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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 March 31, 2022

OR

       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 April 25, 2022, Registrant had 188,690,008 outstanding shares of common stock.

STEEL DYNAMICS, INC.

Table of Contents

PART I. Financial Information

Item 1.

Financial Statements:

Page

Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021

1

Consolidated Statements of Income for the three-month periods ended March 31, 2022 and 2021 (unaudited)

2

Consolidated Statements of Comprehensive Income for the three-month periods ended March 31, 2022 and 2021 (unaudited)

3

Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2022 and 2021 (unaudited)

4

Notes to Consolidated Financial Statements (unaudited)

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

21

Item 4.

Controls and Procedures

21

PART II. Other Information

Item 1.

Legal Proceedings

22

Item 1A.

Risk Factors

22

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

22

Item 3.

Defaults Upon Senior Securities

22

Item 4.

Mine Safety Disclosures

22

Item 5.

Other Information

23

Item 6.

Exhibits

24

Exhibit Index

24

Signature

25

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

STEEL DYNAMICS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

March 31,

December 31,

2022

2021

Assets

(unaudited)

Current assets

Cash and equivalents

$

1,189,528

$

1,243,868

Accounts receivable, net

2,285,245

1,911,385

Accounts receivable-related parties

78,423

5,049

Inventories

3,516,815

3,531,130

Other current assets

79,624

209,591

Total current assets

7,149,635

6,901,023

Property, plant and equipment, net

4,827,962

4,751,430

Intangible assets, net

288,183

295,345

Goodwill

453,088

453,835

Other assets

337,769

129,601

Total assets

$

13,056,637

$

12,531,234

Liabilities and Equity

Current liabilities

Accounts payable

$

1,202,033

$

1,266,833

Accounts payable-related parties

11,525

13,722

Income taxes payable

229,360

13,746

Accrued payroll and benefits

275,621

539,812

Accrued interest

33,539

17,533

Accrued expenses

270,178

278,549

Current maturities of long-term debt

68,390

97,174

Total current liabilities

2,090,646

2,227,369

Long-term debt

3,010,109

3,008,702

Deferred income taxes

856,790

854,905

Other liabilities

120,918

120,087

Total liabilities

6,078,463

6,211,063

Commitments and contingencies

Redeemable noncontrolling interests

227,914

211,414

Equity

Common stock voting, $0.0025 par value; 900,000,000 shares authorized;

267,224,622 and 267,224,622 shares issued; and 189,247,115 and 194,997,922

shares outstanding, as of March 31, 2022 and December 31, 2021, respectively

649

649

Treasury stock, at cost; 77,977,507 and 72,226,700 shares,

as of March 31, 2022 and December 31, 2021, respectively

(3,050,497)

(2,674,267)

Additional paid-in capital

1,204,023

1,218,933

Retained earnings

8,800,883

7,761,417

Accumulated other comprehensive income (loss)

9,296

(2,091)

Total Steel Dynamics, Inc. equity

6,964,354

6,304,641

Noncontrolling interests

(214,094)

(195,884)

Total equity

6,750,260

6,108,757

Total liabilities and equity

$

13,056,637

$

12,531,234

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,

2022

2021

Net sales

Unrelated parties

$

5,410,801

$

3,537,625

Related parties

159,101

6,972

Total net sales

5,569,902

3,544,597

Costs of goods sold

3,787,389

2,744,331

Gross profit

1,782,513

800,266

Selling, general and administrative expenses

152,015

149,781

Profit sharing

128,469

48,848

Amortization of intangible assets

7,162

7,438

Operating income

1,494,867

594,199

Interest expense, net of capitalized interest

16,669

17,269

Other (income) expense, net

20,468

10,071

Income before income taxes

1,457,730

566,859

Income tax expense

350,376

128,104

Net income

1,107,354

438,755

Net income attributable to noncontrolling interests

(3,423)

(8,248)

Net income attributable to Steel Dynamics, Inc.

$

1,103,931

$

430,507

Basic earnings per share attributable to Steel

Dynamics, Inc. stockholders

$

5.74

$

2.04

Weighted average common shares outstanding

192,158

211,015

Diluted earnings per share attributable to Steel

Dynamics, Inc. stockholders, including the effect

of assumed conversions when dilutive

$

5.71

$

2.03

Weighted average common shares and share equivalents outstanding

193,241

212,254

Dividends declared per share

$

0.34

$

0.26

See notes to consolidated financial statements.

2

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

Three-Month Periods Ended

March 31,

2022

2021

Net income

$

1,107,354

$

438,755

Other comprehensive income - net unrealized gain on cash

flow hedging derivatives, net of income tax of $3,557 and $1,176

for the three-month periods ended March 31, 2022 and 2021, respectively

11,387

3,765

Comprehensive income

1,118,741

442,520

Comprehensive income attributable to noncontrolling interests

(3,423)

(8,248)

Comprehensive income attributable to Steel Dynamics, Inc.

$

1,115,318

$

434,272

See notes to consolidated financial statements.

