Steel Dynamics 10-Q 2023-09-30

st

​

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 September 30, 2023

OR

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

Commission File Number 0-21719

Steel Dynamics, Inc**.**

(Exact name of registrant as specified in its charter)

Indiana		35-1929476
(State or other jurisdiction of incorporation or organization)	​	(I.R.S. Employer Identification No.)
​	​	​
7575 West Jefferson Blvd**,** Fort Wayne**,** IN	​	46804
(Address of principal executive offices)	​	(Zip Code)

​

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

Not Applicable

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

​

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

​

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

​

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

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

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

​			Large accelerated filer ⌧		Accelerated filer ◻		Non-accelerated filer ◻
​	​		​	​	​	​	​
​	​		Smaller reporting company ☐	​	Emerging growth company ☐	​	​

​

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

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

As of November 2, 2023, Registrant had 161,816,470 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, 2023 (unaudited) and December 31, 2022	1
​	​	​
​	Consolidated Statements of Income for the three and nine-month periods ended September 30, 2023 and 2022 (unaudited)	2
​	​	​
​	Consolidated Statements of Comprehensive Income for the three and nine-month periods ended September 30, 2023 and 2022 (unaudited)	3
​	​	​
​	Consolidated Statements of Cash Flows for the three and nine-month periods ended September 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)

​	​	​	​	​	​	​
​	September 30,		​	​	December 31,
​	2023		​	​	2022
Assets	(unaudited)		​	​	​	​
Current assets	​	​	​	​	​	​
Cash and equivalents	$	1,765,467	​	​	$	1,628,417
Short-term investments	​	500,844	​	​	​	628,215
Accounts receivable, net	​	1,807,313	​	​	​	1,976,282
Accounts receivable-related parties	​	74,736	​	​	​	79,769
Inventories	​	2,941,634	​	​	​	3,129,964
Other current assets	​	138,605	​	​	​	195,371
Total current assets	​	7,228,599	​	​	​	7,638,018
​	​	​	​	​	​	​
Property, plant and equipment, net	​	6,313,366	​	​	​	5,373,665
​	​	​	​	​	​	​
Intangible assets, net	​	265,845	​	​	​	267,507
Goodwill	​	477,471	​	​	​	502,067
Other assets	​	643,675	​	​	​	378,727
Total assets	$	14,928,956	​	​	$	14,159,984
Liabilities and Equity	​	​	​	​	​	​
Current liabilities	​	​	​	​	​	​
Accounts payable	$	1,049,317	​	​	$	1,007,304
Accounts payable-related parties	​	10,858	​	​	​	9,934
Income taxes payable	​	30,343	​	​	​	6,520
Accrued payroll and benefits	​	405,556	​	​	​	610,558
Accrued expenses	​	336,242	​	​	​	340,646
Current maturities of long-term debt	​	86,061	​	​	​	57,334
Total current liabilities	​	1,918,377	​	​	​	2,032,296
​	​	​	​	​	​	​
Long-term debt	​	3,009,010	​	​	​	3,013,241
Deferred income taxes	​	961,117	​	​	​	889,103
Other liabilities	​	182,161	​	​	​	129,539
Total liabilities	​	6,070,665	​	​	​	6,064,179
​	​	​	​	​	​	​
Commitments and contingencies	​	​	​	​	​	​
​	​	​	​	​	​	​
Redeemable noncontrolling interests	​	171,212	​	​	​	1

Showing the first 8K of 72K characters. Open the full section

Forward-Looking Statements

This report contains some predictive statements about future events, including statements related to conditions in domestic or global economies, conditions in steel, aluminum, and recycled metals market places, Steel Dynamics' revenues, costs of purchased materials, future profitability and earnings, and the operation of new, existing or planned facilities. These statements, which we generally precede or accompany by such typical conditional words as "anticipate", "intend", "believe", "estimate", "plan", "seek", "project", or "expect", or by the words "may", "will", or "should", are intended to be made as "forward-looking", subject to many risks and uncertainties, within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These statements speak only as of this date and are based upon information and assumptions, which we consider reasonable as of this date, concerning our businesses and the environments in which they operate. Such predictive statements are not guarantees of future performance, and we undertake no duty to update or revise any such statements. Some factors that could cause such forward-looking statements to turn out differently than anticipated include: (1) domestic and global economic factors; (2) global steelmaking overcapacity and imports of steel, together with increased scrap prices; (3) pandemics, epidemics, widespread illness or other health issues, such as COVID-19 or its variants; (4) the cyclical nature of the steel industry and the industries we serve; (5) volatility and major fluctuations in prices and availability of scrap metal, scrap substitutes and supplies, and our potential inability to pass higher costs on to our customers; (6) cost and availability of electricity, natural gas, oil, or other energy resources are subject to volatile market conditions; (7) increased environmental, greenhouse gas emissions and sustainability considerations or regulations; (8) compliance with and changes in environmental and remediation requirements; (9) significant price and other forms of competition from other steel and aluminum producers, scrap processors and alternative materials; (10) availability of an adequate source of supply of scrap for our metals recycling operations; (11) cybersecurity threats and risks to the security of our sensitive data and information technology; (12) the implementation of our growth strategy; (13) litigation and legal compliance; (14) unexpected equipment downtime or shutdowns; (15) governmental agencies may refuse to grant or renew some of our licenses and permits; (16) our senior unsecured credit facility contains, and any future financing agreements may contain, restrictive covenants that may limit our flexibility; and (17) the impacts of impairment charges.

