Tricia Meyers - Investor Relations Manager Mark D. Millett - President, CEO & Director Theresa E. Wagler - EVP and CFO Chris Graham - VP of Steel Dynamics, Inc. and President of New Millennium Building Systems Barry Schneider - VP, Bar products Glenn Pushis - SVP Long Products Steel Group Russell B. Rinn - President and COO.

Matthew Korn - Barclays Capital, Inc. Evan Kurtz - Morgan Stanley & Co. Anthony Rizzuto - Cowen and Company David Gagliano - BMO Capital Markets Michael Gambardella - JP Morgan Securities Timna Tanners - Bank of America Merrill Lynch Jorge Beristain - Deutsche Bank Securities, Inc. Philip Gibbs - KeyBanc Capital Markets, Inc.

Charles Bradford - Bradford Research, Inc. Aldo Mazzaferro - Macquarie Capital (USA) Inc. Richard Yu - Citigroup.

Good day and welcome to the Steel Dynamics' First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's remarks, we will conduct a question-and-answer session and instructions will follow at that time.

Please be advised, this call is being recorded today, April 21, 2016, and your participation implies consent to our recording this call. If you do not agree to these terms, please disconnect your line now. At this time, I'd like to turn the conference over to Tricia Meyers, Investor Relations Manager. Thank you. Please go ahead..

Thank you, Adam. Good morning, everyone, and welcome to the Steel Dynamics' first quarter 2016 earnings conference call. As a reminder, today's call is being recorded and will be available on the Company's Web site for replay later today.

Leading today's call are Mark Millett, President and Chief Executive Officer of Steel Dynamics; and Theresa Wagler, Executive Vice President and Chief Financial Officer. We also have our leaders for the Company's operating platforms, including our Metals Recycling operations, Russ Rinn, Executive Vice President.

Our Fabrication Operations, Chris Graham, Senior Vice President Downstream Manufacturing Group, and our Steel Operations, Glenn Pushis, Senior Vice President Long Products Steel Group and Barry Schneider, Senior Vice President Flat Roll Steel Group.

Please be advised that certain comments made today may involve forward-looking statements about future events that by their nature are predictive.

These are intended to be covered by the Safe Harbor protections of the Private Securities Litigation Reform Act of 1995, and we refer you to a more detailed form of this statement contained in the press release announcing this earnings call.

These predictive statements speak only as of this date, April 21, 2016, and involve many risks and uncertainties related to our businesses and the environment in which they operate, any of which may cause actual results to turn out differently than anticipated.

More detailed information about such risks and uncertainties may be found in our most recent annual report on Form 10-K under the heading, special note regarding forward-looking statements and risk factors; and our quarterly reports on Form 10-Q or in other reports which we from time to time file with the Securities and Exchange Commission.

And now, I'm pleased to turn the call over to Mark..

Well, thanks, Tricia, and good morning, everyone. Thank you for joining our call this morning. And first I’d like to tell you a quick moment to welcome our new call participants, Barry and Glenn. Upon Dick’s recent retirement at the end of March, Chris, Barry, and Glenn were named Senior Vice President’s reporting directly to me.

Chris retains oversight of the new Millennium Fabrication Group and also manufacturing as we seek downstream value add growth opportunities. Barry is in charge of the Flat Ross Steel Group and Glenn of the Long Products platform.

Each of these gentlemen has extensive experience in the steel industry, as well as the unique distinction that being with Steel Dynamics from the very beginning, some 20 plus years ago.

They are well versed and are performance driven, low-cost operating culture, and are passionately aligned with our commitment to creating superior value for our loyal customer base. And fortunately Dick isn’t going too far.

His vast experience and talent will be retained as he continues on the Board and I’m sure he will be turning up from time-to-time in the mills. He will also be actively assisting me to ensure smooth leadership transition over the next couple of months.

Now before talking about the market environment, I ask Theresa to comment on our first quarter financial performance.

Theresa?.

Thank you, Mark. Good morning, everyone. Within a continued challenging global steel industry environment, we achieved solid financial results to the first quarter. Our net income was $63 million or $0.26 per diluted share, which was at the top of our guidance of between $0.22 and $0.26 per share.

These results compared to sequential fourth quarter adjusted net income of $22 million or $0.09 per diluted share which excludes the impact of non-cash goodwill and asset impairment charges of $1.13. And compares to prior year first quarter adjusted net income of $40 or $0.17 per diluted share, which excludes certain refinancing costs of $0.04.

First quarter 2016 revenues were $1.7 billion, a 9% improvement over the sequential fourth quarter based on increased shipments from our steel operations. Our first quarter 2016 gross margin as a percentage of sales increased to 14%, driven primarily by increased volume and represents a vast improvement from fourth quarter results of 9%.