3

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Three-Month Periods Ended

March 31,

2022

2021

Operating activities:

Net income

$

1,107,354

$

438,755

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization

87,546

86,919

Equity-based compensation

16,519

17,040

Deferred income taxes

2,632

66,744

Other adjustments

11,157

(662)

Changes in certain assets and liabilities:

Accounts receivable

(447,234)

(394,545)

Inventories

14,315

(374,588)

Other assets

19,402

5,828

Accounts payable

(75,971)

360,681

Income taxes receivable/payable

341,905

59,593

Accrued expenses

(258,657)

(3,574)

Net cash provided by operating activities

818,968

262,191

Investing activities:

Purchases of property, plant and equipment

(159,330)

(309,863)

Investments in unconsolidated affiliates

(222,480)

-

Other investing activities

410

390

Net cash used in investing activities

(381,400)

(309,473)

Financing activities:

Issuance of current and long-term debt

319,779

297,441

Repayment of current and long-term debt

(349,272)

(304,284)

Dividends paid

(50,699)

(52,729)

Purchases of treasury stock

(389,190)

-

Other financing activities

(22,527)

(16,598)

Net cash used in financing activities

(491,909)

(76,170)

Decrease in cash, cash equivalents, and restricted cash

(54,341)

(123,452)

Cash, cash equivalents, and restricted cash at beginning of period

1,249,369

1,374,122

Cash, cash equivalents, and restricted cash at end of period

$

1,195,028

$

1,250,670

Supplemental disclosure information:

Cash paid for interest

$

9,168

$

11,315

Cash paid for income taxes, net

$

9,948

$

2,142

See notes to consolidated financial statements.

4

Table of Contents

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. 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 (Sinton), Structural and Rail Division, Engineered Bar Products Division, Roanoke Bar Division, and Steel of West Virginia; and steel coating and processing operations at The Techs, Heartland Flat Roll Division, United Steel Supply (USS), and Vulcan Threaded Products, Inc (Vulcan). Steel operations accounted for 68% and 71% of the company’s consolidated net sales during the three-month periods ended March 31, 2022 and 2021, 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 10% and 13% of the company’s consolidated net sales during the three-month periods ended March 31, 2022 and 2021, 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 17% and 7% of the company’s consolidated net sales during the three-month periods ended March 31, 2022 and 2021, 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, and our idle 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 the company’s profit sharing component.

Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of SDI, together with its wholly- and majority-owned or controlled consolidated 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 75% by SDI) are $116.7 million at March 31, 2022 and $100.2 million at December 31, 2021. Noncontrolling members of USS exercised their put option to require the company to purchase an additional 12.5% of the equity interest of USS, increasing SDI’s ownership to 87.5%, on April 1, 2022. Redeemable noncontrolling interests related to Mesabi Nugget (owned 85% by SDI) are $111.2 million at March 31, 2022, and December 31, 2021.

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Table of Contents

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, 2021.

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 at March 31, 2022, December 31, 2021, March 31, 2021, and December 31, 2020, which are recorded in Other Assets (noncurrent) in the company’s consolidated balance sheets.

Goodwill

The company’s goodwill consisted of the following at March 31, 2022, and December 31, 2021 (in thousands):

March 31,

December 31,

2022

2021

Steel Operations Segment

$

272,133

$

272,133

Metals Recycling Operations Segment

179,030

179,777

Steel Fabrication Operations Segment

1,925

1,925

$

453,088

$

453,835

Metals Recycling Operations Segment goodwill decreased $747,000 from December 31, 2021 to March 31, 2022, in recognition of the 2022 tax benefit related to the normal amortization of the component of Metals Recycling Operations tax-deductible goodwill in excess of book goodwill.

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Table of Contents

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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, 2022, the company reported $2.4 billion of accounts receivable, net of allowances for credit losses of $6.3 million. Changes in the allowance were not material for the three-month periods ended March 31, 2022 and 2021.

Note 2. Investments in Unconsolidated Affiliates

On January 31, 2022, the company purchased a 45% minority equity interest in New Process Steel, L.P. (NPS), a metals solutions and distribution supply-chain management company headquartered in Houston, Texas, with a focus toward growing its value-added manufacturing applications. On February 28, 2022, the company also purchased a minority equity interest in Aymium, a producer of renewable biocarbon products. As the company does not have power to control these entities, the company accounts for these investments using the equity method of accounting, which are recorded in Other Assets (noncurrent) in the company’s consolidated balance sheets.

Note 3. 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-month periods ended March 31, 2022 and 2021.

