Steel Dynamics Inc. (NASDAQ:STLD)

Current Income Tax Expense

The current income tax expense exhibited variability over the five-year period. Starting at approximately $269 million in 2017, it increased moderately to about $305 million in 2018. Thereafter, a significant decline occurred in 2019 and 2020, with values falling to roughly $149 million and $89 million respectively. However, in 2021 there was a marked rebound with the expense reaching its highest level in the period at nearly $644 million. This suggests episodic fluctuations with a notable peak in the latest year observed.

Deferred Income Tax Expense (Benefit)

The deferred income tax expense (benefit) demonstrated a mixed trend. Initially, there was a substantial benefit shown in 2017, indicated by a negative amount of approximately -$140 million. This shifted to expense in the following years, with amounts of roughly $59 million in 2018, $48 million in 2019, and $46 million in 2020. The deferred tax expense then surged to about $319 million in 2021. This shift from a large benefit to consistent expenses, culminating in a significant increase in 2021, points to evolving tax timing differences or changes in tax planning strategies over time.

Total Income Tax Expense

The total income tax expense amalgamates the current and deferred components and reveals a general upward trend throughout the period. Beginning at around $129 million in 2017, it rose sharply to approximately $364 million in 2018. It then declined in the subsequent two years to $197 million in 2019 and $135 million in 2020. The expense escalated dramatically in 2021, reaching almost $962 million, the highest annual amount recorded. This trend mirrors the behavior of the individual components and indicates significant tax cost variability, with an especially pronounced increase in the most recent year.

Statutory federal tax rate

The statutory federal tax rate decreased sharply from 35% in 2017 to 21% in 2018 and remained stable at 21% through 2021.

State income taxes, net of federal benefit

State income taxes, net of federal benefit, showed an increasing trend from 1.4% in 2017 to a peak of 2.6% in 2018 and 2020, slightly decreasing to 2.5% in 2021.

Release of valuation allowance

A release of valuation allowance was recorded only in 2020, reflected as a negative 2.9%, indicating a one-time tax benefit during that year.

Noncontrolling interests

Noncontrolling interests appeared solely in 2017 at a minimal 0.3%, with no subsequent data available.

Audit settlements

Audit settlements had a minor negative impact of 0.3% in 2018, with no other years showing activity in this item.

Federal research & development credits

Federal research and development credits increased in their relative impact over time, starting from a negligible effect of -0.3% in 2018, deepening to -0.6% in 2019, reaching a maximum benefit at -2.1% in 2020, before reducing to -0.7% in 2021.

Domestic manufacturing deduction

A notable domestic manufacturing deduction was recorded exclusively in 2017 at -2.6%, with no subsequent deductions in following years.

Other permanent differences

Other permanent differences demonstrated a decreasing negative impact from -1% in 2017 to -0.5% in 2018, transitioning to a slight positive effect of 0.1% in 2019, peaking at 0.5% in 2020, and returning to 0.1% in 2021, indicating variable minor adjustments over the years.

Effective tax rate, before impact from Tax Reform

The effective tax rate before the impact of tax reform dropped significantly from 33.1% in 2017 to around 22% in 2018 and 2019, reaching a low of 19.1% in 2020, then increasing again to 22.9% in 2021. This pattern reveals a general decline followed by a moderate rebound in the last reported year.

Impact from Tax Reform

The tax reform impact was significant only in 2017 with a -19.3% effect, indicating a substantial one-time reduction that year; no impact is reported in later years.

Effective tax rate

The overall effective tax rate closely mirrors the trends before tax reform, starting at a low 13.8% in 2017 — influenced by the tax reform's impact — then adjusting to around 22.5% in 2018 and 2019, dropping to 19.1% in 2020 before increasing to 22.9% in 2021. This suggests that the effective tax burden stabilized after the initial tax reform adjustments but experienced variability likely due to changes in credits and deductions.

The financial data reveals several key trends across the analyzed periods.

Accrued Expenses and Allowances

There is a consistent increase in accrued expenses and allowances from approximately 16.3 million USD in 2017 to 24.3 million USD in 2021, indicating a gradual rise in short-term obligations or estimated liabilities.

