As Filed with the Securities and Exchange Commission on September 17, 2003
Registration No. 333-103672
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------
Steel Dynamics, Inc.
(Exact name of registrant as specified in its charter)
Indiana 35-1929476
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Keith E. Busse, President & CEO
6714 Pointe Inverness Way, Suite 200 6714 Pointe Inverness Way, Suite 200
Fort Wayne, Indiana 46804 Fort Wayne, Indiana 46804
(260) 459-3553 (260) 459-3553
(Address, including zip code, and telephone number, (Name, address, including zip code, and telephone
including area code, of registrant's principal number, including area code, of agent
executive offices) for service)
Copies to:
Robert S. Walters, Esq.
Barrett & McNagny LLP
215 East Berry Street
Fort Wayne, Indiana 46802
(260) 423-9551
Approximate date of commencement of the proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. |_|
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.|_|
(continued on next page)
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
===============================================================================
----------------
Pursuant to Rule 429 under the Securities Act, this registration statement
contains a combined prospectus that covers shares of our common stock
previously registered that remain unsold under Registration Statement on
Form S-3, SEC File No. 333-82210. Accordingly, this Post-Effective Amendment
No. 1 to this registration statement also constitutes a post-effective
amendment to such earlier registration statement, which will become effective
concurrently with the effectiveness of this Post-Effective Amendment No. 1.
Explanatory Note
The purpose of this Post-Effective Amendment No. 1 to the Registration
Statement on Form S-3 of Steel Dynamics, Inc. (333-103672) is to amend the
table under the caption "Selling Securityholders" in the prospectus to add the
names of selling securityholders who have requested inclusion in the
prospectus since June 11, 2003, the date of effectiveness of the Registration
Statement, and to update certain other disclosures in the prospectus.
PROSPECTUS
Subject to Completion, Dated September 17, 2003
[Steel Dynamics, Inc. Logo]
4% Convertible Subordinated Notes due 2012
[Cusip Number: 858119 AD2]
6,762,874 Shares of Common Stock Issuable Upon Conversion of the Notes
and
436,150 Additional Shares of Common Stock
----------------
On December 23, 2002 and on January 3, 2003, we issued and sold $115,000,000
aggregate principal amount of our 4% Convertible Subordinated Notes due 2012
in a private offering. The holders of the notes and the common stock issuable
upon conversion of the notes, identified in this prospectus, as well as the
holder of the other shares of common stock identified in this prospectus, may
from time to time offer up to the full amount of these securities pursuant to
this prospectus. If required, we will set forth the names of any other selling
securityholders in another post-effective amendment to the registration
statement of which this prospectus is a part.
We will not receive any proceeds from the sale of the notes, the shares of
common stock issuable upon conversion of the notes or the other shares of
common stock by any of the selling securityholders. The notes and the shares
of common stock may be offered in negotiated transactions or otherwise, at
market prices prevailing at the time of sale or at negotiated prices. The
selling securityholders will also pay any applicable discounts, commissions or
concessions in connection with such sale. The selling securityholders and any
underwriters, broker-dealers or agents that participate in the sale of the
securities may be "underwriters" within the meaning of the Securities Act, and
any discounts, commissions, concessions or profit they earn on any resale of
the securities may constitute underwriting discounts or commissions under the
Securities Act.
We will pay interest on the notes on June 15 and December 15 of each year,
beginning June 15, 2003. The notes mature on December 15, 2012, unless earlier
converted, redeemed or repurchased by us.
Beginning with the six-month interest period commencing December 15, 2007,
we will pay additional contingent interest on the notes during any six-month
interest period from December 15 to June 14 and from June 15 to December 14,
if the trading price of a note for each of the five trading days immediately
preceding the first day of the applicable six-month interest period equals
120% or more of the principal amount of such note.
Holders of notes may convert the notes, before maturity, into shares of our
common stock at a conversion rate of 58.8076 shares per $1,000 principal
amount of notes (equivalent to an initial conversion price of approximately
$17.0046 per share), subject to adjustment, only under the following
circumstances:
(1) During any fiscal quarter commencing after December 31, 2002, at any
time after the closing sale price of our common stock exceeds 120% of
the conversion price for at least 20 trading days in the 30
consecutive trading days ending on the last trading day of any fiscal
quarter;
(2) After the earlier of (a) the date the notes are rated by both Standard
& Poor's Credit Market Services, a division of the McGraw-Hill
Companies, and Moody's Investor Services, Inc. and (b) January 31,
2003, during any period that the long-term credit rating assigned to
the notes by either Standard & Poor's or Moody's (or any successor to
these entities) is "CCC" or "Caa3", respectively, or lower, or if
either of these rating agencies no longer rates the notes, or if
either of these rating agencies suspends or withdraws the rating
assigned to the notes, or if the notes are not assigned a rating by
both rating agencies;
(3) If the notes have been called for redemption; or
(4) Upon the occurrence of specified corporate events described under
"Description of Notes."
From December 18, 2007 through December 14, 2008, we may redeem any of the
notes at a redemption price of 101.143%, and from December 15, 2008 through
December 14, 2009 at a redemption price of 100.571% of their principal amount
plus accrued interest. After December 15, 2009, we may redeem any of the notes
at a redemption price of 100% of their principal amount plus accrued interest.
You may also require us to repurchase your notes on or after December 15,
2009, or following a fundamental change, at a purchase price of 100% of the
principal amount of the notes plus accrued interest.
The notes are junior to all of our existing and future senior indebtedness
and are structurally subordinated to all existing and future liabilities of
our subsidiaries, including trade payables, lease commitments and monies
borrowed.
For U.S. federal income tax purposes, the notes are subject to U.S. federal
income tax rules applicable to contingent payment debt instruments. See "U.S.
Federal Income Tax Considerations" beginning on page 41.
The notes originally issued in the private placement are eligible for
trading on The Private Offerings, Resales and Trading Through Automated
Linkages, or "PORTAL Market" of the National Association of Securities
Dealers, Inc. However, notes sold pursuant to this prospectus will no longer
be eligible for trading on the PORTAL Market. We do not intend to list the
notes on any national securities exchange.
Our common stock is listed on The Nasdaq National Market under the symbol
"STLD." On September 16, 2003, the closing sale price of our common stock on
The Nasdaq National Market was $16.01.
----------------
Investing in the Notes, the Common Stock Issuable Upon Conversion of the
Notes, and the Additional Common Stock Involves Risks. See "Risk Factors"
beginning on page 6.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
The date of this prospectus is September 17, 2003.
The information in this prospectus is not complete and may be changed. The
selling securityholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
TABLE OF CONTENTS
Page
----
Important Notice to Readers ............................................. i
Prospectus Summary ...................................................... 1
The Offering ............................................................ 3
Risk Factors ............................................................ 6
Special Note Regarding Forward Looking Statements ....................... 18
Use of Proceeds ......................................................... 19
Ratios of Earnings to Fixed Charges ..................................... 19
Description of Notes .................................................... 19
Description of Capital Stock ............................................ 33
Price Range of Common Stock ............................................. 35
Dividend Policy ......................................................... 36
Selling Securityholders ................................................. 36
Plan of Distribution .................................................... 39
Certain United States Federal Income Tax Considerations ................. 41
Certain ERISA Considerations ............................................ 46
Legal Matters ........................................................... 47
Experts ................................................................. 47
Where You Can Find More Information ..................................... 48
Information Incorporated by Reference ................................... 48
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you
with information that is different. This prospectus may only be used where it
is legal to sell these securities. The information in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or any sale of the securities.
----------------
Unless otherwise indicated, all references in this prospectus to "SDI,"
"Steel Dynamics," "Company," "we," "our," "ours" and "us" refer to Steel
Dynamics, Inc. together with its subsidiaries.
IMPORTANT NOTICE TO READERS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission, or SEC, using a "shelf" registration
process. Under this shelf registration process, the selling securityholders
may from time to time offer notes or shares of our common stock issuable upon
conversion of the notes or otherwise covered by this prospectus. Each time a
selling securityholder offers notes or common stock under this prospectus,
they will provide a copy of this prospectus and, if applicable, a copy of a
prospectus supplement. You should read both this prospectus and, if
applicable, any prospectus supplement together with the information
incorporated by reference in this prospectus. See "Where You Can Find More
Information" and "Information Incorporated by Reference" for more information.
i
PROSPECTUS SUMMARY
This summary contains basic information about us and this offering. Because
it is a summary, it does not contain all of the information you should
consider before investing in the notes or the common stock issuable upon
conversion of the notes or otherwise covered by this prospectus. You should
read carefully this entire prospectus, including the section entitled "Risk
Factors" and the information incorporated by reference herein, including our
financial statements and the notes thereto.
Steel Dynamics
We are a steel manufacturing company that owns and operates electric furnace
steelmaking mini-mills.
We own and operate a flat-rolled mini-mill located in Butler, Indiana, which
we built and have operated since 1996, with an annual production capacity of
2.2 million tons of flat-rolled steel. Our Butler mini-mill, which actually
produced 2.4 million tons during 2002, produces a broad range of high quality
hot-rolled, cold-rolled and coated steel products, including a large variety
of high value-added and high margin specialty products such as thinner gauge
rolled products and galvanized products. We sell our flat-rolled products
directly to end-users, intermediate steel processors and service centers
primarily in the Midwestern United States. Our products are used in numerous
industry sectors, including the automotive, construction and commercial
industries.
In May 2002, we announced plans to construct a new coil coating facility at
our Butler mini-mill and we expect to complete this facility and to commence
coating operations in October of 2003. This $25 to $30 million facility will
have an annual production capacity of 240,000 tons.
In March 2003, we announced plans to purchase the assets of the steel
coating facility formerly owned by GalvPro II LLC in Jeffersonville, Indiana
for $17.5 million plus a potential of an additional $1.5 million based on an
earn-out formula. On March 14, 2003, we consummated this purchase. We
anticipate that this facility will be capable of producing between 300,000 and
350,000 tons per year of light-gauge, hot-dipped cold-rolled galvanized steel.
We operate this new facility as a part of our Butler, Indiana Flat Roll
Division, which supplies the Jeffersonville plant with steel coils for
coating. We expect to invest between approximately $2 and $6 million of
additional capital for certain equipment modifications and upgrades to the
facility. We commenced production at this facility in July 2003. Our new
Jeffersonville facility, together with our new coil-coating facility in
Butler, will enable us to further increase the mix of higher-margin value-
added downstream steel products. This value-added product mix, during 2002,
was approximately 60% of our total flat-roll shipments.
We began construction of our new structural steel and rail mini-mill in
Columbia City, Indiana in May 2001, completed plant construction in April 2002
and commenced commercial structural steel operations during the third quarter
of 2002. Our Columbia City mini-mill is designed to have an annual production
capacity of up to 1.3 million tons of structural steel beams, pilings and
other steel components for the construction, transportation and industrial
machinery markets, as well as standard and premium grade rails for the
railroad industry. Through regular product introductions and continued
production ramp-up of structural steel products, we anticipate that during the
fourth quarter of 2003 we will be able to offer a full compliment of wide
flange beams and H-piling structural steel products. In addition, we expect to
begin production of standard rail products during the fourth quarter of 2003.
Initial rail production will be used in a testing capacity to be monitored by
individual railroad companies for qualification purposes. This qualification
process may take between six and nine months.
On September 6, 2002, we purchased the special bar quality mini-mill assets
in Pittsboro, Indiana formerly owned by Qualitech Steel SBQ LLC. We paid
$45 million for these assets and currently plan to invest approximately
$75 million of additional capital to upgrade and modify the Pittsboro facility
for the production of merchant bars and shapes, as well as reinforcing bar
products. We also expect to produce certain special bar quality products at
this facility in the future. After completion of remaining engineering plans
and equipment specification, we expect to begin SBQ steel production in the
first quarter of 2004 and
1
general bar product production in the second quarter of 2004. After
modification, we expect the Pittsboro facility to have a capacity of
approximately 500,000 to 600,000 tons per year.
On February 24, 2003, we announced that we are making plans to restart
ironmaking operations at our wholly-owned Iron Dynamics facility adjacent to
our Butler, Indiana mini-mill. Since 1997, we have tried to develop and
commercialize a pioneering process for the production of a virgin form of iron
that might serve as a lower cost substitute for a portion of the metallic raw
material mix that goes into our electric arc furnaces to be melted into new
steel. Since initial start-up in August 1999, we encountered a number of
difficulties associated with major pieces of equipment and with operating
processes and systems, and on several occasions during 1999 and 2000 shut the
facility down for redesign, re-engineering and retrofitting. In July 2001, we
suspended operations because of higher than expected start-up and process
refinement costs, high energy costs, low production quantities encountered at
that time, and then historically low steel scrap pricing existing at that
time. These factors made the cost of producing and using Iron Dynamics' scrap
substitute at our flat-rolled mini-mill higher than our cost of purchasing and
using steel scrap. We continued to make refinements to our systems and
processes, however, and began experimental production trials in the fourth
quarter of 2002. After an evaluation of these production trials, we concluded
that the improved production technology, coupled with our ability to recycle
waste materials and the current relatively high price of scrap, makes the
restart of this liquid pig iron production facility feasible. We currently
expect that the Iron Dynamics operation will restart during the fourth quarter
of 2003 and, if the results of our restart indicate that we will be able to
produce liquid pig iron in sufficient quantities and at a cost to be
competitive with purchased pig iron, we could begin commercial production
later in 2003. We also anticipate that the use of this liquid pig iron raw
material will provide cost and operational benefits to our Butler, Indiana
steelmaking operations. We expect to invest approximately $14 million of
additional capital for modifications and refinements, including the
installation of three additional briquetting machines in the facility, which
will enable us to stockpile iron briquettes after reduction in the rotary
hearth furnace, as well as to introduce the hot briquettes directly into our
submerged arc furnace. After the briquettes are liquefied, the hot liquid pig
iron will be transferred in ladles to the flat-roll mill's meltshop and
combined with scrap steel in the mill's electric arc furnaces.
On February 27, 2003, we announced that we were increasing our ownership in
our consolidated New Millennium Building Systems subsidiary from our existing
46.6% ownership to 100%, through our acquisition of (a) the 46.6% interest in
New Millennium previously held by New Process Steel Corporation, a privately
held Houston, Texas steel processor, which we have already consummated at a
cost of $3.5 million, plus the purchase of New Process Steel's portion of New
Millennium's subordinated notes payable, including accrued interest, to New
Process Steel for $3.9 million, and (b) an agreement to acquire the remaining
6.8% stake, held by other minority investors, which we consummated, during the
first quarter of 2003. The New Millennium facility, which began production in
June of 2000, produces steel building components, including joists, girders,
trusses and steel roof and floor decking, which we sell primarily in the upper
Midwest non-residential building components market. Our Butler flat-roll mill
supplies a majority of the hot-rolled steel utilized in New Millennium's
manufacturing operations.
Steel Dynamics, Inc. is an Indiana corporation, incorporated in August 1993,
and commenced operations in January 1996. Our principal executive offices are
located at 6714 Pointe Inverness Way, Suite 200, Fort Wayne, Indiana 46804 and
our telephone number is (260) 459-3553.
2
The Offering
Securities Offered. . . . . . . . . . . . . $115,000,000 aggregate principal
amount of 4% Convertible
Subordinated Notes due 2012.
Maturity Date . . . . . . . . . . . . . . . December 15, 2012.
Interest. . . . . . . . . . . . . . . . . . 4.0% per annum on the principal
amount, payable semi-annually in
arrears in cash on June 15 and
December 15 of each year,
beginning June 15, 2003.
We will pay contingent interest in
addition during any six-month
period from December 15 to June 14
and from June 15 to December 14,
with the initial six-month period
commencing December 15, 2007, if
the trading price of a note for
each of the five trading days
immediately preceding the first
day of the applicable six-month
period equals 120% or more of the
principal amount of such note.
During any interest period when
contingent interest shall be
payable, the contingent interest
payable per note will be an amount
equal to 0.25% of the average
trading price per $1,000 principal
amount of notes during the five
trading days immediately preceding
the first day of the applicable
six-month interest period.
Conversion. . . . . . . . . . . . . . . . . You may convert your notes into
shares of our common stock in only
the following circumstances:
o at any time after the closing
sale price of our common stock
exceeds 120% of the conversion
price for at least 20 trading
days in the 30 consecutive
trading days ending on the
last trading day of any fiscal
quarter commencing after
December 31, 2002; or
o after the earlier of (a) the
date the notes are rated by
both Standard & Poor's Credit
Market Services, a division of
the McGraw-Hill Companies, and
Moody's Investor Services,
Inc. and (b) January 31, 2003,
during any period that the
long-term credit rating
assigned to the notes by
either Standard & Poor's or
Moody's (or any successors to
these entities) is "CCC" or
"Caa3", respectively, or
lower, or if either of these
rating agencies no longer
rates the notes, or if either
of these rating agencies
suspends or withdraws the
rating assigned to the notes,
or if the notes are not
assigned a rating by both
rating agencies; or
o if the notes have been called
for redemption; or
o upon the occurrence of
specified corporate events
described under "Description
of Notes."
The initial conversion rate will
be 58.8076 shares of our common
stock for each $1,000 principal
amount of notes converted
(equivalent to an initial
conversion price of approximately
$17.0046 per share). The
conversion rate may be adjusted
for certain reasons, but will not
be adjusted for accrued interest.
Upon conversion, you will not
receive any cash payment
representing accrued interest
except in the limited
circumstances described under
"Description of the Notes --
Conversion of Notes." Instead,
3
accrued and unpaid interest will
be deemed paid by the delivery of
the shares of common stock (or
cash in lieu of such shares) which
you receive on conversion.
The ability to surrender notes for
conversion will expire at the
close of business on December 15,
2012.
Redemption. . . . . . . . . . . . . . . . . We may redeem any of the notes
beginning December 18, 2007, by
giving you at least 30 days'
notice. We may redeem the notes
either in whole or in part at
redemption prices as described in
this prospectus under "Description
of Notes -- Optional Redemption by
Steel Dynamics," plus accrued and
unpaid interest.
Fundamental Change. . . . . . . . . . . . . If a fundamental change (as
described under "Description of
Notes -- Repurchase at Option of
the Holder Upon a Fundamental
Change") occurs prior to maturity,
you may require us to repurchase
all or part of your notes at a
repurchase price equal to 100% of
their principal amount, plus
accrued and unpaid interest.
Repurchase at the Option of the
Holder. . . . . . . . . . . . . . . . . . . You may require us to repurchase
all or a portion of your notes for
cash on December 15, of 2009 at a
repurchase price equal to 100% of
their principal amount, plus
accrued and unpaid interest.
Subordination . . . . . . . . . . . . . . . The notes are subordinated in
right of payment to all of our
existing and future senior
indebtedness. In addition, the
notes are effectively subordinated
to all debt and other liabilities
of our subsidiaries. After giving
effect to the issuance of the
notes and the repayment of
indebtedness under our senior
secured credit facilities with the
net proceeds from the notes, as of
September 30, 2002, we would have
had $440 million of consolidated
debt outstanding other than the
notes, all of which are senior in
right of payment to the notes.
Use of Proceeds . . . . . . . . . . . . . . We will not receive any of the
proceeds from the sale by the
selling securityholders of the
notes or the common stock issuable
upon conversion of the notes.
Registration Rights . . . . . . . . . . . . We have filed with the SEC a
registration statement, of which
this prospectus is a part,
pursuant to a registration rights
agreement with the initial
purchasers of the notes. We have
also agreed to use our reasonable
best efforts to have the
registration statement declared
effective within 180 days of the
date of filing and, subject to
certain exceptions, to use our
reasonable best efforts to keep
the shelf registration statement
effective until either of the
following has occurred:
o all securities covered by the
registration statement have
been sold; or
o the expiration of the
applicable holding period with
respect to the notes and the
underlying common stock under
Rule 144(k) under the
Securities Act of 1933, or any
successor provision.
United States Federal Income Tax
Considerations. . . . . . . . . . . . . . . The notes are debt instruments
subject to the United States
federal income tax contingent
payment debt regulations. Under
such regulations, even if we do
not pay any contingent interest on
the notes, a beneficial owner of
the notes who is a U.S. holder, as
defined below under "Certain
United States Federal Income Tax
4
Considerations," will be required
to include interest, which we
refer to as tax original issue
discount, at the rate described
below in its gross income for
United States federal income tax
purposes, regardless of whether
such owner uses the cash or
accrual method of tax accounting.
This imputed interest will accrue
at a rate equal to 9.25% per year,
computed on a semiannual bond
equivalent basis, which represents
the yield on our noncontingent,
nonconvertible, fixed-rate debt
with terms and conditions
otherwise similar to those of the
notes. The rate at which this
imputed interest will accrue for
United States federal income tax
purposes will exceed the stated
cash interest payable on the
notes.
