01—Abstract
Summary
Summary of the 10-K filed February 25, 2010. Cited figures are marked; the original filing is the authoritative source.
Nucor Corporation, a steel and steel products manufacturer and North America's largest recycler, reported a net loss for 2009, its first annual net loss in company history.
Net sales fell 53% to $11.19 billiona from $23.66 billion in 2008, as the average sales price per ton dropped 32% to $637 and total tons shipped to outside customers declined 30%. Net loss attributable to Nucor stockholders was $293.6 million, or $0.94 per diluted share, compared with record earnings of $1.83 billion, or $5.98 per diluted share, in 2008. Gross margin fell to $154.4 million (1%) from $4.05 billion (17%), and results were hurt by roughly $420 million from high-priced pig iron inventory consumed in the first three quarters, though the company returned to profitability in the fourth quarter.
Management described steel market conditions as extremely challenging entering 2010, with industry capacity utilization at 51% in 2009 versus 81% in 2008, and expects any North American demand recovery to be a long, slow one. Nucor reported $2.24 billionb in cash, cash equivalents and short-term investments, $3.09 billion of long-term debt, and no borrowings under its $1.3 billion revolving credit facility. Capital expenditures were $390.5 million in 2009 and are projected at about $400 million for 2010.
The base quarterly dividend was raised 3% to $0.36c per share in December 2009, and total 2009 dividends declared were $1.40 per share, with no supplemental dividend paid in 2009. The company is pursuing a multi-pronged growth strategy that includes greenfield projects such as the Memphis special bar quality mill, the Blytheville Castrip facility and the Decatur galvanizing line, along with the 50% interest in Duferdofin Nucor in Italy. Key risks disclosed include climate change legislation that could raise energy costs, the cyclical nature of the steel business, Chinese steel overcapacity and imports, and a pending antitrust class action in which Nucor is a co-defendant.
02—Key points
Key Highlights
- Net sales fell 53% to $11.19 billion in 2009 from $23.66 billion in 2008, reflecting a 32% decline in average selling price per ton.
- Nucor reported its first annual net loss in its history: $293.6 million attributable to Nucor stockholders, or $(0.94) per diluted share, versus $1.83 billion ($5.98 per diluted share) in 2008.
- Gross margin dropped to $154.4 million (1%) from $4.05 billion (17%), including an approximately $420 million after-tax impact from high-priced pig iron inventory consumed through the third quarter of 2009.
- The company returned to profitability in the fourth quarter of 2009 after losses in the first three quarters.
- Balance sheet remained strong, with cash, cash equivalents and short-term investments of $2.24 billion, long-term debt of $3.09 billion, and an undrawn $1.3 billion revolving credit facility.
- Capital expenditures were $390.5 million in 2009 and are projected at approximately $400 million for 2010; the base quarterly dividend was raised 3% to $0.36 per share.
- Operating facilities ran at low utilization in 2009, with average rates of about 54% for steel mills, 49% for steel products and 53% for raw materials.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 25, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $11.19B$23.66B | −52.7% |
| Cost of Revenue | $11.04B$19.61B | −43.7% |
| Gross Profit | $154.39M$4.05B | −96.2% |
| SG&A Expenses | $351.28M$714.06M | −50.8% |
| Interest Expense | $149.92M$134.55M | +11.4% |
| Net Income | -$293.61M$1.83B | −116.0% |
| EPS (Basic) | $-0.94$5.99 | −115.7% |
| EPS (Diluted) | $-0.94$5.98 | −115.7% |
| Shares Outstanding (Basic) | 314.87M304.52M | +3.4% |
| Shares Outstanding (Diluted) | 314.87M305.01M | +3.2% |
05—Questions
Frequently Asked Questions
Why did Nucor report a net loss in 2009?
Demand for steel fell sharply during the global recession. Net sales decreased 53% as the average sales price per ton fell 32% to $637 and tons shipped to outside customers declined 30%. Results were also hurt by consumption of high-cost pig iron inventory purchased before the late-2008 downturn, which the filing says reduced earnings by about $420 million after taxes.
How did Nucor's cash position and debt look at year-end 2009?
Nucor had cash and cash equivalents of $2.02 billion and short-term investments of $225.0 million, for a combined position of $2.24 billion. Long-term debt due after one year was $3.08 billion, and total long-term debt including current maturities was $3.09 billion. The $1.3 billion revolving credit facility, which matures in November 2012, was undrawn, and the company reported a funded debt to total capital ratio of 29%.
What is Nucor's dividend policy after the 2009 results?
Nucor paid total dividends of $1.40 per share in 2009, compared with $2.17 per share in 2008, which included a $0.91 supplemental dividend. No supplemental dividend was paid in 2009. In December 2009 the board increased the base quarterly dividend by 3% to $0.36 per share, and in February 2010 it declared the 148th consecutive quarterly cash dividend at that level.
What growth projects is Nucor pursuing despite the downturn?
Nucor completed or started several greenfield projects in 2009, including the special bar quality mill in Memphis, Tennessee, the Castrip facility in Blytheville, Arkansas, and the galvanizing line in Decatur, Alabama. It also began a heat treating facility in North Carolina and expanded its Nu-Iron DRI plant in Trinidad. The iron-making facility in St. James Parish, Louisiana, has been significantly delayed pending permitting and climate change legislation.
What are the main risks identified in the filing?
The filing highlights the prolonged global recession and credit crisis, cyclical demand, global steel overcapacity and resulting imports (particularly from China), volatility in scrap and energy costs, and potential climate change legislation that could raise energy and compliance costs. It also notes a pending antitrust class action in which Nucor is a co-defendant, though management believes the claims are without merit and cannot predict the outcome.
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