As a result, our operating income for the first quarter 2016 was $132 million compared to adjusted fourth quarter results of $47 million. For the first quarter, steel shipments increased 17% to 2.3 million tons as volumes improved across all divisions, but most significantly in Flat Roll.

Flat Roll steel imports declined and customer inventory levels are better aligned with actual demand which is supporting increased domestic steel production and now also Flat Roll price increases as we head into the second quarter, especially for value added products.

And as a reminder, about 40% of our Flat Roll volume is contractual and generally tied to a one to two months lag in CRU price index. First quarter 2016 steel platform average selling price have decreased $40 per ton to $574, more than offsetting decreased average crap costs per ton at $21.

Despite lower metal spread, the improved volume resulted in significantly higher sequential operating income from our steel operations of $136, just over double fourth quarter results. Our sheet operations drove this increase improving operating income by over 180% with a 20% increase in shipments.

While our Metals Recycling platform continues to operate in an extremely challenging environment, the team was able to achieve significantly improved profitability in the first quarter, recording $6 million of operating income versus the adjusted operating loss of $16 million in the fourth quarter.

Increased domestic steel mill utilization and export volume resulted in improved recycling demand and pricing. Ferrous shipments increased 9%, while metal spread improved 36% compared to the sequential quarter.

Additionally, internal ferrous shipments increased 27% and represented 60% of mills recycling quarterly volume, effectively levering the strength of our vertically integrated business profile.

Our fabrication operations continued their ongoing strong financial performance in the first quarter, achieving operating income of $32 million, not only improving sequentially, but also a result only slightly below their record of $37 million set in the third quarter of last year.

We continue to see steady non-residential construction demand resulting in a slight increase in the quarterly shipments which partially offset modest metal spread compression, as product pricing declined more than raw material steel costs.

Based on first quarter coat activity, we could see some additional metals spread compression in the second quarter as Flat Roll steel prices have risen in the interim. During the first quarter 2016, we continue to generate significant cash flow from operations of $289 million. Working capital provided a $130 million of funding in the quarter.

First quarter 2016 capital investments totaled $28 million. We currently estimate full-year capital expenditures to be in the range of $250 million, which includes the $100 million paint line addition at our Columbus Flat Roll Division, which is still expected to begin operations in the first quarter of 2017.

We increased our cash dividend in the first quarter, $0.14 per common share. Our history of sustained and increasing cash dividends demonstrates the confidence that we and our Board of Directors having the strength and consistency of our cash generation capability, financial position and optimism concerning our future.

As demonstrated through the years, our business model generate strong cash flow through varying market cycles based on the low, highly variable cost structure of our operations that are diversified value added product offerings.

We achieved record liquidity of $2.2 billion at March 31, comprised of our undrawn revolver and available cash of $977 million. During the quarter, total debt remained flat while net debt decreased $246 million to $1.6 billion. Our first quarter 2016 adjusted EBITDA was $214 million, resulting in the last 12 months EBITDA being $748 million.

Net leverage then was 2.2x down from 2.7x at the end of the year. Our credit profile continues to be solidly aligned with our preferred through cycle net leverage of less than 3x, a testament to our disciplined approach to growth, creating shareholder value through sound capital allocation and an efficient balance sheet.

Additionally, our debt maturity outlook continues to provide great optionality, having no meaningful maturities until 2019, but in the interim period having call provision flexibility.

Looking forward we continue to believe that our capital structure and credit profile have the strength and flexibility to not only sustain current operations, but to support additional strategic growth. Thank you..

Super. Thanks, Theresa. As I've said on every call, the safety and welfare of our employees is our number one priority. Nothing surpasses the importance of creating and maintaining a safe work environment. Our safety performance remains better than the industry averages, and continues to improve toward our goal at zero incidents.

Year-over-year the Company continues to improve with 2015 performance being the best so far. The trend continued into the first quarter. The team is doing a great job. Over 80% of our locations achieved zero recordable injuries so far this year.

We also reduced our total recordable injury rate in the first quarter by 20% when compared to last year's full-year results and by 40% when compared to prior year's first quarter. We are definitely beginning the year in a even better position.

And my sincere thanks go to the entire SDI team for their continued focus and dedication to our most important priority. The steel platform performed well in the first quarter. 2016 has certainly provided a changing landscape to the domestic flat roll market.

Several positive macro shifts have resulted and significantly improved flat roll product pricing going into the second quarter. Flat roll steel import levels have declined and global steel pricing has appreciated.

Customer inventory levels are better aligned to actual consumption, supporting higher domestic steel mill utilization and mill lead times have extended. While demand has remained steady, the supply side drivers have led to much improved market dynamics.