Each holder of the notes will
recognize gain or loss on the
sale, exchange, purchase by us at
the holder's option, conversion,
redemption or retirement of a note
in an amount equal to the
difference between the amount
realized, including the fair
market value of any common stock
received upon conversion, and the
holder's adjusted tax basis in the
notes. Any gain recognized by a
holder on the sale, exchange,
purchase by us at the holder's
option, conversion, redemption or
retirement of a note generally
will be ordinary interest income;
any loss generally will be
ordinary loss to the extent of the
interest previously included in
income, and thereafter, capital
loss. Holders should consult their
tax advisers as to the United
States federal, state, local or
other tax consequences of
acquiring, owning and disposing of
the notes. See "Certain United
States Federal Income Tax
Considerations."
Trading . . . . . . . . . . . . . . . . . . The notes originally issued in the
private placement are eligible for
trading on The Private Offerings,
Resales and Trading Through
Automated Linkages, or "PORTAL
Market" of the National
Association of Securities Dealers,
Inc. However, notes sold pursuant
to this prospectus will no longer
be eligible for trading on the
PORTAL Market. We do not intend to
list the notes on any national
securities exchange.
For a more complete description of the terms of the notes, see "Description
of Notes." For a description of our common stock, see "Description of Capital
Stock," including the documents incorporated by reference in this prospectus
that are referred to in that section.
5
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks described below are not the only ones facing
our company. Additional risks not presently known to us or that we currently
deem immaterial may also impair our business operations.
Our business, financial condition or results of operations could be
materially adversely affected by any of these risks. The trading price of the
notes could decline due to any of these risks, and you may lose all or part of
your investment.
This prospectus and the information incorporated by reference herein also
contain forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including the risks
faced by us described below and elsewhere in this prospectus.
Risks Related to Our Industry
In recent years, imports of steel into the United States have adversely
affected, and may again adversely affect, U.S. steel prices, which would
impact our sales, margins and profitability
Excessive imports of steel into the United States have in recent years, and
may again in the future, exert downward pressure on U.S. steel prices and
significantly reduce our sales, margins and profitability. U.S. steel
producers compete with many foreign producers. Competition from foreign
producers is typically strong, but as a result of an excess of foreign
steelmaking capacity it increases greatly where there is a weakening of
certain foreign economies, particularly in Eastern Europe, Asia and Latin
America. When there are economic difficulties in these countries this results
in lower local demand for steel products and tends to encourage greater steel
exports to the United States at depressed prices.
In addition, we believe the downward pressure on, and depressed levels of,
U.S. steel prices in recent years have been further exacerbated by imports of
steel involving dumping and subsidy abuses by foreign steel producers. Some
foreign steel producers are owned, controlled or subsidized by foreign
governments. As a result, decisions by these producers with respect to their
production, sales and pricing are often influenced to a greater degree by
political and economic policy considerations than by prevailing market
conditions, realities of the marketplace or consideration of profit or loss.
Even though various protective actions taken by the U.S. government during
2001 and 2002, including the enactment of various steel import quotas and
tariffs, resulted in an abatement of some steel imports during 2002, these
protective measures are only temporary, and many foreign steel manufacturers
have been granted exemptions from the application of these measures. In any
event, when these measures expire or if they are relaxed, or if prevailing
U.S. steel prices enable foreign steelmakers to export their steel products
into the United States, even with the presence of tariffs, the resurgence of
substantial imports of foreign steel could again create downward pressure on
U.S. steel prices. Moreover, there are products and countries not covered by
these protective measures and imports of these exempt products or of products
from these countries may have an additional adverse effect upon our revenues
and income. We refer you to "Business -- The Steel Industry" in our Annual
Report on Form 10-K for the year ended December 31, 2002 for additional
information.
Intense competition and excess global capacity in the steel industry may
continue to exert downward pressure on our pricing
We may not be able to compete effectively in the future as a result of
intense competition. The highly competitive nature of the industry, in part,
exerts downward pressure on prices for some of our products. Competition
within the steel industry, both domestically and worldwide, is intense and it
is expected to remain so. We compete primarily on the basis of (1) price, (2)
quality and (3) the ability to meet our customers' product needs and delivery
schedules. Our primary competitors are other mini-mills, which may have cost
structures and management cultures more similar to ours than integrated mills.
We also compete with many integrated producers of hot-rolled, cold-rolled and
coated products, many of which are larger, have substantially greater capital
resources and have cost structures that have become more competitive. Over the
past few years, more than 30 domestic steel producers have entered bankruptcy
proceedings. In some cases,
6
these previously marginal producers have been able to emerge from bankruptcy
reorganization with lower and more competitive cost structures. In other
cases, steelmaking assets have been sold through bankruptcy proceedings to
other steelmakers or to new companies, at greatly depressed prices. The
reemergence of these producers or their successors has further increased the
competitive environment in the steel industry and has contributed to price
declines. In the case of certain product applications, steel also competes
with other materials, including plastic, aluminum, graphite composites,
ceramics, glass, wood and concrete.
In addition, global overcapacity in steel manufacturing and its negative
impact on U.S. steel pricing are likely to continue to persist and could have
a negative impact on our sales, margins and profitability. The U.S. steel
industry continues to be adversely impacted by excess global steel
manufacturing capacity. Over the last decade, the construction of new mini-
mills, expansion and improved production efficiencies of some integrated mills
and substantial expansion of foreign steel capacity have all led to the excess
of manufacturing capacity. Increasingly, this overcapacity, combined with the
high levels of steel imports into the United States, has exerted downward
pressure on domestic steel prices, including the prices of our products, and
has resulted in, at times, a dramatic narrowing, or with many companies the
elimination, of gross margins.
The positive effects of President Bush's March 5, 2002 order in contributing
to the reduction of excessive imports of steel into the United States may be
lessened if appeals to the World Trade Organization by the exporting
countries result in a final ruling by that body that the tariffs are illegal
or if continued domestic or international political pressure results in a
relaxation of, or substantial further exemptions from, the tariffs contained
in the order
If the amount, scope or duration of the Section 201 orders are lessened or
adversely changed, it could lead to a resurgence of flat-rolled steel imports,
an increase of steel slab imports and/or an increase in welded pipe and tube
imports. Any of these results would again put downward pressure on U.S. flat-
rolled prices which would negatively impact our sales, margins and
profitability.
On June 22, 2001, the Bush Administration requested that the International
Trade Commission, or ITC, initiate an investigation under Section 201 of the
Trade Act of 1974 to determine whether steel is being imported into the United
States in such quantities as to be a substantial cause of serious injury to
the U.S. steel industry. In October 2001, the ITC found "serious injury" due
to imports of steel products, including the products we manufacture, and in
December 2001, the ITC recommended that the President impose tariffs of
approximately 20%-40%, as well as tariff quotas in connection with certain
products such as steel slabs. On March 5, 2002, President Bush, among other
actions, imposed a three year tariff of 30% for the first year, 24% for the
second year and 18% for the third year on imports of hot-rolled, cold-rolled
and coated sheet, as well as on imports of steel slabs in excess of a
specified annual quota. North American Free Trade Agreement partners of the
United States, principally Canada and Mexico, are excluded from these tariffs,
as are "developing countries" that account for less than 3% of imported steel.
Increased imports from these excluded countries may reduce the benefit from
these tariffs to U.S. steel producers, including us.
Imports of flat-rolled steel declined, in part, due to the imposition of
dumping duties that were imposed on certain imports of foreign steel, and, in
part, due to the imposition of significant tariffs as a result of this
Section 201 action. While the President's decision to implement a Section 201
remedy was not appealable to U.S. courts, foreign governments may appeal, and
some did appeal, to the World Trade Organization, or WTO. In this regard, the
WTO has issued a decision that the tariffs imposed by the United States on
hot-rolled and cold-rolled finished steel imports violate global trade rules.
Furthermore, a number of affected countries have threatened to impose various
retaliatory tariffs on U.S. steel or other products or have sought and
obtained various product exemptions from the imposition of the tariffs.
Accordingly, there is a risk that rulings adverse to the United States or
substantial political pressures could result in the President changing the
remedy, granting substantial additional exemptions from the remedy, or
terminating the remedy entirely prior to the full three years, although any
such modification would apply only prospectively.
7
Our level of production and our sales and earnings are subject to significant
Fluctuations as a result of the cyclical nature of the steel industry and the
industries we serve
The price of steel and steel products may fluctuate significantly due to
many factors beyond our control. This fluctuation directly affects the levels
of our production and our sales and earnings. The steel industry is highly
cyclical, influenced by a combination of factors, including periods of
economic growth, or recession, strength or weakness of the U.S. dollar,
worldwide production capacity, levels of steel imports and applicable tariffs,
as well as general economic conditions and the condition of certain other
industries. The demand for steel products is generally affected by
macroeconomic fluctuations in the United States and global economies in which
steel companies sell their products. For example, future economic downturns,
stagnant economies or currency fluctuations in the United States or globally
could decrease the demand for our products or increase the amount of imports
of steel into the United States, either event of which would decrease our
sales, margins and profitability.
In addition, a disruption or downturn in the automotive, oil and gas, gas
transmission, construction, commercial equipment, rail transportation,
appliance, agricultural and durable goods industries could negatively impact
our financial condition, production, sales, margins and earnings. We are also
particularly sensitive to trends and events, including strikes and labor
unrest, that may impact these industries. These industries are significant
markets for our products and are themselves highly cyclical.
Risks Related to Our Business
Technology, operating and start-up risks associated with our Iron Dynamics
scrap substitute project may prevent us from realizing the anticipated
benefits from this project and could result in a loss of our investment
If we abandon our Iron Dynamics project, or if its process does not succeed,
we will not be able to realize the expected benefits of this project and will
suffer the loss of our entire investment. As of December 31, 2002, our
investment in the Iron Dynamics project was $160 million. Since 1997, our
wholly-owned subsidiary, Iron Dynamics, has tried to develop and commercialize
a pioneering process of producing a virgin form of iron that might serve as a
lower cost substitute for a portion of the metallic raw material mix that goes
into our electric arc furnaces to be melted into new steel. This scrap
substitute project is the first of its kind. It involves processes that are
based on various technical assumptions and new applications of technologies
that have yet to be commercially proven. Since our initial start-up in August
1999, we have encountered a number of difficulties associated with major
pieces of equipment and with operating processes and systems. Throughout the
latter part of each of 1999 and 2000, our Iron Dynamics facility was shut
down. During these shut downs, we engaged in time consuming and expensive
redesign, re-engineering, reconstruction and retrofitting of major pieces of
equipment, systems and processes. As a result, the Iron Dynamics project has
taken considerably longer and has required us to expend considerably greater
resources than originally anticipated. While we made significant progress
during these shut downs in correcting various technical and other
deficiencies, we have not yet been successful in achieving the results
necessary to bring production output up and product costs down to the point of
being commercially competitive. In February 2001, we re-started operations at
our Iron Dynamics facility. However, in July 2001, we suspended these
operations again, with no specific date set for resumption of operations. This
shut down was a result of:
(1) higher than expected start-up and process refinement costs;
(2) exceptionally high energy costs;
(3) low production quantities achieved at the Iron Dynamics facility;
and
(4) historically low steel scrap pricing.
These factors made the cost of producing and using Iron Dynamics scrap
substitute at our flat-rolled mini-mill higher than our cost of purchasing and
using steel scrap. Furthermore, we believe that, even with additional
development and refinement to the equipment, technology systems and processes,
the Iron Dynamics facility may only be able to achieve monthly output levels
between 75%-85% of our original estimates, resulting in higher unit costs than
originally planned. We currently estimate that these additional
8
developments and refinements will cost approximately $14 million. On July 10,
2002, we announced that we would begin experimental production trials in the
fourth quarter of 2002. During the fourth quarter of 2002, we successfully
completed certain trials. On February 24, 2003, we announced that we are
making plans to restart our ironmaking operations during the second half of
2003. If the results of this restart indicate that we will be able to produce
liquid pig iron in sufficient quantities and at a cost to be competitive with
purchased pig iron, we could begin commercial production in late 2003.
However, Iron Dynamics may never become commercially operational.
In addition, while we remain optimistic that the remaining start-up
difficulties with the equipment, technology, systems and processes can be
resolved, our Iron Dynamics facility may not be able to consistently operate
or be able to produce steel scrap substitute material in the quantities that
will enable it to be cost competitive. Moreover, in connection with any
restart of operations, our Iron Dynamics facility may experience additional
shutdowns or equipment failures and such shutdowns or failures may have a
material adverse impact on our liquidity cost structure and earnings.
A substantial portion of our flat-rolled products are sold on the spot
market, and therefore, our sales, margins and earnings are negatively
impacted by decreases in domestic flat-rolled steel prices
Our sales, margins and earnings are negatively impacted by decreases in
domestic flat-rolled steel prices since a significant portion of our flat-
rolled products are sold on the spot market. As a result, we are vulnerable to
downturns in the domestic flat-rolled steel market. For the three year period
ended December 31, 2002, approximately 80% of our flat-roll products were sold
on the spot market under contracts with terms of twelve months or less.
Weakness in the automotive industry would result in a substantial reduction
in demand for our products
A prolonged weakness in the automotive industry would reduce the demand for
our products and decrease our sales. In addition, if automobile manufacturers
choose to incorporate more plastics, aluminum and other steel substitutes in
their automobiles, it could reduce demand for our products. Our sales and
earnings fluctuate due to the cyclical nature of the automotive industry. The
cyclical nature of the automotive industry is affected by such things as the
level of consumer spending, the strength or weakness of the U.S. dollar and
the impact of international trade and various factors, such as labor unrest
and the availability of raw materials, which affect the ability of the
automotive industry to actually build cars. While we do not presently sell a
material portion of our steel production directly to the automotive market, a
substantial portion of our sales to the intermediate steel processor and
service center market is resold to various companies in the automotive
industry.
We may be unable to pass on increases in the cost of scrap and other raw
materials to our customers which would reduce our earnings
If we are unable to pass on higher scrap and other raw material costs to our
customers and our margins will decrease and we will be less profitable. We may
not be able to adjust our product prices, especially in the short-term, to
recover the costs of increases in scrap and other raw material prices. Our
principal raw material is scrap metal derived primarily from junked
automobiles, industrial scrap, railroad cars, railroad track materials,
agricultural machinery and demolition scrap from obsolete structures,
containers and machines. The prices for scrap are subject to market forces
largely beyond our control, including demand by U.S. and international steel
producers, freight costs and speculation. The prices for scrap have varied
significantly and are currently reaching high levels in relation to the
selling prices of our steel products. Scrap prices may continue to vary
significantly in the future and do not necessarily fluctuate in tandem with
the price of steel. Moreover, some of our integrated steel producer
competitors are not as dependant as we are on scrap as a part of their raw
material melt mix, which, during periods of high scrap costs relative to the
cost of blast furnace iron used by the integrated producers, give them a raw
material cost advantage over mini-mills. In addition, our operations require
substantial amounts of other raw materials, including various types of pig
iron, alloys, refractories, oxygen, natural gas and electricity, the price and
availability of which are also subject to market conditions.
9
We have primarily relied upon one supplier to meet our steel scrap
requirements
Since our inception, we have had an exclusive contract with OmniSource, one
of the largest scrap processors and brokers in the Midwest, to purchase steel
scrap. Our current agreement with OmniSource expires on December 31, 2004.
However, OmniSource may terminate the agreement at anytime on or after July 1,
2003. If the contract terminates for any reason, we would have to find another
supplier for steel scrap or develop our own scrap purchasing capability. We
may be unable to secure substitute arrangements for steel scrap on the same or
better terms as those in our contract with OmniSource. In addition, if our
contract is adversely changed for any reason, we may experience an increase in
our cost of goods sold.
For the years ended December 31, 2001 and 2002, we purchased 1.5 million
tons and 2.1 million tons, respectively, of steel scrap and scrap substitutes
from OmniSource which represented approximately 87% and 82%, respectively, of
our total scrap tons purchased during those periods.
There may be potential conflicts of interest with regard to our relationship
with OmniSource
With respect to any dispute between us and OmniSource involving our existing
contract, including its remaining term, any future contract, or in connection
with the terms of any commercial transaction, OmniSource may be viewed as
having a conflict of interest between what it perceives as being best for
itself as a seller of scrap and what is best for us as a buyer of scrap. We
may not be able to resolve potential conflicts and if we do resolve them, we
may receive a less favorable resolution since we are dealing with OmniSource
rather than an unaffiliated person. The chairman of the board and chief
executive officer of OmniSource is also a member of our board of directors and
is a substantial stockholder of Steel Dynamics. This person has obligations to
us as well as to OmniSource and may have conflicts of interest with respect to
matters potentially or actually involving or affecting us and OmniSource.
OmniSource also supplies scrap to many other customers, including other steel
mills.
We rely upon a small number of major customers for a substantial percentage
of our sales
A loss of any large customer or group of customers could materially reduce
our sales and earnings. We have substantial business relationships with a few
large customers. For the years ended December 31, 2001 and 2002, our Butler
mini-mill's top ten customers accounted for approximately 48% and 54% of our
total net sales, respectively. During those periods, our largest customer,
Heidtman, accounted for approximately 18% and 17% of our total net sales. We
expect to continue to depend upon a small number of customers for a
significant percentage of our total net sales, and cannot assure you that any
of them will continue to purchase steel from us.
There may be potential conflicts of interest with regard to our relationship
with Heidtman Steel Products, Inc.
If a dispute arises between us and Heidtman, we may be viewed as having a
conflict of interest. What is best for Heidtman as a buyer and what is best
for us as a product seller may be at odds. We may be unable to resolve
potential conflicts. If we do resolve them, we may receive a less favorable
resolution since we are dealing with Heidtman rather than an unaffiliated
person. Heidtman is an affiliate of one of our large stockholders and its
president and chief executive officer serves as one of our directors. This
person has obligations to us as well as to Heidtman and may have conflicts of
interest with respect to matters potentially or actually involving or
affecting us and Heidtman.
Start-up and operating risks associated with the construction of our Columbia
City structural steel and rail mini-mill could result in materially greater
operating costs than those we have anticipated
Start-up and operating risks associated with the commencement of operations
at our Columbia City mini-mill may result in materially greater operating
costs than we initially expected. At our Columbia City mini-mill, we are
subject to all of the general risks associated with the construction and
start-up of a new mini-mill. These risks involve construction delays, cost
overruns and start-up difficulties. We could also experience operational
difficulties after start-up that could result in our inability to operate our
Columbia City mini-mill at full or near full capacity.
10
Unexpected equipment failures may lead to production curtailments or
shutdowns
Interruptions in our production capabilities will inevitably increase our
production costs, and reduce our sales and earnings for the affected period.
In addition to equipment failures, our facilities are also subject to the risk
of catastrophic loss due to unanticipated events such as fires, explosions or
violent weather conditions. Our manufacturing processes are dependent upon
critical pieces of steelmaking equipment, such as our furnaces, continuous
casters and rolling equipment, as well as electrical equipment, such as
transformers, and this equipment may, on occasion, be out of service as a
result of unanticipated failures. We have experienced and may in the future
experience material plant shutdowns or periods of reduced production as a
result of such equipment failures. Moreover, any interruption in production
capability may require us to make significant capital expenditures to remedy
the problem, which could have a negative effect on our profitability and cash
flows. We may also sustain revenue losses in excess of any recoveries we make
under any applicable business interruption insurance coverages we may have. In
addition to such revenue losses, longer-term business disruption could result
in a loss of customers, which could adversely affect our business, results of
operations and financial condition.
We depend heavily on our senior management and we may be unable to replace
key executives if they leave
The loss of the services of one or more members of our senior management
team or our inability to attract, retain and maintain additional senior
management personnel could harm our business, financial condition, results of
operations and future prospects. Our senior management founded our company,
pioneered the development of thin-slab, flat-rolled technology and directed
the construction of our Butler mini-mill and Columbia City structural mini-
mill. Our operations and prospects depend in large part on the performance of
our senior management team, including Keith E. Busse, president and chief
executive officer, Mark D. Millett, vice president and general manager of our
flat-roll division, Richard P. Teets, Jr., vice president and general manager
of our structural division, Tracy L. Shellabarger, vice president and chief
financial officer and John W. Nolan, vice president, sales and marketing.
Although these senior managers have each been employees and stockholders of
Steel Dynamics for more than seven years, these individuals may not remain
with us as employees. In addition, we may not be able to find qualified
replacements for any of these individuals if their services are no longer
available. We do not have key man insurance on any of these individuals.
We may face risks associated with the implementation of our growth strategy
Our growth strategy subjects us to various risks. As part of our growth
strategy, we may expand our existing facilities, build additional plants,
acquire other businesses and steel assets, enter into joint ventures, or form
strategic alliances that we believe will complement our existing business.
