Cover and table of contents

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Cover and table of contents

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 June 30, 2023

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

Commission File Number 0-21719

Steel Dynamics, Inc**.**

(Exact name of registrant as specified in its charter)

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

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

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

Not Applicable

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act.


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock voting, $0.0025 par value	STLD	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

			Large accelerated filer ⌧		Accelerated filer ◻		Non-accelerated filer ◻

			Smaller reporting company ☐		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No⌧

As of July 31, 2023, Registrant had 165,644,387 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 June 30, 2023 (unaudited) and December 31, 2022	1

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

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

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

	Notes to Consolidated Financial Statements (unaudited)	5

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

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25

Item 4.	Controls and Procedures	25



	PART II. Other Information

Item 1.	Legal Proceedings	26

Item 1A.	Risk Factors	26

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

Item 3.	Defaults Upon Senior Securities	26

Item 4.	Mine Safety Disclosures	26

Item 5.	Other Information	27

Item 6.	Exhibits	28

Exhibit Index		29

Signature		30

STEEL DYNAMICS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	June 30,		December 31,
	2023		2022
Assets	(unaudited)
Current assets
Cash and equivalents	$	1,475,356	$	1,628,417
Short-term investments		611,701		628,215
Accounts receivable, net		2,079,949		1,976,282
Accounts receivable-related parties		63,015		79,769
Inventories		3,044,009		3,129,964
Other current assets		122,025		195,371
Total current assets		7,396,055		7,638,018

Property, plant and equipment, net		5,783,622		5,373,665

Intangible assets, net		274,005		267,507
Goodwill		477,471		502,067
Other assets		620,244		378,727
Total assets	$	14,551,397	$	14,159,984
Liabilities and Equity
Current liabilities
Accounts payable	$	1,039,149	$	1,007,304
Accounts payable-related parties		9,435		9,934
Income taxes payable		39,177		6,520
Accrued payroll and benefits		321,303		610,558
Accrued expenses		293,102		340,646
Current maturities of long-term debt		56,869		57,334
Total current liabilities		1,759,035		2,032,296

Long-term debt		3,010,829		3,013,241
Deferred income taxes		941,491		889,103
Other liabilities		175,073		129,539
Total liabilities		5,886,428		6,064,179

Commitments and contingencies

Redeemable noncontrolling interests		171,212		181,503

Equity
Common stock voting, $0.0025 par value; 900,000,000 shares authorized;
267,772,737 and 267,762,488 shares issued; and 166,383,336 and 172,936,163
shares outstanding, as of June 30, 2023 and December 31, 2022, respectively		650		650
Treasury stock, at cost; 101,389,401 and 94,826,325 shares,
as of June 30, 2023 and December 31, 2022, respectively		(5,179,722)		(4,459,513)
Additional paid-in capital		1,204,134		1,212,566
Retained earnings		12,681,894		11,375,765
Accumulated other comprehensive income		1,027		889
Total Steel Dynamics, Inc. equity		8,707,983		8,130,357
Noncontrolling interests		(214,226)		(216,055)
Total equity		8,493,757		7,914,302
Total liabilities and equity	$	14,551,397	$	14,159,984

See notes to consolidated financial statements.

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)



	Three-Month Periods Ended				Six-Month Periods Ended
	June 30,				June 30,
	2023		2022		2023		2022

Net sales
Unrelated parties	$	4,930,422	$	5,964,503	$	9,675,775	$	11,375,304
Related parties		151,208		248,375		299,061		407,476
Total net sales		5,081,630		6,212,878		9,974,836		11,782,780

Costs of goods sold		3,774,772		4,329,536		7,611,856		8,116,925
Gross profit		1,306,858		1,883,342		2,362,980		3,665,855

Selling, general and administrative expenses		141,209		118,377		285,518		270,392
Profit sharing		90,990		139,742		160,565		268,211
Amortization of intangible assets		10,924		7,160		17,802		14,322
Operating income		1,063,735		1,618,063		1,899,095		3,112,930

Interest expense, net of capitalized interest		20,767		25,667		43,274		42,336
Other (income) expense, net		(31,348)		(4,021)		(66,284)		16,447
Income before income taxes		1,074,316		1,596,417		1,922,105		3,054,147

Income tax expense		258,139		381,765		461,595		732,141
Net income		816,177		1,214,652		1,460,510		2,322,006

