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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 period

      ended September 30, 2021

OR

       Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

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

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 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 October 29, 2021, Registrant had 198,451,226 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 September 30, 2021 (unaudited) and December 31, 2020

1

Consolidated Statements of Income for the three and nine-month periods ended September 30, 2021 and 2020 (unaudited)

2

Consolidated Statements of Comprehensive Income for the three and nine-month periods ended September 30, 2021 and 2020 (unaudited)

3

Consolidated Statements of Cash Flows for the three and nine-month periods ended September 30, 2021 and 2020 (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

28

Signature

29

STEEL DYNAMICS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

September 30,

December 31,

2021

2020

Assets

(unaudited)

Current assets

Cash and equivalents

$

1,095,701

$

1,368,618

Accounts receivable, net

1,886,759

967,981

Accounts receivable-related parties

6,036

3,937

Inventories

2,894,970

1,843,548

Other current assets

104,106

74,363

Total current assets

5,987,572

4,258,447

Property, plant and equipment, net

4,654,192

4,105,569

Intangible assets, net

302,522

324,577

Goodwill

454,683

457,226

Other assets

137,016

119,743

Total assets

$

11,535,985

$

9,265,562

Liabilities and Equity

Current liabilities

Accounts payable

$

1,208,499

$

760,536

Accounts payable-related parties

11,938

8,919

Income taxes payable

80,167

2,386

Accrued payroll and benefits

406,538

201,778

Accrued interest

33,540

19,656

Accrued expenses

258,551

178,618

Current maturities of long-term debt

55,056

86,894

Total current liabilities

2,054,289

1,258,787

Long-term debt

3,019,175

3,015,782

Deferred income taxes

722,220

536,288

Other liabilities

117,367

106,479

Total liabilities

5,913,051

4,917,336

Commitments and contingencies

Redeemable noncontrolling interests

186,814

158,614

Equity

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

266,618,566 shares issued; and 199,778,688 and 210,914,264

shares outstanding, as of September 30, 2021 and December 31, 2020, respectively

648

648

Treasury stock, at cost; 66,839,878 and 55,704,302 shares,

as of September 30, 2021 and December 31, 2020, respectively

(2,344,477)

(1,623,747)

Additional paid-in capital

1,219,438

1,207,392

Retained earnings

6,721,734

4,758,969

Accumulated other comprehensive income

10,583

1,902

Total Steel Dynamics, Inc. equity

5,607,926

4,345,164

Noncontrolling interests

(171,806)

(155,552)

Total equity

5,436,120

4,189,612

Total liabilities and equity

$

11,535,985

$

9,265,562

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

Nine-Month Periods Ended

September 30,

September 30,

2021

2020

2021

2020

Net sales

Unrelated parties

$

5,081,476

$

2,327,224

$

13,072,657

$

6,991,732

Related parties

6,812

3,608

25,536

8,505

Total net sales

5,088,288

2,330,832

13,098,193

7,000,237

Costs of goods sold

3,487,659

2,038,017

9,497,606

6,007,762

Gross profit

1,600,629

292,815

3,600,587

992,475

Selling, general and administrative expenses

157,526

118,235

461,686

340,432

Profit sharing

113,880

11,778

244,868

42,324

Amortization of intangible assets

7,178

6,946

22,054

21,327

Operating income

1,322,045

155,856

2,871,979

588,392

Interest expense, net of capitalized interest

12,704

18,950

44,871

74,671

Other (income) expense, net

6,776

3,546

26,886

29,060

Income before income taxes

1,302,565

133,360

2,800,222

484,661

Income tax expense

302,406

29,083

649,105

110,783

Net income

1,000,159

104,277

2,151,117

373,878

Net income attributable to noncontrolling interests

(9,396)

(4,134)

(27,556)

(10,899)

Net income attributable to Steel Dynamics, Inc.