These transactions will likely involve some or all of the following risks:
o the difficulty of competing for acquisitions and other growth
opportunities with companies having materially greater financial
resources than ours;
o the difficulty of integrating the acquired operations and personnel into
our existing business;
o the potential disruption of our ongoing business;
o the diversion of resources;
o the inability of management to maintain uniform standards, controls,
procedures and polices;
o the difficulty of managing the growth of a larger company;
o the risk of entering markets in which we have little experience;
o the risk of becoming involved in labor, commercial, or regulatory
disputes or litigation related to the new enterprise;
o the risk of contractual or operational liability to our venture
participants or to third parties as a result of our participation;
11
o the inability to work efficiently with joint venture or strategic
alliance partners; and
o the difficulties of terminating joint ventures or strategic alliances.
These transactions might be required for us to remain competitive, but we
may not be able to complete any such transactions on favorable terms or obtain
financing, if necessary, for such transactions on favorable terms. Future
transactions may not improve our competitive position and business prospects
as anticipated, and if they do not, our sales and earnings may be
significantly reduced.
We may be delayed in the construction and start-up of our Pittsboro, Indiana
mini-mill
On September 6, 2002, we purchased, through our wholly owned subsidiary,
Dynamic Bar Products, LLC, Qualitech Steel SBQ LLC's special bar quality mini-
mill assets located in Pittsboro, Indiana for $45 million, and we have
announced plans to invest approximately $75 million in plant upgrades and
retrofitting to convert the facility from one capable of producing only
special bar quality steel products to a facility capable of also producing
merchant bars and shapes and reinforcing bar products.
It may cost more than the approximately $75 million we estimate is required
to convert the Pittsboro mini-mill into a mini-mill for the production of
merchant and reinforcing bar. We are also subject to regulatory approval and
to construction and start-up delays and operational risks associated with the
start-up of a new mini-mill, either in the Pittsboro mini-mill's present
configuration or in connection with its conversion. These factors could result
in materially greater operating costs than we initially expected. We may also
be delayed either as a result of other unforeseen circumstances or events
beyond our control.
Environmental regulation imposes substantial costs and limitations on our
operations
We are subject to the risk of substantial environmental liability and
limitations on our operations brought about by the requirements of
environmental laws and regulations. We are subject to various federal, state
and local environmental, health and safety laws and regulations concerning
such issues as air emissions, wastewater discharges, solid and hazardous waste
handling and disposal, and the investigation and remediation of contamination.
These laws and regulations are increasingly stringent. While we believe that
our facilities are and will continue to be in material compliance with all
applicable environmental laws and regulations, the risks of substantial costs
and liabilities related to compliance with such laws and regulations are an
inherent part of our business. Although we are not currently involved in any
remediation activities, it is possible that future conditions may develop,
arise or be discovered that create substantial environmental remediation
liabilities and costs. For example, our steelmaking operations produce certain
waste products, such as electric arc furnace dust, which are classified as
hazardous waste and must be properly disposed of under applicable
environmental laws. These laws can impose clean up liability on generators of
hazardous waste and other substances that are shipped off-site for disposal,
regardless of fault or the legality of the disposal activities. Other laws may
require us to investigate and remediate contamination at our properties,
including contamination that was caused in whole or in part by third parties.
While we believe that we can comply with environmental legislation and
regulatory requirements and that the costs of doing so have been included
within our budgeted cost estimates, it is possible that such compliance will
prove to be more limiting and costly than anticipated.
In addition to potential clean up liability, in the past we have been, and
in the future we may become, subject to substantial monetary fines and
penalties for violation of applicable laws, regulations or administrative
conditions. We may also be subject from time to time to legal proceedings
brought by private parties or governmental agencies with respect to
environmental matters, including matters involving alleged property damage or
personal injury.
Risks Related to the Notes
We have substantial indebtedness and debt service requirements which limits
our financial and operating flexibility
After giving effect to the issuance of the notes and the repayment of
indebtedness under our senior secured credit facilities with the net proceeds
from the notes, as of September 30, 2002, we would have had
12
$555 million of indebtedness, which would have represented approximately 52%
of our total consolidated capitalization, including current maturities of
long-term debt.
Our substantial indebtedness limits our financial and operating flexibility.
For example, it could:
o make it more difficult to satisfy our obligations with respect to our
debt, including the notes;
o limit our ability to obtain additional financing for working capital,
capital expenditures, acquisitions or general corporate purposes;
o require us to dedicate a substantial portion of our cash flow from
operations to payments on our debt, reducing our ability to use these
funds for other purposes;
o limit our ability to adjust rapidly to changing market conditions; and
o increase our vulnerability to downturns in general economic conditions or
in our business.
Our ability to satisfy our debt obligations will depend upon our future
operating performance, which in turn will depend upon the successful
implementation of our strategy and upon financial, competitive, regulatory,
technical and other factors, many of which are beyond our control. If we are
not able to generate sufficient cash from operations to make payments under
our credit agreements or to meet our other debt service obligations, we will
need to refinance our indebtedness. Our ability to obtain such financing will
depend upon our financial condition at the time, the restrictions in the
agreements governing our indebtedness and other factors, including general
market and economic conditions. If such refinancing were not possible, we
could be forced to dispose of assets at unfavorable prices. Even if we could
obtain such financing, we cannot be sure that it would be on terms that are
favorable to us. In addition, we could default on our debt obligations.
Our senior secured credit agreement and the indenture relating to our 9 1/2%
senior notes due 2009 contain restrictive covenants that may limit our
flexibility
Restrictions and covenants in our existing debt agreements, including our
senior secured credit agreement and the indenture relating to our 9 1/2%
senior notes due 2009, and any future financing agreements, may impair our
ability to finance future operations or capital needs or to engage in other
business activities. Specifically, these agreements will restrict our ability
to:
o incur additional indebtedness;
o pay dividends or make distributions with respect to our capital stock;
o repurchase or redeem capital stock;
o make investments;
o create liens and enter into sale and leaseback transactions;
o make capital expenditures;
o enter into transactions with affiliates or related persons;
o issue or sell stock of certain subsidiaries;
o sell or transfer assets; and
o participate in certain joint ventures, acquisitions or mergers.
A breach of any of the restrictions or covenants in our debt agreements
could cause a default under our senior secured credit agreement, the 9 1/2%
senior notes due 2009, other debt or the notes. A significant portion of our
indebtedness then may become immediately due and payable. We are not certain
whether we would have, or be able to obtain, sufficient funds to make these
accelerated payments, including payments on the notes.
13
We may not have sufficient cash flow to make payments on the notes and our
other debt
Our ability to pay principal and interest on the notes and our other debt
and to fund our planned capital expenditures depends on our future operating
performance. Our future operating performance is subject to a number of risks
and uncertainties that are often beyond our control, including general
economic conditions and financial, competitive, regulatory and environmental
factors. For a discussion of some of these risks and uncertainties, please see
"Risk Factors -- Risks Related to Our Business" and "-- Risks Related to Our
Industry." Consequently, we cannot assure you that we will have sufficient
cash flow to meet our liquidity needs, including making payments on our
indebtedness.
If our cash flow and capital resources are insufficient to allow us to make
scheduled payments on your notes or our other debt, we may have to sell
assets, seek additional capital or restructure or refinance our debt. We
cannot assure you that the terms of our debt will allow for these alternative
measures or that such measures would satisfy our scheduled debt service
obligations.
If we cannot make scheduled payments on our debt:
o our debtholders could declare all outstanding principal and interest to
be due and payable;
o the lenders under our senior secured credit agreement could terminate
their commitments and commence foreclosure proceedings against our
assets;
o we could be forced into bankruptcy or liquidation; and
o you could lose all or part of your investment in the notes.
Because the notes are subordinated to our senior debt and effectively
subordinated to the debt and other liabilities of our subsidiaries, you may
not receive full payment on your notes
The notes are junior in right of payment to all of our debt, other than any
future debt that expressly provides that it ranks equal with, or is
subordinated in right of payment to, the notes. As a result, upon any
distribution to our creditors in a bankruptcy, liquidation, reorganization or
similar proceeding, the holders of our senior debt will be entitled to be paid
in full before any payment will be made in on the notes.
In addition, all payments on the notes may be blocked in the event of a
payment default until cured, or for up to 179 days in the event of certain
non-payment defaults under our senior secured credit facilities or any other
designated senior debt, including our 9 1/2 senior notes due 2009. Such
payments may only be blocked once within any period of 365 days.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to us, holders of the notes will participate in our assets
with trade creditors and all other holders of our debt. However, because the
indenture for the notes requires that amounts otherwise payable to holders of
the notes in a bankruptcy or similar proceeding be paid to holders of senior
debt instead, holders of the notes may receive less ratably than holders of
trade payables and holders of our other debt in any such proceeding. In any of
these cases, holder of the notes may not be paid in full.
After giving effect to the issuance of the notes and the repayment of
indebtedness under our senior secured credit facilities with the net proceeds
from the notes, as of September 30, 2002, we would have had $440 million of
consolidated debt outstanding other than the notes, all of which were senior
in right of payment to the notes. The notes are also effectively subordinated
in right of payment to all debt and other liabilities, including trade
payables and other accrued liabilities, of all of our subsidiaries.
Since the notes are unsecured, they are also effectively subordinated to any
of our existing and future secured debt
Our obligations under the notes are unsecured. In contrast, our obligations
under our senior secured credit agreement are secured by a significant portion
of our assets. As a result, the notes are effectively subordinated to our
obligations under our senior secured credit agreement as well as any other
secured debt. If we are in default on these secured obligations, you may not
receive principal and interest payment on your notes. After giving effect to
the issuance of the notes and the repayment of indebtedness under our senior
14
secured credit facilities with the net proceeds from the notes, as of
September 30, 2002, we would have had $165 million of secured indebtedness
outstanding, and the ability to borrow $75 million more under our senior
secured credit agreement.
Despite our substantial indebtedness, we may still incur significantly more
debt, which could further increase the risks described above
The terms of our senior secured credit agreement and the indentures related
to the notes and the 9 1/2% senior notes due 2009 do not prohibit us or our
subsidiaries from incurring additional indebtedness in the future. Any
additional debt could be senior to the notes and could increase the risks
described above.
We may not be able to raise the funds necessary to finance our obligation to
purchase the notes at the option of the holder and your repurchase right may
result in a default under our other debt under some circumstances
On December 15, 2009, and upon the occurrence of a fundamental change (as
defined), holders of the notes will have the right to require us to purchase
all or a portion of their notes for cash. See "Description of Notes --
Repurchase at Option of the Holder" and "Description of Notes -- Repurchase at
Option of the Holder Upon a Fundamental Change." However, we may not have
sufficient funds at that time to make the required purchase of all the notes
surrendered for purchase and, if we don't, we may not be able to raise the
necessary funds either through the sale of assets, debt or equity financings
or otherwise. In addition, the agreements governing our other debt, including
the senior secured credit agreement, may prohibit us from making any such
repurchase and we cannot assure you that we would be able to obtain any
consent or waiver from our lenders.
In addition, certain important corporate events, such as leveraged
recapitalizations that would increase the level of our indebtedness, may not
constitute a fundamental change under the indenture.
The value of the conversion right associated with the notes may be
substantially lessened or eliminated if we are party to a merger,
consolidation or other similar transaction
If we are party to a consolidation, merger or binding share exchange or
transfer or lease of all or substantially all of our assets pursuant to which
our common stock is converted into, or into the right to receive, cash,
securities or other property, at the effective time of the transaction, the
right to convert a note into our common stock will be changed into a right to
convert it into the kind and amount of cash, securities or other property
which the holder would have received if the holder had converted its note
immediately prior to the transaction. This change could substantially lessen
or eliminate the value of the conversion privilege associated with the notes
in the future. For example, if we were acquired in a cash merger, each note
would become convertible solely into cash and would no longer be convertible
into securities whose value would vary depending on our future prospects and
other factors.
We expect that the trading value of the notes will be significantly affected
by the price of our common stock and other factors and our stock price may be
volatile and could decline substantially
The market price of the notes is expected to be affected significantly by
the market price of our common stock. This may result in greater volatility in
the trading value of the notes than would be expected for nonconvertible debt
securities we issue. Our stock price may decline substantially as a result of
the volatile nature of the stock market and other factors beyond our control.
The stock market has, from time to time, experienced extreme price and volume
fluctuations. Many factors may cause the market price for our common stock to
decline following this offering, including:
o our operating results failing to meet the expectations of securities
analysts or investors in any quarter;
o downward revisions in securities analysts' estimates;
o material announcements by us or our competitors;
o public sales of a substantial number of shares of our common stock
following this offering;
15
o governmental regulatory action; or
o adverse changes in general market conditions or economic trends.
In the past, companies that have experienced volatility in the market price
of their stock have been the subject of securities class action litigation. If
we become involved in securities class action litigation in the future, it
could result in substantial costs and diversion of management attention and
resources, thus harming our business.
If we increase the applicable conversion rate for the notes, we would be
required to file a new registration statement covering the resale of the
additional shares and the issuance of such additional shares would dilute the
equity of existing holders of our common stock
Under the indenture, we are entitled, at any time and in any amount, to
increase the conversion rate at which holders of notes may convert their notes
into shares of our common stock, from the initial rate of 58.8076 shares per
$1,000 principal amount of notes, to a greater conversion rate. If we increase
the conversion rate, however, we would be required to file a new registration
statement with the SEC covering the resale of any additional shares of common
stock issuable as a result of such increase, the SEC might review and issue
comments regarding such additional filing, and, in any event, the issuance of
such additional shares would dilute the equity of existing holders of our
common stock.
Shares eligible for public sale could adversely affect our stock price and in
turn the market price of the notes
The future sale of a substantial number of our shares of common stock in the
public market, or the perception that such sales could occur, could
significantly reduce our stock price which, in turn, could adversely affect
the market price of the notes. It could also make it more difficult for us to
raise funds through equity offerings in the future.
As of September 15, 2003, we had 47,689,797 shares of common stock
outstanding including 13,887,297 restricted shares held by some of our
stockholders. This does not include the 6,762,874 shares of common stock that
are issuable upon conversion of the notes. The restricted shares may in the
future be sold without registration under the Securities Act of 1933 to the
extent permitted by Rule 144 under the Securities Act or any applicable
exemption under the Securities Act. In addition, stockholders holding
13,451,147 of these restricted shares have the right to require us to file a
registration statement under the Securities Act to register their shares of
common stock.
In addition, we have filed registration statements under the Securities Act
to register shares of common stock reserved for issuance under our stock
option plans, thus permitting the resale of such shares by non-affiliates upon
issuance in the public market without restriction under the Securities Act. As
of September 15, 2003, options to purchase 2,702,854 shares were outstanding
under these stock option plans.
An active trading market for the notes may not develop
The notes comprise a new issue of securities for which there is currently no
public market. We do not plan to list the notes on any securities exchange or
to include them in any automated quotation system. We cannot assure you that
an active trading market for the notes will develop or as to the liquidity or
sustainability of any such market, your ability to sell your notes or the
price at which you will be able to sell your notes. Future trading prices of
the notes will depend on many factors, including, among other things,
prevailing interest rates, our operating results, the price of our common
stock and the market for similar securities.
You should consider the United States federal income tax consequences of
owning the notes
The notes are characterized as indebtedness for United States federal income
tax purposes. Accordingly, holders will be required to include, in their
income, interest with respect to the notes.
16
The notes are characterized as contingent payment debt instruments for
United States federal income tax purposes, and are subject to United States
federal income tax rules applicable to contingent payment debt instruments.
Moreover, under the indenture, we agree, and by acceptance of a beneficial
interest in the notes each beneficial owner of the notes will be deemed to
have agreed, among other things, for United States federal income tax
purposes, to treat the notes as indebtedness that is subject to the
regulations governing contingent payment debt instruments, and the discussion
below assumes that the notes will be so treated. However, no assurance can be
given that the Internal Revenue Service will not assert that the notes should
be treated differently. Any such different treatment could affect the amount,
timing and character of income, gain or loss in respect of an investment in
the notes. In general, beneficial owners of the notes will be required to
accrue ordinary interest income, which we refer to as tax original issue
discount, on the notes, in advance of the receipt of the cash or other
property attributable to the notes, regardless of whether such owner uses the
cash or accrual method of tax accounting. Beneficial owners will be required,
in general, to accrue tax original issue discount based on the rate at which
we would issue a noncontingent, nonconvertible, Fixed-rate debt instrument
with terms and conditions otherwise similar to those of the notes, rather than
at a lower rate based on the stated semi-annual cash interest payable on the
notes. Accordingly, owners of the notes will be required to include interest
in taxable income in each year in excess of the stated semi-annual cash
interest payable on the notes. Furthermore, upon a sale, exchange, purchase by
us at the holder's option, conversion, redemption or retirement of a note,
owners of the notes will recognize gain or loss equal to the difference
between the amount realized and their adjusted tax basis in the notes. In
general, the amount realized will include, in the case of a conversion, the
fair market value of shares of our common stock received. Any gain on a sale,
exchange, purchase by us at the holder's option, conversion, redemption or
retirement of a note will be treated as ordinary interest income; any loss
will be ordinary loss to the extent of the interest previously included in
income, and thereafter, capital loss. Owners of the notes should consult their
tax advisors as to the United States federal, state, local or other tax
consequences of acquiring, owning and disposing of the notes. A summary of the
United States federal income tax consequences of ownership of the notes is
described in this prospectus under the heading "Certain United States Federal
Income Tax Considerations."
You may only convert the notes into shares of our common stock under certain
circumstances, which may not occur
The notes may only be converted into shares of our common stock if one or
more of the conditions described under "Description of Notes -- Conversion of
Notes" are satisfied. We cannot assure you that any notes you purchase will
become convertible into shares of our common stock prior to their stated
maturity. If you are unable to convert your notes prior to their stated
maturity, you may be unable to realize the value of the conversion rights
associated with your notes.
Conversion of the notes will dilute the ownership interests of existing
stockholders
The conversion of some or all of the notes will dilute the ownership
interest of existing stockholders. Any sales in the public market of the
common stock issuable upon such conversion could adversely affect prevailing
market prices of our common stock. In addition, the existence of the notes may
encourage short selling by market participants because the conversion of the
notes could depress the price of our common stock.
17
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Throughout this prospectus, including documents we incorporate by reference,
we may make statements that express our opinions, expectations, or projections
regarding future events or future results, in contrast with statements that
reflect historical facts. These predictive 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 operate as "forward
looking statements" of the kind permitted by the Private Securities Litigation
Reform Act of 1995, incorporated in Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act of 1934, as amended. That
legislation protects such predictive statements by creating a "safe harbor"
from liability in the event that a particular prediction does not turn out as
anticipated.
While we always intend to express our best judgment when we make statements
about what we believe will occur in the future, and although we base these
statements on assumptions that we believe to be reasonable when made, these
forward looking statements are not a guarantee of performance, and you should
not place undue reliance on such statements. Forward looking statements are
subject to many uncertainties and other variable circumstances, many of which
are outside of our control, that could cause our actual results and experience
to differ materially from those we thought would occur.
The following listing represents some, but not necessarily all, of the
factors that may cause actual results to differ from those anticipated or
predicted:
o cyclical changes in market supply and demand for steel; general economic
conditions; U.S. or foreign trade policy affecting steel imports or
exports; and governmental monetary or fiscal policy in the U.S. and other
major international economies;
o risks and uncertainties involving new products or new technologies, such
as our Iron Dynamics ironmaking process, in which the product or process
or certain critical elements thereof may not work at all, may not work as
well as expected, or may turn out to be uneconomic even if they do work;
o changes in the availability or cost of steel scrap, steel scrap
substitute materials or other raw materials or supplies which we use in
our production processes, as well as periodic fluctuations in the
availability and cost of electricity, natural gas or other utilities;
o the occurrence of unanticipated equipment failures and plant outages or
incurrence of extraordinary operating expenses;
o actions by our domestic and foreign competitors, including the addition
or reduction of production capacity, or loss of business from one or more
of our major customers or end-users;
o labor unrest, work stoppages and/or strikes involving our own workforce,
those of our important suppliers or customers, or those affecting the
steel industry in general;
o the effect of the elements upon our production or upon the production or
needs of our important suppliers or customers;
o the impact of, or changes in, environmental laws or in the application of
other legal or regulatory requirements upon our production processes or
costs of production or upon those of our suppliers or customers,
including actions by government agencies, such as the U.S. Environmental
Protection Agency or the Indiana Department of Environmental Management,
on pending or future environmentally related construction or operating
permits;
o pending, anticipated or unanticipated private or governmental liability
claims or litigation, or the impact of any adverse outcome of any
currently pending or future litigation on the adequacy of our reserves,
the availability or adequacy of our insurance coverage, our financial
well-being or our business and assets;
o changes in interest rates or other borrowing costs, or the effect of
existing loan covenants or restrictions upon the cost or availability of
credit to fund operations or take advantage of other business
opportunities;
18
o changes in our business strategies or development plans which we may
adopt or which may be brought about in response to actions by our
suppliers or customers, and any difficulty or inability to successfully
consummate or implement as planned any of our projects, acquisitions,
joint ventures or strategic alliances; and
o the impact of governmental approvals, litigation, construction delays,
cost overruns or technology risk upon our ability to complete, start-up
or continue to profitably operate a project, or to operate it as
anticipated.
