Steel Dynamics(STLD) - 2024 Q1 - Quarterly Report

PART I. Financial Information Item 1. Financial Statements This section presents the unaudited consolidated financial statements of Steel Dynamics, Inc. for the three-month periods ended March 31, 2024, and 2023, including balance sheets, income statements, comprehensive income statements, cash flow statements, and accompanying notes detailing business description, significant accounting policies, and segment information Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at March 31, 2024, and December 31, 2023 | Metric | March 31, 2024 (in millions, unaudited) | December 31, 2023 (in millions) | | :-------------------------------- | :------------------------- | :------------------ | | Assets | | | | Cash and equivalents | $1,039.4 | $1,400.9 | | Short-term investments | $653.3 | $721.2 | | Accounts receivable, net | $1,665.4 | $1,535.1 | | Inventories | $3,027.1 | $2,894.6 | | Total current assets | $6,597.4 | $6,787.8 | | Property, plant and equipment, net | $7,064.0 | $6,734.2 | | Total assets | $15,026.8 | $14,908.4 | | Liabilities & Equity | | | | Accounts payable | $1,174.1 | $1,078.6 | | Income taxes payable | $150.1 | $5.5 | | Accrued payroll and benefits | $209.8 | $469.1 | | Current maturities of long-term debt | $425.7 | $460.0 | | Total current liabilities | $2,298.7 | $2,332.3 | | Long-term debt | $2,612.2 | $2,611.1 | | Total liabilities | $5,979.0 | $6,068.9 | | Total equity | $8,876.5 | $8,668.3 | Consolidated Statements of Income This section outlines the company's financial performance, presenting net sales, costs, gross profit, operating income, and net income for the three-month periods ended March 31, 2024, and 2023 | Metric | Three-Month Period Ended March 31, 2024 (in millions) | Three-Month Period Ended March 31, 2023 (in millions) | | :------------------------------------------ | :-------------------------------------- | :-------------------------------------- | | Total net sales | $4,694.0 | $4,893.2 | | Costs of goods sold | $3,713.2 | $3,837.1 | | Gross profit | $980.8 | $1,056.1 | | Operating income | $751.0 | $835.4 | | Income before income taxes | $765.8 | $847.8 | | Net income | $587.5 | $644.3 | | Net income attributable to Steel Dynamics, Inc. | $584.0 | $637.3 | | Basic earnings per share | $3.68 | $3.71 | | Diluted earnings per share | $3.67 | $3.70 | | Dividends declared per share | $0.46 | $0.425 | Consolidated Statements of Comprehensive Income This section details the company's comprehensive income, including net income and other comprehensive income components, for the three-month periods ended March 31, 2024, and 2023 | Metric | Three-Month Period Ended March 31, 2024 (in millions) | Three-Month Period Ended March 31, 2023 (in millions) | | :------------------------------------------ | :-------------------------------------- | :-------------------------------------- | | Net income | $587.5 | $644.3 | | Other comprehensive income - net unrealized (loss) gain on cash flow hedging derivatives, net of income tax | ($0.4) | $0.9 | | Comprehensive income | $587.1 | $645.2 | | Comprehensive income attributable to Steel Dynamics, Inc. | $583.6 | $638.2 | Consolidated Statements of Cash Flows This section presents the cash inflows and outflows from operating, investing, and financing activities for the three-month periods ended March 31, 2024, and 2023 | Metric | Three-Month Period Ended March 31, 2024 (in millions) | Three-Month Period Ended March 31, 2023 (in millions) | | :------------------------------------------ | :-------------------------------------- | :-------------------------------------- | | Net cash provided by operating activities | $355.2 | $733.8 | | Net cash used in investing activities | ($292.9) | ($309.6) | | Net cash used in financing activities | ($423.8) | ($447.6) | | Decrease in cash, cash equivalents, and restricted cash | ($361.6) | ($23.5) | | Cash, cash equivalents, and restricted cash at end of period | $1,044.9 | $1,610.4 | | Cash paid for interest | $9.3 | $9.6 | | Cash paid for income taxes, net | $28.4 | $4.7 | Notes to Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements Note 1. Description of the Business and Significant Accounting Policies This note describes Steel Dynamics, Inc.'s business operations, including its segments and new aluminum operations, along with significant accounting policies and the evaluation of new FASB ASUs - Steel Dynamics, Inc. (SDI) is a diversified