Our Flat Roll Steel divisions operated basically at full capacity for the quarter, supported by the strong auto build and construction pick up. Although sequential long products steel shipments improved 9%, our long product mills was still challenged with end market weakness, operating at only 67% of their capacity.

As the heavy equipment, agricultural, and energy markets remain weak, grabs for market share resulted in extensive published pricing discounts, especially in the structural steel arena.

For the steel platform as a whole, driven by the our flat roll operations, our production utilization rate for the first quarter 2016 increased to 88% as compared to overall industry utilization of approximately 71%.

Despite a material decline in scrap cost in the quarter, our metal spread contracted as average product pricing declined more than our actualized average scrap costs. Pricing declines were felt in all areas.

However, the recent price increases in flat roll, especially for value-added coated product is sticking and we should see the positive impact in the coming months. The successful market and product diversification we achieved at Columbus during 2015 is one of the key differentiators for anticipated improved profitability in 2016.

As a testament, Columbus achieved near record quarterly shipments in the first quarter of 2016 and increased value-added shipments almost 80% compared to the prior year's first quarter. The new paint line project is on budget and on schedule. The expectation for shipments to begin in the first quarter of 2017.

The $100 million dollar investment will provide 250,000 tons of annual coating and Galvalume capability and further diversification in to higher margin products for Columbus.

We already have two paint lines and Galvalume capability in Indiana and this new project allows for higher quality double wide steel and access to the Southern markets, including Mexico. We plan to sell surface-critical, appliance-grade steel, as well as construction-related products.

Our steel platform also continues to benefit from our other organic growth investments, some of which began contributing in 2015 which should continue to increase momentum in 2016.

The $26 million investment in premium rail, the $96 million investment in engineered special bar quality diversification and capacity expansion generally geared toward the automotive industry. This diversification has already facilitated increased mill utilization and cost compression during this weak heavy equipment and energy demand environment.

And lastly the $22 million investment for an additional 600,000 tons of annual flat roll pickling capacity at our Butler Flat Roll Division. This will increase value-added sales and while deemphasizing commodity-grade hot roll. The team began operating the line in January and the production ramp up is going extremely well.

Increased domestic steel mill utilization is also benefiting our Metals Recycling platform. While the platform remains free cash flow positive from ’15, we now return to operating profitability in the first quarter of this year, as pricing stabilize, metal spreads expanded and volumes improved.

Additionally, I want to thank the team for the cost reductions of approximately $25 million that were achieved during the last 18 to 24 months, through cost efficiencies and some location and shredder idling. Recycling environment definitely remains challenging. Many regional players in the industry are either for sale or headed to insolvency.

As such, the number of active shredders has declined meaningfully, which should benefit the industry and the years ahead..

However, what we didn't anticipate was such a rapid and a significant increase in flat roll utilization and pricing. During that period of low obsolete scrap flows driven by low scale prices. In aggregate, these market dynamics resulted in the scrap price increases of about $10 to $15 a ton in March and another increase of $50 a ton in April.

Looking forward, we expect the market to stabilize as the rush to regain mill inventories subsides and obsolete scrap flows improve.

Combined with the expectation of a continued relative strong U.S dollar and relatively low scrap export volumes, we anticipate ample scrap supply and don't see drivers for further significant increases in ferrous scrap prices this year. The fabrication platform continues to achieve exceptional performance.

Steady demand resulted in near record quarterly operating income of $32 million. The team is executing on all fronts and doing a phenomenal job. The CSI acquisition at the end of the last year's third quarter gained market share in deck achieving 34% in the first quarter this year compared to only 25% in prior year’s first quarter.

We also increased our joist market share over the same period from 32% to approximately 37%. Additionally, the acquisition provides an opportunity for steel supply options from our Columbus Flat Roll division. Over the last three years, the acquired assets averaged over 60,000 tons of annual flat roll steel purchases, predominantly galvanized.

We plan to source a substantial amount of the steel from Columbus which will help further shift Columbus’s product mix and increased mill utilization in weak demand environments. The power of pull through volume was certainly helpful in last year's steel environment.

Our fabrication operations purchased over 300,000 t of steel from our steel operations in 2015. This year, the new millennium team continues to perform exceedingly well, leveraging our national footprint to gain market share.

And the strength of their business provides positive insight into the continued growth with non-residential construction activity. Relative to the macro environment, the steel consuming sectors that were weak in 2015 such as energy, heavy equipment and agriculture will likely remain so in 2016.

However, those that have been strong or recovering are also expected to continue this path, such as automotive and construction. 2016 forecast for these two largest domestic steel consuming sectors remains positive.

