st
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
ended
OR
Commission File Number
(Exact name of registrant as specified in its charter)
| ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Not Applicable
(Former name, former address and former fiscal year, if changed since last report.)
Securities registered pursuant to Section 12(b) of the Act.
Title of each class | Trading Symbol | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
| Accelerated filer ◻ |
| Non-accelerated filer ◻ | |||
Smaller reporting company | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of April 28, 2023, Registrant had
STEEL DYNAMICS, INC.
Table of Contents
PART I. Financial Information | ||
Item 1. | Financial Statements: | Page |
Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022 | 1 | |
2 | ||
3 | ||
4 | ||
5 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 13 | |
21 | ||
21 | ||
22 | ||
22 | ||
22 | ||
22 | ||
22 | ||
22 | ||
23 | ||
23 | ||
24 |
STEEL DYNAMICS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
March 31, | December 31, | |||||
2023 | 2022 | |||||
Assets | (unaudited) | |||||
Current assets | ||||||
Cash and equivalents | $ | | $ | | ||
Short-term investments | | | ||||
Accounts receivable, net | | | ||||
Accounts receivable-related parties | | | ||||
Inventories | | | ||||
Other current assets | | | ||||
Total current assets | | | ||||
Property, plant and equipment, net | | | ||||
Intangible assets, net | | | ||||
Goodwill | | | ||||
Other assets | | | ||||
Total assets | $ | | $ | | ||
Liabilities and Equity | ||||||
Current liabilities | ||||||
Accounts payable | $ | | $ | | ||
Accounts payable-related parties | | | ||||
Income taxes payable | | | ||||
Accrued payroll and benefits | | | ||||
Accrued expenses | | | ||||
Current maturities of long-term debt | | | ||||
Total current liabilities | | | ||||
Long-term debt | | | ||||
Deferred income taxes | | | ||||
Other liabilities | | | ||||
Total liabilities | | | ||||
Commitments and contingencies | ||||||
Redeemable noncontrolling interests | | | ||||
Equity | ||||||
Common stock voting, $ | ||||||
| ||||||
shares outstanding, as of March 31, 2023 and December 31, 2022, respectively | | | ||||
Treasury stock, at cost; | ||||||
as of March 31, 2023 and December 31, 2022, respectively | ( | ( | ||||
Additional paid-in capital | | | ||||
Retained earnings | | | ||||
Accumulated other comprehensive income (loss) | | | ||||
Total Steel Dynamics, Inc. equity | | | ||||
Noncontrolling interests | ( | ( | ||||
Total equity | | | ||||
Total liabilities and equity | $ | | $ | |
See notes to consolidated financial statements.
1
STEEL DYNAMICS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)
Three-Month Periods Ended | |||||
March 31, | |||||
2023 | 2022 | ||||
Net sales | |||||
Unrelated parties | $ | | $ | | |
Related parties | | | |||
Total net sales | | | |||
Costs of goods sold | | | |||
Gross profit | | | |||
Selling, general and administrative expenses | | | |||
Profit sharing | | | |||
Amortization of intangible assets | | | |||
Operating income | | | |||
Interest expense, net of capitalized interest | | | |||
Other (income) expense, net | ( | | |||
Income before income taxes | | | |||
Income tax expense | | | |||
Net income | | | |||
Net income attributable to noncontrolling interests | ( | ( | |||
Net income attributable to Steel Dynamics, Inc. | $ | | $ | | |
Basic earnings per share attributable to Steel | |||||
Dynamics, Inc. stockholders | $ | $ | |||
Weighted average common shares outstanding | |||||
Diluted earnings per share attributable to Steel | |||||
Dynamics, Inc. stockholders, including the effect | |||||
of assumed conversions when dilutive | $ | $ | |||
Weighted average common shares and share equivalents outstanding | |||||
Dividends declared per share | $ | $ |
See notes to consolidated financial statements.
