01—Abstract
Summary
Summary of the 10-K filed March 25, 2003. Cited figures are marked; the original filing is the authoritative source.
Nucor Corporation, the steel producer, reported record 2002 steel production of 13,622,000 tons and net sales of $4.80 billiona, up 11% from $4.33 billion in 2001.
Net earnings rose 43% to $162.1 millionb, or $2.07 diluted earnings per share, from $113.0 million, or $1.45 per share. Earnings benefited from a $29.9 million pre-tax graphite electrodes anti-trust settlement and $16.2 million of state income tax credits recorded in the fourth quarter. Pre-operating and start-up costs fell to $84.4 million from $97.8 million, though gross margin was 10%, unchanged from 2001.
Results were weighed down by a depressed non-residential construction market that hurt the steel products segment, where net earnings before income taxes fell to a loss of $407,489c from $98.4 million in 2001. During 2002 Nucor expanded its steel mill footprint significantly. It acquired the Trico Steel sheet mill in Decatur, Alabama for $117.7 million in July, and the Birmingham Steel assets for approximately $615 million in December, funded largely by a $350 million 4.875% note issue due 2012.
Long-term debt rose to $878.6 milliond from $460.5 million, and the debt-to-capital ratio reached 26% versus 16% a year earlier. Cash and short-term investments fell to $219.0 million. Management expects 2003 capital expenditures of less than $300 million and says earnings will depend on the economy, the construction industry, and relief from dumped steel imports, noting that the past year was one of the toughest the steel industry has experienced in decades.
The filing shows stockholders' equity of $2.32 billion, or $29.71 per share, and a 7.2% return on average equity. Shares outstanding were 78,180,108 at year end.
Working capital declined 6% to $832.6 million, and the current ratio was 2.4. Nucor reported that cash provided by operating activities was $497.2 million in 2002, roughly flat with $495.1 million in 2001.
02—Key points
Key Highlights
- Net sales rose 11% to $4.80 billion, and total steel shipments to outside customers reached a record 12,314,000 tons, up 12% from 11,032,000 tons.
- Net earnings increased 43% to $162.1 million ($2.07 diluted EPS), helped by a $29.9 million graphite electrodes anti-trust settlement and $16.2 million of state tax credits.
- Steel products segment swung to a pre-tax loss of $407,489 in 2002, down from $98.4 million in 2001, as non-residential construction stayed depressed.
- Acquired Trico Steel's Decatur, Alabama sheet mill for $117.7 million and Birmingham Steel's mills for about $615 million, adding roughly 3.9 million tons of annual capacity.
- Long-term debt more than doubled to $878.6 million after a $350 million 4.875% note issuance, lifting the debt-to-capital ratio to 26% from 16%.
- Pre-operating and start-up costs totaled $84.4 million in 2002, including $31.4 million at Decatur and $23.5 million for the Castrip facility in Crawfordsville, Indiana.
- Capital expenditures are projected to be less than $300 million in 2003, and management says the company has the financial ability to borrow significant additional funds for major acquisitions.
03—Questions
Frequently Asked Questions
How did Nucor perform financially in 2002?
Net sales increased 11% to $4,801,776,537, and net earnings increased 43% to $162,080,015, or $2.07 per diluted share, compared with $1.45 per share in 2001. Gross margin was 10%, the same as in 2001. The earnings improvement came mainly from higher steel mill volume and a $29.9 million anti-trust settlement, partly offset by weakness in the steel products segment.
What acquisitions did Nucor complete in 2002 and how were they financed?
Nucor bought substantially all of the assets of Trico Steel Company, LLC for $117.7 million in July 2002, a sheet mill in Decatur, Alabama with about 1,900,000 tons of annual capacity. In December 2002 it bought Birmingham Steel Corporation's assets for approximately $615 million, including $116.9 million of inventory and receivables. The Birmingham purchase was financed with proceeds from $350 million of 4.875% notes due 2012 and internal cash flows.
How is Nucor's balance sheet and liquidity position?
Long-term debt due after one year rose to $878,550,000 from $460,450,000. Working capital declined 6% to $832,602,872, and the current ratio was 2.4. Cash and short-term investments fell to $219,004,868 from $462,348,547. Unused long-term credit facilities totaled $425,000,000 at year end, and stockholders' equity was $2,322,989,489.
What does Nucor expect for 2003?
Management expects capital expenditures of less than $300,000,000 in 2003 and expects funds from operations, existing credit facilities and new borrowings to be adequate for existing operations. Earnings in 2003 are expected to depend on the state of the economy, especially the construction industry, and on the maintenance and implementation of remedies against dumped steel imports. Steel production is anticipated to increase significantly over the next several years.
What were the main risks and legal matters disclosed?
The filing cites exposure to steel prices, scrap and raw material costs, electricity and natural gas availability, import competition, and trade policy, including the March 2002 tariffs that are scheduled to decline over three years. It also discloses a December 2000 consent decree with the EPA and several states, under which Nucor paid a $9,000,000 penalty and agreed to spend another $4,000,000 on supplemental environmental projects. Accrued environmental costs totaled $82,768,000 at year end.
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