STEEL DYNAMICS, INC. Forward-Looking Statements
This report contains some predictive statements about future events, including statements related to conditions in domestic or global economies, conditions in steel and recycled metals market places,Steel Dynamics' revenues, costs of purchased materials, future profitability and earnings, and the operation of new, existing or planned facilities. These 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 be made as "forward-looking", subject to many risks and uncertainties, within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These statements speak only as of this date and are based upon information and assumptions, which we consider reasonable as of this date, concerning our businesses and the environments in which they operate. Such predictive statements are not guarantees of future performance, and we undertake no duty to update or revise any such statements. Some factors that could cause such forward-looking statements to turn out differently than anticipated include: (1) the effects of uncertain economic conditions; (2) the effects of pandemics or other health issues, such as the recent novel coronavirus outbreak (COVID-19); (3) cyclical and changing industrial demand; (4) changes in conditions in any of the steel or scrap-consuming sectors of the economy which affect demand for our products, including the strength of the non-residential and residential construction, automotive, manufacturing, appliance, energy, and other steel-consuming industries; (5) fluctuations in the cost of key raw materials and supplies (including steel scrap, iron units, zinc, graphite electrodes, and energy costs) and our ability to pass on any cost increases; (6) the impact of domestic and foreign imports, including trade policy, restrictions, or agreements; (7) unanticipated difficulties in integrating or starting up new, acquired or planned businesses or assets; (8) risks and uncertainties involving product and/or technology development; and (9) occurrences of unexpected plant outages or equipment failures. More specifically, we refer you to our more detailed explanation of these and other factors and risks that may cause such predictive statements to turn out differently, as set forth in our most recent Annual Report on Form 10-K under the headings Special Note Regarding Forward-Looking Statements and Risk Factors for the year endedDecember 31, 2019 , in our quarterly reports on Form 10-Q, or in other reports which we from time to time file with theSecurities and Exchange Commission . These reports are available publicly on theSecurities and Exchange Commission website, www.sec.gov, and on our website, www.steeldynamics.com under "Investors - SEC Filings."
Description of the Business
We are one of the largest domestic steel producers and metal recyclers inthe United States based on current estimated annual steelmaking and coating capability and actual metals recycling volumes, with one of the most diversified, high-margin steel product portfolios. Our primary sources of revenue are from the manufacture and sale of steel products, the processing and sale of recycled ferrous and nonferrous metals, and the fabrication and sale of steel joists and deck products. We have three reportable segments: steel operations, metals recycling operations, and steel fabrication operations.
Operating Statement Classifications
Net Sales . Net sales from our operations are a factor of volumes shipped, product mix and related pricing. We charge premium prices for certain grades of steel, product dimensions, certain smaller volumes, and for value-added processing or coating of our steel products. Except for the steel fabrication operations, we recognize revenues from sales and the allowance for estimated returns and claims from these sales at the point in time control of the product transfers to the customer, upon shipment or delivery. Our steel fabrication operations recognize revenues over time based on completed fabricated tons to date as a percentage of total tons required for each contract. Costs of Goods Sold. Our costs of goods sold represent all direct and indirect costs associated with the manufacture of our products. The principal elements of these costs are scrap and scrap substitutes (which represent the most significant single component of our consolidated costs of goods sold), steel substrate, direct and indirect labor and related benefits, alloys, zinc, transportation and freight, repairs and maintenance, utilities such as electricity and natural gas, and depreciation. Selling, General and Administrative Expenses. Selling, general and administrative expenses consist of all costs associated with our sales, finance and accounting, and administrative departments. These costs include, among other items, labor and related benefits, professional services, insurance premiums, and property taxes. Company-wide profit sharing and amortization of intangible assets are each separately presented in the statement of income.
Interest Expense, net of Capitalized Interest. Interest expense consists of interest associated with our senior credit facilities and other debt net of interest costs that are required to be capitalized during the construction period of certain capital investment projects.
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Other (Income) Expense, net. Other income consists of interest income earned on
our temporary cash deposits and short-term investments; any other non-operating
income activity, including income from non-consolidated investments accounted
for under the equity method. Other expense consists of any non-operating costs,
such as certain acquisition and financing expenses.