Automotive has continued forecasting strength and overall construction spending continues to improve with additional forecasted growth in ’16. SDI’s growing exposure to both of these sectors through our Columbus Flat Roll Division, additional Long Products production capability, and growing fabrication operations.

Driven by the strength from the U.S dollar, low iron ore cost and global over capacity, steel imports were the 2015 principal headwind. However, recent import levels have declined and the trade cases are likely to erode them further.

Reduced imports, idling of domestic capacity, and increasing global pricing along with steady demand and rebalanced supply chain inventory, have created a positive pricing and volume environment for flat roll products. As raw material prices moderate, there is likely some margin expansion opportunity.

Importantly, as we typically do, we are not waiting around.

In order to help insulate ourselves from imports, part of our strategy is to not only develop strong customer relationships, but also manufacture products that are more difficult to compete with on a global basis, such as our painted flat roll steel, highly engineered SBQ steels and longer length rail.

As such, we are able to mitigate some of the import impact and with our broad portfolio of value-added products, maintain higher steel mill utilization rates when compared to our peers. We continue to strengthen our financial position through strong cash flow generation and the execution of our long-term strategy.

We also have additional company specific earnings catalysts and are well positioned for growth. Customer focus coupled with our market diversification and low-cost operating platforms support our ability to maintain our best-in-class industry performance.

We believe we are uniquely positioned to capitalize on growth opportunities that will benefit our customers, our shareholders, employees, and communities alike. Driven to maintain a sustainable differentiated business, we are focusing on growth opportunities to maximize our financial performance through market cycles.

We will concentrate on growth opportunities that will improve the quality of our margins with a particular focus on downstream value-added growth to mitigate the impact of the imports and the inevitable cyclicality of our business. The strong character and determination of our employees are unmatched.

They’re a phenomenal group and I’m proud to stand with them. We look forward to creating new opportunities for them, for our customers and shareholders in the months and years ahead. So, again, thank you for your time today. And Adam, we’d like to open the call to questions..

Thank you. [Operator Instructions] Our first question comes from the line of Matthew Korn from Barclays. Please go ahead..

Hey, good morning, everyone. Thanks for taking my question..

Good morning, Matthew.

Just a couple, if I could on the scrap market.

Scrap tightness appears to be fairly profound right now, and so when you thing about flows improving on obsolete side, how much friction you think there could be from you or other recyclers having from shrunken headcount over the back half of 2015 or the potential bankruptcies, you said of certain shredders.

Also don’t know if there is a sense to any dealers are holding back supply right now on expectation of higher prices in the next month.

And a quick follow-up there too on the industrial side for scrap, Bushland bundles, are you in the other AFB producers maybe seeing some of the effect of your own success here, because volumes are looking good numbers, look good, but maybe Bushland and bundles, I would expect those two necessarily proportionally increase in supply.

So any comments there would be very helpful. Thanks..

Well, I’d say this is Russ, Matthew. The flows certainly have increased somewhat not to a overwhelming degree on the obsolete side. We have seen a increase, particularly in our retail side more so than in the Rigler flows from the dealers. I think the pricing -- the new pricing, the up $50 will bring up some more obsolete grades into the marketplace.

But it's still, it hasn’t manifested itself in a big way as of yet. Back to the prime side of the equation, again I think the prime levels are going to remain fairly, fairly consistent as they have all year, because the manufacturing, particularly automotive manufacturing has been strong.

So, I don’t -- as a proportion of the scrap flow that’s available. It necessarily will have to down as a percentage. But at this point, it seems fairly static and while demand increases that will mean a percentage of that will have to be replaced by other grades.

We do think that it's going to be reasonable enough to support the needs of the steel mills..

Thank you. Our next question comes from the line of Evan Kurtz from Morgan Stanley. Please go ahead..

Hi, good morning, guys..

Good morning, Evan..

Good morning..

So just maybe trying to put a couple of your comments together Mark, you mentioned that you thought pricing would start to have a positive impact in coming months. You’ve also have an outlook for stabilization scrap.

It is safe to say that you are expecting metal margins to expand in the two and 3Q?.

Yes, I think so. I think obviously from a pricing standpoint as we mentioned in the last call, we have about 40% of our sheet products indexed against CIU. And as a -- sort of lag there of -- amounted to for that pricing to kick in fully. And so as we move into the second quarter, obviously the pricing profile should be dramatically different.

And I’m assuming that relatively moderate scrap markets for the quarter, I think one can imagine that margins will expand so..

Great. Thanks for confirming and if I may just kind of one follow-up on what’s going on flat roll markets right now. One thing that some chatter I’ve been here is integrated mills have been out.