2
STEEL DYNAMICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)
Three-Month Periods Ended | |||||
March 31, | |||||
2023 | 2022 | ||||
Net income | $ | | $ | | |
Other comprehensive income - net unrealized gain on cash | |||||
flow hedging derivatives, net of income tax expense of $ | |||||
for the three-month periods ended March 31, 2023 and 2022, | |||||
respectively | | | |||
Comprehensive income | | | |||
Comprehensive income attributable to noncontrolling interests | ( | ( | |||
Comprehensive income attributable to Steel Dynamics, Inc. | $ | | $ | |
See notes to consolidated financial statements.
3
STEEL DYNAMICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three-Month Periods Ended | |||||
March 31, | |||||
2023 | 2022 | ||||
Operating activities: | |||||
Net income | $ | | $ | | |
Adjustments to reconcile net income to net cash provided by | |||||
operating activities: | |||||
Depreciation and amortization | | | |||
Equity-based compensation | | | |||
Deferred income taxes | | | |||
Other adjustments | ( | | |||
Changes in certain assets and liabilities: | |||||
Accounts receivable | ( | ( | |||
Inventories | | | |||
Other assets | | | |||
Accounts payable | | ( | |||
Income taxes receivable/payable | | | |||
Accrued expenses | ( | ( | |||
Net cash provided by operating activities | | | |||
Investing activities: | |||||
Purchases of property, plant and equipment | ( | ( | |||
Purchases of short-term investments | ( | - | |||
Proceeds from maturities of short-term investments | | - | |||
Investments in unconsolidated affiliates | - | ( | |||
Other investing activities | | | |||
Net cash used in investing activities | ( | ( | |||
Financing activities: | |||||
Issuance of current and long-term debt | | | |||
Repayment of current and long-term debt | ( | ( | |||
Dividends paid | ( | ( | |||
Purchases of treasury stock | ( | ( | |||
Other financing activities | ( | ( | |||
Net cash used in financing activities | ( | ( | |||
Decrease in cash, cash equivalents, and restricted cash | ( | ( | |||
Cash, cash equivalents, and restricted cash at beginning of period | | | |||
Cash, cash equivalents, and restricted cash at end of period | $ | | $ | | |
Supplemental disclosure information: | |||||
Cash paid for interest | $ | | $ | | |
Cash paid for income taxes, net | $ | | $ | |
See notes to consolidated financial statements.
4
Note 1. Description of the Business and Significant Accounting Policies
Description of the Business
Steel Dynamics, Inc. (SDI), together with its subsidiaries (the company), is one of the largest and most diversified domestic steel producers and metals recycler, combined with a meaningful steel fabrication manufacturing platform. The company has
Steel Operations Segment. Steel operations include the company’s electric arc furnace (EAF) steel mills, including Butler Flat Roll Division, Columbus Flat Roll Division, Southwest-Sinton Flat Roll Division (Sinton), Structural and Rail Division, Engineered Bar Products Division, Roanoke Bar Division, Steel of West Virginia, steel coating and processing operations at The Techs, Heartland Flat Roll Division, United Steel Supply (USS) –
Metals Recycling Operations Segment. Metals recycling operations include the company’s OmniSource ferrous and nonferrous processing, transportation, marketing, brokerage, and scrap management services primarily throughout the United States and in Central and Northern Mexico. Metals recycling operations accounted for
Steel Fabrication Operations Segment. Steel fabrication operations include the company’s New Millennium Building Systems’ joist and deck plants located throughout the United States, and in Northern Mexico. Revenues from these plants are generated from the fabrication of trusses, girders, steel joists and steel deck used within the non-residential construction industry. Steel fabrication operations accounted for
Other. Other operations consist of subsidiary operations that are below the company’s quantitative thresholds required for reportable segments and primarily consist of joint ventures, including the company’s newly announced aluminum flat roll mill and idled Minnesota ironmaking operations. Also included in “Other” are certain unallocated corporate accounts, such as the company’s senior unsecured credit facility, senior notes, certain other investments and certain profit sharing expenses.
Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of SDI, together with its wholly- and majority-owned or controlled subsidiaries, after elimination of intercompany accounts and transactions. Noncontrolling and redeemable noncontrolling interests represent the noncontrolling owners’ proportionate share in the equity, income, or losses of the company’s majority-owned or controlled consolidated subsidiaries. Redeemable noncontrolling interests related to USS (owned
At March 31, 2023, SDI owned
5
Note 1. Description of the Business and Significant Accounting Policies (Continued)
Use of Estimates
These consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, and accordingly, include amounts that require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and in the notes thereto. Significant items subject to such estimates and assumptions include the carrying value of property, plant and equipment, intangible assets, and goodwill; valuation allowances for trade receivables, inventories and deferred income tax assets; unrecognized tax benefits; potential environmental liabilities; and litigation claims and settlements. Actual results may differ from these estimates and assumptions.
In the opinion of management, these financial statements reflect all normal recurring adjustments necessary for a fair presentation of the interim period results. These consolidated financial statements and notes should be read in conjunction with the audited financial statements and notes thereto included in the company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Cash and Equivalents, and Restricted Cash
Cash and equivalents include all highly liquid investments with a maturity of three months or less at the date of acquisition. Restricted cash is primarily funds held in escrow as required by various insurance and government organizations. The balance of cash, cash equivalents and restricted cash in the consolidated statements of cash flows includes restricted cash of $
Goodwill
The company’s goodwill consisted of the following at March 31, 2023, and December 31, 2022 (in thousands):
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
Steel Operations Segment | $ | | $ | | ||||
Metals Recycling Operations Segment | | | ||||||
Steel Fabrication Operations Segment | | | ||||||
$ | | $ | |
Credit Losses
The company is exposed to credit risk in the event of nonpayment of accounts receivable by customers. The company mitigates its exposure to credit risk, which it generally extends on an unsecured basis, by performing ongoing credit evaluations and taking further action if necessary, such as requiring letters of credit or other security interests to support the customer receivable. The allowance for credit losses for accounts receivable is based on the company’s reasonable estimate of known credit risks and historical experience, adjusted for current and anticipated economic and other pertinent factors affecting the company’s customers, that may differ from historical experience. Customer accounts receivable are written off when all collection efforts have been exhausted and the amounts are deemed uncollectible.
At March 31, 2023, the company reported $
6
Note 2. Earnings Per Share
Basic earnings per share is based on the weighted average shares of common stock outstanding during the period. Diluted earnings per share assumes the weighted average dilutive effect of common share equivalents outstanding during the period applied to the company’s basic earnings per share. Common share equivalents represent potentially dilutive restricted stock units, deferred stock units, restricted stock, and performance awards, and are excluded from the computation in periods in which they have an anti-dilutive effect. There were
Three-Month Periods Ended March 31, | |||||||||||||||||
2023 | 2022 | ||||||||||||||||
Weighted | Weighted | ||||||||||||||||
Average | Average | ||||||||||||||||
Net Income | Shares | Per Share | Net Income | Shares | Per Share | ||||||||||||
(Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | ||||||||||||
Basic earnings per share | $ | | | $ | | $ | | | $ | | |||||||
Dilutive common share equivalents | - | | - | | |||||||||||||
Diluted earnings per share | $ | | | $ | | $ | | | $ | |
Note 3. Inventories
Inventories are stated at lower of cost or net realizable value. Cost is determined using a weighted average cost method for raw materials (including scrap and purchased steel substrate) and supplies, and on a first-in, first-out basis for other inventory.