domestic steel producer and metals recycler, with a steel fabrication manufacturing platform, and effective Q4 2023, the company changed its reportable segments[17] - The Aluminum Operations Segment includes a recycled aluminum flat rolled products mill under construction, and SDI holds a 94.4% equity interest in the flat rolled products mill joint venture[21] - The company is evaluating the potential impact of new FASB ASUs 2023-07 (Segment Reporting) and 2023-09 (Income Taxes) on its financial statements and disclosures[33][34] Note 2. Earnings Per Share This note details the basic and diluted earnings per share calculations and the weighted average common shares outstanding for the reported periods | Metric | Three-Month Period Ended March 31, 2024 | Three-Month Period Ended March 31, 2023 | | :------------------------------------------ | :-------------------------------------- | :-------------------------------------- | | Basic earnings per share | $3.68 | $3.71 | | Diluted earnings per share | $3.67 | $3.70 | | Weighted average common shares outstanding (Basic) | 158,666 | 171,597 | | Weighted average common shares and share equivalents outstanding (Diluted) | 159,354 | 172,479 | Note 3. Inventories This note provides a breakdown of inventory components, including raw materials, supplies, work in progress, and finished goods, at March 31, 2024, and December 31, 2023 | Inventory Type | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :--------------- | :------------- | :---------------- | | Raw materials | $1,277.7 | $1,226.3 | | Supplies | $730.2 | $711.7 | | Work in progress | $330.2 | $296.9 | | Finished goods | $689.0 | $659.8 | | Total inventories | $3,027.1 | $2,894.6 | Note 4. Changes in Equity This note outlines the changes in stockholders' equity, including dividends, share repurchases, net income, and other comprehensive income, for the reported periods Changes in Equity (Three-Month Period Ended March 31, 2024): | Item | Stockholders of Steel Dynamics, Inc. (in millions) | | :-------------------------------- | :------------------------------------------------ | | Balances at December 31, 2023 | $8,866.7 | | Dividends declared | ($72.6) | | Share repurchases | ($298.1) | | Net income | $584.0 | | Other comprehensive income, net of tax | ($0.4) | | Balances at March 31, 2024 | $9,072.4 | Changes in Equity (Three-Month Period Ended March 31, 2023): | Item | Stockholders of Steel Dynamics, Inc. (in millions) | | :-------------------------------- | :------------------------------------------------ | | Balances at December 31, 2022 | $7,914.3 | | Dividends declared | ($72.3) | | Share repurchases | ($354.0) | | Net income | $637.3 | | Other comprehensive income, net of tax | $0.9 | | Balances at March 31, 2023 | $8,120.2 | Note 5. Fair Value Measurements This note presents fair value measurements for financial instruments, including short-term investments and commodity futures, categorized by valuation levels Fair Value Measurements (March 31, 2024): | Financial Instrument | Total (in millions) | Level 1 | Level 2 | Level 3 | | :----------------------- | :------------------- | :------ | :------ | :------ | | Short-term investments | $653.3 | $- | $653.3 | $- | | Commodity futures – financial assets | $3.6 | $- | $3.6 | $- | | Commodity futures – financial liabilities | $6.0 | $- | $6.0 | $- | Fair Value Measurements (December 31, 2023): | Financial Instrument | Total (in millions) | Level 1 | Level 2 | Level 3 | | :----------------------- | :------------------- | :------ | :------ | :------ | | Short-term investments | $721.2 | $- | $721.2 | $- | | Commodity futures – financial assets | $2.5 | $- | $2.5 | $- | | Commodity futures – financial liabilities | $9.3 | $- | $9.3 | $- | - The fair value of long-term debt (Level 2) was approximately $2.8 billion at March 31, 2024, and December 31, 2023, with a corresponding carrying amount of $3.1 billion Note 6. Commitments and Contingencies This note discloses the company's involvement in various litigation, administrative, and environmental matters, none of which are expected to have a material financial impact - The company is involved in various routine litigation and disputes, none of which are expected to have a material impact on its financial condition, results of operations, or liquidity[42] Note 7. Segment Information This note provides detailed financial information by segment, including net sales and operating income for steel, metals