I’m trying to take advantage of the spread between hot roll coil and cold rolled coil by maybe buying some hot roll coil from -- some of the many mills and rolling that, turning that into high value products. Is that something that you’re participating and seeing and is that impacting your mix anyways, it’s a big enough needle mover to shift to Mex..

Well, I think whatever happens is happening in that environment is positive for the industry in general, because obviously we are benefiting as an industry with the idling of Granite city of Fairfield of Ashland. And if they’re moving those tons are around and utilizing others to provide or get help bank supply and keep those operations idle.

I think that’s very good for the industry and for the market in general..

Thank you. Our next question comes from the line of Tony Rizzuto from Cowen and Company. Please go ahead..

Thanks everybody and what a difference a couple of months make, boy. It’s incredible. So my question is just a follow-up on scrap a little bit and your comments more comment and then Russ, are you guys concerned about exports which are period to be recovering after a lengthy period of dormancy and also scrap stabilizes near-term.

Is there any further scope for price increases in flat roll steel do you think? Or is it more of a situation where you look for more margin gains as your spreads improve?.

Well, I think from the standpoint of export scrap there is obviously some positive activity there and that is for I think helped the recent uptick in pricing.

Again, I think the predominant increase in pricing in April was forced by -- just a surprising increase in utilization of the -- that regard [indiscernible] sheet melt in an environment were flows are still low and as Russ said, those flow should start to pick up with higher pricing.

And I think if you consider that we operated our sheet mills at near capacity, its just say, and others are likely to be doing the same because of the increase in demand in the last couple of months. The incremental or the additional price scrap needs are going to be minimal and that should contain pricing as to at the current levels.

I think from the standpoint of domestic pricing, it should be sustainable for sure. For the near-term, I think the market is looking good for us into Q3 and certainly early Q4. The Asian pricing, the trade cases have certainly eroded the import volumes.

And the -- more importantly, the U.S., the global spread is very, very low and in fact it wasn’t low. I do believe even with further upward momentum in pricing before you start seeing any major import interest. The Chinese market seems to be inspired.

Their pricing is up and there is room in that spread to appreciate domestic pricing further, I do believe..

Fantastic. Mark, can you -- if I may ask a second question, perhaps you’ve been pretty vocal about the section of the need potentially for Section 201. I was wondering if you could maybe elaborate a bit on your thought process as it relates to that..

Well the thing, as an industry we are all firmly aligned that the existing trade loss need to be enforced, and they need to be enforced in a much more expeditious manner going forward. So there’s total agreement there.

On a sort of a intimated safeguard, I think my issue is that, a large portion of the hot band market which is pipe and tube has been absolutely decimated. And so it was one thing to erode imports coming into the country, but we still need a market -- a market place to sell our goods. And those folks need some protection.

And I mean, its over 50% or 60% I do believe of their consumption is imported today, and they need some sort of safeguard before, again that industry gets decimated. So its -- I think personally there should be a long-term solution which is in place, just needs to be enforced and a short-term safeguard to safeguard that particular industry..

Thank you so much, Mark. I appreciate your insights..

Thank you. Our next question comes from the line of David Gagliano from BMO Capital Markets. Please go ahead..

Hi. Great. Thanks for taking my question. I just have one shorter term forward looking type of question. Typically Q2 and Q3 are very strong volume quarters relative to Q1, and often times it’s actually meaningfully stronger.

Any reasons to expect that pattern to be different this year?.

No, I don’t think so. I think the markets are generally good. As we said earlier, it’s a little bit of a mix bag, off-road equipment, energy, agriculture is definitely soft. But the more intense consuming sectors, automotive and construction are remaining strong.

I think the non-residential construction numbers both the macro indices but also our order book would suggest that we’re going to see continued growth in that area, and we’re fortunately highly leveraged.

I think now we’ve got about 2.5 million tons of excess capacity that we haven’t been able to exploit yet most of which is correlated to construction. So we do see that second quarter and the third quarter being very, very strong as we go forward..

The another one thing that I would add to that David is that, with the big bump that you saw in the first quarter that was related primarily to the Flat Roll Division and the Flat Roll Divisions were basically at very high capacity already.

So any additional volume improvement you see would need to come through markets that are attached to long product mill..

Okay. Thanks for that. And then just as a follow-up, can you just talk a little bit about the -- any changes you’ve seen in the order books specific to any of the particular end markets et cetera? Thanks..

I don’t think there was any basic change David, and honestly against the areas that were weak in 2015 will continue to be weak. Automotive remains very strong. Residential, I think although it ticked down a little bit here in the last month and so, year-over-year it’s improved and will continue to improve. Our garage door business is off the charts.