Net income attributable to noncontrolling interests		(4,070)		(5,098)		(11,093)		(8,521)
Net income attributable to Steel Dynamics, Inc.	$	812,107	$	1,209,554	$	1,449,417	$	2,313,485



Basic earnings per share attributable to Steel
Dynamics, Inc. stockholders	$	4.83	$	6.49	$	8.54	$	12.22

Weighted average common shares outstanding		168,009		186,442		169,803		189,300

Diluted earnings per share attributable to Steel
Dynamics, Inc. stockholders, including the effect
of assumed conversions when dilutive	$	4.81	$	6.44	$	8.49	$	12.14

Weighted average common shares and share equivalents outstanding		168,865		187,740		170,672		190,491

Dividends declared per share	$	0.425	$	0.34	$	0.85	$	0.68

See notes to consolidated financial statements.

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)



	Three-Month Periods Ended				Six-Month Periods Ended
	June 30,				June 30,
	2023		2022		2023		2022

Net income	$	816,177	$	1,214,652	$	1,460,510	$	2,322,006
Other comprehensive income - net unrealized gain (loss) on cash
flow hedging derivatives, net of income tax expense (benefit) of
($247) and ($4,465) for the three months ended, and $44 and ($908)
for the six months ended June 30, 2023 and 2022, respectively		(773)		(14,295)		138		(2,908)
Comprehensive income		815,404		1,200,357		1,460,648		2,319,098

Comprehensive income attributable to noncontrolling interests		(4,070)		(5,098)		(11,093)		(8,521)
Comprehensive income attributable to Steel Dynamics, Inc.	$	811,334	$	1,195,259	$	1,449,555	$	2,310,577

See notes to consolidated financial statements.

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)



	Three-Month Periods Ended				Six-Month Periods Ended
	June 30,				June 30,
	2023		2022		2023		2022

Operating activities:
Net income	$	816,177	$	1,214,652	$	1,460,510	$	2,322,006

Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization		110,970		95,701		218,664		183,247
Equity-based compensation		11,678		11,069		27,756		27,588
Deferred income taxes		43,380		(2,636)		52,388		(4)
Other adjustments		1,541		(640)		(8,465)		10,517
Changes in certain assets and liabilities:
Accounts receivable		(16,971)		(297,047)		(87,893)		(744,281)
Inventories		(55,158)		(130,552)		85,954		(116,237)
Other assets		(4,923)		(12,887)		2,919		6,515
Accounts payable		(114,013)		187,521		3,299		111,550
Income taxes receivable/payable		(85,486)		(203,352)		103,761		138,553
Accrued expenses		100,611		140,023		(317,304)		(118,634)
Net cash provided by operating activities		807,806		1,001,852		1,541,589		1,820,820

Investing activities:
Purchases of property, plant and equipment		(358,280)		(164,142)		(584,599)		(323,472)
Purchases of short-term investments		(165,052)		(351,510)		(521,829)		(351,510)
Proceeds from maturities of short-term investments		267,969		-		539,076		-
Investments in unconsolidated affiliates		-		-		-		(222,480)
Other investing activities		(217,905)		4,817		(215,562)		5,227
Net cash used in investing activities		(473,268)		(510,835)		(782,914)		(892,235)

Financing activities:
Issuance of current and long-term debt		327,132		382,868		721,042		702,647
Repayment of current and long-term debt		(321,143)		(414,719)		(726,422)		(763,991)
Dividends paid		(72,323)		(64,344)		(131,121)		(115,043)
Purchases of treasury stock		(380,206)		(517,024)		(734,203)		(906,214)
Other financing activities		(17,579)		(60,241)		(41,028)		(82,768)
Net cash used in financing activities		(464,119)		(673,460)		(911,732)		(1,165,369)

Decrease in cash, cash equivalents, and restricted cash		(129,581)		(182,443)		(153,057)		(236,784)
Cash, cash equivalents, and restricted cash at beginning of period		1,610,443		1,195,028		1,633,919		1,249,369

Cash, cash equivalents, and restricted cash at end of period	$	1,480,862	$	1,012,585	$	1,480,862	$	1,012,585


Supplemental disclosure information:
Cash paid for interest	$	41,781	$	41,114	$	51,377	$	50,282
Cash paid for income taxes, net	$	308,055	$	580,454	$	312,758	$	590,402

See notes to consolidated financial statements.