More specifically, we refer you to our more detailed explanation of these and other factors and risks that may cause such predictive statements to turn out differently, as set forth in our most recent Annual Report on Form 10-K under the headings Special Note Regarding Forward-Looking Statements and Risk Factors for the year ended December 31, 2022, in our quarterly reports on Form 10-Q, or in other reports which we from time to time file with the Securities and Exchange Commission. These reports are available publicly on the Securities and Exchange Commission website, www.sec.gov, and on our website, www.steeldynamics.com under “Investors – SEC Filings.”

Description of the Business

We are one of the largest domestic steel producers and metal recyclers in the United States, based on estimated steelmaking and steel coating capacity of approximately 16 million tons and actual metals recycling volumes, with one of the most diversified product and end market portfolios in the domestic steel industry, combined with meaningful downstream steel fabrication operations. Our primary sources of revenue are from the manufacture and sale of steel products, the processing and sale of recycled ferrous and nonferrous metals, and the fabrication and sale of steel joists and deck products.

Operating Statement Classifications

Net Sales. Net sales from our operations are a factor of volumes shipped, product mix and related pricing. We charge premium prices for certain grades of steel, product dimensions, certain smaller volumes, and for value-added processing or coating of our steel products. Except for the steel fabrication operations, we recognize revenues from sales and the allowance for estimated returns and claims from these sales at the point in time control of the product transfers to the customer, upon shipment or delivery. Our steel fabrication operations recognize revenues over time based on completed fabricated tons to date as a percentage of total tons required for each contract.

​

Costs of Goods Sold. Our costs of goods sold represent all direct and indirect costs associated with the manufacture of our products. The principal elements of these costs are scrap and scrap substitutes (which represent the most significant single component of our consolidated costs of goods sold), steel substrate, direct and indirect labor and related benefits, alloys, zinc, transportation and freight, repairs and maintenance, utilities such as electricity and natural gas, and depreciation.

Selling, General and Administrative Expenses. Selling, general and administrative expenses consist of all costs associated with our sales, finance and accounting, and administrative departments, including, among other items, labor and related benefits, and professional services.

Companywide profit sharing and amortization of intangible assets are each separately presented in the statement of income.

Interest Expense, net of Capitalized Interest. Interest expense consists of interest associated with our senior credit facilities and other debt, net of interest costs that are required to be capitalized during the construction period of certain capital investment projects.

Other (Income) Expense, net. Other income consists of interest income earned on our temporary cash deposits, short-term and other investments, and any other non-operating income activity, including income from investments in unconsolidated affiliates accounted for under the equity method. Other expense consists of any non-operating costs, such as certain acquisition and financing expenses.

Results Overview

In the third quarter of 2023 we achieved quarterly steel shipments of 3.1 million tons, as steel demand remained steady. Our metals recycling operations benefitted from consistent domestic steel industry demand during the third quarter of 2023 compared to the same period in 2022, while our steel fabrication segment achieved historically strong results on solid non-residential construction demand.

Consolidated operating income decreased $486.3 million, or 40%, to $733.6 million for the third quarter of 2023, compared to the third quarter of 2022 as metal spread contracted in our steel operations and steel fabrication operations had reduced volumes along with metal spread contraction. Third quarter 2023 net income attributable to Steel Dynamics, Inc. decreased $337.1 million, or 37%, to $577.2 million, compared to the third quarter of 2022, consistent with decreased operating income.

