AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 2003
REGISTRATION NO. 333-103672
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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STEEL DYNAMICS, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-1929476
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
6714 POINTE INVERNESS WAY, SUITE 200 KEITH E. BUSSE, PRESIDENT & CEO
FORT WAYNE, INDIANA 46804 6714 POINTE INVERNESS WAY, SUITE 200
(260) 459-3553 FORT WAYNE, INDIANA 46804
(Address, including zip code, and telephone (260) 459-3553
number, including area code, of registrant's (Name, address, including zip code, and
principal executive offices) telephone number, including area code, of agent
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. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE MAXIMUM REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(2) PER UNIT OR SHARE(3) OFFERING PRICE(3) FEE(4)
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4% Convertible Subordinated
Notes Due 2012(1)......... $115,000,000 100% $115,000,000 $9,304
Common Stock, par value
$0.01 par share(5)........ 6,762,874 Shares -- -- --
Common Stock, par value
$0.01 par share(6)........ 436,150 Shares -- -- --
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(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.
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(continued from previous page)
(1) We issued the 4% Convertible Notes due 2012 on December 23, 2002 and January
3, 2003 in an offering exempt from registration under the Securities Act of
1933. Under a registration rights agreement dated December 23, 2002 among us
and the initial purchasers of the notes, who resold the notes in offerings
exempt from registration under Rule 144A under the Securities Act, we are
obligated to file this registration statement to permit registered resales
by the selling security holders of the notes and the shares of common stock
underlying the notes.
(2) We are registering $115,000,000 aggregate principal amount of notes and
6,762,874 shares of common stock initially issuable upon conversion of the
notes. The prospectus filed with this registration statement, however, is a
combined prospectus pursuant to Rule 429 under the Securities Act and
includes (a) the securities we are registering hereby and (b) 436,150 shares
of our common stock which we registered under Registration Statement No.
333-82210, effective February 28, 2002, which remain unsold.
(3) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(i) under the Securities Act, based upon the offering price of
the notes when we originally sold the notes on December 23, 2002 and on
January 3, 2003.
(4) Does not include any registration fee payable with respect to the 436,150
shares of common stock held by GE Capital CFE, Inc., covered by the combined
prospectus and previously registered under Registration Statement No.
333-82210, with respect to which we already paid the required fee. In
addition, under Rule 457(i) there is no additional filing fee payable with
respect to the shares of common stock issuable upon conversion of the notes
because we will receive no additional consideration upon exercise of the
conversion privilege.
(5) Represents the number of shares of common stock issuable upon conversion of
the 4% Convertible Subordinated Notes due 2012 which we are hereby
registering. The notes are convertible into 58.8076 shares of our common
stock, par value $0.01 per share, per $1,000 principal amount of notes,
subject to adjustment under certain circumstances. Pursuant to Rule 416
under the Securities Act, such number of shares includes an indeterminate
number of shares of common stock that may be issuable from time to time upon
the conversion of the notes as a result of a stock split, stock dividend,
recapitalization or similar event.
(6) Shares of common stock held by GE Capital CFE, Inc. previously registered
pursuant to Registration Statement No. 333-82210 and being registered
herewith under the combined prospectus.
------------------------
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 registration statement constitutes a
post-effective amendment to such earlier registration statement. This
post-effective amendment shall hereafter become effective concurrently with the
effectiveness of this registration statement.
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.
SUBJECT TO COMPLETION, DATED MAY 29, 2002.
PROSPECTUS
STEEL DYNAMICS, INC.
4% CONVERTIBLE SUBORDINATED NOTES DUE 2012
6,762,874 SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES
AND
436,150 ADDITIONAL SHARES OF COMMON STOCK
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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 a 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 42.
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 March 4, 2003, the closing sale price of our common stock on The
Nasdaq National Market was $12.12.
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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.
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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 May 29, 2003.
