STEEL DYNAMICS INC [STLD] Filings

10-Q 1 stld-20230930x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period

ended September 30, 2023

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______

Commission File Number 0-21719

Steel Dynamics, Inc.

(Exact name of registrant as specified in its charter)

Indiana		35-1929476
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7575 West Jefferson Blvd, Fort Wayne, IN		46804
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (260) 969-3500

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
Common Stock voting, $0.0025 par value	STLD	NASDAQ Global Select Market

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. Yes ⌧ No ◻

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). Yes ⌧ No ◻

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.

Large accelerated filer ⌧	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 ☐ No⌧

As of November 2, 2023, Registrant had 161,816,470 outstanding shares of common stock.

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STEEL DYNAMICS, INC.

Table of Contents


PART I. Financial Information

Item 1.	Financial Statements:	Page

	Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022	1

	Consolidated Statements of Income for the three and nine-month periods ended September 30, 2023 and 2022 (unaudited)	2

	Consolidated Statements of Comprehensive Income for the three and nine-month periods ended September 30, 2023 and 2022 (unaudited)	3

	Consolidated Statements of Cash Flows for the three and nine-month periods ended September 30, 2023 and 2022 (unaudited)	4

	Notes to Consolidated Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25

Item 4.	Controls and Procedures	25



	PART II. Other Information

Item 1.	Legal Proceedings	26

Item 1A.	Risk Factors	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3.	Defaults Upon Senior Securities	26

Item 4.	Mine Safety Disclosures	26

Item 5.	Other Information	27

Item 6.	Exhibits	28

Exhibit Index		29

Signature		30

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STEEL DYNAMICS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	September 30,		December 31,
	2023		2022
Assets	(unaudited)
Current assets
Cash and equivalents	$	1,765,467	$	1,628,417
Short-term investments		500,844		628,215
Accounts receivable, net		1,807,313		1,976,282
Accounts receivable-related parties		74,736		79,769
Inventories		2,941,634		3,129,964
Other current assets		138,605		195,371
Total current assets		7,228,599		7,638,018

Property, plant and equipment, net		6,313,366		5,373,665

Intangible assets, net		265,845		267,507
Goodwill		477,471		502,067
Other assets		643,675		378,727
Total assets	$	14,928,956	$	14,159,984
Liabilities and Equity
Current liabilities
Accounts payable	$	1,049,317	$	1,007,304
Accounts payable-related parties		10,858		9,934
Income taxes payable		30,343		6,520
Accrued payroll and benefits		405,556		610,558
Accrued expenses		336,242		340,646
Current maturities of long-term debt		86,061		57,334
Total current liabilities		1,918,377		2,032,296

Long-term debt		3,009,010		3,013,241
Deferred income taxes		961,117		889,103
Other liabilities		182,161		129,539
Total liabilities		6,070,665		6,064,179

Commitments and contingencies

Redeemable noncontrolling interests		171,212		181,503

Equity
Common stock voting, $0.0025 par value; 900,000,000 shares authorized;
267,772,737 and 267,762,488 shares issued; and 163,489,456 and 172,936,163
shares outstanding, as of September 30, 2023 and December 31, 2022, respectively		650		650
Treasury stock, at cost; 104,283,281 and 94,826,325 shares,
as of September 30, 2023 and December 31, 2022, respectively		(5,510,983)		(4,459,513)
Additional paid-in capital		1,214,894		1,212,566
Retained earnings		13,189,468		11,375,765
Accumulated other comprehensive income (loss)		(494)		889
Total Steel Dynamics, Inc. equity		8,893,535		8,130,357
Noncontrolling interests		(206,456)		(216,055)
Total equity		8,687,079		7,914,302
Total liabilities and equity	$	14,928,956	$	14,159,984

See notes to consolidated financial statements.

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STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)



	Three-Month Periods Ended				Nine-Month Periods Ended
	September 30,				September 30,
	2023		2022		2023		2022

Net sales
Unrelated parties	$	4,408,861	$	5,438,747	$	14,061,569	$	16,814,051
Related parties		178,196		212,960		500,324		620,436
Total net sales		4,587,057		5,651,707		14,561,893		17,434,487

Costs of goods sold		3,635,038		4,187,278		11,246,894		12,304,203
Gross profit		952,019		1,464,429		3,314,999		5,130,284

Selling, general and administrative expenses		145,896		132,627		431,414		403,019
Profit sharing		64,413		105,122		224,978		373,333
Amortization of intangible assets		8,160		6,836		25,962		21,158
Operating income		733,550		1,219,844		2,632,645		4,332,774

Interest expense, net of capitalized interest		18,415		25,347		61,689		67,683
Other (income) expense, net		(39,464)		(13,975)		(105,748)		2,472
Income before income taxes		754,599		1,208,472		2,676,704		4,262,619

Income tax expense		174,817		289,997		636,412		1,022,138
Net income		579,782		918,475		2,040,292		3,240,481

Net income attributable to noncontrolling interests		(2,587)		(4,150)		(13,680)		(12,671)
Net income attributable to Steel Dynamics, Inc.	$	577,195	$	914,325	$	2,026,612	$	3,227,810



Basic earnings per share attributable to Steel
Dynamics, Inc. stockholders	$	3.49	$	5.07	$	12.04	$	17.33

Weighted average common shares outstanding		165,170		180,264		168,259		186,288

Diluted earnings per share attributable to Steel
Dynamics, Inc. stockholders, including the effect
of assumed conversions when dilutive	$	3.47	$	5.03	$	11.98	$	17.21

Weighted average common shares and share equivalents outstanding		166,105		181,613		169,150		187,531

Dividends declared per share	$	0.425	$	0.34	$	1.275	$	1.02

See notes to consolidated financial statements.