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Description of the Business and Significant Accounting Policies

Description of the Business

Steel Dynamics, Inc. (SDI), together with its subsidiaries (the company), is one of the largest and most diversified domestic steel producers and metals recycler, combined with a meaningful steel fabrication manufacturing platform. The company has three reporting segments: steel operations, metals recycling operations, and steel fabrication operations.

Steel Operations Segment. Steel operations include the company’s electric arc furnace (EAF) steel mills, including Butler Flat Roll Division, Columbus Flat Roll Division, Southwest-Sinton Flat Roll Division, Structural and Rail Division, Engineered Bar Products Division, Roanoke Bar Division, Steel of West Virginia, steel coating and processing operations at The Techs, Heartland Flat Roll Division, United Steel Supply (USS) – 90% equity interest as of April 1, 2023, Vulcan Threaded Products, Inc., and SDI Biocarbon Solutions, LLC, a joint venture to construct and operate a biocarbon production facility. Steel operations accounted for 67% of the company’s consolidated net sales during the three-month periods ended June 30, 2023 and 2022 and the six-month period ended June 30, 2022 and 65% during the six-month period ended June 30, 2023.

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 and six-month periods ended June 30, 2023 and 10% during the three and six-month periods ended June 30, 2022.

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 15% and 16% of the company’s consolidated net sales during the three and six-month periods ended June 30, 2023, respectively, and 17% during the three and six-month periods ended June 30, 2022.

Other. Other operations consist of subsidiary operations that are below the company’s quantitative thresholds required for reportable segments and primarily consist of joint ventures, including the company’s newly announced aluminum flat roll mill and the company’s idled Minnesota ironmaking operations. Also included in “Other” are certain unallocated corporate accounts, such as the company’s senior unsecured credit facility, senior notes, certain other investments and certain profit sharing expenses.

Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of 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 owners’ proportionate share in the equity, income, or losses of the company’s majority-owned or controlled consolidated subsidiaries. Redeemable noncontrolling interests related to USS (owned 90% by SDI at April 1, 2023 and 87.5% at December 31, 2022) are $60.0 million at June 30, 2023, and $70.3 million at December 31, 2022. On April 1, 2023, a noncontrolling member of USS exercised its option to require SDI to purchase its 2.5% equity interest, increasing SDI’s ownership to 90%. The remaining noncontrolling members’ option to require SDI to purchase the remaining 10% equity interest of USS has been extended to on or after February 28, 2025. Redeemable noncontrolling interests related to Mesabi Nugget (owned 85.5% by SDI) are $111.2 million at June 30, 2023, and December 31, 2022.

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Use of Estimates

These consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, and accordingly, include amounts that require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and in the notes thereto. Significant items subject to such estimates and assumptions include the carrying value of property, plant and equipment, intangible assets, and goodwill; valuation allowances for trade receivables, inventories and deferred income tax assets; unrecognized tax benefits; potential environmental liabilities; and litigation claims and settlements. Actual results may differ from these estimates and assumptions.

In the opinion of management, these financial statements reflect all normal recurring adjustments necessary for a fair presentation of the interim period results. These consolidated financial statements and notes should be read in conjunction with the audited financial statements and notes thereto included in the company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Cash and Equivalents, and Restricted Cash

Cash and equivalents include all highly liquid investments with a maturity of three months or less at the date of acquisition. Restricted cash is primarily funds held in escrow as required by various insurance and government organizations. The balance of cash, cash equivalents and restricted cash in the consolidated statements of cash flows includes restricted cash of $5.5 million for all periods presented, which are recorded in Other Assets (noncurrent) in the company’s consolidated balance sheets.

Senior Credit Facility

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

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

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Other Obligations

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

Goodwill

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



	June 30,		December 31,
	2023		2022

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

Credit Losses

The company is exposed to credit risk in the event of nonpayment of accounts receivable by customers. The company mitigates its exposure to credit risk, which it generally extends on an unsecured basis, by performing ongoing credit evaluations and taking further action if necessary, such as requiring letters of credit or other security interests to support the customer receivable. The allowance for credit losses for accounts receivable is based on the company’s reasonable estimate of known credit risks and historical experience, adjusted for current and anticipated economic and other pertinent factors affecting the company’s customers, that may differ from historical experience. Customer accounts receivable are written off when all collection efforts have been exhausted and the amounts are deemed uncollectible.