We also believe that you should read the many factors described in "Risk
Factors" to better understand the risks and uncertainties inherent in our
business and underlying any forward looking statements.
Any forward looking statements which we make in this prospectus or in any of
the documents that are incorporated by reference herein speak only as of the
date of such statement, and we undertake no ongoing obligation to update such
statements. Comparisons of results between current and any prior periods are
not intended to express any future trends or indications of future
performance, unless expressed as such, and should only be viewed as historical
data.
USE OF PROCEEDS
The selling securityholders will receive all of the proceeds from the sale
of the notes and the common stock issuable upon conversion of the notes or
otherwise offered by this prospectus. We will not receive any proceeds.
RATIOS OF EARNINGS TO FIXED CHARGES
Our ratios of earnings to fixed charges for each of the periods indicated
are as follows:
Year Ended December 31,
-----------------------------------------
2002 2001 2000 1999 1998 1997
---- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges... 3.74x .79x 2.78x 2.48x 3.10x 4.01x
For purposes of calculating our ratio of earnings to fixed charges, earnings
consist of earnings from continuing operations before income taxes, and
extraordinary items, adjusted for the portion of fixed charges deducted from
these earnings, plus amortization of capitalized interest. Fixed charges
consist of interest on all indebtedness, including capitalized interest, and
amortization of debt issuance costs other than those classified as
extraordinary.
DESCRIPTION OF NOTES
The notes were issued under an indenture dated as of December 23, 2002,
between Steel Dynamics, or SDI, as issuer, and Fifth Third Bank, as trustee.
The notes and the shares issuable upon conversion of the notes are covered by
a registration rights agreement, which we entered into with the initial
purchaser of the notes. The indenture and the registration rights agreement
are exhibits to the registration statement of which this prospectus is a part.
The following description is a summary of the material provisions of the
notes, the indenture and the registration rights agreement. It does not
purport to be complete. This summary is subject to and is qualified by
reference to all the provisions of the indenture, including the definitions of
certain terms used in the indenture, and the registration rights agreement.
Wherever particular provisions or defined terms of the indenture or form of
note are referred to, these provisions or defined terms are incorporated in
this prospectus by reference. We urge you to read the indenture because it,
and not this description, defines your rights as a holder of notes.
19
As used in this "Description of Notes" section, references to "Steel
Dynamics," "SDI," "we," "our" or "us" refer solely to Steel Dynamics, Inc. and
not to our subsidiaries.
General
The notes are general unsecured obligations of Steel Dynamics. Our payment
obligations under the notes are subordinated to our senior indebtedness and
effectively subordinated to all indebtedness and other liabilities of our
subsidiaries. See "-- Subordination of Notes." The notes are convertible into
common stock as described under "Conversion of Notes."
The notes are limited to $115 million aggregate principal amount. The notes
are issued only in denominations of $1,000 and multiples of $1,000. The notes
will mature on December 15, 2012 unless earlier converted, redeemed or
repurchased.
Neither we nor any of our subsidiaries will be subject to any financial
covenants under the indenture. In addition, neither we nor any of our
subsidiaries are restricted under the indenture from paying dividends,
incurring debt, or issuing or repurchasing our securities.
You are not afforded protection under the indenture in the event of a highly
leveraged transaction or a change in control of us except to the extent
described below under "Repurchase at Option of the Holder."
Under the indenture governing the notes, we have agreed, and by acceptance
of a beneficial interest in the notes each beneficial owner of the notes will
be deemed to have agreed, among other things, for United States federal income
tax purposes, to treat the notes as indebtedness that is subject to the
regulations governing contingent payment debt instruments and, for purposes of
those regulations, to treat the fair market value of any stock received upon
any conversion of the notes as a contingent payment, and the discussion herein
assumes that such treatment is correct. However, the characterization of
instruments such as the notes and the application of such regulations is
uncertain in several respects. See "Certain United States Federal Income Tax
Considerations."
We will pay interest, including contingent interest, if any, on June 15 and
December 15 of each year, beginning June 15, 2003, to record holders at the
close of business on the preceding June 1 and December 1, as the case may be,
except interest payable upon redemption or repurchase will be paid to the
person to whom principal is payable, unless the redemption or repurchase date
is an interest payment date.
We will maintain an office in the Borough of Manhattan, The City of New
York, for the payment of interest, which shall initially be an office or
agency of the trustee. We may pay interest either:
o by check mailed to your address as it appears in the note register,
provided that if you are a holder with an aggregate principal amount in
excess of $2.0 million, you shall be paid, at your written election, by
wire transfer in immediately available funds; or
o by transfer to an account maintained by you in the United States.
However, payments to The Depository Trust Company, New York, New York, which
we refer to as DTC, will be made by wire transfer of immediately available
funds to the account of DTC or its nominee. Interest will be computed on the
basis of a 360-day year composed of twelve 30-day months.
The notes are debt instruments that are subject to the contingent payment
debt regulations. Therefore, the notes were issued with original issue
discount for United States federal income tax purposes, which we refer to as
tax original issue discount. In general, beneficial owners of the notes will
be required to accrue interest income on the notes for United States federal
income tax purposes in the manner described herein, regardless of whether such
owners use the cash or accrual method of tax accounting. Beneficial owners
will be required, in general, to accrue interest each year, as tax original
issue discount, based on the rate at which we would issue a noncontingent,
nonconvertible, fixed-rate debt instrument with terms and conditions otherwise
similar to those of the notes, rather than at a lower rate based on the
accrual on the notes for non-tax purposes (i.e., in excess of the stated semi-
annual interest payments and any contingent interest payments) actually
received in that year. Accordingly, owners of notes will be required to
include tax original issue discount as interest in taxable income in each year
in excess of the accruals on the notes for non-tax purposes. Furthermore, upon
a
20
sale, exchange, purchase by us at the holder's option, conversion, redemption
or retirement of a note, holders will recognize gain or loss equal to the
difference between the amount realized and their adjusted tax basis in the
note. The amount realized will include, in the case of a conversion, the fair
market value of shares of our common stock received. Any gain recognized on a
sale, exchange, purchase by us at the holder's option, conversion, redemption
or retirement of a note will be treated as ordinary interest income. Holders
are expected to consult their own tax advisors as to the United States
federal, state, local or other tax consequences of acquiring, owning and
disposing of the notes.
Ranking
The notes are junior in right of payment with all our existing and future
senior indebtedness. As of September 30, 2002, after giving effect to the
issuance of the notes and the repayment of indebtedness under our senior
secured credit facilities with the net proceeds from the notes, we would have
had $440 million of consolidated indebtedness outstanding other than the
notes, all of which would have been senior to the notes. The notes are
effectively subordinated to all of the liabilities of our subsidiaries.
Conversion of Notes
You may convert any of your notes, in whole or in part, into common stock
prior to the close of business on the final maturity date of the notes,
subject to prior redemption or repurchase of the notes, only under the
following circumstances:
o upon satisfaction of a market price condition;
o upon the occurrence of specified credit rating events with respect to the
notes;
o upon notice of redemption; or
o upon specified corporate transactions.
The number of shares of common stock you will receive upon conversion of
your notes will be determined by multiplying the number of $1,000 principal
amount notes you convert by the conversion rate on the date of conversion. If
we call notes for redemption, you may convert the notes only until the close
of business on the business day prior to the redemption date unless we fail to
pay the redemption price. If you have submitted your notes for repurchase upon
a fundamental change, you may convert your notes only if you withdraw your
repurchase election. Similarly, if you exercise your option to require us to
redeem your notes other than upon a fundamental change, those notes may be
converted only if you withdraw your election to exercise your option in
accordance with the terms of the indenture. You may convert your notes in part
so long as such part is $1,000 principal amount or an integral multiple of
$1,000. If any note is converted during the period after a record date for an
interest payment date to but excluding the corresponding interest payment
date, then unless that note has been called for redemption on a redemption
date during that period (in which case we will not be required to pay interest
on that interest payment date with respect to that note), the notes must be
accompanied by funds equal to the interest payable on that interest payment
date on the principal amount so converted; provided that no such payment need
be made to the extent any overdue interest, or overdue contingent interest, if
any, exists at the time of conversion with respect to such note. You will not
receive any cash payments representing accrued interest, including contingent
interest, if any, upon conversion unless you convert on an interest payment
date and were the record holder on the applicable record date.
Our delivery to you of shares of common stock into which a note is
convertible, together with any cash payment in lieu of any fractional shares,
will satisfy our obligation to pay the principal amount of such note, the
accrued but unpaid cash interest, including contingent interest, if any, and
accrued tax original issue discount through the conversion date. Thus, the
accrued but unpaid interest, including contingent interest, if any, and
accrued tax original issue discount through the conversion date will be deemed
to be paid in full rather than cancelled, extinguished or forfeited. For a
discussion of the tax treatment to you of receiving our common stock upon
conversion, see "Certain United States Federal Income Tax Considerations."
21
Conversion Upon Satisfaction of Market Price Condition
You may surrender your note for conversion into our common stock prior to
close of business on the maturity date at any time after the closing sale
price of our common stock exceeds 120% of the conversion price for at least 20
trading days in the 30 consecutive trading days ending on the last trading day
of any fiscal quarter commencing after December 31, 2002.
The "closing sale price" of our common stock on any date means the closing
per share sale price (or if no closing sale price is reported, the average of
the bid and ask prices or, if more than one in either case, the average of the
average bid and the average ask prices) on such date as reported in composite
transactions for the principal United States securities exchange on which our
common stock is traded or, if our common stock is not listed on a United
States national or regional securities exchange, as reported by the Nasdaq
System or by the National Quotation Bureau Incorporated. The "conversion
price" as of any day will equal $1,000 divided by the number of shares of
common stock issuable upon conversion of $1,000 principal amount of notes.
Conversion Upon Credit Ratings Event
After the earlier of (a) the date the notes are rated by both Standard &
Poor's and Moody's and (b) January 31, 2003, you may surrender your note for
conversion into our common stock prior to maturity during any period in which
the long-term credit rating assigned to the notes by Standard & Poor's or
Moody's (or any successors to these entities) is "CCC" or "Caa3",
respectively, or lower, or if either of these rating agencies no longer rates
the notes, or if either of these rating agencies suspend or withdraws the
rating assigned to the notes, or if the notes are not assigned a rating by
both rating agencies.
Conversion Upon Notice of Redemption
If we call notes for redemption, you may convert the notes until the close
of business on the business day immediately preceding the redemption date,
after which time your right to convert will expire unless we default in the
payment of the redemption price.
Conversion Upon Specified Corporate Transactions
If we elect to:
o distribute to all holders of our common stock certain rights entitling
them to purchase, for a period expiring within 45 days, our common stock
at less than the current market price (measured by averaging the closing
prices for the 10 preceding trading days); or
o distribute to all holders of our common stock, assets, debt securities or
certain rights to purchase our securities, which distribution has a per
share value exceeding 10% of the closing sale price of our common stock
on the day preceding the declaration date for such distribution;
we must notify you at least 20 days prior to the ex-dividend date for such
distribution. Once we have given such notice, you may surrender your notes for
conversion at any time until the earlier of close of business on the business
day prior to the ex-dividend date or any announcement by us that such
distribution will not take place. No adjustment to your ability to convert
will be made if you will otherwise participate in the distribution without
conversion.
In addition, if we are a party to a consolidation, merger, a binding share
exchange or sale of all or substantially all of our assets, in each case
pursuant to which our common stock would be converted into cash, securities or
other property, you may surrender your notes for conversion at any time from
and after the date which is 15 days prior to the anticipated effective date of
the transaction until and including the date which is 15 days after the actual
date of such transaction. If we are a party to a consolidation, merger,
binding share exchange or sale of all or substantially all of our assets, in
each case pursuant to which our common stock is converted into cash,
securities, or other property, then at the effective time of the transaction,
your right to convert a note into our common stock will be changed into a
right to convert it into the kind and amount of cash, securities and other
property which you would have received if you had
22
converted your notes immediately prior to the transaction. If the transaction
also constitutes a fundamental change, you can require us to redeem all or a
portion of your notes as described under "Repurchase At Option of the Holder
Upon a Fundamental Change."
Conversion Procedures
The initial conversion rate for the notes is 58.8076 shares of common stock
per $1,000 principal amount of notes, subject to adjustment as described
below. We will not issue fractional shares of common stock upon conversion of
notes. Instead, we will pay cash equal to the closing price of the common
stock on the trading day prior to the conversion date. Except as described
below, you will not receive any accrued interest or dividends upon conversion.
To convert your note into common stock you must do the following (or comply
with DTC procedures for doing so in respect of your beneficial interest in
notes evidenced by a global note held by DTC):
o complete and manually sign the conversion notice on the back of the note
or facsimile of the conversion notice and deliver this notice to the
conversion agent;
o surrender the note to the conversion agent;
o if required, furnish appropriate endorsements and transfer documents;
o if required, pay all transfer or similar taxes; and
o if required, pay funds equal to interest payable on the next interest
payment date.
The date you comply with these requirements is the conversion date under the
indenture.
We will adjust the conversion rate if any of the following events occurs:
o we issue common stock as a dividend or distribution on our common stock;
o we issue to all holders of common stock certain rights or warrants to
purchase our common stock at a price per share that is less than the
current market price of our common stock, as defined in the indenture;
o we subdivide or combine our common stock;
o we distribute to all holders of our common stock, shares of our capital
stock, evidences of indebtedness or assets, including securities but
excluding:
o rights or warrants specified above;
o dividends or distributions specified above; and
o cash distributions;
o we distribute cash, excluding any dividend or distribution in connection
with our liquidation, dissolution or winding up or any quarterly cash
dividend on our common stock to the extent that the aggregate cash
dividend per share of common stock in any quarter does not exceed the
greater of:
o the amount per share of common stock of the next preceding quarterly
cash dividend on the common stock to the extent that the preceding
quarterly dividend did not require an adjustment of the conversion rate
pursuant to this clause, as adjusted to reflect subdivisions or
combinations of the common stock; and
o 2.5% of the average of the last reported sale price of the common stock
during the ten trading days immediately prior to the declaration date
of the dividend.
If an adjustment is required to be made under this clause as a result of
a distribution that is a quarterly dividend, the adjustment would be
based upon the amount by which the distribution exceeds the amount of the
quarterly cash dividend permitted to be excluded pursuant to this clause.
If an adjustment is required to be made under this clause as a result of
a distribution that is not a quarterly dividend, the adjustment would be
based upon the full amount of the distribution;
23
o we or one of our subsidiaries makes a payment in respect of a tender
offer or exchange offer for our common stock to the extent that the cash
and value of any other consideration included in the payment per share of
common stock exceeds the current market price per share of common stock
on the trading day next succeeding the last date on which tenders or
exchanges may be made pursuant to such tender or exchange offer; and
o someone other than us or one of our subsidiaries makes a payment in
respect of a tender offer or exchange offer in which, as of the closing
date of the offer, our board of directors is not recommending rejection
of the offer. The adjustment referred to in this clause will only be made
if:
o the tender offer or exchange offer is for an amount that increases the
offeror's ownership of common stock to more than 25% of the total
shares of common stock outstanding; and
o the cash and value of any other consideration included in the payment
per share of common stock exceeds the current market price per share of
common stock on the business day next succeeding the last date on which
tenders or exchanges may be made pursuant to the tender or exchange
offer.
However, the adjustment referred to in this clause will generally not be
made if as of the closing of the offer, the offering documents disclose a plan
or an intention to cause us to engage in a consolidation or merger or a sale
of all or substantially all of our assets.
To the extent that we have a rights plan in effect upon conversion of the
notes into common stock, you will receive, in addition to the common stock,
the rights under the rights plan whether or not the rights have separated from
the common stock at the time of conversion, subject to limited exceptions.
In the event of:
o any reclassification of our common stock;
o a consolidation, merger or combination involving us; or
o a sale or conveyance to another person or entity of all or substantially
all of our property and assets;
in which holders of our common stock would be entitled to receive stock, other
securities, other property, assets or cash for their common stock, upon
conversion of your notes you will be entitled to receive the same type of
consideration which you would have been entitled to receive if you had
converted the notes into our common stock immediately prior to any of these
events.
You may in certain situations be deemed to have received a distribution
subject to United States federal income tax as a dividend in the event of any
taxable distribution to holders of common stock or in certain other situations
requiring a conversion rate adjustment. See "Certain United States Federal
Income Tax Considerations."
In addition to the foregoing mandatory conversion rate adjustments, we may
also, from time to time, to the extent permitted by applicable law, increase
the conversion rate by any amount and for any period of time of at least 20
days if our board of directors has made a determination that this increase
would be in our best interests. Any such determination by our board will be
conclusive. We would give holders at least 15 days' notice of and the amount
of any increase in the conversion rate, together with the length of time the
increased conversion rate will remain in effect. We may also increase the
conversion rate if our board of directors deems it advisable to avoid or
diminish any income tax to holders of common stock resulting from any stock or
rights distribution. See "Certain United States Federal Income Tax
Considerations."
Any issuance of additional shares pursuant to any conversion rate adjustment
or conversion rate increase would require us to file another registration
statement to register such additional shares for resale.
We will not be required to make an adjustment in the conversion rate unless
the adjustment would require a change of at least 1% in the conversion rate.
However, we will carry forward any adjustments that are less than 1% of the
conversion rate. Except as described above in this section, we will not adjust
the conversion rate for any issuance of our common stock or convertible or
exchangeable securities or rights to purchase our common stock or convertible
or exchangeable securities.
24
Contingent Interest
Subject to the accrual and record date provisions described herein, we will
pay contingent interest to the holders of notes during any six-month period
from December 15 to June 14 and from June 15 to December 14, with the initial
six-month period commencing December 15, 2007, if the trading price of the
notes, as defined in the indenture, for each of the Five trading days
immediately preceding the First day of the applicable six-month period equals
120% or more of the principal amount of the notes.
During any period when contingent interest shall be payable, the contingent
interest payable per $1,000 principal amount of notes will be an amount equal
to 0.25% of the average trading price per $1,000 principal amount of notes
during the Five trading days immediately preceding the First day of the
applicable six-month interest period.
We will notify the noteholders upon determination that they will be entitled
to receive contingent interest during a six-month interest period.
Optional Redemption by Steel Dynamics
Beginning December 18, 2007, we may redeem the notes in whole or in part at
the following prices expressed as a percentage of the principal amount:
Redemption Period Price(%)
----------------- --------
Beginning on December 18, 2007 and ending on December 14, 2008...... 101.143%
Beginning on December 15, 2008 and ending on December 14, 2009...... 100.571%
and 100% if redeemed on or after December 15, 2009. In each case, we will pay
interest to, but excluding, the redemption date. If the redemption date is an
interest payment date, interest shall be paid to the record holder on the
relevant record date. We are required to give notice of redemption by mail to
holders not more than 60 but not less than 30 days prior to the redemption
date.
If less than all of the outstanding notes are to be redeemed, the trustee
will select the notes to be redeemed in principal amounts of $1,000 or
multiples of $1,000 by lot, pro rata or by another method the trustee
considers fair and appropriate. If a portion of your notes is selected for
partial redemption and you convert a portion of your notes, the converted
portion will be deemed to be of the portion selected for redemption.
We may not redeem the notes if we have failed to pay any interest on the
notes and such failure to pay is continuing. We will notify the noteholders if
we redeem the notes.
Repurchase at Option of the Holder
You have the right to require us to repurchase the notes for cash on
December 15 of 2009. We will be required to repurchase any outstanding note
for which you deliver a written repurchase notice to the paying agent. This
notice must be delivered during the period beginning at any time from the
opening of business on the date that is 20 business days prior to the
repurchase date until the close of business on the repurchase date. If a
repurchase notice is given and withdrawn during that period, we will not be
obligated to repurchase the notes listed in the notice. Our repurchase
obligation will be subject to certain additional conditions.
The repurchase price payable for a note will be equal to 100% of the
principal amount thereof plus accrued and unpaid interest, including
contingent interest, if any, to the repurchase date.