March 31, | December 31, | ||||
2023 | 2022 | ||||
Raw materials | $ | $ | |||
Supplies | |||||
Work in progress | |||||
Finished goods | |||||
Total inventories | $ | $ |
Note 4. Changes in Equity
The following tables provide a reconciliation of the beginning and ending carrying amounts of total equity, equity attributable to stockholders of Steel Dynamics, Inc., and equity and redeemable amounts attributable to noncontrolling interests (in thousands) for each of the three-month periods ended March 31, 2023 and 2022:
Stockholders of Steel Dynamics, Inc. | ||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
Additional | Other | Redeemable | ||||||||||||||||||||||
Common | Treasury | Paid-In | Retained | Comprehensive | Noncontrolling | Total | Noncontrolling | |||||||||||||||||
Stock | Stock | Capital | Earnings | Income | Interests | Equity | Interests | |||||||||||||||||
Balances at December 31, 2022 | $ | | $ | ( | $ | | $ | | $ | | $ | ( | $ | | $ | | ||||||||
Dividends declared | - | - | - | ( | - | - | ( | - | ||||||||||||||||
Noncontrolling investors, net | - | - | - | - | - | ( | ( | | ||||||||||||||||
Share repurchases | - | ( | - | - | - | - | ( | - | ||||||||||||||||
Equity-based compensation | - | | ( | ( | - | - | ( | - | ||||||||||||||||
Net income | - | - | - | | - | | | - | ||||||||||||||||
Other comprehensive income, net of tax | - | - | - | - | | - | | - | ||||||||||||||||
Balances at March 31, 2023 | $ | | $ | ( | $ | | $ | | $ | | $ | ( | $ | | $ | |
7
Note 4. Changes in Equity (Continued)
Stockholders of Steel Dynamics, Inc. | ||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
Additional | Other | Redeemable | ||||||||||||||||||||||
Common | Treasury | Paid-In | Retained | Comprehensive | Noncontrolling | Total | Noncontrolling | |||||||||||||||||
Stock | Stock | Capital | Earnings | Income (Loss) | Interests | Equity | Interests | |||||||||||||||||
Balances at December 31, 2021 | $ | | $ | ( | $ | | $ | | $ | ( | $ | ( | $ | | $ | | ||||||||
Dividends declared | - | - | - | ( | - | - | ( | - | ||||||||||||||||
Noncontrolling investors, net | - | - | - | - | - | ( | ( | | ||||||||||||||||
Share repurchases | - | ( | - | - | - | - | ( | - | ||||||||||||||||
Equity-based compensation | - | | ( | ( | - | - | ( | - | ||||||||||||||||
Net income | - | - | - | | - | | | - | ||||||||||||||||
Other comprehensive income, net of tax | - | - | - | - | | - | | - | ||||||||||||||||
Balances at March 31, 2022 | $ | | $ | ( | $ | | $ | | $ | | $ | ( | $ | | $ | |
Note 5. Derivative Financial Instruments
The company is exposed to certain risks relating to its ongoing business operations. The company utilizes derivative instruments to mitigate commodity margin risk, and occasionally to mitigate foreign currency exchange rate risk, and have in the past to mitigate interest rate fluctuation risk. The company routinely enters into forward exchange traded futures and option contracts to manage the price risk associated with nonferrous metals inventory as well as purchases and sales of nonferrous metals (primarily aluminum and copper) and ferrous metals. The company offsets fair value amounts recognized for derivative instruments executed with the same counterparty under master netting agreements.
Commodity Futures Contracts. If the company is “long” on futures contracts, it means the company has more futures contracts purchased than futures contracts sold for the underlying commodity. If the company is “short” on a futures contract, it means the company has more futures contracts sold than futures contracts purchased for the underlying commodity.