At June 30, 2023, the company reported $2,143 million of accounts receivable, net of allowances for credit losses of $7.9 million. Changes in the allowance were not material for each of the three and six-month periods ended June 30, 2023 and 2022.

Note 2. Earnings Per Share

Basic earnings per share is based on the weighted average shares of common stock outstanding during the period. Diluted earnings per share assumes the weighted average dilutive effect of common share equivalents outstanding during the period applied to the company’s basic earnings per share. Common share equivalents represent potentially dilutive restricted stock units, deferred stock units, restricted stock, and performance awards, and are excluded from the computation in periods in which they have an anti-dilutive effect. There were no anti-dilutive common share equivalents as of or for the three and six-month periods ended June 30, 2023 and 2022.

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 2. Earnings Per Share (Continued)



	Three-Month Periods Ended June 30,
	2023						2022
			Weighted						Weighted
			Average						Average
	Net Income		Shares		Per Share		Net Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount		(Numerator)		(Denominator)		Amount
Basic earnings per share	$	812,107		168,009	$	4.83	$	1,209,554		186,442	$	6.49
Dilutive common share equivalents		-		856				-		1,298
Diluted earnings per share	$	812,107		168,865	$	4.81	$	1,209,554		187,740	$	6.44

N

	Six-Month Periods Ended June 30,
	2023						2022
			Weighted						Weighted
			Average						Average
	Net Income		Shares		Per Share		Net Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount		(Numerator)		(Denominator)		Amount
Basic earnings per share	$	1,449,417		169,803	$	8.54	$	2,313,485		189,300	$	12.22
Dilutive common share equivalents		-		869				-		1,191
Diluted earnings per share	$	1,449,417		170,672	$	8.49	$	2,313,485		190,491	$	12.14

Note 3. Inventories

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


	June 30,		December 31,
	2023		2022
Raw materials	$	1,416,669	$	1,608,344
Supplies		678,823		629,074
Work in progress		305,691		256,071
Finished goods		642,826		636,475
Total inventories	$	3,044,009	$	3,129,964

Note 4. Changes in Equity

The following tables provide a reconciliation of the beginning and ending carrying amounts of total equity, equity attributable to stockholders of Steel Dynamics, Inc., and equity and redeemable amounts attributable to noncontrolling interests (in thousands) for each of the three and six-month periods ended June 30, 2023 and 2022:

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 4. Changes in Equity (Continued)



	Stockholders of Steel Dynamics, Inc.
									Accumulated
					Additional				Other						Redeemable
	Common		Treasury		Paid-In		Retained		Comprehensive		Noncontrolling		Total		Noncontrolling
	Stock		Stock		Capital		Earnings		Income		Interests		Equity		Interests
Balances at December 31, 2022	$	650	$	(4,459,513)	$	1,212,566	$	11,375,765	$	889	$	(216,055)	$	7,914,302	$	181,503
Dividends declared		-		-		-		(72,316)		-		-		(72,316)		-
Noncontrolling investors, net		-		-		-		-		-		(7,387)		(7,387)		4,702
Share repurchases		-		(353,997)		-		-		-		-		(353,997)		-
Equity-based compensation		-		12,997		(18,487)		(138)		-		-		(5,628)		-
Net income		-		-		-		637,310		-		7,023		644,333		-
Other comprehensive income, net of tax		-		-		-		-		911		-		911		-
Balances at March 31, 2023		650		(4,800,513)		1,194,079		11,940,621		1,800		(216,419)		8,120,218		186,205
Dividends declared		-		-		-		(70,694)		-		-		(70,694)		-
Noncontrolling investors, net		-		-		-		-		-		(1,877)		(1,877)		(14,993)
Share repurchases		-		(380,206)		-		-		-		-		(380,206)		-
Equity-based compensation		-		997		10,055		(140)		-		-		10,912		-
Net income		-		-		-		812,107		-		4,070		816,177		-
Other comprehensive loss, net of tax		-		-		-		-		(773)		-		(773)		-
Balances at June 30, 2023	$	650	$	(5,179,722)	$	1,204,134	$	12,681,894	$	1,027	$	(214,226)	$	8,493,757	$	171,212