Impact of COVID-19 on Our Business
InMarch 2020 , theWorld Health Organization categorized the novel coronavirus (COVID-19) as a pandemic, and since that time, efforts to slow the contagion have impacted global economies. Countries, includingthe United States , issued "shelter in place" orders, temporarily closing non-essential businesses and restricting social interactions in an effort to slow the spread of COVID-19. Due to use of steel in the broad infrastructure and defense framework ofthe United States , our business operations are designated "essential" as part of the critical infrastructure of the states where we operate. As a result, all of our locations continued to operate during the first half of 2020 and continue to operate. Our teams are our most valued priority, and we have implemented numerous additional process and procedural initiatives to ensure the health and safety of our people, their families, and our communities. We have adjusted schedules to support social distancing, provided additional and more frequent sanitizing applications, provided additional protective measures, and many other items. While the economic impact of COVID-19 negatively impacted our results of operations during the second quarter of 2020, we are unable to specifically quantify that impact or predict the ultimate impact it may have on our business, financial condition, results of operations, or cash flow for the remainder of 2020. The extent to which our operations may continue to be impacted by COVID-19 will depend on future developments, which are highly uncertain and cannot be accurately predicted, including the possibility of a resurgence or further spread of the virus. In addition, the duration of the pandemic and its eventual impact on world economies is not known or estimable. The COVID-19 pandemic significantly reduced the supply of scrap and the demand for some of our steel products during the second quarter 2020, and its continuation could continue to have similar impact. Certain of our suppliers and customers, such as those in the automotive, energy, and related industries, have experienced, and could further experience, temporary shutdowns or significant demand reductions. Reduced demand for our products or lack of ferrous scrap raw material supply due to shutdowns or slowdowns in manufacturing businesses could adversely affect our volumes, selling prices, and margins. However, our low, highly variable cost structure, our diversified value-added product offerings, and our downstream manufacturing businesses which are able to provide base-load "pull-through" volume for our steel operations, support our continued cash flow prospects.
Results Overview
Our consolidated results for the second quarter of 2020 were negatively impacted by the COVID-19 pandemic from the related temporary closures of numerous domestic steel consuming businesses. Domestic steel demand lagged during the second quarter 2020, driving lower steel shipments and selling values, as well as significantly lower scrap flows for our metals recycling operations. The non-residential construction market remained resilient, with construction activity largely intact during the quarter, resulting in steady second quarter 2020 shipments and selling prices for our fabrication operations compared to second quarter 2019. Consolidated operating income decreased$126.2 million , or 44%, to$158.9 million for the second quarter 2020, compared to the second quarter 2019. Second quarter 2020 net income attributable toSteel Dynamics, Inc. decreased$118.8 million , or 61%, to$75.5 million , compared to the second quarter 2019, consistent with the decreased operating income, and due to the additional expenses and interest associated with ourJune 2020 refinancing of senior notes.
Consolidated operating income decreased
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Segment Operating Results 2020 vs. 2019 (dollars in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2020 % Change 2019 2020 % Change 2019
Net sales:
Steel Operations Segment $ 1,699,398 (22)% $ 2,188,185 $ 3,715,550 (15)% $ 4,388,350
Metals Recycling Operations Segment 416,688 (37)% 656,766 1,045,427 (25)% 1,393,811
Steel Fabrication Operations Segment 218,428 (10)% 241,424
439,869 (6)% 470,093
Other 94,445 (5)% 99,762 215,135 1% 213,258
2,428,959 3,186,137 5,415,981 6,465,512
Intra-company (334,654) (415,622) (746,576) (877,562)
$ 2,094,305 (24)% $ 2,770,515 $ 4,669,405 (16)% $ 5,587,950
Operating income (loss):
Steel Operations Segment $ 168,043 (42)% $ 291,411 $ 456,437 (24)% $ 600,489
Metals Recycling Operations Segment (8,715) (214)% 7,619 (3,187) (113)% 24,581
Steel Fabrication Operations Segment 27,155 (11)% 30,664
56,318 10% 51,287
Other (32,089) 35% (49,153) (78,444) 26% (106,073)
154,394 280,541 431,124 570,284
Intra-company 4,456 4,491 1,412 6,590
$ 158,850 (44)% $ 285,032 $ 432,536 (25)% $ 576,874
Steel Operations Segment
Steel operations consist of our six electric arc furnace steel mills, producing
sheet and long products steel from ferrous scrap and scrap substitutes,
utilizing continuous casting and automated rolling mills, with numerous
value-added downstream processing and coating lines, as well as IDI, our liquid
pig iron production facility that solely supplies our Butler Flat Roll Division.