Commodity Futures | Long/Short | Metric Tons | ||||
Aluminum | Long | |||||
Aluminum | Short | |||||
Copper | Long | |||||
Copper | Short |
The following summarizes the location and amounts of the fair values reported on the company’s consolidated balance sheets as of March 31, 2023, and December 31, 2022, and gains and losses related to derivatives included in the company’s statement of income for the three-month periods ended March 31, 2023 and 2022 (in thousands):
Asset Derivatives | Liability Derivatives | ||||||||||||
Balance sheet | Fair Value | Fair Value | |||||||||||
location | March 31, 2023 | December 31, 2022 | March 31, 2023 | December 31, 2022 | |||||||||
Derivative instruments designated as hedges | |||||||||||||
Commodity futures | Other current assets | $ | | $ | | $ | | $ | | ||||
Derivative instruments not designated as hedges | |||||||||||||
Commodity futures | Other current assets | | | | | ||||||||
Total derivative instruments | $ | | $ | | $ | | $ | |
8
Note 5. Derivative Financial Instruments (Continued)
The fair value of the above derivative instruments along with required margin deposit amounts with the same counterparty under master netting arrangements totaled $
Amount of gain (loss) | Amount of gain (loss) | |||||||||||||||
recognized in income | Location of gain | recognized in income | ||||||||||||||
Location of gain | on derivatives for the | (loss) recognized | on derivatives for the | |||||||||||||
(loss) recognized | three-month periods | Hedged items in | in income on | three-month periods | ||||||||||||
in income on | ended March 31, | fair value hedge | related hedged | ended March 31, | ||||||||||||
derivatives | 2023 | 2022 | relationships | items | 2023 | 2022 | ||||||||||
Derivatives in fair value hedging relationships | ||||||||||||||||
Commodity futures | Costs of goods sold | $ | ( | $ | | Firm commitments | Costs of goods sold | $ | | $ | ( | |||||
Inventory | Costs of goods sold | | ( | |||||||||||||
$ | | $ | ( | |||||||||||||
Derivatives not designated as hedging instruments | ||||||||||||||||
Commodity futures | Costs of goods sold | $ | ( | $ | ( |
Derivatives accounted for as fair value hedges had ineffectiveness resulting in losses of $
Derivatives accounted for as cash flow hedges resulted in net gains of $
Note 6. Fair Value Measurements
Accounting standards provide a comprehensive framework for measuring fair value and sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. Levels within the hierarchy are defined as follows:
● | Level 1—Unadjusted quoted prices for identical assets and liabilities in active markets; |
● | Level 2—Quoted prices for similar assets and liabilities in active markets (other than those included in Level 1) which are observable for the asset or liability, either directly or indirectly; and |
● | Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
9
Note 6. Fair Value Measurements (Continued)
The following table sets forth financial assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheet and the respective levels to which the fair value measurements are classified within the fair value hierarchy as of March 31, 2023 and December 31, 2022 (in thousands):
Quoted Prices | Significant | ||||||||||
in Active | Other | Significant | |||||||||
Markets for | Observable | Unobservable | |||||||||
Identical Assets | Inputs | Inputs | |||||||||
Total | (Level 1) | (Level 2) | (Level 3) | ||||||||
March 31, 2023 | |||||||||||
Short-term investments | $ | | $ | $ | | $ | |||||
Commodity futures – financial assets | | | |||||||||
Commodity futures – financial liabilities | | | |||||||||
December 31, 2022 | |||||||||||
Short-term investments | $ | | $ | $ | | $ | |||||
Commodity futures – financial assets | | | |||||||||
Commodity futures – financial liabilities |
| |
|
| |
|
The carrying amounts of financial instruments including cash and equivalents, and restricted cash approximate fair value (Level 1). The fair values of short-term investments and commodity futures contracts are estimated by the use of quoted market prices, estimates obtained from brokers, and other appropriate valuation techniques based on references available (Level 2). The fair value of long-term debt, including current maturities, as determined by quoted market prices (Level 2), was approximately $
Note 7. Commitments and Contingencies
The company is involved in various routine litigation matters, including administrative proceedings, regulatory proceedings, governmental investigations, environmental matters, and commercial and construction contract disputes, none of which are expected to have a material impact on the company’s financial condition, results of operations, or liquidity.
Note 8. Segment Information
The company’s operations are primarily organized and managed by reportable operating segments, which are steel operations, metals recycling operations, and steel fabrication operations. The segment operations are more fully described in Note 1 to the consolidated financial statements. Operating segment performance and resource allocations are primarily based on operating results before income taxes. The accounting policies of the reportable segments are consistent with those described in Note 1 to the consolidated financial statements. Intra-segment sales and any related profits are eliminated in consolidation. Amounts included in the category “Other” are from subsidiary operations that are below the quantitative thresholds required for reportable segments and primarily consist of joint ventures and the idled Minnesota ironmaking operations. Also included in “Other” are certain unallocated corporate accounts, such as the company’s senior unsecured credit facility, senior notes, certain other investments and certain profit sharing expenses.
The company’s segment results, including disaggregated revenue by segment to external, external non-United States, and other segment customers, are as follows (in thousands):
10