Inventories

Inventories display volatility with a notable peak in 2018 at about 9.6 million USD, followed by a decline in 2019 and 2020 to around 5.6 million USD, and then an increase again in 2021 to roughly 9.1 million USD. This pattern suggests fluctuating inventory levels, potentially reflecting changes in production cycles or demand.

Net Operating Loss Carryforwards

Net operating loss carryforwards show a consistent downward trend from about 33.7 million USD in 2017 to 20.3 million USD in 2021. This reduction signals the gradual utilization or expiration of tax loss carryforwards over time.

Other Assets

The "Other" asset category exhibits minor fluctuations, starting at 8.1 million USD in 2017, declining slightly in 2018 and 2020, and rising to approximately 8.8 million USD in 2021, suggesting moderate variability in miscellaneous assets.

Gross Deferred Tax Assets

Gross deferred tax assets remain relatively stable, fluctuating slightly between approximately 60.9 million USD and 66.4 million USD over the years, which indicates a consistent recognition of temporary differences and carryforwards.

Valuation Allowance

There is a significant decrease in valuation allowance from around -21 million USD in 2019 to roughly -0.8 million USD in 2020 and 2021, which may reflect improved realizability of deferred tax assets or changes in tax planning strategies.

Net Deferred Tax Assets

Net deferred tax assets initially decrease from approximately 44.6 million USD in 2018 to 38.9 million USD in 2019 but then significantly increase to about 60.0 million USD in 2020 and further to 61.7 million USD in 2021, correlating with the reduction in valuation allowance.

Property, Plant, and Equipment

Property, plant, and equipment show a growing negative balance from roughly -344.5 million USD in 2017 to -846.9 million USD in 2021, indicating increasing accumulated depreciation or impairment charges over the years.

Intangible Assets

Intangible assets also reveal an expanding negative balance from about -1.3 million USD in 2017 to -62.3 million USD in 2021, which could be associated with amortization or write-downs of intangible resources.

Other Liabilities

Other liabilities increase in magnitude from roughly -1.6 million USD in 2017 to -7.3 million USD in 2021, demonstrating an increase in miscellaneous liabilities.

Deferred Tax Liabilities

Deferred tax liabilities have grown substantially from approximately -347.4 million USD in 2017 to -916.6 million USD in 2021, reflecting increasing taxable temporary differences or changes in tax rates or laws affecting timing differences.

Net Deferred Tax Asset (Liability)

The net deferred tax asset (liability) balance becomes increasingly negative, moving from around -306 million USD in 2017 to about -854.9 million USD in 2021, which largely results from the steep increase in deferred tax liabilities outpacing net deferred tax assets.

Overall, the data indicate increasing accrual of expenses and liabilities alongside fluctuating inventories and a notable decrease in valuation allowance improving net deferred tax assets. However, significant increases in property, plant and equipment depreciation/amortization and deferred tax liabilities contribute to a deepening net deferred tax liability position over the periods examined.

The analysis of deferred tax liabilities over the five-year period demonstrates a consistent upward trend, indicating an increasing obligation recognized by the company in this accounting category.

Deferred Tax Liabilities (US$ in thousands)

The value has steadily risen from 305,949 in 2017 to 854,905 in 2021, representing nearly a threefold increase over the period.

This upward trajectory is continuous each year, with significant jumps particularly noticeable between 2020 and 2021.

The increase in deferred tax liabilities could suggest growing temporary differences between the company's accounting income and taxable income, potentially due to accelerated depreciation, inventory valuation differences, or other timing differences affecting taxable income.

The growth in these liabilities may also reflect changes in tax regulations or strategic financial planning aimed at tax deferral.

Overall, the marked increase in deferred tax liabilities highlights a rising deferred tax burden for the company over the examined timeframe, which should be considered in the context of broader tax planning and future tax payments implications.

The financial data reflect clear upward trends in both the liabilities and equity over the five-year period. Adjusted figures, which account for deferred income tax effects, provide a refined perspective on the company’s financial position and performance.