TABLE OF CONTENTS
PAGE
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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......................... 20
Description of Notes........................................ 20
Description of Capital Stock................................ 35
Price Range of Common Stock................................. 37
Dividend Policy............................................. 37
Selling Securityholders..................................... 37
Plan of Distribution........................................ 41
Certain United States Federal Income Tax Considerations..... 44
Certain ERISA Considerations................................ 49
Legal Matters............................................... 50
Experts..................................................... 50
Where You Can Find More Information......................... 51
Information Incorporated by Reference....................... 51
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.
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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 the middle 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 will
operate this new facility as a part of our Butler, Indiana Flat Roll Division,
which we expect will supply 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, and we anticipate that production will begin mid-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 being able to offer a full compliment
of wide flange beams and H-piling structural steel products during the first
quarter of 2003. In addition, we expect to begin production of standard rail
products during the second 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 between $70 to $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
may also produce some special bar quality products at this facility in the
future. After completion of remaining engineering plans and equipment
specification, as well as the issuance of the necessary operational permits, we
expect to
1
begin steel production in the first 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 second half 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 in late 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:
- 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
- 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
- if the notes have been called for
redemption; or
- 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
3
Notes." Instead, 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:
- all securities covered by the registration
statement have been sold; or
- 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.
4
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 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 it has greatly increased as a result of an excess of
foreign steelmaking capacity and a weakening of certain foreign economies,
particularly in Eastern Europe, Asia and Latin America. The economic
difficulties in these countries have resulted in lower local demand for steel
products and have tended 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. For
example, between 1998 and 2001, when imports of hot-rolled and cold-rolled
products increased dramatically, domestic steel producers, including us, were
adversely affected by unfairly priced or "dumped" imported steel. Even though
various protective actions taken by the U.S. government during 2001, including
the enactment of various steel import quotas and tariffs, have resulted in an
abatement of some steel imports during 2002, these protective measures are only
temporary. When these measures expire or if they are relaxed, or if increasingly
higher 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. In addition, domestic steel companies, as well as
labor unions, have filed complaints with the International Trade Commission and
the U.S. Department of Commerce against certain hot-rolled, cold-rolled and
structural steel imports. In June of 2002, the ITC made final negative injury
determinations in cases relating to structural steel imports from China,
Germany, Italy, Luxembourg, Russia, South Africa, Spain and Taiwan. In addition,
in August and October of 2002, the ITC also made final negative injury
determinations in all outstanding cases relating to cold-rolled steel, thus
ending the investigations without the imposition of duties. These negative
determinations may increase the amount of cold-rolled and structural steel
imports into the United States and may create further downward pressure on U.S.
steel prices. In June of 2002, the United States granted "market economy" status
to Russia, which may enable Russia to more effectively defend itself against
dumping actions and increase the risk that Russia in the future may dump steel
into the U.S. market, which may adversely affect U.S. steel prices. 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.
6
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. 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 and have substantially greater capital resources. The highly competitive
nature of the industry, in part, exerts downward pressure on prices for some of
our products. Further, over the past few years, approximately 30 domestic steel
producers have entered bankruptcy proceedings. In some cases, 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 may further increase the competitive environment in the steel
industry and contribute to price declines. In the case of certain product
applications, steel 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 THERE ARE SUCCESSFUL APPEALS TO THE WORLD TRADE ORGANIZATION BY THE
EXPORTING COUNTRIES OR IF DOMESTIC OR INTERNATIONAL POLITICAL PRESSURE RESULTS
IN A RELAXATION OF, OR SUBSTANTIAL 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 have declined, in part, due to the imposition
of dumping duties that have been 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. These events have, in part, allowed us to begin restoring
prices on flat-rolled products. While the President's decision to implement a
Section 201 remedy is not appealable to
7
U.S. courts, foreign governments may appeal, and some have appealed, to the
World Trade Organization, or WTO. The European Union, Japan and other countries
are currently prosecuting such appeals. These dispute settlement proceedings at
the WTO and further appeals to the Appellate Body of the WTO generally take
15-24 months. These appeals were filed in April of 2002 and may be concluded by
the end of 2003. Moreover, a number of affected countries have threatened to
impose various retaliatory tariffs on U.S. steel or other products or have
sought 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 exemptions from the remedy, or terminating the
remedy entirely prior to the full three years, although any such modification
would apply only prospectively.