Your right to require us to repurchase notes is exercisable by delivering a
written repurchase notice to the paying agent within 20 business days of the
repurchase date. The paying agent initially will be the trustee.
The repurchase notice must state:
(1) if certificated notes have been issued, the note certificate numbers
(or, if your notes are not certificated, your repurchase notice must
comply with appropriate DTC procedures);
25
(2) the portion of the principal amount of notes to be repurchased,
which must be in $1,000 multiples; and
(3) that the notes are to be repurchased by us pursuant to the
applicable provisions of the notes and the indenture.
You may withdraw any written repurchase notice by delivering a written
notice of withdrawal to the paying agent prior to the close of business of the
repurchase date. The withdrawal notice must state:
o the principal amount of the withdrawn notes;
o if certificated notes have been issued, the certificate numbers of the
withdrawn notes (or, if your notes are not certificated, your withdrawal
notice must comply with appropriate DTC procedures); and
o the principal amount, if any, which remains subject to the repurchase
notice.
We must give notice of an upcoming repurchase date to all note holders not
less than 20 business days prior to the repurchase date at their addresses
shown in the register of the registrar. We will also give notice to beneficial
owners as required by applicable law. This notice will state, among other
things the procedures that holders must follow to require us to repurchase
their notes.
Payment of the repurchase price for a note for which a repurchase notice has
been delivered and not withdrawn is conditioned upon book-entry transfer or
delivery of the note, together with necessary endorsements, to the paying
agent at its office in the Borough of Manhattan, The City of New York, or any
other office of the paying agent, at any time after delivery of the repurchase
notice. Payment of the repurchase price for the note will be made promptly
following the later of the repurchase date and the time of book-entry transfer
or delivery of the note. If the paying agent holds money sufficient to pay the
repurchase price of the note on the business day following the repurchase
date, then, on and after the date:
o the note will cease to be outstanding;
o interest will cease to accrue; and
o all other rights of the holder will terminate.
This will be the case whether or not book-entry transfer of the note has
been made or the note has been delivered to the paying agent, and all other
rights of the note holder will terminate, other than the right to receive the
repurchase price upon delivery of the note.
Our ability to repurchase notes with cash may be limited by the terms of our
then-existing borrowing agreements. The indenture will prohibit us from
repurchasing notes for cash from note holders if any event of default under
the indenture has occurred and is continuing, except a default in the payment
of the repurchase price with respect to the notes.
We will comply with the provisions of Rule 13e-4 and any other tender offer
rules under the Exchange Act that may be applicable at the time of the tender
offer. We will file a Schedule TO or any other schedule required in connection
with any offer by us to repurchase the notes.
Repurchase at Option of the Holder Upon a Fundamental Change
If a fundamental change of SDI occurs at any time prior to the maturity of
the notes, you may require us to repurchase your notes, in whole or in part,
on a repurchase date that is 30 days after the date of our notice of the
fundamental change. The notes will be repurchased in integral multiples of
$1,000 principal amount.
We will repurchase the notes at a price equal to 100% of the principal
amount to be repurchased, plus accrued interest, including contingent
interest, if any, to, but excluding, the repurchase date. If the repurchase
date is an interest payment date, we will pay interest to the record holder on
the relevant record date.
We will mail to all record holders a notice of a fundamental change within
10 days after it has occurred. We are also required to deliver to the trustee
a copy of the fundamental change notice. If you elect to have us repurchase
your notes, you must deliver to us or our designated agent, on or before the
30th day after the date of our fundamental change notice, your repurchase
notice and any notes to be repurchased, duly
26
endorsed for transfer. We will promptly pay the repurchase price for notes
surrendered for repurchase following the repurchase date.
A "fundamental change" is any transaction or event (whether by means of an
exchange offer, liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise) in connection with which all
or substantially all of our common stock is exchanged for, converted into,
acquired for or constitutes solely the right to receive, consideration which
is not all or substantially all common stock that:
o is listed on, or immediately after the transaction or event will be
listed on, a United States national securities exchange, or
o is approved, or immediately after the transaction or event will be
approved, for quotation on the Nasdaq National Market or any similar
United States system of automated dissemination of quotations of
securities prices.
We will comply with any applicable provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act in the event of a fundamental
change.
These fundamental change repurchase rights could discourage a potential
acquirer. However, this fundamental change repurchase feature is not the
result of management's knowledge of any specific effort to obtain control of
us by means of a merger, tender offer or solicitation, or part of a plan by
management to adopt a series of anti-takeover provisions. The term
"fundamental change" is limited to specified transactions and may not include
other events that might adversely affect our financial condition or business
operations. Our obligation to offer to redeem the notes upon a fundamental
change would not necessarily afford you protection in the event of a highly
leveraged transaction, reorganization, merger or similar transaction involving
us.
We may be unable to repurchase the notes in the event of a fundamental
change. If a fundamental change were to occur, we may not have enough funds to
pay the repurchase price for all tendered notes. Any future credit agreements
or other agreements relating to our indebtedness may contain provisions
prohibiting repurchase of the notes under certain circumstances, or expressly
prohibit our repurchase of the notes upon a fundamental change or may provide
that a fundamental change constitutes an event of default under that
agreement. If a fundamental change occurs at a time when we are prohibited
from purchasing or redeeming notes, we could seek the consent of our lenders
to repurchase the notes or attempt to refinance this debt. If we do not obtain
consent, we would not be permitted to purchase or redeem the notes. Our
failure to repurchase tendered notes would constitute an event of default
under the indenture, which might constitute a default under the terms of our
other indebtedness. In these circumstances, or if a fundamental change would
constitute an event of default under our senior indebtedness, the
subordination provisions of the indenture would restrict payments to the
holders of notes.
Merger and Sale of Assets by Steel Dynamics
The indenture provides that we may not consolidate with or merge with or
into any other person or convey, transfer or lease its properties and assets
substantially as an entirety to another person, unless among other items:
o we are the surviving person, or the resulting, surviving or transferee
person, if other than us is a corporation organized and existing under
the laws of the United States, any state thereof or the District of
Columbia;
o the successor person assumes all of our obligations under the notes and
the indenture; and
o we or such successor person will not be in default under the indenture
immediately after the transaction.
When such a person assumes our obligations in such circumstances, subject to
certain exceptions, we shall be discharged from all obligations under the
notes and the indenture.
27
Events of Default; Notice and Waiver
The following will be events of default under the indenture:
o we fail to pay principal or premium, if any, when due upon redemption,
repurchase or otherwise on the notes;
o we fail to pay any interest and liquidated damages, if any, on the notes,
when due and such failure continues for a period of 30 days;
o default in the payment of principal when due or a default resulting in
acceleration of our other indebtedness for borrowed money where the
aggregate principal amount with respect to which the default or
acceleration has occurred exceeds $10 million, and such acceleration has
not been rescinded or annulled within a period of 30 days;
o we fail to perform or observe any of the covenants in the indenture and
such failure continues for 30 days after written notice of that failure
is given to us from the transfer (or to us and the trustee from the
holders of at least 25% in principal amount of the outstanding notes); or
o certain events involving our bankruptcy, insolvency or reorganization.
The trustee may withhold notice to the holders of the notes of any default,
except defaults in payment of principal, premium, interest or liquidated
damages, if any, on the notes. However, the trustee must consider it to be in
the interest of the holders of the notes to withhold this notice.
If an event of default occurs and continues, the trustee or the holders of
at least 25% in principal amount of the outstanding notes may declare the
principal, premium, if any, and accrued interest and liquidated damages, if
any, on the outstanding notes to be immediately due and payable. In case of
certain events of bankruptcy or insolvency involving us, the principal,
premium, if any, and accrued interest and liquidated damages, if any, on the
notes will automatically become due and payable. However, if we cure all
defaults, except the nonpayment of principal, premium, if any, interest or
liquidated damages, if any, that became due as a result of the acceleration,
and meet certain other conditions, with certain exceptions, this declaration
may be cancelled and the holders of a majority of the principal amount of
outstanding notes may waive these past defaults.
Payments of principal, premium, if any, or interest on the notes that are
not made when due will accrue interest at the annual rate of 1% above the then
applicable interest rate from the required payment date.
The holders of a majority of outstanding notes will have the right to direct
the time, method and place of any proceedings for any remedy available to the
trustee, subject to limitations specified in the indenture.
No holder of the notes may pursue any remedy under the indenture, except in
the case of a default in the payment of principal, premium, if any, or
interest on the notes, unless:
o the holder has given the trustee written notice of an event of default;
o the holders of at least 25% in principal amount of outstanding notes make
a written request, and offer reasonable indemnity, to the trustee to
pursue the remedy;
o the trustee does not receive an inconsistent direction from the holders
of a majority in principal amount of the notes; and
o the trustee fails to comply with the request within 60 days after
receipt.
Modification and Waiver
The consent of the holders of a majority in principal amount of the
outstanding notes is required to modify or amend the indenture. However, a
modification or amendment requires the consent of the holder of each
outstanding note if it would:
o extend the fixed maturity of any note;
o reduce the rate or extend the time for payment of interest of any note;
28
o reduce the principal amount or premium of any note;
o reduce any amount payable upon redemption or repurchase of any note;
o adversely change our obligation to redeem any note upon a fundamental
change;
o impair the right of a holder to institute suit for payment on any note;
o change the currency in which any note is payable;
o impair the right of a holder to convert any note;
o adversely modify, in any material respect, the subordination provisions
of the indenture;
o reduce the quorum or voting requirements under the indenture;
o change any obligation of ours to maintain an office or agency in the
places and for the purposes specified in the indenture;
o subject to specified exceptions, modify certain of the provisions of the
indenture relating to modification or waiver of provisions of the
indenture; or
o reduce the percentage of notes required for consent to any modification
of the indenture.
We are permitted to modify certain provisions of the indenture without the
consent of the holders of the notes.
Subordination of Notes
Payment on the notes will, to the extent provided in the indenture, be
subordinated in right of payment to the prior payment in full of all of our
existing and future senior indebtedness.
Upon any distribution of our assets upon any dissolution, winding up,
liquidation or reorganization, the payment of the principal of, or premium, if
any, interest, and liquidated damages, if any, on the notes will be
subordinated in right of payment to the prior payment in full in cash or other
payment satisfactory to the holders of senior indebtedness of all senior
indebtedness. In the event of any acceleration of the notes because of an
event of default, the holders of any outstanding senior indebtedness would be
entitled to payment in full in cash or other payment satisfactory to the
holders of senior indebtedness of all senior indebtedness obligations before
the holders of the notes are entitled to receive any payment or distribution.
We are required under the indenture to promptly notify holders of senior
indebtedness, if payment of the notes is accelerated because of an event of
default.
We may not make any payment on the notes if:
o a default in the payment of designated senior indebtedness occurs and is
continuing beyond any applicable period of grace (called a "payment
default"); or
o a default other than a payment default on any designated senior
indebtedness occurs and is continuing that permits holders of designated
senior indebtedness to accelerate its maturity, or in the case of a
lease, a default occurs and is continuing that permits the lessor to
either terminate the lease or require us to make an irrevocable offer to
terminate the lease following an event of default under the lease, and
the trustee receives a notice of such default (called "payment blockage
notice") from us or any other person permitted to give such notice under
the indenture (called a "non-payment default").
We may resume payments and distributions on the notes:
o in case of a payment default, upon the date on which such default is
cured or waived or ceases to exist; and
o in case of a non-payment default, the earlier of the date on which such
nonpayment default is cured or waived or ceases to exist or 179 days
after the date on which the payment blockage notice is received, if the
maturity of the designated senior indebtedness has not been accelerated,
or in the case of any lease, 179 days after notice is received if we have
not received notice that the lessor under such lease
29
has exercised its right to terminate the lease or require us to make an
irrevocable offer to terminate the lease following the event of default
under the lease.
No new period of payment blockage may be commenced pursuant to a payment
blockage notice unless 365 days have elapsed since the initial effectiveness
of the immediately prior payment blockage notice. No non-payment default that
existed or was continuing on the date of delivery of any payment blockage
notice shall be the basis for any later payment blockage notice.
If the trustee or any holder of the notes receives any payment or
distribution of our assets in contravention of the subordination provisions on
the notes before all senior indebtedness is paid in full in cash or other
payment satisfactory to holders of senior indebtedness, then such payment or
distribution will be held in trust for the benefit of holders of senior
indebtedness or their representatives to the extent necessary to make payment
in full in cash or payment satisfactory to the holders of senior indebtedness
of all unpaid senior indebtedness.
Because of the subordination provisions discussed above, in the event of our
bankruptcy, dissolution or reorganization, holders of senior indebtedness may
receive more, ratably, and holders of the notes may receive less, ratably,
than our other creditors. This subordination will not prevent the occurrence
of any event of default under the indenture.
The term "senior indebtedness" is defined in the indenture and includes
principal, premium, interest, rent, fees, costs, expenses and other amounts
accrued or due on our existing or future indebtedness, as defined below, or
any existing or future indebtedness guaranteed or in effect guaranteed by us,
subject to certain exceptions. The term does not include:
o any indebtedness that expressly provides that it is pari passu or junior
to the notes; or
o any indebtedness we owe to any of our subsidiaries; or
o the notes.
The term "indebtedness" is also defined in the indenture and includes, in
general terms, our liabilities in respect of borrowed money, notes, bonds,
debentures, letters of credit, bank guarantees, bankers' acceptances, capital
and certain other leases, interest rate and foreign currency derivative
contracts or similar arrangements, guarantees and certain other obligations
described in the indenture, subject to certain exceptions. The term does not
include, for example, any account payable or other accrued current liability
or obligation incurred in the ordinary course of business in connection with
the obtaining of materials or services.
The term "designated senior indebtedness" is defined in the indenture and
includes our indebtedness under our senior secured credit facilities and our 9
1/2 senior notes due 2009 as well as, in general terms, any senior
indebtedness that by its terms expressly provides that it is "designated
senior indebtedness" for purposes of the indenture.
After giving effect to the issuance of the notes and the repayment of
indebtedness under our senior secured credit facilities with the proceeds from
the notes, as of September 30, 2002, we would have had $440 million of
consolidated debt outstanding other than the notes, all of which was senior in
right of payment to the notes. The indentures for the notes and the 9 1/2%
senior notes due 2009 and the senior secured credit agreement do not prohibit
us or our subsidiaries from incurring additional indebtedness. The notes are
also effectively subordinated in right of payment to all debt and other
liabilities, including trade payables and other accrued liabilities, of all of
our subsidiaries.
We are obligated to pay reasonable compensation to the trustee and to
indemnify the trustee against certain losses, liabilities or expenses incurred
by the trustee in connection with its duties relating to the notes. The
trustee's claims for these payments will generally be senior to those of the
holders of the notes in respect of all funds collected or held by the trustee.
Form, Denomination and Registration
The notes are issued:
30
o in fully registered form;
o without interest coupons; and
o in denominations of $1,000 principal amount and integral multiples of
$1,000.
Global Note, Book-Entry Form
The notes are evidenced by one or more global notes. We have deposited the
global note or notes with DTC and have registered the global notes in the name
of Cede & Co. as DTC's nominee. Except as set forth below, a global note may
be transferred, in whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee.
Beneficial interests in a global note may be held through organizations that
are participants in DTC (called "participants") or indirectly through
organizations that are participants. Transfers between participants will be
effected in the ordinary way in accordance with DTC rules and will be settled
in clearing house funds. The laws of some states require that certain persons
take physical delivery of securities in definitive form. As a result, the
ability to transfer beneficial interests in the global note to such persons
may be limited.
Beneficial interests in a global note held by DTC can only be held through
participants, or certain banks, brokers, dealers, trust companies and other
parties that clear through or maintain a custodial relationship with a
participant, either directly or indirectly (called "indirect participants").
So long as Cede & Co., as the nominee of DTC, is the registered owner of a
global note, Cede & Co. for all purposes will be considered the sole holder of
such global note. Except as provided below, owners of beneficial interests in
a global note will:
o not be entitled to have certificates registered in their names;
o not receive physical delivery of certificates in definitive registered
form; and
o not be considered holders of the global note.
We will pay interest including contingent interest, if any, on and the
redemption or repurchase price of a global note to Cede & Co., as the
registered owner of the global note, by wire transfer of immediately available
funds on each interest payment date or the redemption or repurchase date, as
the case may be. Neither we, the trustee nor any paying agent will be
responsible or liable:
o for the records relating to, or payments made on account of, beneficial
ownership interests in a global note; or
o for maintaining, supervising or reviewing any records relating to the
beneficial ownership interests.
We have been informed that DTC's practice is to credit participants'
accounts on that payment date with payments in amounts proportionate to their
respective beneficial interests in the principal amount represented by a
global note as shown in the records of DTC, unless DTC has reason to believe
that it will not receive payment on that payment date. Payments by
participants to owners of beneficial interests in the principal amount
represented by a global note held through participants will be the
responsibility of the participants, as is now the case with securities held
for the accounts of customers registered in "street name."
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants, the ability of a person having a beneficial
interest in the principal amount represented by the global note to pledge such
interest to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interest, may be affected by the
lack of a physical certificate evidencing its interest.
Neither we, the trustee, registrar, paying agent nor conversion agent will
have any responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations. DTC has advised us that it will take
any action permitted to be taken by a holder of notes, including the
presentation of notes for exchange, only at the direction of one or more
participants to whose account with DTC interests in the global note are
credited, and only in respect of the principal amount of the notes represented
by the global note as to which the participant or participants has or have
given such direction.
31
DTC has advised us that it is:
o a limited purpose trust company organized under the laws of the State of
New York, and a member of the Federal Reserve System;
o a "clearing corporation" within the meaning of the Uniform Commercial
Code; and
o a "clearing agency" registered pursuant to the provisions of Section 17A
of the Exchange Act.
DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between participants
through electronic book-entry changes to the accounts of its participants.
Participants include securities brokers, dealers, banks, trust companies and
clearing corporations and other organizations. Some of the participants or
their representatives, together with other entities, own DTC. Indirect access
to the DTC system is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
DTC has agreed to the foregoing procedures to facilitate transfers of
interests in a global note among participants. However, DTC is under no
obligation to perform or continue to perform these procedures, and may
discontinue these procedures at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed
by us within 90 days, we will issue notes in certificated form in exchange for
global notes.
Registration Rights of the Noteholders
On December 23, 2002, we entered into a registration rights agreement with
the initial purchasers that required us, among other things, to file within 90
days, and to use our reasonable best efforts to cause to become effective
within 180 days after that date, a shelf registration statement with the SEC
covering the resale of the notes and the common stock issuable upon conversion
of the notes. We have timely filed with the SEC a registration statement, of
which this prospectus is a part, to satisfy the filing obligation under the
registration rights agreement.
A holder who sells notes or common stock pursuant to the registration
statement generally will be required to be named as a selling securityholder
in this prospectus or in a related prospectus supplement and to deliver a
prospectus to the subsequent purchasers, and will be bound by the provisions
of the registration rights agreement which are applicable to that holder
(including certain indemnification provisions). We are required to use our
reasonable best efforts to keep the shelf registration statement effective
until the earlier of:
o the sale pursuant to the shelf registration statement of all of the notes
and the common stock issuable upon conversion of the notes registered
thereunder; or
o the expiration of the holding period under Rule 144(k) under the
Securities Act, or any successor provision.
We may suspend the use of the prospectus under certain circumstances
relating to pending corporate developments, public Filings with the SEC and
similar events. Any suspension period shall not:
o exceed 30 days in any three-month period; or
o an aggregate of 90 days for all periods in any 12-month period.
Notwithstanding the foregoing, we will be permitted to suspend the use of
the prospectus for up to 60 days in any 3-month period under certain
circumstances, relating to possible acquisitions, financings or other similar
transactions.
We will pay predetermined liquidated damages if the shelf registration
statement is not timely filed or made effective or if the prospectus is
unavailable for periods in excess of those permitted above:
32
o on the notes at an annual rate equal to 0.5% of the aggregate principal
amount of the notes outstanding until the registration statement is filed
or made effective or during the additional period the prospectus is
unavailable; and
o on the common stock that has been converted, at an annual rate equal to
0.5% of an amount equal to $1,000 divided by the conversion rate during
such periods.
Information Concerning the Trustee
We have appointed Fifth Third Bank, the trustee under the indenture, as
paying agent, conversion agent, note registrar and custodian for the notes.
The trustee or its affiliates may provide banking and other services to us in
the ordinary course of their business.
The indenture contains certain limitations on the rights of the trustee, if
it or any of its affiliates is then our creditor, to obtain payment of claims
in certain cases or to realize on certain property received on any claim as
security or otherwise. The trustee and its affiliates will be permitted to
engage in other transactions with us. However, if the trustee or any affiliate
continues to have any conflicting interest and a default occurs with respect
to the notes, the trustee must eliminate such conflict or resign.