$

990,763

$

100,143

$

2,123,561

$

362,979

Basic earnings per share attributable to Steel

Dynamics, Inc. stockholders

$

4.89

$

0.48

$

10.22

$

1.72

Weighted average common shares outstanding

202,450

210,366

207,704

211,321

Diluted earnings per share attributable to Steel

Dynamics, Inc. stockholders, including the effect

of assumed conversions when dilutive

$

4.85

$

0.47

$

10.15

$

1.71

Weighted average common shares and share equivalents outstanding

204,167

211,926

209,222

212,443

Dividends declared per share

$

0.26

$

0.25

$

0.78

$

0.75

See notes to consolidated financial statements.

2

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

Three-Month Periods Ended

Nine-Month Periods Ended

September 30,

September 30,

2021

2020

2021

2020

Net income

$

1,000,159

$

104,277

$

2,151,117

$

373,878

Other comprehensive income - net unrealized gain (loss) on cash

flow hedging derivatives, net of income tax of $(6,797), $(38),

$2,711, and $32, for the three and nine-month periods ended

September 30, 2021 and 2020, respectively

(21,761)

(121)

8,681

102

Comprehensive income

978,398

104,156

2,159,798

373,980

Comprehensive income attributable to noncontrolling interests

(9,396)

(4,134)

(27,556)

(10,899)

Comprehensive income attributable to Steel Dynamics, Inc.

$

969,002

$

100,022

$

2,132,242

$

363,081

See notes to consolidated financial statements.

3

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Three-Month Periods Ended

Nine-Month Periods Ended

September 30,

September 30,

2021

2020

2021

2020

Operating activities:

Net income

$

1,000,159

$

104,277

$

2,151,117

$

373,878

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization

87,407

81,752

261,373

240,732

Equity-based compensation

9,917

9,486

36,765

36,850

Deferred income taxes

71,008

10,388

188,474

30,949

Other adjustments

(781)

17,237

(2,915)

21,701

Changes in certain assets and liabilities:

Accounts receivable

(321,771)

(58,271)

(920,877)

(57,991)

Inventories

(412,952)

(38,236)

(1,052,475)

83,790

Other assets

(20,361)

(3,894)

(18,818)

5,702

Accounts payable

48,726

645

472,562

121,764

Income taxes receivable/payable

(353)

(27,127)

86,791

33,251

Accrued expenses

169,817

55,533

278,240

(41,545)

Net cash provided by operating activities

630,816

151,790

1,480,237

849,081

Investing activities:

Purchases of property, plant and equipment

(214,629)

(327,647)

(801,698)

(854,898)

Purchases of short-term investments

-

-

-

(149,359)

Proceeds from maturities of short-term investments

-

69,545

-

411,533

Acquisition of business, net of cash and restricted cash acquired

-

(59,012)

-

(59,012)

Other investing activities

1,024

380

3,273

1,701

Net cash used in investing activities

(213,605)

(316,734)

(798,425)

(650,035)

Financing activities:

Issuance of current and long-term debt

343,007

295,814

1,059,912

1,611,849

Repayment of current and long-term debt

(382,489)

(305,911)

(1,095,338)

(1,645,482)

Dividends paid

(53,380)

(52,592)

(161,025)

(156,657)

Purchases of treasury stock

(337,616)

-

(730,814)

(106,529)

Other financing activities

(4,776)

(1,587)

(27,468)

(16,502)

Net cash used in financing activities

(435,254)

(64,276)

(954,733)

(313,321)

Decrease in cash, cash equivalents, and restricted cash

(18,043)

(229,220)

(272,921)

(114,275)

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

1,119,244

1,502,342

1,374,122

1,387,397

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

$

1,101,201

$

1,273,122

$

1,101,201

$

1,273,122

Supplemental disclosure information:

Cash paid for interest

$

9,174

$

8,597

$

62,216

$

77,050

Cash paid for income taxes, net

$

222,691

$

43,900

$

370,835

$

45,848

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 reportable segments: steel operations, metals recycling operations, and steel fabrication operations.

