stockholders, of a conforming amendment to the Amended and Restated Articles of Incorporation.

Executive Officer Certifications

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

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

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

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

Other

95**		Mine Safety Disclosures.

XBRL Documents

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Document

101.DEF*		XBRL Taxonomy Definition Document

101.LAB*		XBRL Taxonomy Extension Label Document

101.PRE*		XBRL Taxonomy Presentation Document

_____________________________________________________________________________________________________________

*Filed concurrently herewith

**Inapplicable for purposes of this report

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

November 9, 2017


STEEL DYNAMICS, INC.

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