Fifth Third Bank is also the trustee under the indenture for the 9 1/2%
senior notes due 2009.
DESCRIPTION OF CAPITAL STOCK
The following summary of certain provisions of the common stock does not
purport to be complete and is subject to, and qualified in its entirety by,
the provisions of our Articles of Incorporation and Bylaws, as well as by the
provisions of Indiana's law.
Our authorized capital stock consists of 100,000,000 shares of common stock,
par value $.01 per share. As of September 15, 2003, there were 50,284,802
shares of common stock issued and 47,885,634 shares outstanding that were
beneficially owned by approximately 7,400 stockholders. As of September 15,
2003, 2,702,854 shares of common stock were reserved for issuance upon
exercise of outstanding stock options. In addition, 6,762,874 shares of common
stock are issuable upon conversion of the notes, subject to adjustment.
Common Stock
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders, including the
election of directors. The Articles do not provide for cumulative voting in
the election of directors and, thus, holders of a majority of the shares of
common stock may elect all of the directors standing for election.
All holders of common stock are entitled to receive ratably such dividends,
if any, as may be declared from time to time by our board of directors in its
discretion from funds legally available therefor. Upon the liquidation,
dissolution or winding-up of our company, the holders of common stock are
entitled to receive ratably the net assets of our company that are available
after the payment of all debts and liabilities. Holders of common stock have
no preemptive rights or rights to convert their common stock into any other
securities, nor are there any redemption or sinking fund provisions applicable
to the common stock.
All outstanding shares of common stock are, and the shares to be issued in
the offering will be, validly issued, fully paid, and non-assessable.
Certain Provisions of Indiana Law Regarding Takeovers
As an Indiana corporation, we are subject to certain provisions of Indiana
law which may discourage or render more difficult an unsolicited takeover of
our company. There are two principal statutes relating to this issue that
constitute part of the Indiana corporate law, the statute regulating "business
combinations" and the statute regulating "control share acquisitions."
33
Under Chapter 43 of the Indiana corporate law relating to "business
combinations" a corporation (with 100 or more stockholders) may not engage in
any "business combination" with any "interested" stockholder for a period of
five years following the interested stockholder's "share acquisition date"
unless the business combination or the purchase of shares made by the
interested stockholder was approved by the corporation's board of directors
prior to the interested stockholder's share acquisition date. The term
"business combination" is broadly defined to apply to any merger or
consolidation of the corporation and the interested stockholder, as well as
any sale, lease, exchange, mortgage, pledge, transfer, or other disposition
(in a single or a series of transactions) to or with the interested
stockholder (or any affiliate or associate thereof) of any assets of the
corporation if the transaction represents 10% or more of the corporation's
assets, outstanding shares of stock, or consolidated net income of the
corporation. Similarly, the issuance or transfer by the corporation of any of
its (or its subsidiary's) stock that has an aggregate market value equal to 5%
or more of all the outstanding shares of stock to the interested stockholder
(or any affiliate or associate thereof) is a "business combination," except if
it is in connection with the distribution of a dividend or the exercise of
warrants paid or made pro rata to all stockholders. The term is applicable as
well as to the adoption of any plan of liquidation or dissolution proposed by
or under any understanding with an interested stockholder (or an affiliate or
associate thereof), and to any reclassification of securities,
recapitalization, merger or consolidation with any subsidiary, or any other
transaction proposed by or under any arrangement with the interested
stockholder or any affiliate or associate thereof) that has the "effect" of
increasing the proportionate interest of the interested stockholder in the
corporation.
An "interested stockholder," as defined, is any person (other than the
corporation or a subsidiary) that is the beneficial owner of 10% or more of
the voting power, or an affiliate or associate of the corporation that at any
time within the five prior years was the beneficial owner of 10% or more of
the voting power. For purposes of the statute, the "share acquisition date" is
the date upon which the person first becomes an interested stockholder of a
corporation. So long as the board of directors does not approve of the
business combination with the interested stockholder, the five-year "blackout"
period, in which the business combination is prohibited, applies, and the
board of directors is required to render its decision within a 30-day period
(or sooner if required by the Securities Exchange Act of 1934).
In addition to the absolute five-year business combination prohibition, the
statute also requires that any business combination between the corporation
and an interested stockholder must satisfy additional statutory conditions.
The board of directors must have approved of the business combination before
the interested stockholder's share acquisition date or a majority of the
outstanding voting stock not beneficially owned by the interested stockholder
must have approved the business combination at a meeting held no earlier than
five years after the interested stockholder's share acquisition date, or the
business combination transaction must meet certain per share values to all
stockholders (keyed to the highest per share price paid by the interested
stockholder within the prior five-year period). All consideration must also be
paid either in cash or in the same form as the interested stockholder has used
to acquire the largest number of shares acquired by it. Furthermore, the
statute requires an interested stockholder to purchase all remaining shares of
stock, if any are purchased, not just one class or series.
Under Chapter 42 of the Indiana corporate law the "control share
acquisition" statute, "control shares" (shares that, in the election of
directors, could exercise or direct the exercise of voting power of one-fifth,
one-third or a majority or more of all of the voting power) of any "issuing
public corporation" (one hundred or more stockholders, principal office or
place of business, or substantial assets within Indiana, or 10% of its
stockholders resident in Indiana) that are acquired in a "control share
acquisition" by an "acquiring person" will be accorded only such voting
rights, after the acquisition, as are specifically conferred by the
stockholders, voting as a group, excluding all "interested shares." If a
person holding "interested shares" engages in a control share acquisition of
control shares, and the stockholders have not acted to specifically grant
those acquired shares the voting rights they had prior to the control share
acquisition, the acquired shares lose their voting rights. A majority of the
shares (excluding interested shares) must be voted to confer voting rights
upon the acquiring person. The only exemption from this statute is if the
corporation's articles of incorporation or its bylaws provide that this
statute does not apply to control share acquisitions of the corporation's
shares, and such provisions must exist prior to the occurrence of any "control
share acquisition." However, the Company does not have such a provision in
either its Articles or in its Bylaws.
34
Furthermore, if the Articles or Bylaws so provide (and the Articles and Bylaws
do not so provide at this time), control shares acquired in a control share
acquisition with respect to which the shares have not been accorded full
voting rights by the stockholders can be redeemed by the corporation at "fair
value." But if in fact the stockholders of the corporation do vote to accord
full voting rights to the acquiring person's control shares, and if the
acquiring person has acquired control with a majority or more of the voting
power, all stockholders of the issuing public corporation are allowed to
invoke dissenters' rights, providing "fair value" to them (defined as not less
than the highest price paid per share by the acquiring person in the control
share acquisition). In order to secure stockholder approval, as required, the
acquiring person must deliver an acquiring person "statement" to the
corporation, setting forth pertinent information concerning the identity of
the acquiring person, the number of shares already owned, the range of voting
power that the control share acquisition seeks, and the terms of the proposed
acquisition. Thereafter, the directors for the issuing public corporation,
within ten days, are required to call a special meeting of the stockholders to
consider the voting rights issue, and the stockholders meeting must be held
within 50 days after receipt of the statement by the issuing public
corporation. The acquiring person can specifically request that the special
stockholders meeting not be held sooner than thirty days after delivery of the
acquiring person's statement to the issuing public corporation. The
corporation's notice of the special stockholders meeting must be accompanied
by the acquiring person's statement, as well as a statement by the Board of
Directors of the corporation, concerning its position or recommendation (or
that it is taking no position or making no recommendation) with respect to the
voting rights issue in the proposed control share acquisition.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is EquiServe Trust
Company, N.A.
PRICE RANGE OF COMMON STOCK
Our common stock is quoted on the Nasdaq National Market under the symbol
"STLD." The following table presents, for the periods indicated, the high and
low sale prices for our common stock as reported on the Nasdaq National
Market.
High Low
------- -------
Year ended December 31, 2001:
First Quarter ............................................ $13.250 $10.000
Second Quarter ........................................... 14.950 10.688
Third Quarter ............................................ 14.950 8.930
Fourth Quarter ........................................... 12.040 9.000
Year ended December 31, 2002:
First Quarter ............................................ $16.890 $11.400
Second Quarter ........................................... 19.300 15.250
Third Quarter ............................................ 18.400 10.610
Fourth Quarter ........................................... 14.690 11.800
2003:
First Quarter ............................................ $ 13.40 $ 9.75
Second Quarter ........................................... $ 14.57 $ 11.10
Third Quarter (through September 15, 2003) ............... $ 16.45 $ 13.33
35
DIVIDEND POLICY
We have never declared or paid cash dividends. We currently anticipate that
all of our future earnings will be retained to finance the expansion of our
business and do not anticipate paying cash dividends in the foreseeable
future. Any determination to pay cash dividends in the future will be 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 plans for expansion. In
addition, the terms of our senior secured credit agreement and the indenture
relating to our 9 1/2% senior notes restrict our ability to pay cash
dividends.
SELLING SECURITYHOLDERS
We initially issued the notes to the initial purchasers of the notes who
then resold the notes in transactions exempt from the registration
requirements of the Securities Act to persons reasonably believed by the
initial purchasers to be "qualified institutional buyers," as defined by Rule
144A under the Securities Act. Selling securityholders, including their
transferees, pledgees, donees and successors, may from time to time offer and
sell pursuant to this prospectus any and all of the notes and shares of common
stock into which the notes are convertible.
No offer or sale under this prospectus may be made by a selling
securityholder unless that holder is listed in the table in this prospectus or
until that holder has notified us and a supplement to this prospectus has been
filed or an amendment to the registration statement of which this prospectus
is a part has become effective. We will supplement or amend this prospectus to
include additional selling securityholders upon request and upon provision of
all required information to us. Information concerning the selling
securityholders may change from time to time, and any changed information will
be set forth in supplements to this prospectus if and when necessary.
The table below sets forth the name of each selling securityholder and the
principal amount of notes and shares of common stock beneficially owned by
each selling securityholder that may be offered pursuant to this prospectus.
Unless set forth below, to our knowledge, none of the selling securityholders
has, or within the past three years has had, any material relationship with us
or any of our predecessors or affiliates.
We have prepared the table below based on information given to us by the
selling securityholders on or prior to September 15, 2003. The selling
securityholders may offer any or all of the notes and shares of common stock
into which the notes are convertible, or the other shares of common stock
listed below. Accordingly, we cannot estimate the amounts of notes or shares
of common stock that will be held by the selling securityholders upon
consummation of any such sales. In addition, the selling securityholders
listed in the table below may have acquired, sold or transferred, in
transactions exempt from the registration requirements of the Securities Act,
some or all of their notes since the date on which they provided to us the
information presented in the table.
The percentage of notes outstanding beneficially owned by each selling
securityholder is based on $115,000,000 aggregate principal amount of notes
outstanding. The number of shares of common stock beneficially owned prior to
the offering includes shares of common stock into which the notes may be
convertible. The number of shares of common stock that may be offered by
holders of notes is based on a conversion rate of 58.8076 shares per $1,000
principal amount of notes and a cash payment in lieu of any fractional share.
The percentage of common stock outstanding beneficially owned and that may be
offered by each selling securityholder, assuming full conversion of all notes
at the foregoing conversion rate, is based on 57,047,676 shares of common
stock deemed to be outstanding on September 15, 2003.
The conversion rate and, therefore, the number of shares of common stock
issuable upon conversion of the notes is subject to adjustment under certain
circumstances. Accordingly, the aggregate principal amount of notes and the
number of shares of common stock into which the notes are convertible may
increase or decrease.
36
4% Convertible Subordinated Notes Due 2012
Selling Securityholders
Principal
Amount Common Percentage
of Notes Percentage Stock Common Stock of Common
that May of Notes Owned Prior to that May Be Stock
Name Be Offered Outstanding the Offering Offered Outstanding
---- ------------ ----------- -------------- ------------ -----------
AIG DKR SoundShore
Opportunity Holding Fund Ltd.(1)................... $ 4,000,000 3.5% 235,230 235,230 *
Akela Capital Master Fund, Ltd.(2).................. $ 8,000,000 7.0% 470,460 470,460 *
Argent Classic Convertible Arbitrage Fund (Bermuda)
Ltd.(3)............................................ $ 1,600,000 1.4% 94,092 94,092 *
Argent Classic Convertible Arbitrage Fund L.P.(4)... $ 900,000 * 52,926 52,926 *
Argent LowLev Convertible Arbitrage Fund LLC(4)..... $ 300,000 * 17,642 17,642 *
Argent LowLev Convertible Arbitrage Fund Ltd.(3).... $ 1,700,000 1.5% 99,972 99,972
#Banc of America Securities LLC(5)................... $ 650,000 * 38,224 38,224
#Bear, Stearns & Co. Inc.(6)......................... $ 1,250,000 1.1% 73,509 73,509 *
BGI Global Investors c/o Forest Investment
Management LLC(7).................................. $ 394,000 * 23,170 23,170 *
+BNP Paribas Equity Strategies, SNC(8)............... $ 6,818,000 5.9% 426,518 400,950 *
CooperNeff Convertible Strategies (Cayman)
Master Fund, LP(9)................................. $ 5,665,000 4.9% 333,145 333,145 *
+DB AG London(10).................................... $ 12,000,000 10.4% 705,691 705,691 1.2%
+D.E. Shaw Investment Group, L.P.(23)................ $ 400,000 * 23,523 23,523 *
+D.E. Shaw Valence Portfolios, L.P.(24).............. $ 1,600,000 1.4% 94,902 94,902 *
#Deutsche Bank Securities Inc.(10)................... $ 5,000,000 4.3% 294,038 294,038 *
#Forest Fulcrum Fund, LLP(7)......................... $ 1,032,000 * 60,689 60,689 *
Forest Global Convertible Fund Series A-5(7)........ $ 4,614,000 4.0% 271,338 271,338 *
Forest Multi-Strategy Master Fund SPC, on behalf of
Series F, Multi-Strategy Segregated Portfolio(7)... $ 534,000 * 31,403 31,403 *
+Grace Convertible Arbitrage Fund, Ltd.(11).......... $ 2,000,000 1.7% 117,615 117,615 *
+KBC Alpha Master Fund A/C KBC Convertible
Opportunities Fund(12)............................. $ 9,000,000 7.8% 529,268 529,268 *
+KBC Convertible Mac 28 Limited(12).................. $ 1,000,000 * 58,807 58,807 *
#KBC Financial Products USA Inc.(13)................. $ 500,000 * 29,403 29,403 *
LLT Limited(7)...................................... $ 371,000 * 21,817 21,817 *
Lyxor Master Fund c/o Forest Investment Management
LLC(7)............................................. $ 1,783,000 1.6% 104,853 104,853 *
Lyxor Master Fund Ref: Argent/LowLev CB c/o
Argent(4).......................................... $ 400,000 * 23,523 23,523 *
Quest Global Convertible Master Fund, Ltd.(14)...... $ 1,250,000 1.1% 73,509 73,509 *
RBC Alternative Assets LP c/o Forest Investment
Management, L.L.C.(7).............................. $ 355,000 * 20,876 20,876 *
Relay 11 Holdings c/o Forest Investment Management,
L.L.C.(7).......................................... $ 198,000 * 11,643 11,643 *
+Royal Bank of Canada(21)............................ $ 3,000,000 2.6% 178,976 178,976 *
Single Hedge US Convertible Arbitrage Fund(25)...... $ 1,107,000 * 65,100 65,100 *
South Dakota Retirement System(15).................. $ 2,000,000 1.7% 117,615 117,615 *
Sphinx Convertible Arbitrage c/o Forest Investment
Management, L.L.C.(7).............................. $ 104,000 * 6,115 6,115 *
Sturgeon Limited (16)............................... $ 1,010,000 * 59,395 59,395 *
+Sunrise Partners Limited Partnership(17)............ $ 11,500,000 10.0% 676,287 676,287 1.2%
Victory Convertible Fund(22)........................ $ 500,000 * 29,403 29,403 *
#White River Securities L.L.C.(18)................... $ 1,250,000 1.1% 73,509 73,509 *
Xavex Risk Arbitrage Fund 2(4)...................... $ 100,000 * 5,880 5,880 *
Zazove Convertible Arbitrage Fund L.P.(19).......... $ 250,000 * 14,701 14,701 *
Zurich Institutional Benchmarks Master Fund Ltd.(20) $ 250,000 * 14,701 14,701 *
Zurich Master Hedge Fund c/o Forest Investment
Management LLC(7).................................. $ 615,000 * 36,166 36,166 *
All other holders of notes or future transferees from
such holders(26)................................... $ 34,475,000 19.2% 1,173,599 1,150,635
TOTALS............................................... $115,000,000 100% 6,788,423(27) 6,762,855(27)
---------------
* Less than 1%
# Broker-dealer
+ Affiliate of broker-dealer
37
(1) DKR Capital Partners L.P. is the registered investment adviser to AIG DKR
SoundShore Opportunity Holding Fund Ltd. Manal Rawal, a Fund portfolio
manager, has shared voting and investment power with respect to these
securities.
(2) Anthony B. Bosco has voting and investment power with respect to these
securities.
(3) Henry J. Cox has voting and investment control with respect to these
securities.
(4) Norman J. Zeigler has voting and investment control with respect to these
securities.
(5) Bank of America Securities LLC is a subsidiary of Bank of America
Corporation, a public company.
(6) Bear, Stearns & Co. Inc. is a registered broker-dealer.
(7) Michael A. Boyd, Jr., Stephen J. DeVoe III and Dominick Aquilio, general
partners of Forest Investment Management LLC have shared voting and
investment power with respect to these securities.
(8) BNP Paribas Equity Strategies, SNC is an affiliate of BNP Paribas S.A., a
foreign public company. BNP Paribas also owns 25,568 shares of common
stock not covered by this prospectus.
(9) CooperNeff (Cayman) Ltd. is the general partner of CooperNeff Convertible
Strategies (Cayman) Master Fund, L.P. The shareholder of CooperNeff
(Cayman) Ltd. that has the power to direct the voting and disposition of
the securities held by CooperNeff (Cayman) Ltd. is CooperNeff Advisors,
Inc., a subsidiary of CooperNeff Group, Inc., which is owned by BNP
Paribas S.A., a foreign public company.
(10) DBAG London and Deutsche Bank Securities Inc. are affiliates of Deutsche
Bank AG, a foreign public company.
(11) Grace Brothers Management LLC has voting and investment control with
respect to these securities. Michael D. Braelor, Bradford T. Whitmore and
Spurgeon Corporation are the owners of Grace Brothers Management LLC.
(12) James Scully has voting and investment control with respect to these
securities.
(13) KBC Financial Products USA Inc. is a subsidiary of KBC Bank N.V., a
foreign public company.
(14) Frank Campane and James Doolin have shared voting and investment control
with respect to these securities.
(15) South Dakota Investment Council is the investment manager for the South
Dakota Retirement System. Chris Huisken and Matthew Clark have shared
voting and investment control over these securities on behalf of the
South Dakota Investment Council.
(16) CooperNeff Advisors, Inc. is the investment advisor for Sturgeon Limited,
with voting and investment control over these securities. CooperNeff
Advisors, Inc. is a subsidiary of CooperNeff Group, Inc., which is owned
by BNP Paribas, S.A., a foreign public company.
(17) Dawn General Partner Corp. is the general partner of Sunrise Partners
Limited Partnership. S. Donald Sussman is the shareholder of Dawn General
Partner Corp., with voting and investment control over these securities.
(18) Yan Erlikh and David Liebowitz have shared voting and investment control
over these securities.
(19) Gene T. Pretti, Chief Executive Officer and Senior Portfolio Manager of
Zazove Associates, LLC, the general partner of Zazove Convertible
Arbitrage Fund L.P., has voting and investment control over these
securities.
(20) Gene T. Pretti, Chief Executive Officer and Senior Portfolio Manager of
Zazove Associates, LLC, has voting and investment control over these
securities.
(21) Royal Bank of Canada is a foreign public company.
(22) Victory Capital Management, a subsidiary of Key Corp., a public company,
has sole voting and investment power with respect to these securities.
(23) D.E. Shaw & Co., L.P. has voting and investment control with respect to
the shares of common stock issuable on conversion of the Notes.
(24) D.E. Shaw & Co., L.P. has voting and investment control with respect to
the shares of common stock issuable on conversion of the Notes.
(25) CooperNeff Advisors, Inc. is the investment manager for this Fund, with
voting and investment power with respect to these securities. CooperNeff
Advisors, Inc. is a subsidiary of CooperNeff Group, Inc., which is owned
by BNP Paribas S.A., a foreign public company.
(26) Other selling securityholders may be identified at a later date. In this
regard, if the names of any of such persons are unavailable when the
registration statement covering the shares held by the foregoing selling
securityholders becomes effective, such future sellers will be identified
by a post-effective amendment to the registration statement.