Total Liabilities

Reported total liabilities increased steadily from $3.55 billion in 2017 to approximately $6.21 billion by the end of 2021, showing a compound rise indicative of the company's growing obligations. Adjusted total liabilities follow a similar upward trajectory, but at lower absolute values due to tax adjustments, rising from about $3.24 billion in 2017 to $5.36 billion in 2021. The adjustment narrows the total liabilities figure by roughly 10-15%, consistently over the years.

Total Equity

Reported equity shows continuous growth, rising from $3.35 billion in 2017 to $6.30 billion in 2021, representing a near doubling in five years. Adjusted equity presents a slightly higher base and increase, starting at approximately $3.66 billion and growing to $7.16 billion in 2021. The difference between reported and adjusted equity widens over time, suggesting that deferred tax adjustments increasingly enhance the equity base.

Net Income Attributable to the Company

Reported net income exhibits volatility, peaking in 2018 at about $1.26 billion before declining to $321 million in 2021. In contrast, adjusted net income shows a somewhat smoother pattern with a peak in 2021 at approximately $3.53 billion, indicating that deferred tax adjustments significantly affect reported profitability. The 2021 spike in adjusted net income implies a strong recovery or exceptional gain not fully reflected in the reported figure.

General Observations

The adjusted figures consistently reflect more favorable financial positions and performance metrics, highlighting the importance of considering deferred income taxes in evaluating the company's financial health. The persistent growth in both liabilities and equity indicates expansion and increased capitalization. However, the disparity between reported and adjusted net income suggests fluctuations in tax-related accounting that materially impact the portrayal of earnings volatility.

Net Profit Margin

Both reported and adjusted net profit margins exhibit fluctuations over the analyzed period. The reported net profit margin increased from 8.52% in 2017 to 10.64% in 2018, followed by a decline in 2019 and 2020 to 6.41% and 5.74% respectively. A significant rebound occurred in 2021, reaching 17.46%. The adjusted net profit margin displays a similar pattern, with values ranging from 7.05% in 2017 peaking at 19.19% in 2021, indicating improved profitability after accounting for tax adjustments.

Financial Leverage

The reported financial leverage ratio remains relatively stable over the years, fluctuating narrowly between 1.96 and 2.13, suggesting consistent use of debt within the company’s capital structure. Adjusted financial leverage is slightly lower than reported figures, ranging from 1.75 to 1.9, which may indicate the impact of tax adjustments on the assessment of leverage, yet the trend remains stable without significant deviations.

Return on Equity (ROE)

Reported ROE shows notable volatility, increasing from 24.25% in 2017 to a peak of 31.98% in 2018, followed by a sharp decrease to 16.47% in 2019 and further to 12.68% in 2020. A remarkable recovery is evident in 2021 with ROE soaring to 50.98%. Adjusted ROE mirrors these movements but consistently reports lower values compared to the reported figures. This suggests that tax adjustments materially affect the equity returns but maintain similar overall trend dynamics.

Return on Assets (ROA)

The reported ROA follows a pattern similar to ROE, increasing from 11.85% in 2017 to 16.34% in 2018, before declining through 2019 and 2020 to 8.11% and 5.94% respectively. A strong increase is observed in 2021 to 25.65%. Adjusted ROA presents slightly different values but confirms the same trend, with a dip prior to 2021 and an elevated return thereafter, reaching 28.19%. This indicates that, after adjusting for tax effects, asset utilization efficiency appears improved in the latest period.

The analysis of financial performance over the specified periods reveals notable fluctuations in both reported and adjusted net income, accompanied by corresponding variations in net profit margins.

Reported Net Income

The reported net income attributable to the company demonstrated substantial volatility. Initial growth was observed from 812,741 thousand USD in 2017 to 1,258,379 thousand USD in 2018, followed by a decline to 671,103 thousand USD in 2019 and a further decrease to 550,822 thousand USD in 2020. A significant recovery and peak occurred in 2021, reaching 3,214,066 thousand USD, the highest value recorded in the period examined.

