Description of the Business and Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2022

Description of the Business and Significant Accounting Policies

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of SDI, together with its wholly- and majority-owned or controlled consolidated 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 75% by SDI) are $116.7 million at March 31, 2022 and $100.2 million at December 31, 2021. Noncontrolling members of USS exercised their put option to require the company to purchase an additional 12.5% of the equity interest of USS, increasing SDI’s ownership to 87.5%, on April 1, 2022. Redeemable noncontrolling interests related to Mesabi Nugget (owned 85% by SDI) are $111.2 million at March 31, 2022, and December 31, 2021.

Use of Estimates

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, 2021.

Cash and Equivalents, and Restricted Cash

Cash and Equivalents, and Restricted Cash

Cash and equivalents include all highly liquid investments with a maturity of three months or less at the date of acquisition. Restricted cash is primarily funds held in escrow as required by various insurance and government organizations. The balance of cash, cash equivalents and restricted cash in the consolidated statements of cash flows includes restricted cash of $5.5 million at March 31, 2022, December 31, 2021, March 31, 2021, and December 31, 2020, which are recorded in Other Assets (noncurrent) in the company’s consolidated balance sheets.

Goodwill

Goodwill

The company’s goodwill consisted of the following at March 31, 2022, and December 31, 2021 (in thousands):

	March 31,		December 31,
	2022		2021
Steel Operations Segment	$	272,133	$	272,133
Metals Recycling Operations Segment		179,030		179,777
Steel Fabrication Operations Segment		1,925		1,925
	$	453,088	$	453,835

Metals Recycling Operations Segment goodwill decreased $747,000 from December 31, 2021 to March 31, 2022, in recognition of the 2022 tax benefit related to the normal amortization of the component of Metals Recycling Operations tax-deductible goodwill in excess of book goodwill.

Credit Losses

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 March 31, 2022, the company reported $2.4 billion of accounts receivable, net of allowances for credit losses of $6.3 million. Changes in the allowance were not material for the three-month periods ended March 31, 2022 and 2021.