Discounted Cash Flow Analysis - Steel Dynamics, Inc.

(Unlevered DCF)
($ in Millions Except Per Share Data)

Steel Dynamics, Inc. - DCF Assumptions & Output:

Company Name: Steel Dynamics, Inc. Terminal Value - Multiples Method:

Current Share Price: $ 17.87
Baseline Terminal EBITDA Multiple:
Effective Tax Rate: 34.0% Baseline Terminal Value:
Discount Rate (WACC): 10.5% Implied Terminal FCF Growth Rate:

Median EBITDA Multiple of Comps: 7.0 x PV of Terminal Value:

Expected GDP Growth of Country: 3.5% Sum of PV of Free Cash Flows:
Implied Enterprise Value:

% from PV of Terminal Value:

Less: Net Debt:

Implied Equity Value:
Diluted Shares Outstanding:

Implied Share Price from DCF:

Premium / (Discount) to Current:
 1

Historical
Steel Dynamics, Inc. - FCF Projections: Year 1 Year 2 Year 3 Year 1

Revenue: $ 7,997.5 $ 7,290.2 $ 7,372.9 $ 7,741.6

Revenue Growth Rate: 26.9% (8.8%) 1.1% 5.0%
Operating Income: 584.8 391.2 386.5 425.8
Operating Margin: 7.3% 5.4% 5.2% 5.5%

Less: Taxes, Excluding Effect of Interest: (198.8) (133.0) (131.4) (144.8)

Net Operating Profit After Tax (NOPAT): 386.0 258.2 255.1 281.0

Adjustments for Non-Cash Charges:

Depreciation & Amortization: 222.6 225.2 230.9 193.5
% Revenue: 2.8% 3.1% 3.1% 2.5%
Impairment Charges: - 8.3 0.3 -
Deferred Income Taxes: 34.4 54.5 30.7 29.0
% Book Taxes on Income Statement: 21.7% 88.3% 30.9% 20.0%
(Gain) / Loss on PP&E Disposal: (3.9) 0.5 1.1 -
Total Non-Cash Adjustments: 253.1 288.5 263.1 222.5

Changes in Working Capital:

Decrease / (Increase) in Accounts Receivable (100.6) 86.0 (78.2)
Decrease / (Increase) in Inventory: (85.5) 13.8 (108.0)
Decrease / (Increase) in Other Assets: 5.7 (1.3) 13.7
Increase / (Decrease) in Accounts Payable: 56.6 (32.6) 40.1
Increase / (Decrease) in Income Tax Payable: 26.2 21.6 (12.5)
Increase / (Decrease) in Accrued Expenses: 47.9 (85.1) 15.0
Net Change in Working Capital: (49.7) 2.4 (129.9) (18.4)
% Change in Revenue: (2.9%) (0.3%) (157.1%) (5.0%)
% Revenue: (0.6%) 0.0% (1.8%) (0.2%)

Less: Capital Expenditures: (167.0) (223.5) (186.8) (232.2)

% Revenue: 2.1% 3.1% 2.5% 3.0%

Unlevered Free Cash Flow: $ 422.4 $ 325.6 $ 201.4 $ 252.8

Growth Rate: N/A (22.9%) (38.1%) 25.5%

EBITDA: $ 807.4 $ 624.6 $ 617.8 $ 619.3

Growth Rate: N/A (22.6%) (1.1%) 0.3%
 e - Multiples Method: Terminal Value - Perpetuity Growth Method:

minal EBITDA Multiple: 6.0 x Baseline Terminal FCF Growth Rate: 2.7%
$ 6,209.05 Baseline Terminal Value: $ 6,195.2
nal FCF Growth Rate: 2.7% Implied Terminal EBITDA Multiple: 6.0 x

2,287.7 PV of Terminal Value: 2,282.6

of Free Cash Flows: 2,177.3 Sum of PV of Free Cash Flows: 2,177.3
$ 4,465.0 Implied Enterprise Value: $ 4,459.9

Terminal Value: 51.2% % from PV of Terminal Value: 51.2%

(1,466.2) Less: Net Debt: (1,466.2)

2,998.8 Implied Equity Value: 2,993.7
s Outstanding: 242.609 Diluted Shares Outstanding: 242.609

e Price from DCF: $ 12.36 Implied Share Price from DCF: $ 12.34
iscount) to Current: (30.8%) Premium / (Discount) to Current: (30.9%)
 2 3 4 5 6 7 8 9

Projected
Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9

$ 8,051.2 $ 8,373.3 $ 8,624.5 $ 8,883.2 $ 9,105.3 $ 9,332.9 $ 9,519.6 $ 9,710.0

4.0% 4.0% 3.0% 3.0% 2.5% 2.5% 2.0% 2.0%
483.1 544.3 603.7 666.2 682.9 746.6 761.6 776.8
6.0% 6.5% 7.0% 7.5% 7.5% 8.0% 8.0% 8.0%

(164.2) (185.0) (205.3) (226.5) (232.2) (253.9) (258.9) (264.1)

318.8 359.2 398.5 439.7 450.7 492.8 502.6 512.7

201.3 209.3 215.6 222.1 227.6 233.3 238.0 242.7

2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
- - - - - - - -
24.6 18.5 10.3 5.7 5.8 6.3 6.5 6.6
15.0% 10.0% 5.0% 2.5% 2.5% 2.5% 2.5% 2.5%
- - - - - - - -
225.9 227.8 225.9 227.7 233.4 239.7 244.5 249.4

(15.5) (16.1) (12.6) (12.9) (11.1) (11.4) (9.3) (9.5)

(5.0%) (5.0%) (5.0%) (5.0%) (5.0%) (5.0%) (5.0%) (5.0%)
(0.2%) (0.2%) (0.1%) (0.1%) (0.1%) (0.1%) (0.1%) (0.1%)

(241.5) (251.2) (258.7) (266.5) (273.2) (280.0) (285.6) (291.3)

3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

$ 287.7 $ 319.7 $ 353.0 $ 388.0 $ 399.9 $ 441.1 $ 452.2 $ 461.2

13.8% 11.1% 10.4% 9.9% 3.1% 10.3% 2.5% 2.0%

$ 684.4 $ 753.6 $ 819.3 $ 888.3 $ 910.5 $ 980.0 $ 999.6 $ 1,019.5

10.5% 10.1% 8.7% 8.4% 2.5% 7.6% 2.0% 2.0%
 10

Year 10

$ 9,855.6
1.5%
788.5
8.0%

(268.1)

520.4

246.4
2.5%
-
6.7
2.5%
-
253.1

(7.3)
(5.0%)
(0.1%)

(295.7)
3.0%

$ 470.5
2.0%

$ 1,034.8
1.5%