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STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)



	Three-Month Periods Ended				Nine-Month Periods Ended
	September 30,				September 30,
	2023		2022		2023		2022

Net income	$	579,782	$	918,475	$	2,040,292	$	3,240,481
Other comprehensive income - net unrealized gain (loss) on cash
flow hedging derivatives, net of income tax expense (benefit) of
($485) and $703 for the three months ended, and ($441) and ($205)
for the nine months ended September 30, 2023 and 2022, respectively		(1,521)		2,251		(1,383)		(657)
Comprehensive income		578,261		920,726		2,038,909		3,239,824

Comprehensive income attributable to noncontrolling interests		(2,587)		(4,150)		(13,680)		(12,671)
Comprehensive income attributable to Steel Dynamics, Inc.	$	575,674	$	916,576	$	2,025,229	$	3,227,153

See notes to consolidated financial statements.

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STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)



	Three-Month Periods Ended				Nine-Month Periods Ended
	September 30,				September 30,
	2023		2022		2023		2022

Operating activities:
Net income	$	579,782	$	918,475	$	2,040,292	$	3,240,481

Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization		107,418		98,714		326,082		281,961
Equity-based compensation		12,044		12,093		39,800		39,681
Deferred income taxes		19,625		3,990		72,013		3,986
Other adjustments		(12,163)		(12,409)		(20,628)		(1,892)
Changes in certain assets and liabilities:
Accounts receivable		260,915		326,731		173,022		(417,550)
Inventories		102,376		270,628		188,330		154,391
Other assets		(13,423)		(15,789)		(10,504)		(9,274)
Accounts payable		(57,532)		(264,313)		(54,233)		(152,763)
Income taxes receivable/payable		(7,105)		8,269		96,656		146,822
Accrued expenses		121,762		149,766		(195,542)		31,132
Net cash provided by operating activities		1,113,699		1,496,155		2,655,288		3,316,975

Investing activities:
Purchases of property, plant and equipment		(558,361)		(241,229)		(1,142,960)		(564,701)
Purchases of short-term investments		(170,887)		(283,188)		(692,716)		(634,698)
Proceeds from maturities of short-term investments		282,592		49,794		821,668		49,794
Business combinations, net of cash acquired		-		(47,638)		-		(47,638)
Investments in unconsolidated affiliates		-		-		-		(222,480)
Other investing activities		(5,891)		4,113		(221,453)		9,340
Net cash used in investing activities		(452,547)		(518,148)		(1,235,461)		(1,410,383)

Financing activities:
Issuance of current and long-term debt		345,563		348,286		1,066,605		1,050,933
Repayment of current and long-term debt		(316,511)		(363,060)		(1,042,933)		(1,127,051)
Dividends paid		(70,713)		(62,088)		(201,834)		(177,131)
Purchases of treasury stock		(331,318)		(481,676)		(1,065,521)		(1,387,890)
Other financing activities		1,953		(6,057)		(39,075)		(88,825)
Net cash used in financing activities		(371,026)		(564,595)		(1,282,758)		(1,729,964)

Increase in cash, cash equivalents, and restricted cash		290,126		413,412		137,069		176,628
Cash, cash equivalents, and restricted cash at beginning of period		1,480,862		1,012,585		1,633,919		1,249,369

Cash, cash equivalents, and restricted cash at end of period	$	1,770,988	$	1,425,997	$	1,770,988	$	1,425,997


Supplemental disclosure information:
Cash paid for interest	$	9,848	$	9,214	$	61,225	$	59,496
Cash paid for income taxes, net	$	160,178	$	276,948	$	472,936	$	867,350

See notes to consolidated financial statements.

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 three reporting segments: steel operations, metals recycling operations, and steel fabrication operations.

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, 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), Vulcan Threaded Products, Inc., and SDI Biocarbon Solutions, LLC, a joint venture to construct and operate a biocarbon production facility. Steel operations accounted for 68% and 66% of the company’s consolidated net sales during the three-month periods ended September 30, 2023 and 2022, respectively, and 66% and 67% of the company’s consolidated net sales during the nine-month periods ended September 30, 2023 and 2022, respectively.

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 11% and 8% of the company’s consolidated net sales during the three-month periods ended September 30, 2023 and 2022, respectively, and 12% and 10% of the company’s consolidated net sales during the nine-month periods ended September 30, 2023 and 2022, respectively.