Consolidated operating income decreased $1.7 billion, or 39%, to $2.6 billion for the first nine months of 2023, compared to the first nine months of 2022. Lower earnings were driven by metal spread contraction in our steel operations and reduced volumes in our steel fabrication operations. First nine months 2023 net income attributable to Steel Dynamics, Inc. decreased $1.2 billion, or 37%, to $2.0 billion, compared to the first nine months of 2022, consistent with decreased operating income.

Segment Operating Results 2023 vs. 2022 (dollars in thousands)

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	Three Months Ended September 30,							​	Nine Months Ended September 30,
​	2023		​	% Change	​	​	2022	​	2023		​	% Change	​	2022
Net sales:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Steel Operations Segment	$	3,261,067	​	(16)%	​	$	3,873,544	​	$	10,054,931	​	(17)%	​	$	12,051,813
Metals Recycling Operations Segment	​	1,052,305	​	7%	​	​	984,625	​	​	3,382,357	​	(3)%	​	​	3,483,824
Steel Fabrication Operations Segment	​	633,207	​	(45)%	​	​	1,145,826	​	​	2,281,609	​	(28)%	​	​	3,166,124
Other	​	299,854	​	(6)%	​	​	318,544	​	​	992,611	​	4%	​	​	952,741
​	​	5,246,433	​	​	​	​	6,322,539	​	​	16,711,508	​	​	​	​	19,654,502
Intra-company	​	(659,376)	​	​	​	​	(670,832)	​	​	(2,149,615)	​	​	​	​	(2,220,015)
​	$	4,587,057	​	(19)%	​	$	5,651,707	​	$	14,561,893	​	(16)%	​	$	17,434,487
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating income (loss):	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Steel Operations Segment	$	470,335	​	(28)%	​	$	654,677	​	$	1,514,741	​	(48)%	​	$	2,920,412
Metals Recycling Operations Segment	​	13,981	​	108%	​	​	6,735	​	​	86,674	​	(18)%	​	​	106,138
Steel Fabrication Operations Segment	​	330,020	​	(51)%	​	​	676,726	​	​	1,343,372	​	(23)%	​	​	1,742,792
Other	​	(95,638)	​	30%	​	​	(137,160)	​	​	(315,389)	​	33%	​	​	(473,889)
​	​	718,698	​	​	​	​	1,200,978	​	​	2,629,398	​	​	​	​	4,295,453
Intra-company	​	14,852	​	​	​	​	18,866	​	​	3,247	​	​	​	​	37,321
​	$	733,550	​	(40)%	​	$	1,219,844	​	$	2,632,645	​	(39)%	​	$	4,332,774

​

Steel Operations Segment

Steel operations consist of our electric arc furnace steel mills, producing steel from ferrous scrap and scrap substitutes, utilizing continuous casting, automated rolling mills, numerous value-added downstream steel coating and processing operations, and distribution operations. Our steel operations sell directly to end-users, steel fabricators, and service centers. These products are used in numerous industry sectors, including the construction, automotive, manufacturing, transportation, heavy and agriculture equipment, and pipe and tube (including OCTG) markets. Steel operations accounted for 68% and 66% of our consolidated net sales during the three-month periods ended September 30, 2023 and 2022, respectively and 66% and 67% during the nine-month periods ended September 30, 2023 and 2022, respectively.

Steel Operations Segment Shipments (tons):

​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​
​	Three Months Ended September 30,					​	Nine Months Ended September 30,
​	2023	​	% Change	​	2022	​	2023	​	% Change	​	2022
​	​	​	​	​	​	​	​	​	​	​	​
Total shipments	3,104,251	​	(2)%	​	3,154,857	​	9,624,822	​	5%	​	9,163,930
Intra-segment shipments	(353,526)	​	​	​	(339,980)	​	(1,013,422)	​	​	​	(1,080,989)
Steel Operations Segment shipments	2,750,725	​	(2)%	​	2,814,877	​	8,611,400	​	7%	​	8,082,941
​	​	​	​	​	​	​	​	​	​	​	​
External shipments	2,632,617	​	(2)%	​	2,694,709	​	8,169,117	​	5%	​	7,796,390

​

Steel Operations Segment Results 2023 vs. 2022

During the third quarter of 2023, our steel operations achieved shipments of 3.1 million tons (2.8 million excluding intra-segment) consistent with the same period in 2022, including 264,000 tons from Sinton during the third quarter 2023. Customer order activity and steel demand were steady during the quarter, supporting consistent shipping volumes excluding the lost volume of approximately 90,000 tons from our Sinton division’s unplanned July outage. Sheet steel pricing was 15% lower than the third quarter of 2022, as prices steadily declined throughout the end of 2022 and beginning of 2023. Third quarter 2023 total steel segment average selling prices decreased 14%, or $190 per ton, compared to third quarter of 2022. Steel operations segment shipments decreased 2% in the third quarter 2023, as compared to the same period in 2022. Net sales for the steel operations in the third quarter 2023 decreased 16% compared to the same period in 2022, due to the decrease in average steel selling prices and shipments. Net sales for the steel operations decreased 17%, in the first nine months of 2023 when compared to the same period in 2022, due to the decrease in average steel selling prices more than offsetting increased shipments.