Steel Operations Segment. Steel operations include the company’s six operating electric arc furnace steel mills, including Butler Flat Roll Division, Columbus Flat Roll Division, Structural and Rail Division, Engineered Bar Products Division, Roanoke Bar Division, and Steel of West Virginia, and the under construction Southwest-Sinton Flat Roll Division; and steel coating and processing operations at The Techs galvanizing lines, Heartland Flat Roll Division, United Steel Supply (USS), and Vulcan Threaded Products, Inc. Steel operations accounted for 72% and 73% of the company’s consolidated net sales during the three-month periods ended September 30, 2021 and 2020, respectively, and 72% and 75% of the company’s consolidated net sales during the nine-month periods ended September 30, 2021 and 2020, 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 12% of the company’s consolidated net sales during the three-month periods ended September 30, 2021 and 2020, and 12% and 10% of the company’s consolidated net sales during the nine-month periods ended September 30, 2021 and 2020, 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 10% of the company’s consolidated net sales during the three-month periods ended September 30, 2021 and 2020, and 8% and 10% of the company’s consolidated net sales during the nine-month periods ended September 30, 2021 and 2020, respectively.

Other. Other operations consist of subsidiary operations that are below the 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 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 owner’s 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 $75.6 million at September 30, 2021 and $47.4 million at December 31, 2020. Redeemable noncontrolling interests related to Mesabi Nugget (owned 84% by SDI) are $111.2 million at September 30, 2021, and December 31, 2020.

5

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, 2020.

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 September 30, 2021, June 30, 2021, December 31, 2020, and September 30, 2020, and $5.9 million at June 30, 2020 and December 31, 2019, which are recorded in Other Assets (noncurrent) in the company’s consolidated balance sheets.

Goodwill

The company’s goodwill consisted of the following at September 30, 2021, and December 31, 2020 (in thousands):

September 30,

December 31,

2021

2020

Steel Operations Segment

$

272,133

$

272,133

Metals Recycling Operations Segment

180,625

183,168

Steel Fabrication Operations Segment

1,925

1,925

$

454,683

$

457,226

Metals Recycling Operations Segment goodwill decreased $2.5 million from December 31, 2020 to September 30, 2021, in recognition of the 2021 tax benefit related to the normal amortization of the component of Metals Recycling Operations tax-deductible goodwill in excess of book goodwill.

6

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 September 30, 2021, the company reported $1,892.8 million of accounts receivable, net of allowances for credit losses of $7.9 million. Changes in the allowance were not material for the three and nine-month periods ended September 30, 2021 and 2020.

Subsequent Event

On October 14, 2021, the company entered into a definitive agreement to acquire a 45% minority equity interest in New Process Steel, L.P., a metals solutions and distribution supply-chain management company headquartered in Houston, Texas, with a focus toward growing its value-added manufacturing applications. This transaction is subject to customary closing conditions and receipt of regulatory approvals.

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, 2021 and 2020.

Three-Month Periods Ended September 30,

2021

2020

Weighted

Weighted

Average

Average

Net Income

Shares

Per Share

Net Income

Shares

Per Share

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount

Basic earnings per share

$

990,763

202,450

$

4.89

$

100,143

210,366

$

0.48

Dilutive common share equivalents

-

1,717

-

1,560

Diluted earnings per share

$

990,763

204,167

$

4.85

$

100,143

211,926

$

0.47

7

Table of Contents

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 2. Earnings Per Share (Continued)

Nine-Month Periods Ended September 30,

2021

2020

Weighted

Weighted

Average

Average

Net Income

Shares

Per Share

Net Income

Shares

Per Share

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount

Basic earnings per share

$

2,123,561

207,704

$

10.22

$

362,979

211,321

$

1.72

Dilutive common share equivalents

-

1,518

-

1,122

Diluted earnings per share

$

2,123,561

209,222

$

10.15

$

362,979

212,443

$

1.71

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 and supplies, and on a first-in, first-out basis for other inventory. Inventory consisted of the following (in thousands):

September 30,

December 31,

2021

2020

Raw materials

$

1,480,799

$

790,324

Supplies

534,248

500,497

Work in progress

305,288

162,843

Finished goods

574,635

389,884

Total inventories

$

2,894,970

$

1,843,548

8

Table of Contents

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 and nine-month periods ended September 30, 2021 and 2020:

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, 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

-

-

-

-