01—Abstract
Summary
Summary of the 10-K filed February 26, 2009. Cited figures are marked; the original filing is the authoritative source.
Nucor Corporation's 2008 Form 10-K, filed with the SEC on February 26, 2009, reports record net sales of $23.66 billiona and record net earnings of $1.83 billion, or $5.98 per diluted share, for 2008, up from $16.59 billion and $1.47 billion in 2007.
The growth was driven by sharply higher steel selling prices and the 2007 and 2008 acquisitions, including Harris Steel and The David J. Joseph Company (DJJ). Gross margin fell to 17% from 19% as scrap and scrap substitute costs rose 58% to $438 per ton, and the LIFO charge increased to $341.8 millionb.
Results weakened sharply in the fourth quarter: the company recorded a $105.2 millionc impairment of non-current assets, including $84.8 million on its HIsmelt investment, and production at the HIsmelt plant was suspended in December 2008. Management describes the outlook as very weak. The filing states that the economic downturn has severely hit construction markets, that high-priced scrap and pig iron inventory must be worked through, and that management is preparing for a long period of depressed demand.
Capital expenditures are projected at about $400 milliond for 2009, down roughly 61% from 2008. The balance sheet remained strong, with cash and equivalents of $2.36 billion, long-term debt of $3.27 billion, and stockholders' equity of $7.93 billion.
The company also raised about $1.99 billion in a May 2008 common stock offering. The base quarterly dividend was $0.35 per share, and the supplemental dividend was suspended in December 2008.
02—Key points
Key Highlights
- Record 2008 net sales of $23.66 billion (up from $16.59 billion in 2007) and record net earnings of $1.83 billion, or $5.98 per diluted share.
- Gross margin declined to $4.05 billion (17%) from $3.13 billion (19%), reflecting scrap costs up 58% to $438 per ton and a LIFO charge of $341.8 million.
- Acquired The David J. Joseph Company (DJJ) in February 2008 for about $1.44 billion, its largest acquisition, and bought 50% of Duferdofin-Nucor for $667.0 million in July 2008.
- Recorded $105.2 million in impairment charges in 2008, including $84.8 million on the HIsmelt joint venture, whose production was suspended in December 2008.
- Management expects prolonged depressed demand and projects 2009 capital expenditures of about $400 million, a roughly 61% decrease from 2008.
- Balance sheet at year-end 2008 included $2.36 billion in cash and equivalents, $3.27 billion in long-term debt, and $7.93 billion in stockholders' equity.
- Quarterly dividend was $0.35 per share, declared in February 2009; the supplemental dividend was suspended in December 2008.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 26, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Revenue | $23.66B$16.59B | +42.6% |
| Cost of Revenue | $19.61B$13.46B | +45.7% |
| Gross Profit | $4.05B$3.13B | +29.4% |
| SG&A Expenses | $714.06M$553.15M | +29.1% |
| Interest Expense | $134.55M— | — |
| Net Income | $1.83B$1.47B | +24.4% |
| EPS (Basic) | $5.99$4.96 | +20.8% |
| EPS (Diluted) | $5.98$4.94 | +21.1% |
| Shares Outstanding (Basic) | 304.52M— | — |
| Shares Outstanding (Diluted) | 305.01M— | — |
05—Questions
Frequently Asked Questions
How did Nucor perform financially in 2008?
Nucor reported record net sales of $23.66 billion and record net earnings of $1.83 billion, or $5.98 per diluted share, compared with $16.59 billion and $1.47 billion, or $4.94 per diluted share, in 2007. Net earnings were 7.7% of net sales, down from 8.9% in 2007.
What pressures reduced Nucor's margins in 2008?
Scrap and scrap substitute costs rose 58% to $438 per ton, and the LIFO charge increased to $341.8 million from $194.3 million. The company also recorded $48.9 million in inventory write-downs and $128.6 million in pre-operating and start-up costs. Gross margin fell to 17% from 19%.
What did the filing say about the outlook for 2009?
Management said market conditions entering 2009 were as challenging as in the fourth quarter of 2008, and that it is preparing for a long period of depressed demand. It expects to work through high-priced inventory and projects 2009 capital expenditures of about $400 million. It also noted that federal stimulus legislation with 'Buy America' language may help, but the timing is uncertain.
What major acquisitions and investments did Nucor make in 2008?
Nucor acquired The David J. Joseph Company (DJJ), a scrap processor and broker, for about $1.44 billion in February 2008, and Ambassador Steel Corporation for about $185.1 million in August 2008. It also acquired 50% of Duferdofin-Nucor S.r.l. for $667.0 million in July 2008. In May 2008, Nucor raised about $1.99 billion through a public offering of approximately 27.7 million common shares.
What risks did the filing highlight?
Key risks include the global recession and credit crisis, cyclical demand, steel imports from global overcapacity, volatility in scrap and energy costs, and proposed greenhouse gas legislation that could raise energy costs. The filing also discloses an antitrust class action in which Nucor is a co-defendant with other steel producers; management cannot predict the outcome or determine potential exposure.
06—Continue