So there is residential strength, we do believe. And non-residential construction for all reports from as I said macro indices and from our customers and also just the order book within New Millennium. They have year-over-year much higher backlog and quote activity right there. We feel quite optimistic that there is going to be incremental growth.

The apparent consumption last year was about 108 million tons and we would love to see that growing to perhaps 111 million, 112 million tons this year..

All right, good. Thanks very much..

Thank you. Our next question comes from the line of Michael Gambardella from JP Morgan. Please go ahead..

Yes. Good morning, Mark and Theresa, and congratulations on another good quarter. Just looking back today's net debt to capital at 35%, it’s the lowest number in net debt to capital that you’ve had since 2006 I think. And since 2006, you’ve grown your steel shipments 75%.

Can you give us some perspective; you’ve had tremendous success basically since the company originated.

But can you give us some feel for what type of growth and then, on your capital structure with the net debt to capital coming down to such low level, what your plans are for use of capital going forward maybe tied into that growth?.

Certainly, Michael. And as you point out, I think we clearly demonstrated the earnings strength -- the cash flow strength of our business model through tough times. We’ve identified several, what I would consider capital effective organic growth opportunities; obviously we’re in the middle of building the paint line in Columbus.

But we have about 400,000 tons or so of excess hot metal capacity of the structural mill. We have excess production capability at Roanoke, and we need to do something with the hot and Steel West Virginia which will ultimately I think give us even a greater hot metal capability.

And Glenn is in charge with finding out the best effort for that excess capacity. We also are expanding the hot-roll galv line in Butler which will be a meaningful event for us. So there’s a lot of organic opportunity.

Again that cash won't be expended in the near-term in the next six months or so, and they’re not massive -- massive consumers of capital either.

What we’re actively exploring, venturing value add opportunities with a very specific eye on pull through volume such as we -- the model that we see at New Millennium it helps dramatically in the down cycle to maintain utilization, maintain cash flow and a more uniformed earnings profile.

And also sort of mitigation of imports looking at opportunities that we can separate ourselves from the import world that this is going to continue for the years to come. And as we do that in parallel, we’re obviously exploring and evaluating the many M&A opportunities that are coming to market currently..

What about on the -- in terms of using some capital to give back to shareholder and dividend?.

Yes. So, Mike we do want to keep that positive different profile. But we also want to keep in mind that we’re a cyclical industry. And so we want to make sure that it’s sustainable at the levels that it is because we view dividend that’s forever.

So it’s definitely one of the outlooks that we’re going to be looking at and we look at other outlets to return to shareholders as well. And to your point the credit profile that we have today is extraordinarily strong.

And so, I think right now it’s a matter of waiting for a period of time to see where the inorganic opportunities fallout as they come to bear for us to look at those and over the next call it 12 months or so.

And then as we’re generating cash flow on the way we’ll make some decisions possibly do some other allocations as well and maybe not just in the organic arena, but the organic and then their possibilities. So I think right now we’re looking at everything.

But the most important strategic move for us as Mark mentioned was to look for pull through volume and to make sure that we’re using our -- the assets we have in place as efficiently as we can..

Okay. Well, it’s a great place to be. So again congratulations..

Thank you, Michael..

Thank you. Our next question comes from the line of Timna Tanners from Bank of America. Please go ahead..

Hi. Good morning..

Good morning, Timna..

So I wanted to drill down a little bit into the discussion on flat-rolls market is really strong and everything we’re hearing is quite robust. Steel Dynamics has a tradition of offering or opening their order book later than piers.

So I just wanted to ask you if that’s still the case, and ask about how to think about utilization in flat-roll going forward.

Did you max out Q1? Is there a little more tonnage to expect going forward or is there still run rate we should expect in this market environment?.

On the flat-roll side I would say there is a little more gas in our tank, but not much. We operated at a great rate in the first quarter. I think there was some commentary from the -- from you folks, regarding our pricing and maybe a little disappointment there to the level of pricing given the environment we’re in.

And again, I think that is focused principally to flat-roll and to the fact that 40% of our output is indexed to CRU, and there’s a one month, two month lag there. Additionally the tax, because of the business model [indiscernible] -- they tend to be looking about two months out. So its kind of again it slows the uptick in pricing.

Our overall philosophy remains to keep a short order book hot band is not much more than four weeks. I would tell you that our Butler facility has been doing that for many, many, many years. Our Columbus team has not necessarily done that in the past.

And so coming into the first quarter in January we were probably stretched out a little bit more at Columbus than we would typically be, but that is well in hand there..

Okay, that’s great. So just a follow-up to make sure I understand that you’re talking about; I think we just alluded to the margin compression and some surprise around that.

So that what you’re saying is that, that’s really a function of some of the lag effect in pricing due to the CRU indices and also the way that Columbus had operated somewhat in the past and maybe going forward?.