(27) Excludes fractional shares payable in cash.
38
Other Selling Securityholders
Number of Shares
Number of Shares Number of Shares of Common Stock
of Common Stock of Common Stock Owned After
Name Owned Prior to to be Sold in this Completion of the
---- this Offering Offering Offering
---------------- ------------------ -----------------
+GE Capital CFE, Inc................................................. 907,650(1) 436,150(2) 471,500(1)
---------------
(1) Includes 471,500 shares of common stock owned by General Electric Capital
Corporation, which are not being offered hereby.
(2) Shares originally registered under Registration Statement No. 333-82210,
effective February 28, 2002.
PLAN OF DISTRIBUTION
The selling securityholders described in the preceding section and their
transferees, pledgees, donees and successors may sell the notes and the
underlying shares of common stock or the other shares of common stock directly
to purchasers or through underwriters, broker-dealers or agents, who may
receive compensation in the form of discounts, concessions or commissions from
the selling securityholders or the purchasers. These discounts, concessions or
commissions as to any particular underwriter, broker-dealer or agent may be in
excess of those customary in the types of transactions involved.
The notes and the common stock may be sold in one or more transactions at:
o fixed prices;
o prevailing market prices at the time of sale;
o prices related to the prevailing market prices;
o varying prices determined at the time of sale; or
o negotiated prices.
In the case of common stock, these sales may be effected in transactions:
o on any national securities exchange or quotation service on which our
common stock may be listed or quoted at the time of sale, including The
Nasdaq National Market;
o in the over-the-counter market;
o otherwise than on such exchanges or services or in the over-the-counter
market;
o through the writing of options, whether the options are listed on an
options exchange or otherwise; or
o through the settlement of short sales.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as agent on both sides of the
trade.
In connection with the sale of the notes and the underlying common stock, or
otherwise, the selling securityholders may enter into hedging transactions
with broker-dealers or other financial institutions. These broker-dealers or
financial institutions may in turn engage in short sales of the common stock
in the course of hedging the positions they assume with the selling
securityholders. The selling security holders may also sell the notes and the
underlying common stock short and deliver these securities to close out such
short positions, or loan or pledge the notes or the underlying common stock to
broker-dealers that in turn may sell these securities.
Selling securityholders may not sell any, or may not sell all, of the notes
and shares of common stock offered by them pursuant to this prospectus. In
addition, we cannot assure you that a selling security holder will not
transfer, devise or gift the notes and underlying shares of common stock by
other means not
39
described in this prospectus. Moreover, any securities covered by this
prospectus that qualify for sale pursuant to Rule 144 or Rule 144A under the
Securities Act may be sold thereunder, rather than pursuant to this
prospectus.
The aggregate proceeds to the selling securityholders from the sale of the
notes or the underlying common stock offered pursuant to this prospectus will
be the purchase price of such securities less discounts and commissions, if
any. Each of the selling securityholders reserves the right to accept and,
together with their agents from time to time, reject in whole or in part any
proposed purchase of notes or common stock to be made directly or through
their agents. We will not receive any of the proceeds from the resale by the
selling securityholders of the notes or the common stock issuable upon
conversion of the notes.
The notes are eligible for trading on The PORTAL Market. However, notes sold
pursuant to this prospectus will no longer be eligible for trading on The
PORTAL Market. We do not intend to list the notes on any securities exchange
or automated quotation system. Our common stock is listed for trading on The
Nasdaq National Market under the symbol "STLD."
In order to comply with the securities laws of some states, if applicable,
the notes and the underlying common stock may be sold in these jurisdictions
only through registered or licensed brokers or dealers. In addition, in some
states the notes may not be sold unless they have been registered or qualified
for sale or an exemption from registration or qualifications requirements is
available and secured.
The selling securityholders identified by the symbol "#" in the table in the
preceding section are broker-dealers, and, as such they are underwriters
within the meaning of Section 2(a)(11) of the Securities Act with respect to
the shares each of them may offer for sale, and subject to the prospectus
delivery requirements of the Securities Act as well as to statutory
liabilities, including, but not limited to, liabilities under Sections 11, 12
and 17 of the Securities Act. With respect to selling securityholders that are
affiliates of broker-dealers, identified by the symbol "+" in the table in the
preceding section, we believe that such entities acquired their notes or
underlying common stock in the ordinary course of business, and at the time of
the purchase such selling securityholders had no agreements or understandings,
directly or indirectly, with any person to distribute the notes or underlying
common stock. To the extent that we become aware that any such entities did
not acquire their notes or underlying common stock in the ordinary course of
business or did have such an agreement or understanding, we will file a post-
effective amendment to the registration statement of which this prospectus
forms a part to designate such affiliate as an underwriter within the meaning
of the Securities Act.
In the event that a selling securityholder and any broker-dealers, agents or
underwriters that participate in the distribution of the notes and the
underlying common stock are underwriters within the meaning of the Securities
Act, any profits realized by the selling securityholders and any discounts,
commissions or concessions received by these broker-dealers, agents or
underwriters may be deemed to be underwriting discounts or commissions under
the Securities Act.
The selling securityholders and any other persons participating in the
distribution of the notes and the underlying common stock will be subject to
applicable provisions of the Securities Exchange Act of 1934 and the rules and
regulations thereunder. Regulation M of the Exchange Act may limit the timing
of purchasers and sales of the notes and underlying common stock by the
selling securityholders and any such other person. In addition, Regulation M
may restrict the ability of any person participating in the distribution to
engage in market-making activities with respect to the particular securities
being distributed for a period of up to five business days prior to the
commencement of the distribution. This may affect the marketability of the
notes and the underlying common stock.
With respect to a particular offering of the notes and underlying common
stock, to the extent required, an accompanying prospectus supplement or, if
appropriate, a post-effective amendment to the registration statement, of
which this prospectus is a part, will set forth the following information:
o the specific notes or common stock to be offered or sold;
o the names of the selling securityholders;
o the respective purchase prices and public offering prices and other
material terms of the offering;
40
o the names of any participating agents, broker-dealers or underwriters;
and
o any applicable commissions, discounts, concessions and other items
constituting compensation from the selling securityholders.
We entered into the registration rights agreement for the benefit of the
holders of the notes to register their notes and the underlying common stock
under applicable federal and state securities laws under certain circumstances
and at certain times. The registration rights agreement provides that we and
the selling securityholders will indemnify each other and our respective
directors, officers and controlling persons against specific liabilities in
connection with the offer and sale of the notes and underlying common stock,
including liabilities under the Securities Act, or will be entitled to
contribution in connection with those liabilities. We will pay all of our
expenses and specified expenses incurred by the selling securityholders
incidental to the registration, offering and sale of the notes and underlying
common stock to the public, but each selling securityholder will be
responsible for the payment of commissions, concessions, fees and discounts of
underwriters, broker-dealers and agents. We estimate that the total expenses
of this offering payable by us will be approximately $136,804.
We will use our reasonable best efforts to keep the registration statement,
of which this prospectus is a part, effective until the earlier of:
o the sale pursuant to the registration statement of all of the securities
registered thereunder; or
o the expiration of the holding period under Rule 144(k) under the
Securities Act, or any successor provision.
We are permitted to suspend the use of this prospectus under specified
circumstances relating to pending corporate developments, public filings with
the SEC and similar events for a period not to exceed 30 days in any three-
month period, but not to exceed an aggregate of 90 days for all periods in any
12-month period. In addition, notwithstanding the foregoing, we are permitted
to suspend the use of this prospectus for up to 60 days in any three-month
period under certain circumstances relating to possible acquisitions,
financings or other similar transactions. We will pay predetermined liquidated
damages if this prospectus is unavailable for periods in excess of those
permitted as described above.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
General
This is a summary of certain United States federal income tax consequences
relevant to holders of the notes. This summary is based upon laws,
regulations, rulings and decisions now in effect, all of which are subject to
change (including retroactive changes) or possible differing interpretations.
The discussion below deals only with notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, tax-exempt entities, persons holding the notes in a
tax-deferred or tax-advantaged account, or persons holding the notes as a
hedge against currency risks, as a position in a "straddle" or as part of a
"hedging" or "conversion" transaction for tax purposes.
We do not address all of the tax consequences that may be relevant to an
investor in the notes. In particular, we do not address:
o the United States federal income tax consequences to shareholders in, or
partners or beneficiaries of, an entity that is a holder of the notes;
o the United States federal estate, gift or alternative minimum tax
consequences of the purchase, ownership or disposition of the notes;
o persons who hold the notes whose functional currency is not the United
States dollar;
o any state, local or foreign tax consequences of the purchase, ownership
or disposition of the notes; or
41
o any United States federal, state, local or foreign tax consequences of
owning or disposing of our common stock.
Persons considering the purchase of the notes should consult their own tax
advisors concerning the application of the United States federal income tax
laws to their particular situations as well as any consequences of the
purchase, ownership and disposition of the notes arising under the laws of any
other taxing jurisdiction.
A U.S. holder is a beneficial owner of the notes who or which is:
o a citizen or individual resident of the United States, as defined in
Section 7701(b) of the Internal Revenue Code of 1986, as amended (which
we refer to as the Code);
o a corporation or partnership, including any entity treated as a
corporation or partnership for United States federal income tax purposes,
created or organized in or under the laws of the United States, any state
thereof or the District of Columbia unless, in the case of a partnership,
Treasury Regulations are enacted that provide otherwise;
o an estate if its income is subject to United States federal income
taxation regardless of its source; or
o a trust if (1) a United States court can exercise primary supervision
over its administration, and (2) one or more United States persons have
the authority to control all of its substantial decisions.
Notwithstanding the preceding sentence, certain trusts in existence on
August 20, 1996, and treated as U.S. persons prior to such date, may also be
treated as U.S. holders. A Non-U.S. holder is a beneficial owner of the notes
other than a U.S. holder.
No statutory or judicial authority directly addresses the treatment of the
notes or instruments similar to the notes for United States federal income tax
purposes. The Internal Revenue Service (the "IRS") has recently issued a
revenue ruling with respect to instruments similar to the notes. To the extent
it addresses the issue, this ruling supports certain aspects of the treatment
described below. No ruling has been or is expected to be sought from the IRS
with respect to the United States federal income tax consequences of the
issues that are not addressed in the recently released revenue ruling. The IRS
would not be precluded from taking contrary positions. As a result, no
assurance can be given that the IRS will agree with all of the tax
characterizations and the tax consequences described below.
We urge prospective investors to consult their own tax advisors with respect
to the tax consequences to them of the purchase, ownership and disposition of
the notes and our common stock in light of their own particular circumstances,
including the tax consequences under state, local, foreign and other tax laws
and the possible effects of changes in United States federal or other tax
laws.
Classification of the Notes
We have received an opinion from our special tax counsel, Sidley Austin
Brown & Wood LLP, that the notes will be treated as indebtedness for United
States federal income tax purposes and that the notes will be subject to the
special regulations governing contingent payment debt instruments (which we
refer to as the CPDI regulations). Pursuant to the terms of the indenture, we
and each holder of the notes agree, for United States federal income tax
purposes, to treat the notes as debt instruments that are subject to the CPDI
regulations, and the remainder of this discussion assumes that the notes will
be so treated.
In addition, under the indenture, each holder will be deemed to have agreed
to treat the fair market value of our common stock received by such holder
upon conversion as a contingent payment and to accrue interest with respect to
the notes as original issue discount for United States federal income tax
purposes according to the "noncontingent bond method," set forth in section
1.1275-4(b) of the Treasury Regulations, using the comparable yield (as
defined below) compounded semiannually and the projected payment schedule (as
defined below) determined by us. Notwithstanding the issuance of the recent
revenue ruling, the application of the CPDI regulations to instruments such as
the notes is uncertain in several respects, and, as a result, no assurance can
be given that the IRS or a court will agree with the treatment described
herein. Any differing treatment could affect the amount, timing and character
of income, gain or loss in respect of an investment in
42
the notes. In particular, a holder might be required to accrue interest income
at a higher or lower rate, might not recognize income, gain or loss upon
conversion of the notes into shares of our common stock, and might recognize
capital gain or loss upon a taxable disposition of the notes. Holders should
consult their tax advisors concerning the tax treatment of holding the notes.
Accrual of Interest on the Notes
Pursuant to the CPDI regulations, a U.S. holder will be required to accrue
interest income on the notes, which we refer to as tax original issue
discount, in the amounts described below, regardless of whether the U.S.
holder uses the cash or accrual method of tax accounting. Accordingly, U.S.
holders will likely be required to include interest in taxable income in each
year in excess of the accruals on the notes for non-tax purposes (i.e., in
excess of the stated semi-annual cash interest payable on the notes and any
contingent interest payments) actually received in that year.
The CPDI regulations provide that a U.S. holder must accrue an amount of
ordinary interest income, as original issue discount for United States federal
income tax purposes, for each accrual period prior to and including the
maturity date of the notes that equals:
(1) the product of (i) the adjusted issue price (as defined below) of
the notes as of the beginning of the accrual period and (ii) the
comparable yield (as defined below) of the notes, adjusted for the
length of the accrual period;
(2) divided by the number of days in the accrual period; and
(3) multiplied by the number of days during the accrual period that the
U.S. holder held the notes.
The notes' issue price is the first price at which a substantial amount of
the notes is sold to the public, excluding sales to bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers. The adjusted issue price of a note is its
issue price increased by any interest income previously accrued, determined
without regard to any adjustments to interest accruals described below, and
decreased by the projected amount of any projected payments (as defined below)
previously made (including payments of stated cash interest) with respect to
the notes.
Sidley Austin Brown & Wood LLP, our special tax counsel, has advised us that
the term "comparable yield" means the annual yield we would pay, as of the
initial issue date, on a noncontingent, nonconvertible, Fixed-rate debt
instrument with terms and conditions otherwise comparable to those of the
notes. Based in part on that advice, we intend to take the position that the
comparable yield for the notes is 9.25%, compounded semiannually. The precise
manner of calculating the comparable yield, however, is not entirely clear. If
the comparable yield were successfully challenged by the IRS, the redetermined
yield could be materially greater or less than the comparable yield provided
by us. Moreover, the projected payment schedule could differ materially from
the projected payment schedule provided by us.
The CPDI regulations require that we provide to U.S. holders, solely for
United States federal income tax purposes, a schedule of the projected amounts
of payments, which we refer to as projected payments, on the notes. This
schedule must produce the comparable yield. The projected payment schedule
includes the semi-annual stated cash interest payable on the notes at the rate
of 4.0% per annum, estimates for certain contingent interest payments and an
estimate for a payment at maturity taking into account the conversion feature.
In this connection, the fair market value of any common stock (and cash, if
any) received by a holder upon conversion will be treated as a contingent
payment.
The comparable yield and the schedule of projected payments will be set
forth in the indenture. U.S. holders may also obtain the projected payment
schedule by submitting a written request for such information to: Steel
Dynamics, Inc., 6714 Pointe Inverness Way, Suite 200, Fort Wayne, Indiana
46804, Attention: Tracy L. Shellabarger, Chief Financial Officer.
The comparable yield and the schedule of projected payments are not
determined for any purpose other than for the determination of a U.S. holder's
interest accruals and adjustments thereof in respect of the notes for United
States federal income tax purposes and do not constitute a projection or
representation regarding the actual amounts payable on the notes.
43
Amounts treated as interest under the CPDI regulations are treated as
original issue discount for all purposes of the Code.
Adjustments to Interest Accruals on the Notes
As noted above, the projected payment schedule includes amounts attributable
to the stated semi-annual cash interest payable on the notes. Accordingly, the
receipt of the stated semi-annual cash interest payments will not be
separately taxable to U.S. holders. If, during any taxable year, a U.S. holder
receives actual payments with respect to the notes for that taxable year that
in the aggregate exceed the total amount of projected payments for that
taxable year, the U.S. holder will incur a "net positive adjustment" under the
CPDI regulations equal to the amount of such excess. The U.S. holder will
treat a "net positive adjustment" as additional interest income. For this
purpose, the payments in a taxable year include the fair market value of
property received in that year, including the fair market value of our common
stock received upon conversion.
If a U.S. holder receives in a taxable year actual payments with respect to
the notes for that taxable year that in the aggregate were less than the
amount of projected payments for that taxable year, the U.S. holder will incur
a "net negative adjustment" under the CPDI regulations equal to the amount of
such deficit. This adjustment will (a) first reduce the U.S. holder's interest
income on the notes for that taxable year and (b) to the extent of any excess
after the application of (a), give rise to an ordinary loss to the extent of
the U.S. holder's interest income on the notes during prior taxable years,
reduced to the extent such interest was offset by prior net negative
adjustments. A negative adjustment is not subject to the two percent floor
limitation imposed on miscellaneous itemized deductions under Section 67 of
the Code. Any negative adjustment in excess of the amounts described in (a)
and (b) will be carried forward and treated as a negative adjustment in the
succeeding taxable year and will offset future interest income accruals in
respect of the notes or will reduce the amount realized on the sale, exchange,
purchase by us at the holder's option, conversion, redemption or retirement of
the notes.
If a U.S. holder purchases notes at a discount or premium to the adjusted
issue price, the discount will be treated as a positive adjustment and the
premium will be treated as a negative adjustment. The U.S. holder must
reasonably allocate the adjustment over the remaining term of the notes by
reference to the accruals of original issue discount at the comparable yield
or to the projected payments. It may be reasonable to allocate the adjustment
over the remaining term of the notes pro rata with the accruals of original
issue discount at the comparable yield. You should consult your tax advisors
regarding these allocations.
Sale, Exchange, Conversion or Redemption
Generally, the sale or exchange of a note, the purchase of a note by us at
the holder's option, or the redemption or retirement of a note for cash, will
result in taxable gain or loss to a U.S. holder. As described above, our
calculation of the comparable yield and the schedule of projected payments for
the notes includes the receipt of common stock upon conversion as a contingent
payment with respect to the notes. Accordingly, we intend to treat the receipt
of our common stock by a U.S. holder upon the conversion of a note as a
contingent payment under the CPDI Regulations. Under this treatment,
conversion also would result in taxable gain or loss to the U.S. holder. As
described above, holders will be deemed to have agreed to be bound by our
determination of the comparable yield and the schedule of projected payments.
The amount of gain or loss on a taxable sale, exchange, purchase by us at
the holder's option, conversion, redemption or retirement would be equal to
the difference between (a) the amount of cash plus the fair market value of
any other property received by the U.S. holder, including the fair market
value of any of our common stock received, and (b) the U.S. holder's adjusted
tax basis in the note. A U.S. holder's adjusted tax basis in a note will
generally be equal to the U.S. holder's original purchase price for the note,
increased by any interest income previously accrued by the U.S. holder
(determined without regard to any adjustments to interest accruals described
above, other than adjustments to reflect a discount or premium to the adjusted
issue price, if any), and decreased by the amount of any projected payments
that have been previously made in respect of the notes to the U.S. holder
(without regard to the actual amount paid). Gain recognized upon a sale,
exchange, purchase by us at the holder's option, conversion, redemption or
retirement
44
of a note will generally be treated as ordinary interest income; any loss will
be ordinary loss to the extent of interest previously included in income, and
thereafter, capital loss (which will be long-term if the note is held for more
than one year). The deductibility of net capital losses by individuals and
corporations is subject to limitations.
A U.S. holder's tax basis in our common stock received upon a conversion of
a note will equal the then current fair market value of such common stock. The
U.S. holder's holding period for the common stock received will commence on
the day immediately following the date of conversion.
Constructive Dividends
If at any time we were to make a distribution of property to our
stockholders that would be taxable to the stockholders as a dividend for
United States federal income tax purposes and, in accordance with the
antidilution provisions of the notes, the conversion rate of the notes were
increased, such increase might be deemed to be the payment of a taxable
dividend to holders of the notes.
For example, an increase in the conversion rate in the event of
distributions of our evidences of indebtedness, or assets, or an increase in
the event of an extraordinary cash dividend may result in deemed dividend
treatment to holders of the notes, but generally an increase in the event of
stock dividends or the distribution of rights to subscribe for common stock
would not be so treated.
Liquidated Damages
We may be required to make payments of liquidated damages if the shelf
registration statement is not timely filed or made effective or if the
prospectus is unavailable for periods in excess of those permitted by the
registration rights agreement, as described under "Description of Notes --
Registration Rights of the Noteholders." We intend to take the position for
United States federal income tax purposes that any payments of liquidated
damages should be taxable to U.S. holders as additional ordinary income when
received or accrued, in accordance with their method of tax accounting. Our
determination is binding on holders of the notes, unless they explicitly
disclose that they are taking a different position to the IRS on their tax
returns for the year during which they acquire the note. The IRS could take a
contrary position from that described above, which could affect the timing and
character of U.S. holders' income from the notes with respect to the payments
of liquidated damages.