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, sensitive to general economic conditions and dependent on 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
8
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 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.
9
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 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, are currently relatively high, may continue to
vary significantly in the future and do not necessarily fluctuate in tandem with
the price of steel. 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.
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.
10
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 construction of 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 or at all.
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.
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
11
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:
- the difficulty of competing for acquisitions and other growth
opportunities with companies having materially greater financial
resources than ours;
- the difficulty of integrating the acquired operations and personnel into
our existing business;
- the potential disruption of our ongoing business;
- the diversion of resources;
- the inability of management to maintain uniform standards, controls,
procedures and polices;
- the difficulty of managing the growth of a larger company;
- the risk of entering markets in which we have little experience;
- the risk of becoming involved in labor, commercial, or regulatory
disputes or litigation related to the new enterprise;
- the risk of contractual or operational liability to our venture
participants or to third parties as a result of our participation;
- the inability to work efficiently with joint venture or strategic
alliance partners; and
- 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 between $60 to $70 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 producing merchant bars and
shapes and reinforcing bar products.
It may cost more than the $60 to $70 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. The 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
12
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, we need to obtain the
air permit for our coil coating facility at our Butler mini-mill, which we
expect to be issued in the near future, and the air permit for our Pittsboro
mini-mill for which we have yet to make an application. There is no guarantee
that we will obtain these permits and any failure to do so could adversely
affect our business.
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. The
United States Environmental Protection Agency is currently seeking $273,900 in
civil penalties from us for alleged violations of the Emergency Planning and
Community Right-to-Know Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Clean Water Act and the Resource
Conservation and Recovery Act, in connection with one or more accidental
releases of spent pickle liquor on our Butler mini-mill site and into adjacent
waterways in January 1999. 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 $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:
- make it more difficult to satisfy our obligations with respect to our
debt, including the notes;
- limit our ability to obtain additional financing for working capital,
capital expenditures, acquisitions or general corporate purposes;
- 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;
- limit our ability to adjust rapidly to changing market conditions; and
- 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.
13
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:
- incur additional indebtedness;
- pay dividends or make distributions with respect to our capital stock;
- repurchase or redeem capital stock;
- make investments;
- create liens and enter into sale and leaseback transactions;
- make capital expenditures;
- enter into transactions with affiliates or related persons;
- issue or sell stock of certain subsidiaries;
- sell or transfer assets; and
- 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.
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:
- our debtholders could declare all outstanding principal and interest to
be due and payable;
- the lenders under our senior secured credit agreement could terminate
their commitments and commence foreclosure proceedings against our
assets;
- we could be forced into bankruptcy or liquidation; and
- you could lose all or part of your investment in the notes.
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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 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
15
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:
- our operating results failing to meet the expectations of securities
analysts or investors in any quarter;
- downward revisions in securities analysts' estimates;
- material announcements by us or our competitors;
- public sales of a substantial number of shares of our common stock
following this offering;
- governmental regulatory action; or
- 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
16
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 March 3, 2003, we had 47,659,398 shares of common stock outstanding
including 14,000,371 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 13,564,221 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 March
3, 2003, options to purchase 2,611,022 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.
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.
17
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.
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:
- 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;
18
- 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;
- 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;
- the occurrence of unanticipated equipment failures and plant outages or
incurrence of extraordinary operating expenses;
- 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;
- 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;
- the effect of the elements upon our production or upon the production or
needs of our important suppliers or customers;
- 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;
- 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;
- 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;
- 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
- 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.
19
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.
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
20
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:
- 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
- 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 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.
21
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:
- upon satisfaction of a market price condition;
- upon the occurrence of specified credit rating events with respect to the
notes;
- upon notice of redemption; or
- 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."
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.
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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:
- 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
- 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 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.