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 14% and 20% of the company’s consolidated net sales during the three-month periods ended September 30, 2023 and 2022, respectively, and 15% and 18% of the company’s consolidated net sales during the nine-month periods ended September 30, 2023 and 2022, respectively.

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 aluminum flat roll mill and satellite slab centers and the company’s 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 Steel Dynamics, Inc., 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 90% by SDI effective April 1, 2023 and 87.5% at December 31, 2022) are $60.0 million at September 30, 2023, and $70.3 million at December 31, 2022. On April 1, 2023, a noncontrolling member of USS exercised its option to require SDI to purchase its 2.5% equity interest, increasing SDI’s ownership to 90%. The remaining noncontrolling members’ option to require SDI to purchase the remaining 10% equity interest of USS has been extended to on or after February 28, 2025. Redeemable noncontrolling interests related to Mesabi Nugget (owned 85.5% by SDI) are $111.2 million at September 30, 2023, and December 31, 2022.

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 $5.5 million for all periods presented, which are recorded in Other Assets (noncurrent) in the company’s consolidated balance sheets.

Senior Credit Facility

On July 19, 2023, the company entered into a new unsecured credit agreement comprised of a senior unsecured credit facility (Facility), which provides a $1.2 billion Revolver, maturing July 19, 2028. The new Credit Agreement replaces the December 3, 2019 Credit Agreement. Subject to certain conditions, the company has the ability to increase the Revolver size by $500.0 million. The Facility is available to fund working capital, capital expenditures, and other general corporate purposes. The Facility contains financial covenants and other covenants pertaining to the company’s ability to incur indebtedness and permit liens on certain assets. The company’s ability to borrow funds within the terms of the unsecured Revolver is dependent upon its continued compliance with financial and other covenants.

The Facility pricing grid is adjusted quarterly and is based on either the company’s leverage of net debt (as defined in the Facility) to last-twelve-months (LTM) consolidated Adjusted EBITDA as defined in the Facility (earnings before interest, taxes, depreciation, amortization, and certain other non-cash items, as defined in the Facility), or the company’s credit ratings. The minimum pricing is adjusted Secured Overnight Financing Rate (SOFR) plus 1.000% and the maximum pricing is adjusted SOFR plus 1.75%. In addition, the company is subject to an unused commitment fee of between 0.11% and 0.275% (based on either the company’s leverage of net debt to LTM consolidated adjusted EBITDA, or the company’s credit ratings) which is applied to the unused portion of the Revolver.

Other Obligations

One of the company’s consolidated joint venture subsidiaries has a secured credit agreement with a maturity in June 2028, comprised of a $125.0 million revolving credit facility, which is subject to a borrowing base determined from eligible accounts receivable and inventory.

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Description of the Business and Significant Accounting Policies (Continued)

Goodwill

The company’s goodwill consisted of the following at September 30, 2023, and December 31, 2022 (in thousands):



	September 30,		December 31,
	2023		2022

Steel Operations Segment	$	272,133	$	272,133
Metals Recycling Operations Segment		203,413		228,009
Steel Fabrication Operations Segment		1,925		1,925
	$	477,471	$	502,067

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 September 30, 2023, the company reported $1,882 million of accounts receivable, net of allowances for credit losses of $8.1 million. Changes in the allowance were not material for each of the three and nine-month periods ended September 30, 2023 and 2022.

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 no anti-dilutive common share equivalents as of or for the three and nine-month periods ended September 30, 2023 and 2022.

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 2. Earnings Per Share (Continued)



	Three-Month Periods Ended September 30,
	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	$	577,195		165,170	$	3.49	$	914,325		180,264	$	5.07
Dilutive common share equivalents		-		935				-		1,349
Diluted earnings per share	$	577,195		166,105	$	3.47	$	914,325		181,613	$	5.03



	Nine-Month Periods Ended September 30,
	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	$	2,026,612		168,259	$	12.04	$	3,227,810		186,288	$	17.33
Dilutive common share equivalents		-		891				-		1,243
Diluted earnings per share	$	2,026,612		169,150	$	11.98	$	3,227,810		187,531	$	17.21

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. Inventory consisted of the following (in thousands):


	September 30,		December 31,
	2023		2022
Raw materials	$	1,288,497	$	1,608,344
Supplies		692,738		629,074
Work in progress		341,036		256,071
Finished goods		619,363		636,475
Total inventories	$	2,941,634	$	3,129,964

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 for each of the three and nine-month periods ended September 30, 2023 and 2022 (in thousands).

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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, 2022	$	650	$	(4,459,513)	$	1,212,566	$	11,375,765	$	889	$	(216,055)	$	7,914,302	$	181,503
Dividends declared		-		-		-		(72,316)		-		-		(72,316)		-
Noncontrolling investors, net		-		-		-		-		-		(7,387)		(7,387)		4,702
Share repurchases		-		(353,997)		-		-		-		-		(353,997)		-
Equity-based compensation		-		12,997		(18,487)		(138)		-		-		(5,628)		-
Net income		-		-		-		637,310		-		7,023		644,333		-
Other comprehensive income, net of tax