Three-Month Periods Ended March 31,

2022

2021

Weighted

Weighted

Average

Average

Net Income

Shares

Per Share

Net Income

Shares

Per Share

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount

Basic earnings per share

$

1,103,931

192,158

$

5.74

$

430,507

211,015

$

2.04

Dilutive common share equivalents

-

1,083

-

1,239

Diluted earnings per share

$

1,103,931

193,241

$

5.71

$

430,507

212,254

$

2.03

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 4. Inventories

Inventories are stated at lower of cost or net realizable value. Cost is determined using a weighted average cost method for raw materials and supplies, and on a first-in, first-out basis for other inventory. Inventory consisted of the following (in thousands):

March 31,

December 31,

2022

2021

Raw materials

$

1,871,749

$

1,870,300

Supplies

562,204

552,616

Work in progress

435,896

402,207

Finished goods

646,966

706,007

Total inventories

$

3,516,815

$

3,531,130

Note 5. 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 the three-month periods ended March 31, 2022 and 2021:

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

$

649

$

(2,674,267)

$

1,218,933

$

7,761,417

$

(2,091)

$

(195,884)

$

6,108,757

$

211,414

Dividends declared

-

-

-

(64,344)

-

-

(64,344)

-

Noncontrolling investors, net

-

-

-

-

-

(21,633)

(21,633)

16,500

Share repurchases

-

(389,190)

-

-

-

-

(389,190)

-

Equity-based compensation

-

12,960

(14,910)

(121)

-

-

(2,071)

-

Net income

-

-

-

1,103,931

-

3,423

1,107,354

-

Other comprehensive income,

-

-

-

-

11,387

-

11,387

-

net of tax

Balances at March 31, 2022

$

649

$

(3,050,497)

$

1,204,023

$

8,800,883

$

9,296

$

(214,094)

$

6,750,260

$

227,914

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, 2020

$

648

$

(1,623,747)

$

1,207,392

$

4,758,969

$

1,902

$

(155,552)

$

4,189,612

$

158,614

Dividends declared

-

-

-

(54,917)

-

-

(54,917)

-

Noncontrolling investors, net

-

-

-

-

-

(9,905)

(9,905)

5,000

Equity-based compensation

-

8,881

(4,447)

(161)

-

-

4,273

-

Net income

-

-

-

430,507

-

8,248

438,755

-

Other comprehensive income,

-

-

-

-

3,765

-

3,765

-

net of tax

Balances at March 31, 2021

$

648

$

(1,614,866)

$

1,202,945

$

5,134,398

$

5,667

$

(157,209)

$

4,571,583

$

163,614

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 6. 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 and ferrous metals (primarily aluminum and copper). 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. The following summarizes the company’s significant futures contract commitments as of March 31, 2022:

Commodity Futures

Long/Short

Metric Tons

Aluminum

Long

6,220

Aluminum

Short

12,225

Copper

Long

14,855

Copper

Short

27,940

The following summarizes the location and amounts of the fair values reported on the company’s consolidated balance sheets as of March 31, 2022, and December 31, 2021, and gains and losses related to derivatives included in the company’s statement of income for the three-month periods ended March 31, 2022, and 2021 (in thousands):

Asset Derivatives

Liability Derivatives

Balance sheet

Fair Value

Fair Value

 location

March 31, 2022

December 31, 2021

March 31, 2022

December 31, 2021

Derivative instruments designated as hedges

Commodity futures

Other current assets

$

13,920

$

1,278

$

3,802

$

7,430

Derivative instruments not designated as

hedges

Commodity futures

Other current assets

6,968

4,319

9,416

6,171

Total derivative instruments

$

20,888

$

5,597

$

13,218

$

13,601

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 6. 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 $17.5 million at March 31, 2022, and $24.9 million at December 31, 2021, and are reflected in other current assets in the consolidated balance sheets.

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

2022

2021

relationships

items

2022

2021

Derivatives in fair value

hedging relationships

Commodity futures

Costs of goods sold

$

1,326

$

7,786

Firm commitments

Costs of goods sold

$

(1,192)

$

(1,898)

Inventory

Costs of goods sold

(384)

(498)

Derivatives not designated

$

(1,576)

$

(2,396)

as hedging instruments

Commodity futures

Costs of goods sold

$

(11,221)

$

(30,195)

Derivatives accounted for as fair value hedges had ineffectiveness resulting in gains of $285,000 and $21,000 during the three-month periods ended March 31, 2022 and 2021, respectively. Losses excluded from hedge effectiveness testing of $536,000 increased cost of goods sold during the three-month period ended March 31, 2022 and gains excluded from hedge effectiveness testing of $5.4 million decreased cost of goods sold during the three-month period ended March 31, 2021.

Derivatives accounted for as cash flow hedges resulted in net gains of $18.1 million and $9.3 million recognized in other comprehensive income for the three-month periods ended March 31, 2022 and 2021, respectively. Net gains of $3.2 million and $4.4 million were reclassified from accumulated other comprehensive income for the three-month periods ended March 31, 2022 and 2021, respectively. At March 31, 2022, the company expects to reclassify all $12.2 million of net gains on derivative instruments from accumulated other comprehensive income to earnings during the next 12 months due to the settlement of futures contracts. The maximum term over which the company is hedging its exposure to the variability of future cash flows for forecasted transactions is less than 12 months.

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Table of Contents

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 7. 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.

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, 2022 and December 31, 2021 (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, 2022

Commodity futures – financial assets

$

20,888

$

-

$

20,888

$

-

Commodity futures – financial liabilities

13,218

-

13,218