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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):
- 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;
- surrender the note to the conversion agent;
- if required, furnish appropriate endorsements and transfer documents;
- if required, pay all transfer or similar taxes; and
- 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:
- we issue common stock as a dividend or distribution on our common stock;
- 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;
- we subdivide or combine our common stock;
- we distribute to all holders of our common stock, shares of our capital
stock, evidences of indebtedness or assets, including securities but
excluding:
- rights or warrants specified above;
- dividends or distributions specified above; and
- cash distributions;
- 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:
- 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
- 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;
- 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
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- 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:
- 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
- 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:
- any reclassification of our common stock;
- a consolidation, merger or combination involving us; or
- 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.
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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.
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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);
(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:
- the principal amount of the withdrawn notes;
- 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
- 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:
- the note will cease to be outstanding;
- interest will cease to accrue; and
- 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.
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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 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:
- is listed on, or immediately after the transaction or event will be
listed on, a United States national securities exchange, or
- 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.
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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:
- 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;
- the successor person assumes all of our obligations under the notes and
the indenture; and
- 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.
EVENTS OF DEFAULT; NOTICE AND WAIVER
The following will be events of default under the indenture:
- we fail to pay principal or premium, if any, when due upon redemption,
repurchase or otherwise on the notes;
- 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;
- 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;
- 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
- 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.
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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:
- the holder has given the trustee written notice of an event of default;
- 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;
- the trustee does not receive an inconsistent direction from the holders
of a majority in principal amount of the notes; and
- 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:
- extend the fixed maturity of any note;
- reduce the rate or extend the time for payment of interest of any note;
- reduce the principal amount or premium of any note;
- reduce any amount payable upon redemption or repurchase of any note;
- adversely change our obligation to redeem any note upon a fundamental
change;
- impair the right of a holder to institute suit for payment on any note;
- change the currency in which any note is payable;
- impair the right of a holder to convert any note;
- adversely modify, in any material respect, the subordination provisions
of the indenture;
- reduce the quorum or voting requirements under the indenture;
- change any obligation of ours to maintain an office or agency in the
places and for the purposes specified in the indenture;
- subject to specified exceptions, modify certain of the provisions of the
indenture relating to modification or waiver of provisions of the
indenture; or
- 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.
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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:
- a default in the payment of designated senior indebtedness occurs and is
continuing beyond any applicable period of grace (called a "payment
default"); or
- 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:
- in case of a payment default, upon the date on which such default is
cured or waived or ceases to exist; and
- 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 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:
- any indebtedness that expressly provides that it is pari passu or junior
to the notes; or
- any indebtedness we owe to any of our subsidiaries; or
- 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
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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:
- in fully registered form;
- without interest coupons; and
- 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:
- not be entitled to have certificates registered in their names;
- not receive physical delivery of certificates in definitive registered
form; and
- not be considered holders of the global note.
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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:
- for the records relating to, or payments made on account of, beneficial
ownership interests in a global note; or
- 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.
DTC has advised us that it is:
- a limited purpose trust company organized under the laws of the State of
New York, and a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the Uniform Commercial
Code; and
- 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
33
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:
- 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
- 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:
- exceed 30 days in any three-month period; or
- 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:
- 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
- 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.
34
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 March 3, 2003, there were 50,058,566
shares of common stock issued and 47,659,398 shares outstanding that were
beneficially owned by approximately 7,400 stockholders. As of March 3, 2003,
2,611,022 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."
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
35
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.
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
36
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, 2000:
First Quarter............................................. $19.000 $11.125
Second Quarter............................................ 12.938 8.250
Third Quarter............................................. 12.750 8.813
Fourth Quarter............................................ 12.000 8.438
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
The last sale price for our common stock as reported on the Nasdaq National
Market at the close of business on March 3, 2003 was $12.34. As of December 31,
2002, there were approximately 660 holders of record and approximately 7,400
beneficial owners of our common stock.
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
37
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 March 3, 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 57,033,294 shares of common stock
deemed to be outstanding on March 3, 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.