Correct..

But in addition to that, Timna remember the long product pricing came down as well in industry, I mean it crossed the industry. So its not just flat-roll, that price that you have is a mixed average..

No, of course. Okay, that makes sense. All right. Thanks for the help..

Thank you. Our next comes from the line of Jorge Beristain from Deutsche Bank. Please go ahead..

Hi, guys. Jorge, with DB here. And congratulations Mark and Theresa on your results. I just had a question really drilling down a little bit on your utilization. You guys are at 88%, rest of industry is at 71%, you’ve obviously picked up share in the kind of environment we saw due to those mill closure that some competitors.

But do you see with the improved pricing that there is a risk that you could kind of give back some volumes to your competitors? That’s my first question..

No, I don’t think so. I think we’re well placed. Some of the market share we gained such as in Columbus is on the value add end, the coated arena. We struggled or that facility struggled a couple of years ago with quality. And I think the teams Butler and Columbus working together have done a phenomenal job getting the quality to where it should be.

We’ve reclaimed a lot of those -- those former customers and they’re loyal customers, and we should retain them. So now, I think we’re in a good spot. We have gained market share. We gained market share on flat-roll. We gained market share dramatically on our fabrication division, and I’m comfortable where we are..

Great. And my second question was on the Columbus paint line. Could you talk a little bit about what type of contracts you’re now able to get with your new promised paint line there? And how much of those would be domestic versus Mexico based or export contract.

If you could just also talk about the sort of type of pricing that you’re able to achieve for a painted product.

Is it going to have a bit more defensiveness vis-à-vis imports and vis-à-vis the underlying CRU pricing?.

Well I think for sure the more customized the product is, the more defensive you can be. Also the margins in that business are a little better and it gives you flexibility to protect your turf so to speak. From the standpoint of contracts, again it’s a little early for us to be securing definitive volumes there.

There will be a shift with some of our products from Butler and Jeffersonville [indiscernible] immediately to give us a base load. But again we don’t have contracts per say down there as of yet.

Is that fair, Glenn?.

Absolutely it’s a little early to make any agreements in place. But the supply chains will naturally dictate some of its work and that’s what we’ll work first to optimize..

Okay. And sorry, could you just discuss a little bit of how the pricing for that kind of product would work.

Is it still going to be based off of an underlying, towards the index or is it going to be more towards like a fixed period type of pricing?.

No, it will be certainly market driven..

Okay. Thanks..

Thank you. Our next question comes from the line of Phil Gibbs from KeyBanc Capital Markets. Please go ahead..

Hi, good morning..

Good morning, Phil..

I had a question on the SBQ business. It looked like it picked up a decent bit quarter-on-quarter. Is that an indication to you that the de-stocking maybe a baiting or a pickup in auto or market share.

How do we think about that momentum right now for you?.

This is, Glenn Pushis, Phil..

Hi, Glenn. Good morning..

Good morning to you. Phil, the engineered Bar Products Division, our capacity utilization for the first quarter was right at 72% and not in cash than 60% rolling. In those markets the automotive is still very strong for them.

They had a great new first quarter with a small mill that they fired up there last year and ran some good tonnage through that facility. So that helped to flatten the first quarter. So if you think they were growing market share in that arena, I would tell you it’s in the small bar area with the start up of that new facility down there last year.

But again a typical, you’ve heard Mark say the automotive is strong, ag and energy is still soft. The coal finished business has been I’d say stable, steady as it is well in the quarters. So that’s kind of where we’re at and what we see coming..

Should we expect the pick up in the business in terms of the volumes from this level or more stability than anything until some of those later cycle markets kick in?.

Yes, I’d agree with this to your later comment. I think its more, just a stable market right now until we see what happens in the second and third quarter..

Okay. I appreciate that.

And Theresa, any comments you can help us on with the mix in flat-roll?.

Yes, I can. So for the first quarter across Flat Roll Group, hot-rolled and P&L shipments were 790,000 tons, cold-rolled was a 129,000 tons, and coated was 738,000 tons..

I appreciate that. And I have one last one here, the CapEx started the year off pretty modestly.

Are you still on track to spend that $250 million more backend loaded or have you pulled some of that off the table?.

No, the expectations are a lot the best estimate I would give you would beat around $250 million; it will probably be a bit less than that. But with the paint line it’s definitely loaded more towards the back half of the year..

Okay. And I know the inventories are low right now.

Are you expecting any further free cash flow generation this year given that you probably have a little bit of improvement in working capital in terms of it going higher?.

Yes, we did some framework changes in the working capital which should reduce some of it effectively from hereon now. But you’re right; the pricing moves will have an impact as well as maybe some inventory volumes on the raw material side.