	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, net of tax		-		-		-		-		11,387		-		11,387		-
Balances at March 31, 2022	$	649	$	(3,050,497)	$	1,204,023	$	8,800,883	$	9,296	$	(214,094)	$	6,750,260	$	227,914
Dividends declared		-		-		-		(62,088)		-		-		(62,088)		-
Noncontrolling investors, net		-		-		630		(2,495)		-		1,235		(630)		(59,611)
Share repurchases		-		(517,024)		-		-		-		-		(517,024)		-
Equity-based compensation		-		1,028		8,828		(144)		-		-		9,712		-
Net income		-		-		-		1,209,554		-		5,098		1,214,652		-
Other comprehensive loss, net of tax		-		-		-		-		(14,295)		-		(14,295)		-
Balances at June 30, 2022	$	649	$	(3,566,493)	$	1,213,481	$	9,945,710	$	(4,999)	$	(207,761)	$	7,380,587	$	168,303

Note 5. 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 metals (primarily aluminum and copper) and ferrous metals. The company offsets fair value amounts recognized for derivative instruments executed with the same counterparty under master netting agreements.

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 5. Derivative Financial Instruments (Continued)

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 June 30, 2023:



Commodity Futures	Long/Short	Metric Tons
Aluminum	Long	8,150
Aluminum	Short	12,500
Copper	Long	55,905
Copper	Short	74,877

The following summarizes the location and amounts of the fair values reported on the company’s consolidated balance sheets as of June 30, 2023, and December 31, 2022, and gains and losses related to derivatives included in the company’s statement of income for the three and six-month periods ended June 30, 2023, and 2022 (in thousands):



		Asset Derivatives				Liability Derivatives
	Balance sheet	Fair Value				Fair Value
	location	June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Derivative instruments designated as hedges
Commodity futures	Other current assets	$	4,485	$	2,169	$	1,979	$	2,119

Derivative instruments not designated as hedges
Commodity futures	Other current assets		26,915		2,102		14,398		5,269
Total derivative instruments		$	31,400	$	4,271	$	16,377	$	7,388

The fair value of the above derivative instruments along with required margin deposit amounts with the same counterparty under master netting arrangements totaled $18.2 million at June 30, 2023, and $23.5 million at December 31, 2022, and are reflected in other current assets in the consolidated balance sheets.


		Amount of gain						Amount of loss
		recognized in income					Location of loss	recognized in income
	Location of gain	on derivatives for the					recognized	on derivatives for the
	recognized	three-month periods				Hedged items in	in income on	three-month periods
	in income on	ended June 30,				fair value hedge	related hedged	ended June 30,
	derivatives	2023		2022		relationships	items	2023		2022
Derivatives in fair value hedging relationships
Commodity futures	Costs of goods sold	$	2,430	$	11,956	Firm commitments	Costs of goods sold	$	(264)	$	(4,343)
						Inventory	Costs of goods sold		(368)		(5,996)
								$	(632)	$	(10,339)
Derivatives not designated as hedging instruments
Commodity futures	Costs of goods sold	$	18,639	$	27,391

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 5. Derivative Financial Instruments (Continued)


		Amount of gain						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
	recognized	six-month periods				Hedged items in	in income on	six-month periods
	in income on	ended June 30,				fair value hedge	related hedged	ended June 30,
	derivatives	2023		2022		relationships	items	2023		2022
Derivatives in fair value hedging relationships
Commodity futures	Costs of goods sold	$	2,275	$	13,281	Firm commitments	Costs of goods sold	$	113	$	(5,535)
						Inventory	Costs of goods sold		(129)		(6,380)
								$	(16)	$	(11,915)
Derivatives not designated as hedging instruments
Commodity futures	Costs of goods sold	$	7,249	$	16,170

Derivatives accounted for as fair value hedges had ineffectiveness resulting in gains of $348,000 and $10,000 during the three-month periods ended June 30, 2023, and 2022, respectively, and gains of $47,000 and $295,000 during the six-month periods ended June 30, 2023, and 2022, respectively. Gains excluded from hedge effectiveness testing of $1.4 million and $1.6 million decreased cost of goods sold during the three-month periods ended June 30, 2023, and 2022, respectively. Gains excluded from hedge effectiveness testing of $2.2 million and $1.1 million decreased cost of goods sold during the six months ended June 30, 2023, and 2022, respectively.