38
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)....................... $ 2,965,000 2.6% 199,932 174,364 *
CooperNeff Convertible
Strategies (Cayman) Master
Fund, LP(9).................. $ 1,650,000 1.4% 97,032 97,032 *
+DB AG London(10).............. $ 12,000,000 10.4% 705,691 705,691 1.2%
#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 *
39
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
---- ------------ ----------- -------------- ------------ -----------
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 *
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%
#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(21).................. $ 34,475,000 30% 2,027,392 2,001,824
0
TOTALS......................... $115,000,000 100% 6,788,423(22) 6,762,855(22)
---------------
* Less than 1%
# Broker-dealer
+ Affiliate of broker-dealer
(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,
40
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) 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 and by an
appropriate prospectus supplement.
(22) Excludes fractional shares payable in cash.
OTHER SELLING SECURITYHOLDERS
NUMBER OF SHARES
NUMBER OF SHARES NUMBER OF SHARES OF COMMON STOCK
OF COMMON STOCK OF COMMON STOCK OWNED AFTER
OWNED PRIOR TO TO BE SOLD IN THIS COMPLETION OF THE
NAME 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
41
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:
- fixed prices;
- prevailing market prices at the time of sale;
- prices related to the prevailing market prices;
- varying prices determined at the time of sale; or
- negotiated prices.
In the case of common stock, these sales may be effected in transactions:
- 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;
- in the over-the-counter market;
- otherwise than on such exchanges or services or in the over-the-counter
market;
- through the writing of options, whether the options are listed on an
options exchange or otherwise; or
- 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 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.
42
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:
- the specific notes or common stock to be offered or sold;
- the names of the selling securityholders;
- the respective purchase prices and public offering prices and other
material terms of the offering;
- the names of any participating agents, broker-dealers or underwriters;
and
- 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.
43
We will use our reasonable best efforts to keep the registration statement,
of which this prospectus is a part, effective until the earlier of:
- the sale pursuant to the registration statement of all of the securities
registered thereunder; or
- 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:
- the United States federal income tax consequences to shareholders in, or
partners or beneficiaries of, an entity that is a holder of the notes;
- the United States federal estate, gift or alternative minimum tax
consequences of the purchase, ownership or disposition of the notes;
- persons who hold the notes whose functional currency is not the United
States dollar;
- any state, local or foreign tax consequences of the purchase, ownership
or disposition of the notes; or
- 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:
- 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);
- 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,
44
any state thereof or the District of Columbia unless, in the case of a
partnership, Treasury Regulations are enacted that provide otherwise;
- an estate if its income is subject to United States federal income
taxation regardless of its source; or
- 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 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
45
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.
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
46
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 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.
47
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 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
48
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
subsequent legislation or other guidance that has or may become available
relating to that
49
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.
50
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:
- Our Annual Report on Form 10-K for our fiscal year ended December 31,
2002.
- Our Quarterly Report on Form 10-Q for our fiscal quarter ended March 31,
2003.
- Our definitive proxy statement filed on April 23, 2003.
- Our Reports on Form 8-K January 2, 2003, February 4, 2003, March 28, 2003
and April 23, 2003.
- 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
51
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,
52
a court is empowered to grant indemnification 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.
53
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.
54
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
its registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Fort Wayne, State of Indiana, on May
29, 2003.
Pursuant to the requirements of the Securities Act, this Amendment No. 1
has been signed by the following persons in the capacities indicated on May 29,
2003.
STEEL DYNAMICS, INC.
By: /s/ KEITH E. BUSSE
------------------------------------
Name: Keith E. Busse
----------------------------------
Title: President and Chief Executive
Officer
-----------------------------------
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Keith E. Busse and Tracy L. Shellabarger,
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement, and to sign any registration statement for the
same offering covered by this registration statement that is to be effective
upon filing pursuant to Rule 462(b) promulgated under the Securities Act of
1933, as amended, and all post-effective amendments thereto, and to file the
same, with all exhibits thereto and all documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or his or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed, on this 29th day of May, 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
Tracy L. Shellabarger officer)
55
* 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
* By: Tracy L. Shellabarger
Attorney-in-Fact
/s/ Tracy L. Shellabarger
------------------------------------------------
56
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