Discounted Cash Flow Analysis - Steel Dynamics, Inc. Ticker STLD Date 10/7/20 ($ in Millions Except Per Share Data) Exchange NASDAQ Steel Dynamics, Inc. - DCF Assumptions & Output: Company Name: Steel Dynamics, Inc. Use Multiples Method for TV? Yes Current Share Price: $ 28.89 PV of Terminal Value: 4,493.4 Effective Tax Rate: 22.6% Sum of PV of Free Cash Flows: 3,124.7 Discount Rate (WACC): 8.5% Implied Enterprise Value: S 7,618.1 Explain how did you choose the Terminal EBITDA Multiple? Baseline Terminal EBITDA Multiple: 3.79 x o of Implied EV from Terminal Value: 59.0% Baseline Terminal Value: 6,753.18 Implied Terminal FCF Growth Rate: (4.3%) Less: Net Debt: 1,352.9 Explain how did you choose the Implied Equity Value: 6,265.2 Terminal FCF Growth Rate? Baseline Terminal FCF Growth Rate: 0.5% Diluted Shares Outstanding: 210.365 Baseline Terminal Value: $ 11,377.9 Implied Terminal EBITDA Multiple: 6.4 x Implied Share Price from DCF: $ 29.78 Premium / (Discount) to Current: 3.1% Historical Projected In the yellow areas below, explain how did you choose those assumptions Steel Dynamics, Inc. - FCF Projections: 2017 2018 2020 2021 2022 2023 2024 corresponding to question 1 of STLD valuation Revenue: $ 9,539.0 $ 11,822.0 $ 10,465.0 $ 9,064.8 $ 9,523.5 $ 11,215.8 $ 11,776.6 $ 12,129.9 Revenue Growth Rate: 25.6% 23.9% (11.5%) (13.4%) 5.1% 17.8% 5.0% 3.0% Operating Income: 1,067.0 1,722.0 987.0 1,063.1 1,116.9 1,315.4 1,381.1 1,422.6 Operating Margin: 11.2% 14.6% 9.4% 11.7% 11.7% 11.7% 11.7% 11.7% Less: Taxes, Excluding Effect of Interest: (362.8) (585.5) (335.6) (361.5) (379.7) (447.2) (469.6) (483.7) Net Operating Profit After Tax (NOPAT): 704.2 1,136.5 651.4 701.6 737.1 868.1 911.5 938.9 Adjustments for Non-Cash Charges: Depreciation & Amortization: 299.0 317.2 321.1 268.5 282.1 332.2 348.8 359.3 % Revenue: 3.1% 2.7% 3.1% 3.0% 3.0% 3.0% 3.0% 3.0% Impairment Charges: Equity-Based Compensation: 36.0 3.0 18.0 36.3 38.1 44.9 17.1 48.5 % Revenue: 0.4% 0.4% 0.5% 1.4% ).4% 0.4% 2.4% 0.4% Deferred Income Taxes: (135.9) 61.8 51.7 % Book Taxes on Income Statement: (85.7%) 100.0% 52.1% 0.0% 0.0% .0% 0.0% 0.0% (Gain) / Loss on PP&E Disposal: Total Non-Cash Adjustments: 199.1 422.0 420.8 304.8 320.2 377.1 395.9 107.8Changes in Working Capital: Decrease / (Increase) in Accounts Receivable: (139.1) (145.9) 237.8 Decrease / (Increase) in Inventory: (242.9) (246.2) 217.9 Decrease / (Increase) in Other Assets: 4.0 (3.5) 13.7 Increase / (Decrease) in Accounts Payable: 96.1 37.9 (86.4) Increase / (Decrease) in Accrued Expenses: 36.0 59.8 (74.3 Increase / (Decrease) in Income Tax Payable: (33.9 26.5 (12.1) Net Change in Working Capital: (279.8) (261.4) 296.6 70.0 (22.9) (84.6) (28.0 (17.7) % Change in Revenue: (15.9%) (11.4%) (21.9%) (5.0%) 5.0% (5.0%) (5.0% 5.0%) % Revenue: (2.9%) (2.2%) 2.8% .8% 0.2% (0.8% (0.2% 0.1%) Less: Capital Expenditures: (164.9) (239.4) (451.9) (317.3) (333.3) (392.6) (412.2) (424.5) % Revenue: 1.7% 2.0% 4.3% 3.5% 3.5% 3.5% 3.5% 3.5% Unlevered Free Cash Flow: 458.6 $ 1,057.7 916.9 $ 759.1 701.1 768.0 867.2 904.5 Growth Rate: N/A 130.6% (13.3%) (17.2%) (7.7%) 9.6% 12.9% 4.3% EBITDA: $ 1,366.0 $ 2,039.2 $ 1,308.1 $ 1,331.6 $ 1,399.0 $ 1,647.6 $ 1,729.9 $ 1,781.8 Growth Rate: V/A 49.3% (35.9%) 1.8% 5.1% 17.8% 5.0% 3.0% Sensitivity - Implied Share Price from DCF Analysis - Long-Term FCF Growth Rate vs. Discount Rate (WACC): Terminal FCF Growth Rate: (1.5%) (0.5%) 0.5% 1.5% 2.5% 8.5% 4.5% 6.5% 7.0% $ 31.93 $ 31.93 $ 31.93 $ 31.93 $ 31.93 $ 31.93 $ 31.93 $ 31.93 $ 31.93 7.5% 31.19 31.19 31.19 31.19 31.19 31.19 31.19 31.19 31.19 8.0% 30.47 30.47 30.47 30.47 30.47 30.47 30.47 30.47 Discount Rate 8.5% 29.77 29.77 29.77 29,77 29.77 29.77 29.77 29.77 29.77 (WACC): 9.0% 29.08 29.08 29.08 29.08 29.08 29.08 29.08 29.08 29.08 9.5% 28.42 28.42 28.42 28.42 28.42 28.42 28.42 28.42 28.42 10.0% 27.77 27.77 27.77 27.77 27.77 27.77 27.77 27.77 27.77 10.5% 27.13 27.13 27.13 27.13 27.13 27.13 27.13 27.13 27.13 26.51 26.51 26.51 26.51 26.51 26.51 26.51 26.51 26.51 Sensitivity - Implied Share Price from DCF Analysis - Year 5 Revenue Growth Rate vs. Year 5 Operating (EBIT) Margin: Year 5 Revenue Growth Rate: (3.0%) -2.0% (1.0%) 3.0% 4.0% 5.0% 11.0% S 27.31 $ 27.52 $ 27.72 $ 27.93 $ 28.13 28.34 $ 28.54 $ 28.75 $ 28.95 11.5% 28.11 28.33 28.54 28.75 28.97 29.18 29.39 29.61 29.82 12.0% 28.92 29.14 29.36 29.58 29.80 30.03 30.25 30.47 Year 5 12.5% 29.72 29.95 30.18 30.41 30.64 30.87 31.10 31.33 Operating 13.0% 30.53 30.76 31.00 31.24 31.48 31.72 31.95 32.19 32.43 Margin: 13.5% 31.33 31.58 31.82 32.07 32.32 32.56 32.81 33.05 33.30 14.0% 32.13 32.39 32.64 32.90 33.15 33.41 33.66 33.92 34.17 14.5% 32.94 33.20 33.46 33.73 33.99 34.25 34.52 34.78 35.04 15.0% 33.74 34.01 34.28 34.56 34.83 35.10 35.37 35.64 35.91