Our steel operations sell a diverse portfolio of value-added sheet and long
products directly to end-users, steel fabricators, and service centers. These
products are used in a wide variety of industries, including the construction,
automotive, manufacturing, transportation, heavy equipment, and agriculture, and
energy markets. Steel operations accounted for 78% and 76% of our consolidated
external net sales during the second quarter of 2020 and 2019, respectively, and
76% during the first half of 2020 and 2019.
Steel Operations Segment Shipments (tons):
Three Months Ended June 30, Six Months Ended June 30,
2020 % Change 2019 2020 % Change 2019
Total shipments 2,518,019 (9)% 2,769,358 5,365,201 (2)% 5,453,769
Intra-segment shipments (257,219) (280,024) (510,696) (527,427)
Steel Operations Segment shipments 2,260,800 (9)% 2,489,334 4,854,505 (1)% 4,926,342
External shipments 2,152,856 (10)% 2,386,851 4,648,020 (2)% 4,734,060
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Steel Operations Segment Results 2020 vs. 2019
The COVID-19 pandemic negatively impacted our steel operations during the second quarter of 2020. The temporary closure of numerous steel consuming businesses such as automotive manufacturers and the related supply change drove lower selling prices and shipments, particularly for sheet steel products. Conversely, construction related steel demand remained steady. However, steel operations segment shipments decreased only 9% in the second quarter 2020, as compared to the same period in 2019, and decreased only 12% from record first quarter 2020. Second quarter 2020 average selling prices decreased 14%, or$125 per ton, compared to 2019, reflecting the decreased steel demand during the quarter. Net sales for the steel operations decreased 22% in the second quarter 2020 when compared to the same period in 2019, due to decreases in shipments and overall steel selling prices. Net sales for the steel operations decreased 15% in the first half of 2020 when compared to the same period in 2019, due to the decrease in steel demand due to the COVID-19 pandemic, negatively impacting both steel shipments and average selling prices, primarily in the second quarter of 2020. Metallic raw materials used in our electric arc furnaces represent our single most significant steel manufacturing cost, generally comprising approximately 50 to 60% of our steel mill operations' manufacturing costs. Our metallic raw material cost per net ton consumed in our steel operations decreased$50 , or 16%, in the second quarter 2020, compared to the same period in 2019, consistent with overall decreased domestic scrap pricing. In the first half of 2020, our metallic raw material cost per ton decreased$61 , or 18% compared to the same period in 2019. As a result of average selling prices decreasing more than scrap costs, metal spread (which we define as the difference between average steel mill selling prices and the cost of ferrous scrap consumed in our steel mills) decreased 13% in the second quarter 2020 compared to the second quarter 2019. Due to this metal spread contraction, coupled with the decrease in shipments, operating income for the steel operations decreased 42%, to$168.0 million , in the second quarter 2020, compared to the same period in 2019. First half 2020 operating income decreased 24%, to$456.4 million , compared to the first half of 2019, due primarily to decreased metal spreads and to a lesser extent steel shipping volumes, which decreased only 2%.
Metals Recycling Operations Segment
Metals recycling operations consist of our ferrous and nonferrous scrap metal processing, transportation, marketing, and brokerage services, strategically located primarily in close proximity to our steel mills and other end-user scrap consumers throughout largely the eastern half ofthe United States . In addition, our metals recycling operations designs, installs, and manages customized scrap management programs for industrial manufacturing companies at hundreds of locations throughoutNorth America . Our steel mills utilize a large portion of the ferrous scrap sold by our metals recycling operations as raw material in our steelmaking operations, 18 Table of Contents and the remainder is sold to other consumers, such as other steel manufacturers and foundries. In the second quarter 2020, 75% of the metals recycling operations ferrous scrap was sold to our own steel mills, as scrap flow slowed and our steel mills were able to maintain 79% utilization compared to 55% estimated domestic steel mill utilization. Our metals recycling operations accounted for 7% and 12% of our consolidated external net sales during the second quarter of 2020 and 2019, respectively, and 10% and 12% during the first half of 2020 and 2019, respectively.