And so, I would expect the second quarter could have some draw from working capital both from receivables and an inventory perspective. But then as you go to the second half of the year I think that, that pretty much gets mitigated and working capital won't have that much of an impact..

But still some expectation for further free cash down the rest of this year..

Perfectly. Yes, absolutely..

Okay. Thanks so much. Have a great morning..

Thanks. You too..

Thanks, Phil..

Thank you. Our next question comes from the line of Charles Bradford from Bradford Research. Please go ahead..

Good morning..

Good morning, Charles..

Over the last year or so the rail industry has been hit pretty hard by the debacle in coal and to some extent the reduced movement of oil by rail.

Have you seen the railroads switching at all to maybe repair and re-railing if you will some of their other lines to offset their maybe reduced needs for the rail for especially coal?.

Well, I think Chuck, the Class 1 railroads in particular and obviously have trimmed down their capital spend, and that will influence a little bit of their track expansion plans. Repair and maintenance is ongoing. Our shipments of the rail are still projected to be in the kind of the 240,000 to 260,000 tons for the year.

I do believe, Glenn?.

Yes. That’s right, Mark..

And I think you’re right. There is a little bit of a shift to maintenance away from sort of mainline track build. But we seem to be continuing to pick up little market share in that product line..

Thank you very much..

Thank you. Our next question comes from the line of Aldo Mazzaferro from Macquarie. Please go ahead..

Hi. Good morning, ladies and gentlemen. I’ve got a question on the mix at Columbus, Mark. I read that you had 80% increase in the value add volume on a year-to-year basis there.

Can you frame that for us in terms of what to find to that value added, and what percentage of the mix that value added was?.

So from the value added perspective Aldo, we’re actually probably being a little bit light on that, because we’re just including anything that beyond hot band that there’s actually some hot band that I think, lets just say value added as well. So that number really is higher.

And so really its just 45% hot-rolled for them and the rest was P&L and cold-rolled and hot-rolled and cold-rolled galvanized..

Okay.

Are you using the degasser there very much now?.

[Indiscernible]..

The vacuum that you look at.

The vacuum degasser at Columbus is that the -- like how much utilized was that in the quarter, did you say?.

We currently utilized vacuum degassing for approximately 5% of the grades and its development work primarily right now. There are some continuing products, but part of our long going strategy to get more into automotive, we usually device more and more each month..

Great. And then one follow-up, Theresa. You mentioned something just now about the, you changed your framework in the working capital.

Can you say if there was anything unusual in that first quarter big source out of payables and inventory?.

Yes, that was really -- those were really changes that we made throughout last year. Aldo, we’ll just have a reemphasis on making sure that we’re being disciplined in watching what the raw material volumes are, what finished goods volumes are.

And there’s also been a change at Columbus, and there’s probably still some opportunity there just based on how we typically operate versus how Columbus may have operated with their working capital in the past..

Great. Congratulations on the balance sheet, Theresa..

Okay..

Thank you. Our next question comes from the line of Richard Yu from Citigroup. Please go ahead..

Hi. Thanks for taking my question..

Good morning..

Glenn, I was wondering if you could talk a little bit more about your acquisition plans in the acquisition environment.

Maybe given your cash position, what kind of acquisitions are you looking for? What are you seeing in that market? And would you look to increase your position in markets that has been weak such as oil and gas?.

I think we’ve already spoken to the extent of that actually, because again its focused on value add downstream type opportunities. We want to enhance the quality of our margins.

We want to see greater pull through volume so that we can at least slow -- mitigate some of the cyclicality of our earnings profile so that we have some higher highs, but higher lows going forward. I think one needs to recognize that we’re intensely global industry today and that imports are going to be with us forever.

And so we need to ensure that our business model tends to insulate us from an import pressure. Additionally again the financial stress in the system is bringing a lot of opportunities to market and we just assess those as they show up and see where some opportunities may or may not align with our long-term plan..

Okay. Thank you very much..

Thank you. Ladies and gentlemen, that does conclude our question-and-answer session. I would now like to turn the call back over to Mr. Millett for any closing comments..

Thanks Adam, and thanks to all of you that remained on the call for your support of our company. We have an absolutely phenomenal team. I think [indiscernible] how we’re differentiated as a team and as a business model, we’ve colossal cash flow generation again in tough times and it will continue. It gives us great opportunity for the future.

So again thank you to you all, and to those customers on the line, my sincere thanks for your support. And for the employees on the line, guys and girls stay safe and keep doing what you’re doing. You’re making us a special company. Thank you..

Thank you. Once again ladies and gentlemen, that does conclude our teleconference for today. Thank you for your participation, and have a great and safe day..