STEEL DYNAMICS INC [STLD] Filings

10-Q 1 stld-20220331x10q.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 March 31, 2022

☐ 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.

Table of Contents

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

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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.

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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.

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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.

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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.

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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. 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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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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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)

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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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