Metals Recycling Operations Segment Shipments:
Three Months Ended June 30, Six Months Ended June 30,
2020 % Change 2019 2020 % Change 2019
Ferrous metal (gross tons)
Total 802,070 (33)% 1,189,679 1,994,214 (16)% 2,361,040
Inter-company (604,100) (21)% (764,202) (1,402,593) (10)% (1,552,722)
External shipments 197,970 (53)% 425,477 591,621 (27)% 808,318
Nonferrous metals (thousands of pounds)
Total 166,914 (37)% 266,222 438,992 (21)% 558,260
Inter-company (39,540) (34,671) (80,218) (73,779)
External shipments 127,374 (45)% 231,551 358,774 (26)% 484,481
Metals Recycling Operations Segment Results 2020 vs. 2019
Our metals recycling operations were also negatively impacted during the second quarter of 2020 by the COVID-19 pandemic. Decreased manufacturing activity during the quarter, primarily temporary closures of domestic automotive manufacturers and their related supply chain, resulted in reduced scrap flows. In addition, domestic steel mill utilization rates declined significantly, resulting in decreased ferrous scrap demand. Net sales decreased 37% during the second quarter of 2020 compared to the same period in 2019, driven primarily by decreased shipments. Ferrous shipments to our own steel mills decreased 21% in the second quarter 2020, compared to the same period in 2019, as our quarterly steel mill utilization percentage decreased from 89% to 79% year over year. Ferrous scrap average selling prices decreased 3% during the second quarter 2020 compared to the same period in 2019, while average nonferrous scrap prices increased 7%. Ferrous metal spread (which we define as the difference between average selling prices and the cost of purchased scrap) however increased 28%, as selling prices decreased less than unprocessed scrap procurement costs, while nonferrous metal spread decreased 21%. Metals recycling operations operating income decreased 214% to a loss of$8.7 million in the second quarter 2020 compared to the second quarter 2019 operating income of$7.6 million , due primarily to the decrease in ferrous and nonferrous shipments. Net sales for our metals recycling operations decreased 25% in the first half of 2020 as compared to the same period in 2019, driven by decreased shipments and pricing. Ferrous scrap average selling prices decreased 6% during the first half of 2020 compared to the same period in 2019, while nonferrous average selling prices decreased 3%. Nonferrous metal spread decreased 24%, while ferrous metal spread increased 9% in the first half of 2020 compared to the first half of 2019. Metals recycling operations operating loss in the first half of 2020 of$3.2 million decreased 113% from the first half of 2019 operating income of$24.6 million , due primarily to decreased ferrous and nonferrous shipments, most notably in the second quarter 2020.
Steel Fabrication Operations Segment
Steel fabrication operations include our joist and deck plants located throughoutthe United States and inNorthern Mexico . Revenues from these plants are generated from the fabrication of steel joists, trusses, girders and steel deck used within the non- 19 Table of Contents residential construction industry. Steel fabrication operations accounted for 10% and 9% of our consolidated external net sales during the second quarter of 2020 and 2019, respectively, and 9% and 8% during the first half of 2020 and 2019, respectively. [[Image Removed: Graphic]]
Steel Fabrication Operations Segment Results 2020 vs. 2019
Net sales for the steel fabrication operations decreased 10% during the second quarter 2020 compared to the same period in 2019, as average selling prices decreased 11%, or$174 per ton, while shipments increased 2%. Net sales for the segment decreased 6% during the first half of 2020, compared to the same period in 2019, as shipments increased 7%, and average selling prices decreased 13%, or$196 per ton. Our steel fabrication operations continue to leverage our national operating footprint. Market demand, orders and backlog continued to be strong in the second quarter 2020, indicating resilience of the non-residential construction market during the COVID-19 pandemic. The purchase of various steel products is the largest single cost of production for our steel fabrication operations, generally representing approximately two-thirds of the total cost of manufacturing. The average cost of steel consumed decreased 16% in the second quarter 2020, as compared to the same period in 2019. As a result of steel costs decreasing less than selling prices per ton, metal spread (which we define as the difference between average selling prices and the cost of purchased steel) decreased 5% in the second quarter 2020 compared to the same period in 2019, and operating income decreased 11% to$27.2 million in the second quarter 2020 compared to the same period in 2019. For the first half of 2020, operating income increased 10% to$56.3 million compared to the first half of 2019, as increased shipments more than offset the 2% decrease in metal spread. Other Operations
Second Quarter Consolidated Results 2020 vs. 2019
Selling, General and Administrative Expenses. Selling, general and administrative expenses of$109.3 million during the second quarter 2020 were comparable to the$106.3 million during the second quarter 2019, representing 5% and 4% of net sales during each period, respectively. Profit sharing expense during the second quarter of 2020 of$9.1 million was down 60% from the$22.9 million during the same period in 2019. The company-wide profit sharing plan represents 8% of pretax earnings; therefore, our lower second quarter 2020 earnings resulted in lower profit sharing. Interest Expense, net of Capitalized Interest. During the second quarter 2020, interest expense of$27.7 million decreased 14% from$32.3 million during the second quarter of 2019, due to increased capitalized interest in 2020 in conjunction with our new flat roll steel mill currently under construction
inSinton, Texas . 20 Table of Contents Income Tax Expense. Second quarter 2020 income tax expense of$24.3 million , at an effective income tax rate of 23.6%, was down 60% from the$60.2 million , at an effective income tax rate of 23.4%, during the second quarter 2019, consistent with decreased income before income taxes.