Derivatives accounted for as cash flow hedges resulted in net gains of $321,000 and net losses of $21.4 million recognized in other comprehensive income for the three-month periods ended June 30, 2023, and 2022, respectively, and net gains of $2.3 million and net losses of $3.2 million for the six-month periods ended June 30, 2023, and 2022, respectively. Net gains of $1.3 million and $2.6 million were reclassified from accumulated other comprehensive income for the three-month periods ended June 30, 2023, and 2022, respectively, and net gains of $2.1 million and net losses of $599,000 for the six-month periods ended June 30, 2023, and 2022, respectively. At June 30, 2023, the company expects to reclassify all $1.4 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.

Note 6. 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.

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 6. Fair Value Measurements (Continued)

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 June 30, 2023 and December 31, 2022 (in thousands):



			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
June 30, 2023
Short-term investments	$	611,701	$	-	$	611,701	$	-
Commodity futures – financial assets		31,400		-		31,400		-
Commodity futures – financial liabilities		16,377		-		16,377		-

December 31, 2022
Short-term investments	$	628,215	$	-	$	628,215	$	-
Commodity futures – financial assets		4,271		-		4,271		-
Commodity futures – financial liabilities		7,388		-		7,388		-

The carrying amounts of financial instruments including cash and equivalents, and restricted cash approximate fair value (Level 1). The fair values of short-term investments and commodity futures contracts are estimated by the use of quoted market prices, estimates obtained from brokers, and other appropriate valuation techniques based on references available (Level 2). The fair value of long-term debt, including current maturities, as determined by quoted market prices (Level 2), was approximately $2.7 billion at June 30, 2023, and December 31, 2022, (with a corresponding carrying amount in the consolidated balance sheet of $3.1 billion at June 30, 2023 and December 31, 2022).

Note 7. Commitments and Contingencies

The company is involved in various routine litigation matters, including administrative proceedings, regulatory proceedings, governmental investigations, environmental matters, and commercial and construction contract disputes, none of which are expected to have a material impact on the company’s financial condition, results of operations, or liquidity.

Note 8. Segment Information

The company’s operations are primarily organized and managed by reportable operating segments, which are steel operations, metals recycling operations, and steel fabrication operations. The segment operations are more fully described in Note 1 to the consolidated financial statements. Operating segment performance and resource allocations are primarily based on operating results before income taxes. The accounting policies of the reportable segments are consistent with those described in Note 1 to the consolidated financial statements. Intra-segment sales and any related profits are eliminated in consolidation. Amounts included in the category “Other” are from subsidiary operations that are below the quantitative thresholds required for reportable segments and primarily consist of joint ventures, including the company’s newly announced aluminum flat roll mill and the company’s idled Minnesota ironmaking operations. Also included in “Other” are certain unallocated corporate accounts, such as the company’s senior unsecured credit facility, senior notes, certain other investments and certain profit sharing expenses.

The company’s segment results, including disaggregated revenue by segment to external, external non-United States, and other segment customers, are as follows (in thousands):

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 8. Segment Information (Continued)



			Metals		Steel
For the three-month period ended	Steel		Recycling		Fabrication
June 30, 2023	Operations		Operations		Operations		Other			Eliminations			Consolidated

Net sales - disaggregated revenue
External	$	3,123,476	$	368,561	$	779,374	$	259,963		$	-		$	4,531,374
External Non-U.S.		274,033		223,812		35		52,376			-			550,256
Other segments		210,724		575,752		189		269			(786,934)			-
		3,608,233		1,168,125		779,598		312,608			(786,934)			5,081,630
Operating income (loss)		702,646		33,005		462,080		(120,811)	(1)		(13,185)			1,063,735
Income (loss) before income taxes		703,887		38,225		462,207		(116,407)			(13,596)			1,074,316
Depreciation and amortization		81,590		20,761		2,422		6,197			-			110,970
Capital expenditures		101,806		25,259		7,138		224,077			-			358,280

As of June 30, 2023
Assets	$	8,802,562	$	1,418,244	$	1,148,279	$	3,357,423	(2)	$	(175,111)	(3)	$	14,551,397


Footnotes related to the three-month period ended June 30, 2023, segment results (in millions):