recycling, steel fabrication, and aluminum operations Segment Net Sales (in millions): | Segment | Q1 2024 | Q1 2023 | % Change | | :-------------------------- | :-------- | :-------- | :------- | | Steel Operations | $3,514.5 | $3,171.7 | 11% | | Metals Recycling Operations | $1,094.0 | $1,161.9 | (6)% | | Steel Fabrication Operations | $451.8 | $868.8 | (48)% | | Aluminum Operations | $- | $- | - | | Other | $311.1 | $352.5 | (12)% | | Total Net Sales | $4,694.0 | $4,893.2 | (4)% | Segment Operating Income (Loss) (in millions): | Segment | Q1 2024 | Q1 2023 | % Change | | :-------------------------- | :-------- | :-------- | :------- | | Steel Operations | $670.9 | $341.9 | 96% | | Metals Recycling Operations | $18.7 | $39.7 | (53)% | | Steel Fabrication Operations | $178.3 | $551.3 | (68)% | | Aluminum Operations | ($13.5) | ($2.4) | (459)% | | Other | ($97.9) | ($96.7) | (1)% | | Total Operating Income | $751.0 | $835.4 | (10)% | - Steel operations accounted for 72% of consolidated net sales in Q1 2024, up from 63% in Q1 2023[62] - Metals recycling operations accounted for 12% of consolidated net sales in both Q1 2024 and Q1 2023[69] - Steel fabrication operations' contribution to consolidated net sales decreased from 18% in Q1 2023 to 10% in Q1 2024[74] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the first quarter of 2024 compared to 2023, including an overview of business segments, key financial metrics, and liquidity and capital resources - Consolidated operating income decreased by $84.4 million (10%) to $751.0 million in Q1 2024, primarily due to metal spread contraction in metals recycling and steel fabrication operations[58] - Net income attributable to Steel Dynamics, Inc. decreased by $53.3 million (8%) to $584.0 million in Q1 2024, consistent with the decrease in operating income[58] Forward-Looking Statements This section highlights that the report contains forward-looking statements subject to various risks and uncertainties, as detailed in the company's Form 10-K - The report contains forward-looking statements regarding future events, subject to various risks and uncertainties outlined in the company's Form 10-K[48][49] Description of the Business This section describes Steel Dynamics as a major domestic steel producer and metal recycler with diversified products and end-markets - Steel Dynamics is one of the largest domestic steel producers and metal recyclers in the U.S., with a diversified product and end-market portfolio[50] Operating Statement Classifications This section explains the components of net sales, costs of goods sold, and other income/expense, net, and their recognition criteria - Net sales are driven by volumes, product mix, and pricing, with revenues recognized upon transfer of control[51] - Costs of goods sold primarily consist of scrap and scrap substitutes, representing 55-65% of steel mill manufacturing costs[53][66] - Other (income) expense, net, includes interest income from temporary cash deposits and investments, and income from unconsolidated affiliates, offset by non-operating costs[56] Results Overview This section provides a high-level summary of the company's performance in Q1 2024, noting near-record steel shipments and strong segment contributions - In Q1 2024, the company achieved near-record quarterly steel shipments of 3.3 million tons, with steady steel demand and strong results from steel fabrication[57] Segment Operating Results 2024 vs. 2023 This section analyzes the operating performance of each business segment, comparing results for Q1 2024 against Q1 2023 Steel Operations Segment This section details the performance of the steel operations segment, including shipments, pricing, costs, metal spread, and operating income Steel Operations Segment Shipments (tons): | Metric | Q1 2024 | Q1 2023 | % Change | | :-------------------------- | :-------- | :-------- | :------- | | Total shipments | 3,255,594 | 3,345,148 | (3)% | | Steel Operations Segment shipments (excluding intra-segment) | 2,922,961 | 2,953,768 | (1)% | | External shipments | 2,803,569 | 2,869,321 | (2)% | - Sheet steel pricing was 19% higher in Q1 2024 compared to Q1 2023[63] - Total steel segment average selling prices increased 12% ($128 per ton) in Q1 2024 YoY[65] - Metallic raw material cost per net ton consumed was consistent, increasing $3 per ton YoY[66] - Metal spread increased 18% in Q1 2024 compared to Q1 2023[67] - Operating income for steel operations increased 96% to $670.9 