First Six Months Consolidated Results 2020 vs. 2019
Selling, General and Administrative Expenses. Selling, general and administrative expenses of$222.2 million during the first half of 2020 were comparable to the$217.3 million during the first half of 2019, representing 5% and 4% of net sales, respectively. Profit sharing expense during the first half of 2020 of$30.5 million decreased 34% from the$46.5 million during the same period in 2019. The company-wide profit sharing plan represents 8% of pretax earnings; therefore our lower first half 2020 earnings resulted in lower profit sharing. Interest Expense, net of Capitalized Interest. During the first half of 2020, interest expense of$55.7 million decreased 12% from$63.4 million during the first half of 2019 due to increased capitalized interest in 2020 in conjunction with our new electric arc furnace flat roll steel mill currently under construction inSinton, Texas . Income Tax Expense. First half 2020 income tax expense of$81.7 million , at an effective income tax rate of 23.3%, was down 33% from the$122.5 million , at an effective income tax rate of 23.4%, during the first half of 2019, consistent with decreased income before income taxes.
Liquidity and Capital Resources
Capital Resources and Long-term Debt. Our business is capital intensive and requires substantial expenditures for, among other things, the purchase and maintenance of equipment used in our steel, metals recycling, and steel fabrication operations, and to remain in compliance with environmental laws. Our short-term and long-term liquidity needs arise primarily from working capital requirements, capital expenditures, currently including those related to our flat roll steel mill under construction inSinton, Texas , principal and interest payments related to our outstanding indebtedness (no significant principal payments until 2024), dividends to our shareholders, potential stock repurchases, and acquisitions. We have met these liquidity requirements primarily with cash provided by operations and long-term borrowings, and we also have availability under our unsecured Revolver. Our liquidity atJune 30, 2020 , is as follows (in thousands): Cash and equivalents$ 1,496,458 Short-term investments 69,546 Revolver availability 1,188,191 Total liquidity$ 2,754,195
Our total outstanding debt decreased$23.7 million during the first half of 2020, primarily due to repayment of revolving debt at two of our consolidated joint ventures. Our total long-term debt to capitalization ratio (representing our long-term debt, including current maturities, divided by the sum of our long-term debt, redeemable noncontrolling interests, and our total stockholders' equity) was 39.6% and 40.2% atJune 30, 2020 , andDecember 31, 2019 , respectively. InJune 2020 , we issued$400.0 million of 2.400% notes due 2025 and$500.0 million of 3.250% notes due 2031. The net proceeds from these notes were used to fund theJune 2020 call and redemption of the$400.0 million outstanding principal amount of the company's 5.250% senior notes due 2023 and the$500.0 million outstanding principal amount of the company's 5.500% senior notes due 2024. We recorded expenses related to premiums, write off of unamortized debt issuance costs, and other expenses of approximately$22.8 million , which are reflected in other expenses in the consolidated statements of income for the second quarter and first half 2020. Our unsecured credit agreement has a senior unsecured revolving credit facility (Facility), which provides a$1.2 billion unsecured Revolver, and matures inDecember 2024 . Subject to certain conditions, we have the opportunity to increase the Facility size by$500.0 million . The unsecured Revolver is available to fund working capital, capital expenditures, and other general corporate purposes. The Facility contains financial covenants and other covenants pertaining to our ability to incur indebtedness and permit liens on property. Our ability to borrow funds within the terms of the unsecured Revolver is dependent upon our continued compliance with the financial and other covenants. AtJune 30, 2020 , we had$1.2 billion of availability on the Revolver,$11.8 million of outstanding letters of credit and other obligations which reduce availability, and there were no borrowings outstanding. 