Adjusted Net Income

Adjusted net income exhibited a somewhat similar trend but with less pronounced decreases. It increased from 672,793 thousand USD in 2017 to 1,317,622 thousand USD in 2018, then decreased to 719,434 thousand USD in 2019 and slightly to 596,558 thousand USD in 2020. In 2021, adjusted net income surged substantially to 3,532,683 thousand USD, surpassing the reported figure for that year, indicating adjustments that positively impacted net income.

Reported Net Profit Margin

The reported net profit margin followed a pattern consistent with net income trends. It rose from 8.52% in 2017 to 10.64% in 2018, then declined to 6.41% in 2019 and further to 5.74% in 2020. A notable increase was recorded in 2021, reaching 17.46%, which is more than double the prior year’s margin, highlighting improved profitability relative to revenues.

Adjusted Net Profit Margin

Adjusted net profit margin reflected a similar trajectory but with higher margins in most years compared to reported margins. It increased from 7.05% in 2017 to 11.15% in 2018, decreased to 6.87% in 2019 and 6.21% in 2020, before sharply rising to 19.19% in 2021, suggesting better operational efficiency or advantageous tax or accounting adjustments enhancing profitability.

Overall, the data indicates a company experiencing earnings growth with intermittent periods of decline, followed by a strong recovery in 2021. The divergence between reported and adjusted figures, especially in 2021, suggests significant beneficial adjustments related to income taxes or other deferred elements that improved net income and profit margins substantially.

The analysis of the financial data over the five-year period reveals several key trends in the equity and leverage metrics for the company.

Total Equity

The reported total equity shows a consistent upward trend from 3,351,574 thousand US dollars in 2017 to 6,304,641 thousand US dollars in 2021. This represents a substantial increase, nearly doubling over the five years.

The adjusted total equity, which factors in deferred income tax adjustments, similarly reflects steady growth. It rises from 3,657,523 thousand US dollars in 2017 to 7,159,546 thousand US dollars in 2021. Notably, the adjusted equity figures remain consistently higher than the reported figures, indicating that the tax adjustments have a material impact, increasing the equity base by approximately 7-14% depending on the year.

The rate of growth in equity appears to accelerate slightly in the last year, with the largest annual increase occurring from 2020 to 2021.

Financial Leverage

The reported financial leverage ratio demonstrates minor fluctuations over the analyzed period. It starts at 2.05 in 2017, decreases to a low of 1.96 in 2018, and slightly increases thereafter, peaking at 2.13 in 2020 before reducing again to 1.99 in 2021. Overall, the leverage ratio remains close to the 2.0 mark without significant variance, suggesting a relatively stable capital structure in terms of debt and equity financing.

The adjusted financial leverage ratio, reflecting the impact of deferred tax adjustments on equity, is lower throughout the period compared to the reported ratio. It moves from 1.87 in 2017 down to 1.75 in 2021, with intermediate fluctuations indicating an improving trend towards reduced leverage. This reduction suggests the company’s adjusted equity base increases at a slightly faster pace than its liabilities, thereby lowering leverage risk according to adjusted metrics.

The generally lower adjusted leverage compared to reported figures highlights the importance of considering deferred tax impacts to accurately assess the company's financial risk.

In summary, the company’s equity capital has grown significantly, both on a reported and adjusted basis, with a notable acceleration in 2021. The financial leverage ratios remain relatively stable, though adjusted leverage indicates a modest deterioration in financial risk. The adjustment for deferred taxes consistently elevates equity and lowers leverage, providing a more conservative and arguably more accurate view of the company’s financial position.

Net Income Trends

Reported net income attributable to the company shows significant fluctuations over the five-year period. Starting at 812,741 thousand US dollars in 2017, it peaked in 2018 at 1,258,379 thousand US dollars before dropping sharply in 2019 and 2020 to 671,103 and 550,822 thousand US dollars, respectively. A remarkable increase is observed in 2021, reaching 3,214,066 thousand US dollars. Adjusted net income follows a similar pattern, with some variations in magnitude. It starts at 672,793 thousand US dollars in 2017, peaks at 1,317,622 thousand US dollars in 2018, declines in 2019 and 2020, and then surges to 3,532,683 thousand US dollars in 2021. This indicates that adjustments related to reported and deferred income taxes have a consistent impact on reported figures but do not alter the overall trend.