million in Q1 2024 YoY[67] Metals Recycling Operations Segment This section analyzes the performance of the metals recycling segment, focusing on ferrous and nonferrous shipments, pricing, metal spreads, and operating income Metals Recycling Operations Segment Shipments: | Metric | Q1 2024 | Q1 2023 | % Change | | :-------------------------------- | :-------- | :-------- | :------- | | Ferrous metal (gross tons) - Total | 1,453,619 | 1,452,821 | 0% | | Ferrous metal (gross tons) - External | 536,973 | 567,403 | (5)% | | Nonferrous metals (thousands of pounds) - Total | 289,436 | 285,837 | 1% | | Nonferrous metals (thousands of pounds) - External | 259,956 | 240,731 | 8% | - Ferrous scrap average selling prices were flat in Q1 2024 YoY[70] - Nonferrous scrap prices decreased 15% in Q1 2024 YoY[70] - Ferrous metal spreads decreased 9% in Q1 2024 YoY[71] - Nonferrous metal spreads decreased 3% in Q1 2024 YoY[71] - Operating income decreased 53% to $18.7 million in Q1 2024 YoY[71] Steel Fabrication Operations Segment This section reviews the steel fabrication segment's performance, highlighting changes in net sales, average selling prices, metal spread, and operating income - Net sales for steel fabrication operations decreased 48% in Q1 2024 YoY, driven by a 37% decrease in average selling prices ($1,880 per ton) and a 17% decrease in volume[75] - The average cost per ton of steel consumed was flat in Q1 2024 YoY, but metal spread contracted 49% due to decreased selling prices[76] - Operating income decreased 68% to $178.3 million in Q1 2024 YoY, impacted by metal spread compression and decreased volume, despite a historically strong order backlog[75][76] Aluminum Operations Segment This section describes the status of the aluminum operations segment, which is currently in the construction phase, with results primarily reflecting construction and start-up costs - The Aluminum Operations Segment is currently in the construction phase for a recycled aluminum flat rolled products mill and two satellite slab centers, with results primarily consisting of construction and start-up costs[78] Other Consolidated Results This section covers other consolidated financial items, including selling, general and administrative expenses, profit sharing, interest expense, net other income, and income tax expense - Selling, General and Administrative Expenses increased 11% to $159.5 million in Q1 2024, primarily due to a 9% increase in payroll and benefits related to growth strategy execution[80] - Profit sharing expense decreased 10% to $62.7 million in Q1 2024, consistent with decreased pretax earnings[81] - Interest expense decreased by $10.5 million in Q1 2024, primarily due to higher capitalized interest related to construction at Sinton, Heartland, and aluminum operations[82] - Net other income decreased to $26.8 million in Q1 2024 from $34.9 million in Q1 2023, mainly due to a decrease in net earnings from equity investments[83] - Income tax expense decreased 12% to $178.3 million in Q1 2024, with an effective tax rate of 23.3%, consistent with decreased pretax earnings[83] Liquidity and Capital Resources This section discusses the company's financial flexibility, including cash, investments, debt, credit facilities, cash flow from operations, capital investments, and shareholder returns Liquidity at March 31, 2024 (in millions): | Metric | Amount | | :-------------------------- | :------- | | Cash and equivalents | $1,039.4 | | Short-term and other investments | $886.4 | | Revolver availability | $1,190.7 | | Total liquidity | $3,116.6 | - Total outstanding debt of $3.1 billion remained consistent with December 31, 2023[85] - The long-term debt to capitalization ratio was 25.1% at March 31, 2024, down from 25.8% at December 31, 2023[85] - The company maintains a $1.2 billion senior unsecured revolving credit facility, with $1.2 billion availability and no outstanding borrowings at March 31, 2024[86][87] - Cash flow from operations decreased to $355.2 million in Q1 2024 from $733.8 million in Q1 2023[88] - Working capital decreased by $1.4 billion (25%) to $4.3 billion at March 31, 2024, primarily due to decreases in cash and receivables and an increase in current maturities of long-term debt[88] - Capital investments in property, plant and equipment increased to $374.3 million in Q1 2024 from $226.3 million in Q1 2023, primarily in steel and aluminum operations[89] - The company plans to invest $2.7 billion in a new