21 Table of Contents The financial covenants under our Facility state that we must maintain an interest coverage ratio of not less than 2.50:1.00. Our interest coverage ratio is calculated by dividing our last-twelve-months (LTM) consolidated adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and certain other non-cash transactions as allowed in the Facility) by our LTM gross interest expense, less amortization of financing fees. In addition, a debt to capitalization ratio of not more than 0.60:1.00 must be maintained. AtJune 30, 2020 , our interest coverage ratio and debt to capitalization ratio were 9.45:1.00 and 0.40:1.00, respectively. We were, therefore, in compliance with these covenants atJune 30, 2020 , and we anticipate we will continue to be in compliance during the next twelve months. Working Capital. We generated cash flow from operations of$697.3 million in the first half of 2020 compared to$543.0 million in the comparable 2019 period. Operational working capital (representing amounts invested in trade receivables and inventories, less current liabilities other than income taxes payable and debt) decreased$223.7 million , to$1.4 billion atJune 30, 2020 , due primarily to decreased inventories and increased accounts payable, generating operating cash flows during the first half of 2020. Capital Investments. During the first half of 2020, we invested$527.3 million in property, plant and equipment, primarily within our steel operations segment, compared with$139.6 million invested during the same period in 2019. The increase in the first half of 2020 versus the same period in 2019 relates to our new flat roll steel mill under construction inSinton, Texas . We entered 2020 with sufficient liquidity of$2.8 billion to provide for our planned 2020 capital requirements, including those necessary to construct theSinton steel mill. For the remainder of 2020, we are planning for capital investments to be roughly between$800 million and$850 million , of which the new flat roll steel mill inSinton, Texas , represents approximately$700 million to$750 million . Cash Dividends. As a reflection of continued confidence in our current and future cash flow generation ability and financial position, we increased our quarterly cash dividend by 4% to$0.25 per share in the first quarter 2020 (from$0.24 per share in 2019), resulting in declared cash dividends of$105.1 million during the first half of 2020, compared to$106.3 million during the same period in 2019. The decrease in declared cash dividends period over period was due to stock repurchases which took place throughout 2019 and into the first quarter of 2020, reducing our common stock shares outstanding. We paid cash dividends of$104.1 million and$95.7 million during the first half of 2020 and 2019, respectively. Our board of directors, along with executive management, approves the payment of dividends on a quarterly basis. The determination to pay cash dividends in the future is 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 growth plans. Other. InAugust 2018 , our board of directors authorized a share repurchase program of up to$750 million of our common stock. InFebruary 2020 , our board authorized an additional share repurchase program of up to$500 million . Under the share repurchase programs, purchases will take place, as and when, we determine in open market or private transactions made based upon the market price of our common stock, the nature of other investment opportunities or growth projects, our cash flows from operations, and general economic conditions. The share repurchase programs do not require us to acquire any specific number of shares, and may be modified, suspended, extended or terminated by us at any time. We acquired 4.4 million shares of our common stock for$106.5 million in the first half of 2020, all within the first quarter, fully expending the remaining purchases available under the 2018 program, leaving$444.0 million remaining available to purchase under the 2020 program. Our ability to meet our debt service obligations and reduce our total debt will depend upon our future performance which, in turn, will depend upon general economic, financial, business and the ongoing COVID-19 pandemic conditions, along with competition, legislation and regulatory factors that are largely beyond our control. In addition, we cannot assure that our operating results, cash flows, access to credit markets and capital resources will be sufficient for repayment of our indebtedness in the future. We believe that based upon current levels of operations and anticipated growth, cash flows from operations, together with other available sources of funds, including borrowings under our Revolver, if necessary, will be adequate for the next twelve months for making required payments of principal and interest on our indebtedness, funding working capital requirements, and anticipated capital expenditures noted above.
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