Metallic raw materials used in our electric arc furnaces represent our single most significant steel manufacturing cost, generally comprising approximately 55% to 65% of our steel mill operations’ manufacturing costs. Our metallic raw material cost per net ton consumed in our steel operations decreased $67, or 14%, in the third quarter of 2023, compared to the same period in 2022, consistent with overall decreased domestic scrap pricing noted below in the metals recycling operations segment discussion. In the first nine months of 2023, our metallic raw material cost per ton decreased $75, or 15%, compared to the same period in 2022.

In the third quarter of 2023, as a result of average selling prices decreasing more than scrap costs, specifically for our sheet steel products, metal spread (which we define as the difference between average steel mill selling prices and the cost of ferrous scrap consumed in our steel mills) decreased 13% compared to the third quarter of 2022. As a result of this metal spread compression, operating income for the steel operations decreased 28%, to $470.3 million, in the third quarter of 2023, compared to the same period in 2022. First nine months 2023 operating income decreased 48%, to $1.5 billion, compared to the first nine months of 2022 due to a 24% decrease in metal spread as reduced average steel selling prices more than offset lower scrap prices.

Metals Recycling Operations Segment

Metals recycling operations includes both ferrous and nonferrous scrap metal processing, transportation, marketing, brokerage, and scrap management services. Our steel mills utilize a large portion of the ferrous scrap sold by our metals recycling operations as raw material in our steelmaking operations, and the remainder is sold to other consumers, such as other steel manufacturers and foundries. In the third quarters of 2023 and 2022, 62% and 68%, respectively, of metals recycling operations ferrous scrap was sold to our own steel mills, while our steel mill utilization (excluding Sinton) was 90% and 93% in the third quarters of 2023 and 2022, respectively. Metals recycling operations accounted for 11% and 8% of our consolidated net sales during the three-month periods ended September 30, 2023 and 2022, respectively, and 12% and 10% of our consolidated net sales during the nine-month periods ended September 30, 2023 and 2022, respectively.

Metals Recycling Operations Segment Shipments:

​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​
​	Three Months Ended September 30,					​	Nine Months Ended September 30,
​	2023	​	% Change	​	2022	​	2023	​	% Change	​	2022
Ferrous metal (gross tons)	​	​	​	​	​	​	​	​	​	​	​
Total	1,442,964	​	9%	​	1,320,117	​	4,415,949	​	12%	​	3,944,068
Inter-company	(895,318)	​	(0)%	​	(896,933)	​	(2,722,921)	​	3%	​	(2,645,655)
External shipments	547,646	​	29%	​	423,184	​	1,693,028	​	30%	​	1,298,413
​	​	​	​	​	​	​	​	​	​	​	​
Nonferrous metals (thousands of pounds)	​	​	​	​	​	​	​	​	​	​	​
Total	279,877	​	9%	​	257,710	​	845,477	​	8%	​	785,381
Inter-company	(43,043)	​	​	​	(37,523)	​	(123,552)	​	​	​	(98,183)
External shipments	236,834	​	8%	​	220,187	​	721,925	​	5%	​	687,198

​

Metals Recycling Operations Segment Results 2023 vs. 2022

During the third quarter of 2023, our metals recycling operations continued to benefit from solid domestic steel industry demand, resulting in higher ferrous and nonferrous scrap shipments compared to the same period in 2022, resulting in increased net sales of 7%. We were able to increase shipments even as domestic steel mill utilization rates declined slightly to approximately 76% in the third quarter of 2023, as compared to approximately 78% in the third quarter of 2022. Ferrous and nonferrous scrap average selling prices decreased 2% during the third quarter of 2023 compared to the same period in 2022. Ferrous metal spreads (which we define as the difference between average selling prices and the cost of purchased scrap) increased 8% during the third quarter of 2023 compared to the same period in 2022, and nonferrous metal spreads increased 11%. As a result of the increased metals spreads, metals recycling operations operating income increased 108% to $14.0 million in the third quarter of 2023 compared to the third quarter of 2022.

Net sales for our metals recycling operations in the first nine months of 2023 decreased 3% compared to the same period in 2022, as increased shipments were more than offset by lower ferrous and nonferrous average selling prices that decreased 13% and 10%, respectively, during the first nine months of 2023 compared to the same period in 2022. Ferrous and nonferrous shipments increased 12% and 8%, respectively, in the first nine months of 2023 compared to the same period in 2022. Ferrous metal spreads decreased 11%, while nonferrous metal spreads increased 14% in the first nine months of 2023 compared to the first nine months of 2022. Metals recycling operations operating income in the first nine months of 2023 of $86.7 million decreased 18% from the first nine months of 2022, as decreased ferrous metal spread more than offset increased shipments.

Steel Fabrication Operations Segment

Steel fabrication operations include seven 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 steel joists, girders, trusses, and steel deck used within the non-residential construction industry. Steel fabrication operations accounted for 14% and 20% of our consolidated net sales during the three-month periods ended September 30, 2023 and 2022, respectively, and 15% and 18% of our consolidated net sales during the nine-month periods ended September 30, 2023 and 2022, respectively.

Steel Fabrication Operations Segment Results 2023 vs. 2022

Our steel fabrication operations continue to benefit from the solid non-residential construction market, as evidenced by a strong order backlog that extends through the first quarter 2024. The continued onshoring of manufacturing, coupled with the robust U.S. infrastructure and Inflation Reduction Act programs and industrial construction, supports consistent strong demand. Net sales for the steel fabrication operations decreased 45% during the third quarter of 2023 compared to the record level earnings during the same period in 2022, as average selling prices decreased $1,329 per ton, or 25%, and volume decreased 26% from record volume during the third quarter of 2022. Net sales for the segment decreased 28% during the first nine months of 2023, compared to the same period in 2022, as volume and average selling prices decreased 21% and 9%, respectively.

The purchase of various steel products is the largest single cost of production for our steel fabrication operations, historically representing approximately two-thirds of the total cost of manufacturing. The average cost per ton of steel consumed decreased 24% in the third quarter 2023, compared to the same period in 2022. As a result of decreased selling prices per ton more than offsetting decreased steel input costs per ton, metal spread (which we define as the difference between average selling prices and the cost of purchased steel) contracted 26% in the third quarter of 2023 compared to the same period in 2022. This metal spread compression coupled with decreased volume resulted in operating income decreasing 51% to $330.0 million in the third quarter 2023, compared to $676.7 million in the same period in 2022. For the first nine months of 2023, operating income decreased 23% to $1.3 billion compared to the first nine months of 2022, as a 1% increase in metal spread was more than offset by the 21% decrease in volume.

​
Other Operations

Third Quarter Consolidated Results 2023 vs. 2022

Selling, General and Administrative Expenses. Selling, general and administrative expenses of $145.9 million during the third quarter of 2023 increased 10% from $132.6 million during the third quarter of 2022 primarily due to an 11% increase in payroll and benefits expense related to the execution of our growth strategy during 2023. Selling, general and administrative expenses represented 3.2% and 2.3% of net sales during third quarter 2023 and 2022, respectively.

Profit sharing expense during the third quarter of 2023 of $64.4 million decreased 39% from the $105.1 million during the same period in 2022, consistent with decreased pretax earnings. Profit sharing expense for eligible employees is 8% of consolidated pretax income excluding noncontrolling interests and other items.

Interest Expense, net of Capitalized Interest. During the third quarter of 2023, interest expense was $18.4 million, a decrease of $6.9 million compared to the third quarter of 2022. The lower interest expense in the third quarter 2023 compared to the same period in 2022 was due to higher capitalized interest in 2023 related to construction at our Sinton and Heartland divisions and the aluminum flat rolled products mill and satellite slab centers.

Other (Income) Expense, net. Net other income was $39.5 million in the third quarter of 2023, compared to $14.0 million in the third quarter of 2022, due primarily to an increase in interest income of $20.3 million associated with an increase in invested cash and short-term investments.

Income Tax Expense. Third quarter 2023 income tax expense of $174.8 million, at an effective income tax rate of 23.2%, decreased 40% compared to the $290.0 million, at an effective income tax rate of 24.0%, during the third quarter of 2022, consistent with decreased pretax earnings.

First Nine Months Consolidated Results 2023 vs. 2022

Selling, General and Administrative Expenses. Selling, general and administrative expenses of $431.4 million during the first nine months of 2023 increased 7% from $403.0 million during the first nine months of 2022 primarily due to a 9% increase in payroll and benefits expense related to the execution of our growth strategy during 2023. Selling, general and administrative expenses represented 3.0% and 2.3% of net sales during the first nine months of 2023 and 2022, respectively.

Profit sharing expense during the first nine months of 2023 of $225.0 million decreased 40% from the $373.3 million during the same period in 2022, consistent with decreased pretax earnings.

Interest Expense, net of Capitalized Interest. During the first nine months of 2023, interest expense of $61.7 million decreased 9% from $67.7 million during the first nine months of 2022, due to higher capitalized interest in 2023.

Other (Income) Expense, net. Net other income was $105.7 million in the first nine months of 2023, compared to expense of $2.5 million in the first nine months of 2022, due primarily to an increase in interest income of $69.7 million associated with an increase in our invested cash and short-term investments in the first nine months of 2023, as well as an increase in net earnings from investments in unconsolidated affiliates of $6.7 million.

Income Tax Expense. First nine months 2023 income tax expense of $636.4 million, at an effective income tax rate of 23.8%, decreased 38% compared to the $1.0 billion, at an effective income tax rate of 24.0%, during the first nine months of 2022, consistent with decreased pretax earnings.

Liquidity and Capital Resources

Capital Resources and Long-term Debt. Our business is capital intensive and requires substantial expenditures for, among other things, the purchase and maintenance of equipment used in our operations, and to remain in compliance with environmental laws. Our short-term and long-term liquidity needs arise primarily from working capital requirements, capital expenditures, including expansion projects, principal and interest payments related to our outstanding indebtedness (no significant principal payments until the fourth quarter of 2024), dividends to our shareholders, and potential stock repurchases and acquisitions or investments. We have met and intend to continue to meet these liquidity requirements primarily with available cash and cash provided by operations, long-term borrowings, and we also have availability under our unsecured Revolver. Our liquidity at September 30, 2023, is as follows (in thousands):

​

​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​
​	​	​	Cash and equivalents	​	$	1,765,467	​	​	​
​	​	​	Short-term and other investments	​	​	729,018	​	​	​
​	​	​	Revolver availability	​	​	1,190,683	​	​	​
​	​	​	Total liquidity	​	$	3,685,168	​	​	​

​

Our total outstanding debt of $3.1 billion is consistent with our total outstanding debt at December 31, 2022. Our total long-term debt to capitalization ratio (representing our long-term debt, including current maturities, divided by the sum of our long-term debt, redeemable noncontrolling interests, and our total stockholders’ equity) was 25.9% and 27.7% at September 30, 2023 and December 31, 2022, respectively.

In the third quarter of 2023, we entered into a new unsecured credit agreement, replacing the previous one, which has a senior unsecured revolving credit facility (Facility), which provides a $1.2 billion Revolver and matures in July 2028. Subject to certain conditions, we have the ability to increase the Facility size by $500.0 million. The unsecured Revolver is available to fund working capital, capital expenditures, and other general corporate purposes. The Facility contains financial covenants and other covenants pertaining to our ability to incur indebtedness and permit liens on certain assets. Our ability to borrow funds within the terms of the unsecured Revolver is dependent upon our continued compliance with the financial and other covenants. At September 30, 2023, we had $1.2 billion of availability on the Revolver, $9.3 million of outstanding letters of credit and other obligations which reduce availability, and there were no borrowings outstanding.

The financial covenants under our Facility state that we must maintain an interest coverage ratio of not less than 2.50:1.00. Our interest coverage ratio is calculated by dividing our last-twelve-months (LTM) consolidated Adjusted EBITDA as defined in the Facility (earnings before interest, taxes, depreciation, amortization, and certain other non-cash transactions as defined in the Facility) by our LTM gross interest expense, less amortization of financing fees. In addition, a debt to capitalization ratio of not more than 0.60:1.00 must be maintained. At September 30, 2023, our interest coverage ratio and debt to capitalization ratio were 38.48:1.00 and 0.26:1.00, respectively. We were, therefore, in compliance with these covenants at September 30, 2023, and we anticipate we will continue to be in compliance during the next twelve months.

Working Capital (representing excess of current assets over current liabilities). We generated cash flow from operations of $2.7 billion in the first nine months of 2023 compared to $3.3 billion in the same 2022 period. Working capital decreased $295.5 million, or 5%, during the first nine months of 2023 to $5.3 billion at September 30, 2023, due primarily to a $362.3 million decrease in accounts receivable and inventories, a $127.4 million decrease in short-term investments, partially offset by a $205.0 million decrease in accrued payroll and benefits related to company-wide profit sharing, consistent with decreased pretax earnings.

Capital Investments. During the first nine months of 2023, we invested $1.1 billion in property, plant and equipment, primarily within our steel operations segment and aluminum flat roll mill and supporting satellite recycled aluminum slab centers, compared with $564.7 million invested during the same period in 2022. As announced in 2022, we plan to invest $2.5 billion in a new state-of-the-art low-carbon aluminum flat roll mill with two supporting satellite recycled aluminum slab centers, which is planned to be funded by available cash and cash flow from operations. Related

expenditures began in the third quarter of 2022 and are expected to continue through 2025. Our liquidity of $3.7 billion and anticipated future operating cash flow generation is sufficient to provide for our planned 2023 capital requirements.

Cash Dividends. As a reflection of continued confidence in our current and future cash flow generation capability and financial position, we increased our quarterly cash dividend by 25% to $0.425 per share in the first quarter and continuing into the second and third quarters of 2023 (from $0.34 per share in 2022), resulting in declared cash dividends of $212.5 million during the first nine months of 2023, compared to $186.5 million during the same period in 2022. We paid cash dividends of $201.8 million and $177.1 million during the first nine months of 2023 and 2022, respectively. Our board of directors, along with executive management, approves the payment of dividends on a quarterly basis. The determination to pay cash dividends in the future is at the discretion of our board of directors, after taking into account various factors, including our financial condition, results of operations, outstanding indebtedness, current and anticipated cash needs and growth plans.

Other. Our board of directors has authorized share repurchase programs during prior years, the most recent of which occurred in November 2022 for a program of up to $1.5 billion of the company’s common stock. Under the share repurchase programs, purchases take place as and when we determine in open market or private transactions made based upon the market price of our common stock, the nature of other investment opportunities or growth projects, our cash flows from operations, and general economic conditions. The share repurchase programs do not require us to acquire any specific number of shares, and may be modified, suspended, extended, or terminated by us at any time. The share repurchase programs do not have an expiration date. There were $1.1 billion and $1.4 billion of share repurchases during the first nine months of 2023 and 2022, respectively. As of September 30, 2023, we had $277.7 million remaining available to purchase under the November 2022 share repurchase program. On October 31, 2023, our board of directors authorized an additional share repurchase program of up to $1.5 billion of the company’s common stock.

Our ability to meet our debt service obligations and reduce our total debt will depend upon our future performance which, in turn, will depend upon general economic, financial, and business conditions, along with competition, legislation and regulatory factors that are largely beyond our control. In addition, we cannot assure that our operating results, cash flows, access to credit markets and capital resources will be sufficient for repayment of our indebtedness in the future. We believe that based upon current levels of operations and anticipated growth, cash flows from operations, together with other available sources of funds, including borrowings under our Facility, if necessary, will be adequate for the next twelve months for making required payments of principal and interest on our indebtedness, funding working capital requirements, and funding anticipated capital expenditures.

Commodity Risk

In the normal course of business, we are exposed to the market risk and price fluctuations related to the sale of our products and to the purchase of raw materials used in our operations, such as metallic raw materials, electricity, natural gas and its transportation services, fuel, air products, zinc, and electrodes. Our risk strategy associated with product sales has generally been to obtain competitive prices for our products and to allow operating results to reflect market price movements dictated by supply and demand.

Our risk strategy associated with the purchase of raw materials utilized within our operations has generally been to make some commitments with suppliers relating to future expected requirements for some commodities such as electricity, water, natural gas and its transportation services, fuel, air products, zinc, and electrodes. Certain of these commitments contain provisions which require us to “take or pay” for specified quantities without regard to actual usage for periods of generally up to 5 years for physical commodity requirements and commodity transportation requirements, with some extending beyond, and for up to 15 years for air products and 29 years for water products. We utilized such “take or pay” requirements during the past three years under these contracts. We believe that production requirements will be such that consumption of the products or services purchased under these commitments will occur in the normal production process.

In our metals recycling and steel operations, we have certain fixed price contracts with various customers and suppliers for future delivery of nonferrous and ferrous metals. Our risk strategy has been to enter into base metal financial contracts with the goal to protect the profit margin, within certain parameters, that was contemplated when we entered into the transaction with the customer or vendor. At September 30, 2023, we had a cumulative unrealized gain associated with these financial contracts of $0.8 million, substantially all of which have a settlement date within the next twelve months. We believe the customer contracts associated with the financial contracts will be fully consummated.

	(a)	Evaluation of Disclosure Controls and Procedures

As required, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures, as defined in rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2023, the end of the period covered by this quarterly report, our disclosure controls and procedures were designed to provide and were effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

	(b)	Changes in Internal Controls Over Financial Reporting

No changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended September 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

​

PART II OTHER INFORMATION

We are involved in various litigation matters, including administrative proceedings, regulatory proceedings, governmental investigations, environmental matters, and commercial and construction contract disputes, none of which are currently expected to have a material impact on our financial condition, results of operations, or liquidity.

We may also be involved from time to time in various governmental investigations, regulatory proceedings or judicial actions seeking penalties, injunctive relief, and/or remediation under federal, state and local environmental laws and regulations. The United States EPA has conducted such investigations and proceedings involving us, in some instances along with state environmental regulators, under various environmental laws, including RCRA, CERCLA, the Clean Water Act and the Clean Air Act. Some of these matters have resulted in fines or penalties, exclusive of interest and costs, which did not exceed $1 million in aggregate, as of September 30, 2023.

No material changes have occurred to the indicated risk factors as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) Issuer Purchases of Equity Securities

​

We purchased the following equity securities registered by us pursuant to Section 12 of the Exchange Act during the three-month period ended September 30, 2023.

​	​	​	​	​	​	​	​	​	​	​	​	​	​
Period	​	Total Number of Shares Purchased	​	Average Price Paid per Share			​	Total Number of Shares Purchased as Part of Publicly Announced Programs (1)		​	Maximum Dollar Value of Shares That May Yet be Purchased Under the Programs**(in thousands)** (1)
Quarter ended September 30, 2023			​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
July 1 - 31	​	815,946	​	​	$	105.37	​	​	815,946	​	​	$	520,601
August 1 - 31	​	945,020	​	​	​	105.69	​	​	945,020	​	​	​	421,729
September 1 - 30	​	1,396,878	​	​	​	104.14	​	​	1,396,878	​	​	​	277,731
​	​	3,157,844	​	​	​	​	​	​	3,157,844	​	​	​	​

(1)	In November 2022, our board of directors authorized a share repurchase program of up to $1.5 billion of our common stock. On October 31, 2023, our board of directors authorized an additional share repurchase program of up to $1.5 billion of the company’s common stock.

​

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

During the three-month period ended September 30, 2023, none of the Company’s directors or executive officers adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as such terms are defined under Item 408 of Regulation S-K.

​

Reference is made to the Exhibit Index preceding the signature page hereto, which Exhibit Index is hereby incorporated into this item.

​

EXHIBIT INDEX

​	​
Articles of Incorporation
​	​
3.1	Amended and Restated Articles of Incorporation of Steel Dynamics, Inc., reflecting all amendments thereto through May 11, 2023, incorporated herein by reference from Exhibit 3.1 to our Form 10-Q filed August 8, 2023.
​	​
3.2	Amended and Restated Bylaws of Steel Dynamics, Inc., reflecting all amendments thereto through January 23, 2023, incorporated herein by reference from Exhibit 3.2 to our Form 10-K filed February 28, 2023.
​
Executive Officer Certifications
​	​
31.1*	Certification of Chief Executive Officer required by Item 307 of Regulation S-K as promulgated by the Securities and Exchange Commission and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
​	​
31.2*	Certification of Chief Financial Officer required by Item 307 of Regulation S-K as promulgated by the Securities and Exchange Commission and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
​	​
32.1*	Certification of Chief Executive Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
​	​
32.2*	Certification of Chief Financial Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
​
XBRL Documents
​	​
101.INS*	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
​	​
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
​	​
101.CAL*	Inline XBRL Taxonomy Extension Calculation Document
​	​
101.DEF*	Inline XBRL Taxonomy Definition Document
​	​
101.LAB*	Inline XBRL Taxonomy Extension Label Document
​	​
101.PRE*	Inline XBRL Taxonomy Presentation Document
​	​
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

​

	*	Filed concurrently herewith

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

November 9, 2023	​	​
​		​
​	​	STEEL DYNAMICS, INC.
​	​	​
​	By:	/s/ Theresa E. Wagler
​	​	Theresa E. Wagler
​	​	Executive Vice President and Chief Financial Officer
​	​	(Principal Financial Officer and Principal Accounting Officer)

​

​

​