U.S. holders should consult their tax advisers concerning the appropriate
tax treatment of the payment of liquidated damages, if any, with respect to
the notes.
Treatment of Non-U.S. Holders
All payments on the notes made to a Non-U.S. holder will be exempt from
United States income or withholding tax provided that: (i) such Non-U.S.
holder does not own, actually, indirectly or constructively, 10% or more of
the total combined voting power of all classes of our stock entitled to vote,
and is not a controlled foreign corporation related, directly or indirectly,
to us through stock ownership; (ii) the statement requirement set forth in
section 871(h) or section 881(c) of the Code has been fulfilled with respect
to the beneficial owner, as discussed below; (iii) such payments and gain are
not effectively connected with the conduct by such Non-U.S. holder of a trade
or business in the United States; (iv) our common stock continues to be, and
the notes are, actively traded within the meaning of section
871(h)(4)(C)(v)(I) of the Code (which, for these purposes and subject to
certain exceptions, includes trading on the Nasdaq National Market); and (v)
we are not a "United States real property holding corporation." We believe
that we are not and do not anticipate becoming a "United States real property
holding corporation." However, if a Non-U.S. holder were deemed to have
received a constructive dividend (see "-- Constructive Dividends" above), the
Non-U.S. holder will generally be subject to United States federal withholding
tax at a 30% rate, subject to a reduction by an applicable treaty, on the
taxable amount of such dividend.
The statement requirement referred to in the preceding paragraph will be
fulfilled if the beneficial owner of a note certifies on IRS Form W-8BEN,
under penalties of perjury, that it is not a United States person and provides
its name and address or otherwise satisfies applicable documentation
requirements. A holder of a
45
note which is not an individual or corporation (or an entity treated as a
corporation for United States federal income tax purposes) holding the notes
on its own behalf may have substantially increased reporting requirements. In
particular, in the case of notes held by a foreign partnership (or certain
foreign trusts), the partnership (or trust) will be required to provide the
certification from each of its partners (or beneficiaries), and the
partnership (or trust) will be required to provide certain additional
information. If a Non-U.S. holder of the notes is engaged in a trade or
business in the United States, and if interest on the notes is effectively
connected with the conduct of such trade or business, the Non-U.S. holder,
although exempt from the withholding tax discussed in the preceding
paragraphs, will generally be subject to regular United States federal income
tax on interest and on any gain realized on the sale, exchange, purchase by us
at the holder's option, conversion, redemption or retirement of the notes in
the same manner as if it were a U.S. holder. In lieu of the certificate
described in the preceding paragraph, such a Non-U .S. holder would be
required to provide to the withholding agent a properly executed IRS Form W-
8ECI (or successor form) in order to claim an exemption from withholding tax.
In addition, if such a Non-U.S. holder is a foreign corporation, such holder
may be subject to a branch profits tax equal to 30% (or such lower rate
provided by an applicable treaty) of its effectively connected earnings and
profits for the taxable year, subject to certain adjustments.
Backup Withholding Tax and Information Reporting
Payments of principal, premium, if any, and interest (including original
issue discount and a payment in common stock pursuant to a conversion of the
notes) on, and the proceeds of dispositions of, the notes may be subject to
information reporting and United States federal backup withholding tax at the
applicable statutory rate if the U.S. holder thereof fails to supply an
accurate taxpayer identification number or otherwise fails to comply with
applicable United States information reporting or certification requirements.
A Non-U.S. holder may be subject to United States backup withholding tax on
payments on the notes and the proceeds from a sale or other disposition of the
notes unless the Non-U.S. holder complies with certification procedures to
establish that it is not a United States person. Any amounts so withheld will
be allowed as a credit against a holder's United States federal income tax
liability and may entitle a holder to a refund, provided the required
information is timely furnished to the IRS.
CERTAIN ERISA CONSIDERATIONS
The following is a summary of certain considerations associated with the
purchase of the notes by employee benefit plans that are subject to Title I of
the U.S. Employee Retirement Income Security Act of 1974, as amended, known as
"ERISA," individual retirement accounts and other arrangements that are
subject to Section 4975 of the Code or provisions under any federal, state,
local, non-U.S. or other laws or regulations that are similar to such
provisions of the Code or ERISA, as well as entities whose underlying assets
are considered to include "assets" of such plans, accounts and arrangements,
each of which we will refer to as a "Plan."
General Fiduciary Matters
ERISA and the Code impose certain duties on persons who are fiduciaries of a
Plan subject to Title I of ERISA or Section 4975 of the Code (an "ERISA Plan")
and prohibit certain transactions involving the assets of an ERISA Plan and
certain "parties in interest," within the meaning of ERISA, or "disqualified
persons," within the meaning of Section 4975 of the Code.
In considering an investment in the notes of a portion of the assets of any
Plan, a fiduciary should determine whether the investment is in accordance
with the documents and instruments governing the Plan and the applicable
provisions of ERISA, the Code or any similar law relating to a fiduciary's
duties to the Plan, including without limitation, the prudence,
diversification, delegation of control and prohibited transaction provisions
of ERISA, the Code and any other similar applicable laws.
Any insurance company proposing to invest assets of its general account in
the notes should consider the extent that such investment would be subject to
the requirements of ERISA in light of the U.S. Supreme Court's decision in
John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank and
under any
46
subsequent legislation or other guidance that has or may become available
relating to that decision, including the enactment of Section 401(c) of ERISA
by the Small Business Job Protection Act of 1996 and the regulations
promulgated thereunder.
Prohibited Transaction Issues
Section 406 of ERISA and Section 4975 of the Code prohibit ERISA Plans from
engaging in specified transactions involving plan assets with persons or
entities who are parties in interest or disqualified persons, unless an
exemption is available. A party in interest or disqualified person who engaged
in a non-exempt prohibited transaction may be subject to excise taxes and
other penalties and liabilities under ERISA and the Code. The acquisition and/
or holding of notes by an ERISA Plan with respect to which we, or the initial
purchasers, are considered a party in interest or a disqualified person may
constitute or result in a direct or indirect prohibited transaction under
Section 406 of ERISA and/or Section 4975 of the Code, unless the investment is
acquired and is held in accordance with an applicable statutory, class or
individual prohibited transaction exemption. In this regard, the U.S.
Department of Labor has issued prohibited transaction class exemptions, or
"PTCEs," that may apply to the acquisition and holding of the notes. These
class exemptions include, without limitation, PTCE 84-14 respecting
transactions determined by independent qualified professional asset managers,
PTCE 90-1 respecting insurance company pooled separate accounts, PTCE 91-38
respecting bank collective investment trust funds, PTCE 95-60 respecting life
insurance company general accounts and PTCE 96-23 respecting transactions
determined by in-house asset managers, although there can be no assurance that
the conditions of any such exemptions will be satisfied.
Deemed Representations
Because of the foregoing, the notes should not be purchased or held by any
person investing assets of any Plan, unless such purchase and holding will not
constitute a non-exempt prohibited transaction under ERISA and the Code or
similar violation of any applicable similar laws. Accordingly, by acceptance
of a note, each purchaser and subsequent transferee of a note will be deemed
to represent and warrant that it is not using assets of a Plan to purchase or
hold the notes or that its purchase and holding of the notes will be covered
by an applicable prohibited transaction exemption.
The foregoing discussion is general in nature and is not intended to be all
inclusive. Due to the complexity of these rules and the penalties that may be
imposed upon persons involved in non-exempt prohibited transactions, it is
particularly important that fiduciaries, or other persons considering
purchasing the notes on behalf of, or with the assets of, any Plan, consult
with their counsel regarding the potential applicability of ERISA, Section 4975
of the Code and any similar laws to such investment and whether an exemption
would be applicable to the purchase and holding of the notes.
LEGAL MATTERS
The validity of the notes and the shares of our common stock issuable upon
conversion of the notes have been passed upon for us by Barrett & McNagny LLP,
Fort Wayne, Indiana. Members of the Firm of Barrett & McNagny LLP own shares
of our common stock amounting to less than one-half of 1% of our outstanding
shares. Sidley Austin Brown & Wood LLP, New York, New York has rendered an
opinion for us with respect to certain federal income tax consequences of the
notes.
EXPERTS
The consolidated Financial statements of Steel Dynamics, Inc. appearing in
Steel Dynamics, Inc.'s Annual Report (Form 10-K) for the year ended
December 31, 2002 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
47
WHERE YOU CAN FIND MORE INFORMATION
We File annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
materials that we have filed with the Securities and Exchange Commission at
the Securities and Exchange Commission's public reference room at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549. Please call the Securities
and Exchange Commission at 1-800-SEC-0330 for further information on the
public reference room. Our Securities and Exchange Commission filings are also
available to the public on the Securities and Exchange Commission's Internet
website at http://www.sec.gov.
Our common stock is quoted on Nasdaq National Market under the symbol
"STLD," and our Securities and Exchange Commission filings can also be read at
Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
You may find additional information about us at our website at http://
www.steeldynamics.com. The information on our website, however, is not a part
of this prospectus.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with the SEC, which means that we can disclose important
information to you by referring you to those documents. Any information
referenced this way is considered to be a part of this prospectus, and any
information that we later file with the SEC will automatically update and
supersede this information. We incorporate by reference into this prospectus
the following documents that we have previously filed with the SEC and any
future filings that we make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this prospectus until all of the
securities covered by this prospectus are sold by the selling securityholders:
o Our Annual Report on Form 10-K for our fiscal year ended December 31,
2002.
o Our Quarterly Reports on Form 10-Q for our fiscal quarters ended March 31,
2003 and June 30, 2003.
o Our definitive proxy statement filed on April 23, 2003.
o Our Reports on Form 8-K filed January 2, 2003, February 4, 2003, March 28,
2003, April 23, 2003, and July 22, 2003.
o Description of Registrant's common stock, incorporated by reference from
Exhibit 4.1 of Registrant's Form 8-A, SEC File No. 96661016, filed
November 13, 1996.
You may request a copy of these filings, at no cost, by writing to or
telephoning us at the following address:
Steel Dynamics, Inc.
6714 Pointe Inverness Way
Suite 200
Fort Wayne, Indiana 46804
Tel No: (260) 459-3553
Attention: Tracy L. Shellabarger
Chief Financial Officer
48
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by the
Registrant in connection with the registration and resales of the 4%
Convertible Subordinated Notes due 2012 and the shares of common stock into
which the notes are convertible. All of the amounts shown are estimates,
except the SEC registration fee and The Nasdaq Stock Market subsequent listing
fee. The Nasdaq Stock Market subsequent listing fee assumes the debentures are
converted into 6,762,874 shares of common stock.
Estimated
Expense Amount
------- ---------
Securities and Exchange Commission registration fee ................ $ 9,304
The Nasdaq Stock Market subsequent listing fee ..................... 7,500
Legal fees and expenses ............................................ 50,000
Accounting fees and expenses ....................................... 10,000
Trustee fees ....................................................... 20,000
Printing fees and expenses ......................................... 30,000
Miscellaneous expenses ............................................. 10,000
--------
Total ........................................................... $136,804
Item 15. Indemnification of Directors and Officers
As permitted by Chapter 37 of the Indiana Business Corporation Law, Article
IX of our Amended and Restated Articles of Incorporation provides that we
shall indemnify a director or officer against liability, including expenses
and costs of defense, incurred in any proceeding, if that individual was made
a party to the proceeding because the individual is or was a director or
officer, or, at our request, was serving as a director, officer, partner,
trustee, employee, or agent of another corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise, whether or not for
profit, so long as the individual's conduct was in good faith and with the
reasonable belief, in connection with the individual's "official capacity,"
that the conduct was in our best interests, or, in all other cases, that the
conduct was at least not opposed to our best interests. In the case of any
criminal proceeding, the duty to indemnify applies so long as the individual
either had reasonable cause to believe that the conduct was lawful, or had no
reasonable cause to believe that the conduct was unlawful. Conduct with
respect to an employee benefit plan in connection with a matter the individual
believed to be in the best interests of the participants and beneficiaries of
the plan is deemed conduct that satisfies the indemnification standard that
the individual reasonably believed that the conduct was at least not opposed
to our best interests.
We may advance or reimburse for reasonable expenses incurred by a person
entitled to indemnification, in advance of final disposition, if the
individual furnishes us with a written affirmation of his or her good faith
belief that the applicable standard of conduct was observed, accompanied by a
written undertaking to repay the advance if it is ultimately determined that
the applicable standards were not met.
In all cases, whether in connection with advancement of expenses during a
proceeding, or afterward, we may not grant indemnification unless authorized
in the specific case after a determination has been made that indemnification
is permissible under the circumstances. The determination may be made either
by our board of directors, by majority vote of a quorum consisting of
directors not at the time parties to the proceeding, or, if a quorum cannot be
so obtained, then by majority vote of a committee duly designated by the board
of directors consisting solely of two or more directors not at the time
parties to the proceeding. Alternatively, the determination can be made by
special legal counsel selected by the board of directors or the committee, or
by the stockholders, excluding shares owned by or voted under the control of
persons who are at the time parties to the proceeding. In the event that a
person seeking indemnification believes that it has not been properly provided
that person may apply for indemnification to the court conducting the
proceeding or to another court of competent jurisdiction. In such a
proceeding, a court is empowered to grant indemnification
49
if it determines that the person is fairly and reasonably entitled to
indemnification in view of all of the relevant circumstances, whether or not
the person met the standard of conduct for indemnification.
We may purchase and maintain insurance on behalf of our directors, officers,
employees or agents, insuring against liability arising from his or her status
as a director, officer, employee, or agent, whether or not we would have the
power to indemnify the individual against the same liability under Article IX.
Article IX does not preclude us from providing indemnification in any other
manner.
The indemnification provisions set forth in Article IX of the Amended and
Restated Articles of Incorporation, as well as the authority vested in our
board of directors by Chapter 37 of the Business Corporation Law to grant
indemnification beyond that which is described in Article IX, may be
sufficiently broad to provide indemnification of our directors and officers
for liabilities arising under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant
to the foregoing provisions, we have been advised that in the opinion of the
SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities, other than the payment of expenses
incurred or paid by a director, officer or controlling person in the
successful defense of any action, suit or proceeding, is asserted by such
director, officer or controlling person in connection with the securities
being registered, we will, unless in the opinion of our counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by us is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
We have obtained liability insurance for the benefit of our directors and
officers which provides coverage for losses of directors and officers for
liabilities arising out of claims against such persons acting as our officers
or directors, or any of our subsidiaries, due to any breach of duty, neglect,
error, misstatement, misleading statement, omission or act done by such
directors and officers, except as prohibited by law.
Item 16. Exhibits
(A) Exhibits.
Exhibit No. Description
----------- -----------
2.1 Agreement (Settlement Agreement), dated as of January 28, 2002, by and among Iron Dynamics, Inc., Steel Dynamics,
Inc., various signatory lender banks, and Mellon Bank, N.A. as Agent for the Iron Dynamics lenders, incorporated by
reference from Exhibit 2.1 to our Report on Form 8-K, Filed February 26, 2002.
3.1a Amended and Restated Articles of Incorporation of Steel Dynamics, Inc., incorporated by reference from Exhibit 3.1a
in Registrant's Registration Statement on Form S-1, SEC File No. 333-12521, effective November 21, 1996.
3.1b Articles of Incorporation of Iron Dynamics, Inc., incorporated by reference from Registrant's 1996 Annual Report on
Form 10-K, filed March 31, 1997.
3.2a Amended Bylaws of Steel Dynamics, Inc., incorporated herein by reference from Exhibit 3.2a to our Registration
Statement on Form S-3, SEC File No. 333-82210, effective February 28, 2002.
4.1c* Registration Rights Agreement between Steel Dynamics, Inc. as Issuer and Morgan Stanley & Co. Incorporated and
Goldman, Sachs & Co. as Initial Purchasers, dated as of December 23, 2002, re $100,000,000 of our 4% Convertible
Subordinated Notes due 2012.
4.2a* Indenture relating to our 4% Convertible Subordinated Notes due 2012, dated as of December 23, 2002, between Steel
Dynamics, Inc. and Fifth Third Bank, Indiana as Trustee.
5.1* Opinion of Barrett & McNagny LLP.
8.1* Opinion of Sidley Austin Brown & Wood LLP.
12.1* Statement re computation of ratios of earnings to fixed charges for each year in the six-year period ended
December 31, 2002.
50
Exhibit No. Description
----------- -----------
23.1* Consent of Barrett & McNagny LLP (included in Exhibit 5.1).
23.2* Consent of Sidley Austin Brown & Wood LLP (included in Exhibit 8.1).
23.3+ Consent of Ernst & Young LLP.
24.1 Powers of attorney, incorporated by reference from Exhibit 24.1 to Registrant's Form S-3 Registration Statement, SEC
File No. 333-103672, filed March 7, 2003.
25.1* Form T-1, Trustee's Statement of Eligibility.
---------------
+ Filed concurrently herewith
* Previously filed
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post- effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
51
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Post-Effective Amendment No. 1 to the registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Fort Wayne, State of Indiana, on September 17, 2003.
STEEL DYNAMICS, INC.
By: /s/ KEITH E. BUSSE
Name: Keith E. Busse
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 1 has been signed, on this 17th day of September,
2003, by the following persons in the capacities indicated:
/s/ KEITH E. BUSSE President and Chief Executive Officer (principal executive officer)
--------------------------------------------------------
Keith E. Busse
* Vice President and Director
--------------------------------------------------------
Mark D. Millett
* Vice President and Director
--------------------------------------------------------
Richard P. Teets, Jr.
/s/ TRACY L. SHELLABARGER Vice President, Chief Financial Officer and Director (principal
-------------------------------------------------------- financial and accounting officer)
Tracy L. Shellabarger
* Director
--------------------------------------------------------
John C. Bates
* Director
--------------------------------------------------------
Dr. Jurgen Kolb
* Director
--------------------------------------------------------
Joseph D. Ruffolo
* Director
--------------------------------------------------------
Naoki Hidaka
* Director
--------------------------------------------------------
Richard J. Freeland
Director
--------------------------------------------------------
James E. Kelley
* Director
--------------------------------------------------------
Paul B. Edgerley
* Director
--------------------------------------------------------
Daniel M. Rifkin
/s/ Tracy L. Shellabarger
--------------------------------------------------------
* By: Tracy L. Shellabarger
Attorney-in-Fact
52
EXHIBIT INDEX
Exhibits
Exhibit No. Description
----------- -----------
2.1 Agreement (Settlement Agreement), dated as of January 28, 2002, by and among Iron Dynamics, Inc., Steel Dynamics,
Inc., various signatory lender banks, and Mellon Bank, N.A. as Agent for the Iron Dynamics lenders, incorporated by
reference from Exhibit 2.1 to our Report on Form 8-K, filed February 26, 2002.
3.1a Amended and Restated Articles of Incorporation of Steel Dynamics, Inc., incorporated by reference from Exhibit 3.1a
in Registrant's Registration Statement on Form S-1, SEC File No. 333-12521, effective November 21, 1996.
3.1b Articles of Incorporation of Iron Dynamics, Inc., incorporated by reference from Registrant's 1996 Annual Report on
Form 10-K, filed March 31, 1997.
3.2a Amended Bylaws of Steel Dynamics, Inc., incorporated herein by reference from Exhibit 3.2a to our Registration
Statement on Form S-3, SEC File No. 333-82210, effective February 28, 2002.
4.1c* Registration Rights Agreement between Steel Dynamics, Inc. as Issuer and Morgan Stanley & Co. Incorporated and
Goldman, Sachs & Co. as Initial Purchasers, dated as of December 23, 2002, re $100,000,000 of our 4% Convertible
Subordinated Notes due 2012.
4.2a* Indenture relating to our 4% Convertible Subordinated Notes due 2012, dated as of December 23, 2002, between Steel
Dynamics, Inc. and Fifth Third Bank, Indiana as Trustee.
5.1* Opinion of Barrett & McNagny LLP.
8.1* Opinion of Sidley Austin Brown & Wood LLP.
12.1* Statement re computation of ratios of earnings to fixed charges for each year in the six-year period ended
December 31, 2002.
23.1* Consent of Barrett & McNagny LLP (included in Exhibit 5.1).
23.2* Consent of Sidley Austin Brown & Wood LLP (included in Exhibit 8.1).
23.3+ Consent of Ernst & Young LLP.
24.1 Powers of attorney, incorporated by reference from Exhibit 24.1 to Registrant's Form S-3 Registration Statement, SEC
File No. 333-103672, filed March 7, 2003.
25.1* Form T-1, Trustee's Statement of Eligibility.
----------------------
+ Filed concurrently herewith
* Previously filed