Equity Trends

Reported total equity displays consistent growth throughout the period, starting at 3,351,574 thousand US dollars in 2017 and increasing steadily each year to reach 6,304,641 thousand US dollars in 2021. Adjusted total equity also shows a parallel upward trend but at higher values compared to reported equity. It rises from 3,657,523 thousand US dollars in 2017 to 7,159,546 thousand US dollars in 2021, indicating that tax-related adjustments result in a stronger equity base when reflected in adjusted figures.

Return on Equity (ROE) Trends

Both reported and adjusted ROE exhibit notable volatility over the analyzed period. Reported ROE increases from 24.25% in 2017 to a high of 31.98% in 2018, then declines sharply in 2019 and 2020 to 16.47% and 12.68%, respectively. In 2021, reported ROE rises substantially to 50.98%. Adjusted ROE mirrors this trend closely, moving from 18.39% in 2017 to 30.15% in 2018, followed by declines in 2019 and 2020 to 15.78% and 12.22%, and a sharp increase to 49.34% in 2021. The significant increase in ROE during 2021 suggests improved profitability and/or operational efficiency relative to equity, consistent with the substantial rise in net income that year.

Overall Insights

The data reveals that while adjusted figures generally demonstrate higher equity values and net income slight increments compared to reported data, both sets of data reflect consistent patterns and significant year-to-year variability. The substantial dips in net income and ROE during 2019 and 2020 suggest challenges or adverse conditions experienced by the company in those years, followed by a robust recovery in 2021. The ongoing growth in equity, both reported and adjusted, supports the company's capital strengthening strategy despite fluctuations in profitability measures. The adjusted metrics provide a useful perspective by accounting for income tax impacts, marginally moderating reported volatility but confirming the underlying financial trends.

Reported Net Income

The reported net income exhibited variability over the reviewed periods, initially increasing from 812,741 thousand USD in 2017 to 1,258,379 thousand USD in 2018. This was followed by a significant decline in 2019 and 2020, reaching 671,103 thousand USD and 550,822 thousand USD respectively. In 2021, there was a marked recovery, with reported net income rising sharply to 3,214,066 thousand USD.

Adjusted Net Income

Adjusted net income mirrored some of the trends observed in reported net income but demonstrated a smoother progression in most years. After an initial rise from 672,793 thousand USD in 2017 to 1,317,622 thousand USD in 2018, adjusted net income decreased in 2019 and 2020 to 719,434 thousand USD and 596,558 thousand USD correspondingly. In 2021, a substantial increase was seen, reaching 3,532,683 thousand USD, exceeding the reported figure for the same period.

Reported Return on Assets (ROA)

The reported ROA showed an upward trend from 11.85% in 2017 to 16.34% in 2018, indicating improving asset efficiency. However, it declined to 8.11% in 2019 and further to 5.94% in 2020. A significant rise occurred in 2021, with reported ROA reaching 25.65%, suggesting enhanced profitability relative to assets.

Adjusted Return on Assets (ROA)

Adjusted ROA displayed a similar pattern to reported ROA but with generally higher values. Starting at 9.81% in 2017, it increased to 17.1% in 2018, followed by a decline to 8.69% in 2019 and 6.44% in 2020. The 2021 figure showed a notable increase to 28.19%, the highest in the periods observed, reflecting improved operational performance when excluding deferred income tax effects.

Overall Trends and Insights

The financial data indicate a period of fluctuating profitability and asset efficiency from 2017 through 2020, with both net income and ROA metrics declining after 2018. The strong rebound in 2021, reflected in both reported and adjusted figures, suggests either a significant improvement in operational results or favorable non-recurring items. The adjusted measures generally trailing behind or exceeding reported figures over time imply that deferred income tax impacts are material, and adjustments provide an alternative view of underlying profitability and asset utilisation. The 2021 results particularly underscore robust performance growth by the company during that year.