aluminum mill and slab centers, funded by available cash and operating cash flow[89] - Quarterly cash dividend increased by 8% to $0.46 per share in Q1 2024, resulting in $72.6 million declared dividends[90] - Share repurchases totaled $298.1 million in Q1 2024, with $1.1 billion remaining under the November 2023 program[92] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section discusses the company's exposure to market risks, particularly commodity price fluctuations for products and raw materials, and outlines mitigation strategies - The company is exposed to market risk from price fluctuations in product sales and raw material purchases[95] - Risk mitigation strategies include obtaining competitive prices for products, entering into 'take or pay' commitments for raw materials (up to 5-28 years), and using base metal financial contracts to protect profit margins[96][97] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of March 31, 2024, ensuring timely and accurate reporting. It also states that no material changes occurred in internal controls over financial reporting during the quarter - The principal executive and financial officers concluded that disclosure controls and procedures were effective as of March 31, 2024[98] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended March 31, 2024[99] PART II. Other Information Item 1. Legal Proceedings The company is involved in various routine litigation and administrative matters, including environmental proceedings, none of which are currently expected to have a material impact on its financial condition, results of operations, or liquidity - The company is involved in various routine litigation and disputes, none of which are expected to materially impact financial condition, results, or liquidity[100] - Fines or penalties from environmental investigations and proceedings did not exceed $1 million in aggregate as of March 31, 2024[101] Item 1A. Risk Factors This section states that no material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes have occurred to the risk factors as disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023[102] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activities during the first quarter of 2024 under its $1.5 billion program authorized in November 2023 Issuer Purchases of Equity Securities (Quarter ended March 31, 2024): | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Maximum Dollar Value of Shares That May Yet be Purchased Under the Programs (in millions) | | :---------------- | :------------------------------- | :--------------------------- | :-------------------------------------------------------------------- | :--------------------------------------------------------------------------------------- | | January 1 - 31 | 1,148,345 | $116.56 | 1,148,345 | $1,261.7 | | February 1 - 29 | 908,005 | $124.65 | 908,005 | $1,149.7 | | March 1 - 31 | 374,453 | $136.26 | 374,453 | $1,099.2 | | Total | 2,430,803 | | 2,430,803 | | - The share repurchases were conducted under a $1.5 billion program authorized in November 2023[104] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reported period - No defaults upon senior securities occurred[105] Item 4. Mine Safety Disclosures This section indicates that there are no mine safety disclosures to report - No mine safety disclosures are reported[106] Item 5. Other Information This section confirms that none of the company's directors or executive officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the first quarter of 2024 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or executive officers during Q1 2024[107] Item 6. Exhibits This section provides an index of exhibits filed with the Form 10-Q, including articles of incorporation, executive officer certifications, and XBRL documents, along with the signature page Exhibit Index This section lists the various exhibits accompanying the filing, including corporate documents, certifications, and XBRL data files - The exhibit index includes Amended and Restated Articles of Incorporation and Bylaws, Executive Officer Certifications (31.1, 31.2, 32.1, 32.2), and various XBRL documents[112][113][114] Signature This section contains the official signature confirming the submission of the report by the company's principal financial and accounting officer - The report was signed on May 10, 2024, by Theresa E. Wagler, Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) of Steel Dynamics, Inc.[117][118]