(1)	Corporate SG&A	$	(22.6)	(2)	Cash and equivalents	$	1,325.9
	Companywide equity-based compensation		(11.2)		Short-term and other investments		837.3
	Company profit sharing component		(88.0)		Accounts receivable		50.8
	Other, net		1.0		Inventories		117.4
		$	(120.8)		Property, plant and equipment, net		689.4
					Intra-company debt		35.7
					Investments in unconsolidated affiliates		231.5
					Other		69.4
						$	3,357.4

(3)	Elimination of intra-company receivables	$	(104.8)
	Elimination of intra-company debt		(35.7)
	Other		(34.6)
		$	(175.1)

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 8. Segment Information (Continued)



			Metals		Steel
For the three-month period ended	Steel		Recycling		Fabrication
June 30, 2022	Operations		Operations		Operations		Other			Eliminations		Consolidated

Net sales - disaggregated revenue
External	$	3,929,646	$	476,093	$	1,085,710	$	330,574		$	-	$	5,822,023
External Non-U.S.		212,376		173,642		44		4,793			-		390,855
Other segments		104,594		706,247		4,444		372			(815,657)		-
		4,246,616		1,355,982		1,090,198		335,739			(815,657)		6,212,878
Operating income (loss)		1,102,725		54,443		599,191		(162,194)	(1)		23,898		1,618,063
Income (loss) before income taxes		1,086,795		53,446		596,763		(164,143)			23,556		1,596,417
Depreciation and amortization		73,962		13,021		2,433		6,285			-		95,701
Capital expenditures		135,864		15,199		4,569		8,510			-		164,142


Footnotes related to the three-month period ended June 30, 2022, segment results (in millions):

(1)	Corporate SG&A	$	(12.7)
	Companywide equity-based compensation		(8.8)
	Company profit sharing component		(136.7)
	Other, net		(4.0)
		$	(162.2)



			Metals		Steel
For the six-month period ended	Steel		Recycling		Fabrication
June 30, 2023	Operations		Operations		Operations		Other			Eliminations		Consolidated

Net sales - disaggregated revenue
External	$	5,970,662	$	751,364	$	1,648,076	$	612,292		$	-	$	8,982,394
External Non-U.S.		487,668		424,477		101		80,196			-		992,442
Other segments		335,534		1,154,211		225		269			(1,490,239)		-
		6,793,864		2,330,052		1,648,402		692,757			(1,490,239)		9,974,836
Operating income (loss)		1,044,406		72,693		1,013,352		(219,751)	(1)		(11,605)		1,899,095
Income (loss) before income taxes		1,046,387		83,774		1,013,619		(209,303)			(12,372)		1,922,105
Depreciation and amortization		165,066		35,126		4,753		13,719			-		218,664
Capital expenditures		222,345		44,956		11,634		305,664			-		584,599


Footnotes related to the six-month period ended June 30, 2023, segment results (in millions):

(1)	Corporate SG&A	$	(46.2)
	Companywide equity-based compensation		(24.8)
	Company profit sharing component		(156.9)
	Other, net		8.1
		$	(219.8)

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 8. Segment Information (Continued)



			Metals		Steel
For the six-month period ended	Steel		Recycling		Fabrication
June 30, 2022	Operations		Operations		Operations		Other			Eliminations		Consolidated

Net sales - disaggregated revenue
External	$	7,502,848	$	924,136	$	2,015,552	$	627,695		$	-	$	11,070,231
External Non-U.S.		401,670		305,224		183		5,472			-		712,549
Other segments		273,751		1,269,839		4,563		1,030			(1,549,183)		-
		8,178,269		2,499,199		2,020,298		634,197			(1,549,183)		11,782,780
Operating income (loss)		2,265,735		99,403		1,066,066		(336,729)	(1)		18,455		3,112,930
Income (loss) before income taxes		2,239,011		99,176		1,061,962		(363,772)			17,770		3,054,147
Depreciation and amortization		140,644		26,275		4,863		11,465			-		183,247
Capital expenditures		272,054		26,756		8,259		16,403			-		323,472


Footnotes related to the six-month period ended June 30, 2022, segment results (in millions):

(1)	Corporate SG&A	$	(32.3)
	Companywide equity-based compensation		(24.7)
	Company profit sharing component		(262.3)
	Other, net		(17.4)
		$	(336.7)

Next: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS