STEEL DYNAMICS INC

Previous wording

In the first quarter of 2024 we achieved near-record quarterly steel shipments of 3.3 million tons, as steel demand remained steady. Our metals recycling operations benefitted from consistent domestic steel industry demand during the first quarter of 2024 compared to the same period in 2023, while our steel fabrication segment achieved historically strong results on solid non-residential construction demand.

Current wording

In the second quarter of 2024 we achieved quarterly steel shipments of 3.2 million tons, as steel demand was solid. Our metals recycling operations benefitted from consistent domestic steel industry demand during the second quarter of 2024 compared to the same period in 2023, while our steel fabrication segment achieved strong results on seasonally solid non-residential construction demand.

Previous wording

Consolidated operating income decreased $84.4 million, or 10%, to $751.0 million for the first quarter of 2024, compared to the first quarter of 2023 as metal spread contracted in our metals recycling and steel fabrication operations, more than offsetting metal spread expansion in our steel operations. First quarter 2024 net income attributable to Steel Dynamics, Inc. decreased $53.3 million, or 8%, to $584.0 million, compared to the first quarter of 2023, consistent with decreased operating income.

Current wording

Consolidated operating income decreased $504.6 million, or 47%, to $559.1 million for the second quarter of 2024, compared to the second quarter of 2023 as metal spread contracted across all operating platforms. Second quarter 2024 net income attributable to Steel Dynamics, Inc. decreased $384.1 million, or 47%, to $428.0 million, compared to the second quarter of 2023, consistent with decreased operating income.

Previous wording

Steel operations include our 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), Vulcan Threaded Products, Inc., warehouse operations in Mexico, and SDI Biocarbon Solutions, LLC, a joint venture to construct and operate a biocarbon production facility. Steel operations accounted for 72% and 63% of our consolidated net sales during the three-month periods ended March 31, 2024 and 2023, respectively.

Current wording

Steel operations include our 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), Vulcan Threaded Products, Inc., warehouse operations in Mexico, and SDI Biocarbon Solutions, LLC, a joint venture to construct and operate a biocarbon production facility. Steel operations accounted for 68% and 67% of our consolidated net sales during the three-month periods ended June 30, 2024 and 2023, respectively, and 70% and 65% during the six-month periods ended June 30, 2024 and 2023, respectively.

Previous wording

During the first quarter of 2024, our steel operations achieved near-record shipments of 3.3 million tons (2.9 million excluding intra-segment), including 467,000 tons from Sinton during the first quarter 2024. Customer order activity and steel demand were solid during the quarter, supporting consistent shipping volumes. Sheet steel pricing was 19% higher than the first quarter of 2023, as prices rebounded after decreasing for much of 2023. First quarter 2024 total steel segment average selling prices increased 12%, or $128 per ton, compared to first quarter of 2023. Steel operations segment shipments decreased 1% in the first quarter 2024, as compared to record shipments in the first quarter of 2023. Net sales for the steel operations in the first quarter 2024 increased 11% compared to the same period in 2023, due to the increase in average steel selling prices coupled with stable shipments.

Current wording

During the second quarter of 2024, our steel operations achieved shipments of 3.2 million tons (2.9 million excluding intra-segment). Despite steady steel demand during the quarter, we experienced customer order inconsistency within steel operations, with decreasing scrap prices and customers continuing to manage to low steel inventory levels. Second quarter 2024 total steel segment average selling prices decreased 9%, or $111 per ton, compared to the second quarter of 2023. Steel operations segment shipments remained flat in the second quarter 2024, as compared to the second quarter of 2023. Net sales for the steel operations in the second quarter 2024 decreased 10% compared to the same period in 2023, due to the decrease in average steel selling prices and shipments. Net sales for the steel operations were flat in the first half of 2024 when compared to the same period in 2023.

Previous wording

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 was consistent in the first quarter of 2024, compared to the same period in 2023, increasing $3 per ton.

Current wording

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 $57 per ton, or 13%, in the second quarter of 2024, compared to the same period in 2023, consistent with overall decreased domestic scrap pricing noted below in the Metals Recycling Operations segment discussion. In the first half of 2024, our metallic raw material cost per ton decreased $25, or 6%, compared to the same period in 2023

Previous wording

In the first quarter of 2024, as a result of average selling prices increasing (particularly for our sheet steel products) more than scrap costs, 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) increased 18% compared to the first quarter of 2023. As a result of this metal spread expansion, operating income for the steel operations increased 96%, to $670.9 million, in the first quarter of 2024, compared to the same period in 2023.

Current wording

In the second quarter of 2024, as a result of average selling prices decreasing more than scrap costs, 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 7% compared to the second quarter of 2023. As a result of this metal spread compression, operating income for the steel operations decreased 37%, to $438.6 million, in the second quarter of 2024, compared to the same period in 2023. First half 2024 operating income increased 7%, to $1.1 billion, compared to the first half of 2023 due primarily to a 4% increase in metal spread, as scrap costs decreased more than selling prices.

Previous wording

Metals recycling operations include our OmniSource ferrous and nonferrous processing, transportation, marketing, brokerage, and scrap management services primarily throughout the United States and in Central and Northern Mexico. 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 first quarters of 2024 and 2023, 63% and 61%, respectively, of metals recycling operations ferrous scrap was sold to our own steel mills, while our steel mill utilization was 87% and 86% in the first quarters of 2024 and 2023, respectively. Metals recycling operations accounted for 12% of our consolidated net sales during the three-month periods ended March 31, 2024 and 2023.

Current wording

Metals recycling operations include our OmniSource ferrous and nonferrous processing, transportation, marketing, brokerage, and scrap management services primarily throughout the United States and in Central and Northern Mexico. 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 second quarters of 2024 and 2023, 61% and 62%, respectively, of metals recycling operations ferrous scrap was sold to our own steel mills, while our steel mill utilization was 81% and 84% in the second quarters of 2024 and 2023, respectively. Metals recycling operations accounted for 13% of our consolidated net sales during the three-month period ended June 30, 2024 and 12% during the three-month period ended June 30, 2023 and six-month periods ended June 30, 2024 and 2023.

Previous wording

During the first quarter of 2024, our metals recycling operations benefited from solid domestic steel industry demand, with flat ferrous and nonferrous scrap shipments compared to the same period in 2023. Ferrous scrap average selling prices were flat during the first quarter of 2024 compared to the same period in 2023, while nonferrous scrap prices decreased 15%, resulting in decreased segment net sales of 6%. Ferrous metal spreads (which we define as the difference between average selling prices and the cost of purchased scrap) decreased 9% during the first quarter of 2024 compared to the same period in 2023, and nonferrous metal spreads decreased 3%. As a result of the decreased metals spreads, metals recycling operations operating income decreased 53% to $18.7 million in the first quarter of 2024 compared to the first quarter of 2023.

Current wording

During the second quarter of 2024, our metals recycling operations benefited from solid domestic steel industry demand, with ferrous scrap shipments that remained flat compared to the same period in 2023, while nonferrous shipments increased 9%. Ferrous scrap average selling prices decreased 13% during the second quarter of 2024 compared to the same period in 2023, while nonferrous scrap prices increased 16%, resulting in flat segment net sales. Ferrous metal spreads (which we define as the difference between average selling prices and the cost of purchased scrap) increased 5% during the second quarter of 2024 compared to the same period in 2023, and nonferrous metal spreads decreased 22%, primarily due to a 40% increase in inter-company sales volumes. As a result of the decreased nonferrous metals spreads, metals recycling operations operating income decreased 14% to $28.2 million in the second quarter of 2024 compared to the second quarter of 2023.

Previous wording

Steel fabrication operations include the company’s New Millennium Building Systems’ joist and deck plants located throughout the United States, and in Northern Mexico. Revenues from these plants are generated from the fabrication of trusses, girders, steel joists and steel deck used within the non-residential construction industry. Steel fabrication operations accounted for 10% and 18% of our consolidated net sales during the three-month periods ended March 31, 2024 and 2023.

Current wording

Steel fabrication operations include the company’s New Millennium Building Systems’ joist and deck plants located throughout the United States, and in Northern Mexico. Revenues from these plants are generated from the fabrication of trusses, girders, steel joists and steel deck used within the non-residential construction industry. Steel fabrication operations accounted for 10% and 15% of our consolidated net sales during the three-month periods ended June 30, 2024 and 2023, respectively, and 10% and 17% during the six-month periods ended June 30, 2024 and 2023, respectively.

Previous wording

Net sales for the steel fabrication operations decreased 48% during the first quarter of 2024 compared to the same period in 2023, as average selling prices decreased $1,880 per ton, or 37%, and volume decreased 17% from the first quarter of 2023. In spite of historically strong demand, first quarter 2024 was negatively impacted by lower shipments, coupled with falling selling prices, which remain above pre-pandemic pricing levels. Our steel fabrication operations continue to benefit from the solid non-residential construction market, as evidenced by a historically strong order backlog that extends through the third quarter 2024. The continued onshoring of manufacturing, coupled with the robust U.S. infrastructure and industrial build-outs, supports consistent strong demand.

Current wording

Net sales for the steel fabrication operations decreased 39% during the second quarter of 2024 compared to the same period in 2023, as average selling prices decreased $1,406 per ton, or 32%, and volume decreased 11% from the second quarter of 2023. While demand remained historically strong, second quarter 2024 was impacted by lower shipments and falling selling prices, which remain above pre-pandemic pricing levels. Our steel fabrication operations continue to benefit from the solid non-residential construction market, as evidenced by a historically strong order backlog that extends through the fourth quarter 2024. The continued onshoring of manufacturing, coupled with the robust U.S. infrastructure and industrial build-outs, supports consistent strong demand.

Previous wording

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 was flat in the first quarter of 2024, compared to the same period in 2023. As a result of decreased selling prices per ton, metal spread (which we define as the difference between average selling prices and the cost of purchased steel) contracted 49% in the first quarter of 2024 compared to the same period in 2023. This metal spread compression coupled with decreased volume resulted in operating income decreasing 68% to $178.3 million in the first quarter 2024, compared to $551.3 million in the same period in 2023.

Current wording

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 was flat in the second quarter of 2024 compared to the same period in 2023. As a result of decreased selling prices per ton, metal spread (which we define as the difference between average selling prices and the cost of purchased steel) contracted 44% in the second quarter of 2024 compared to the same period in 2023. This metal spread compression coupled with decreased volume resulted in operating income decreasing 61% to $180.7 million in the second quarter 2024, compared to $462.1 million in the same period in 2023. For the first half of 2024, operating income decreased 65% to $359.1 million compared to the first half of 2023, due to a 47% decrease in metal spread.

Previous wording

Aluminum operations include the recycled aluminum flat rolled products mill being constructed in Columbus, Mississippi, and two satellite recycled aluminum slab centers in Arizona and Mexico. The flat rolled products mill is a joint venture concurrently formed with Unity Aluminum, Inc. of which SDI has a 94.4% equity interest. Construction has begun on the flat rolled products mill and the recycled aluminum slab centers with the flat rolled mill operations expected to begin mid-2025 and operations at the Mexico and Arizona recycled slab centers in late 2024 and mid-2025, respectively. The results of this segment currently consist of construction and start-up costs recorded in selling, general and administrative expenses, included within the discussion of consolidated results within the Other Consolidated Results section below. During the first quarter of 2024, there were no additional results of operations, such as those related to shipments or production, to be discussed.

Current wording

Aluminum operations include the recycled aluminum flat rolled products mill being constructed in Columbus, Mississippi, and two satellite recycled aluminum slab centers in the southwest United States (US) and central Mexico. The flat rolled products mill is a joint venture concurrently formed with Unity Aluminum, Inc. of which SDI has a 94.4% equity interest. Construction has begun on the flat rolled products mill and the recycled aluminum slab centers with the flat rolled mill operations expected to begin mid-2025 and operations at the Mexico and US recycled slab centers in late 2024 and mid-2025, respectively. The results of this segment currently consist of construction and start-up costs recorded in selling, general and administrative expenses, included within the discussion of consolidated results within the Other Consolidated Results section below. During the first half of 2024, there were no additional results of operations, such as those related to shipments or production, to be discussed.

Previous wording

First Quarter Consolidated Results 2024 vs. 2023

Current wording

Second Quarter Consolidated Results 2024 vs. 2023

Previous wording

Profit sharing expense during the first quarter of 2024 of $62.7 million decreased 10% from the $69.6 million during the same period in 2023, consistent with decreased pretax earnings. Profit sharing expense for eligible employees is 8% of consolidated pretax income excluding noncontrolling interests and other items.

Current wording

Profit sharing expense during the second quarter of 2024 of $48.1 million decreased 47% from the $91.0 million during the same period in 2023, consistent with decreased pretax earnings. Profit sharing expense for eligible employees is 8% of consolidated pretax income excluding noncontrolling interests and other items.

Previous wording

Interest Expense, net of Capitalized Interest. During the first quarter of 2024, interest expense was $12.0 million, a decrease of $10.5 million compared to the first quarter of 2023. The lower interest expense in the first quarter 2024 compared to the same period in 2023 was due to higher capitalized interest in 2024 related to construction at our Sinton and Heartland divisions, and within the aluminum operations segment.

Current wording

Interest Expense, net of Capitalized Interest. During the second quarter of 2024, interest expense was $12.7 million, a decrease of $8.0 million compared to the second quarter of 2023. The lower interest expense in the second quarter 2024 compared to the same period in 2023 was due to higher capitalized interest in 2024 related to construction within the aluminum operations segment.

Previous wording

Income Tax Expense. First quarter 2024 income tax expense of $178.3 million, at an effective income tax rate of 23.3%, decreased 12% compared to the $203.5 million, at an effective income tax rate of 24.0%, during the first quarter of 2023, consistent with decreased pretax earnings.

Current wording

Income Tax Expense. Second quarter 2024 income tax expense of $133.4 million, at an effective income tax rate of 23.6%, decreased 48% compared to the $258.1 million, at an effective income tax rate of 24.0%, during the second quarter of 2023, consistent with decreased pretax earnings.

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses of $159.5 million during the first quarter of 2024 increased 11% from $144.3 million during the first quarter of 2023 primarily due to a 9% increase in payroll and benefits expense related to the execution of our growth strategy during 2024. Selling, general and administrative expenses represented 3.4% and 2.9% of net sales during first quarter 2024 and 2023, respectively.

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses of $319.5 million during the first half of 2024 increased 12% from $285.5 million during the first half of 2023 primarily due to an increase in payroll and benefits expense related to the execution of our growth strategy during 2024. Selling, general and administrative expenses represented 3.4% and 2.9% of net sales during the first half of 2024 and 2023, respectively.

Previous wording

Our total outstanding debt of $3.1 billion is consistent with our total outstanding debt at December 31, 2023. 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 25.1% and 25.8% at March 31, 2024 and December 31, 2023, respectively.

Current wording

Our total outstanding debt of $3.1 billion is consistent with our total outstanding debt at December 31, 2023. 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 24.9% and 25.8% at June 30, 2024 and December 31, 2023, respectively.

Previous wording

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 March 31, 2024, our interest coverage ratio and debt to capitalization ratio were 35.44:1.00 and 0.25:1.00, respectively. We were, therefore, in compliance with these covenants at March 31, 2024, and we anticipate we will continue to be in compliance during the next twelve months.

Current wording

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 June 30, 2024, our interest coverage ratio and debt to capitalization ratio were 30.84:1.00 and 0.25:1.00, respectively. We were, therefore, in compliance with these covenants at June 30, 2024, and we anticipate we will continue to be in compliance during the next twelve months.

Previous wording

Working Capital (representing excess of current assets over current liabilities). We generated cash flow from operations of $355.2 million in the first quarter of 2024 compared to $733.8 million in the same 2023 period. Working capital decreased $1.4 billion, or 25%, during the first quarter of 2024 to $4.3 billion at March 31, 2024, due to a $565.5 million decrease in cash and equivalents, a $387.9 million decrease in receivables and a $379.2 million increase in current maturities of long-term debt as our $400 million 2.800% senior notes were recorded as current in December 2023.

Current wording

Working Capital (representing excess of current assets over current liabilities). We generated cash flow from operations of $737.8 million in the first half of 2024 compared to $1.5 billion in the same 2023 period. Working capital decreased $872.5 million, or 20%, during the first half of 2024 to $3.6 billion at June 30, 2024, due to a $570.9 million decrease in cash and equivalents, and a $355.7 million increase in current maturities of long-term debt, as our $400 million 2.400% senior notes due 2025 were recorded as current in June 2024.

Previous wording

Capital Investments. During the first quarter of 2024, we invested $374.3 million in property, plant and equipment, primarily within our steel operations segment and aluminum operations segment, compared with $226.3 million invested during the same period in 2023. We are currently executing our plan to invest $2.7 billion in a new state-of-the-art low-carbon recycled aluminum flat rolled products 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 early 2025. Our liquidity of $3.1 billion and anticipated future operating cash flow generation is sufficient to provide for our planned 2024 capital requirements.

Current wording

Capital Investments. During the first half of 2024, we invested $793.5 million in property, plant and equipment, primarily within our steel operations segment and aluminum operations segment, compared with $584.6 million invested during the same period in 2023. We are currently executing our plan to invest $2.7 billion in a new state-of-the-art low-carbon recycled aluminum flat rolled products 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 early 2025. Our liquidity of $2.7 billion and anticipated future operating cash flow generation is sufficient to provide for our planned 2024 capital requirements.

Previous wording

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 8% to $0.46 per share in the first quarter of 2024 (from $0.425 per share for each quarter in 2023), resulting in declared cash dividends of $72.6 million during the first quarter of 2024, compared to $72.3 million during the same period in 2023. We paid cash dividends of $68.0 million and $58.8 million during the first quarters of 2024 and 2023, 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.

Current wording

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 8% to $0.46 per share in the first quarter of 2024 (from $0.425 per share for each quarter in 2023), resulting in declared cash dividends of $144.2 million during the first half of 2024, compared to $143.0 million during the same period in 2023. We paid cash dividends of $140.6 million and $131.1 million during the first half of 2024 and 2023, 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.

Previous wording

Other. Our board of directors has authorized share repurchase programs during prior years, the most recent of which occurred in November 2023 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 $298.1 million and $354.0 million of share repurchases during the first quarters of 2024 and 2023, respectively. As of March 31, 2024, we had $1.1 billion remaining available to purchase under the November 2023 share repurchase program.

Current wording

Other. Our board of directors has authorized share repurchase programs during prior years, the most recent of which occurred in November 2023 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 $607.1 million and $734.2 million of share repurchases during the first half of 2024 and 2023, respectively. As of June 30, 2024, we had $793.2 million remaining available to purchase under the November 2023 share repurchase program.