01—Abstract
Summary
Summary of the 10-K filed February 28, 2011. Cited figures are marked; the original filing is the authoritative source.
Nucor Corporation and its affiliates manufacture steel and steel products, produce direct reduced iron (DRI) for use in its steel mills, and, through The David J.
Joseph Company (DJJ) acquired in 2008, process and broker ferrous and nonferrous metals. The company reports three segments: steel mills (about 69% of 2010 sales to external customers), steel products, and raw materials. In 2010 net sales rose to $15.84 billiona from $11.19 billion in 2009, and the company returned to profitability with net earnings attributable to Nucor stockholders of $134.1 million, or $0.42 per diluted share, after a net loss of $293.6 million in 2009.
Gross margin improved to $843.7 millionb (5%) from $154.4 million (1%), and the filing notes that average steel mill utilization rose to about 70% from 54%. The filing describes a continued challenging demand environment. Management states that the recovery from the recession remains sluggish, non-residential construction remains depressed, and steel imports accounted for 21% of the U.S. market in 2010.
Nucor cites overcapacity in China and unfairly traded imports as key competitive pressures. Management's outlook expects net sales and financial results to be stronger in 2011 than 2010, with 2011 capital expenditures projected at about $560 millionc, including the planned Louisiana DRI facility. Cash and short-term investments totaled $2.48 billion at year-end 2010, and long-term debt rose to $4.28 billion, with the company citing an A rating from Standard & Poor's and an A2 rating from Moody's.
At year-end 2010 the company had no commercial paper outstanding and an undrawn $1.3 billiond revolving credit facility maturing in November 2012. The filing also discloses a pending antitrust class action in which Nucor is a co-defendant with other major steel producers, and states that management cannot predict the outcome or estimate the range of potential exposure.
02—Key points
Key Highlights
- Net sales were $15.84 billion in 2010, up 42% from $11.19 billion in 2009; total tons shipped to outside customers rose 25%.
- Net earnings attributable to Nucor stockholders were $134.1 million ($0.42 per diluted share) in 2010, compared with a net loss of $293.6 million ($0.94 per share) in 2009.
- Gross margin was $843.7 million (5%) in 2010 versus $154.4 million (1%) in 2009, with a LIFO charge of $164.0 million in 2010 versus a LIFO credit of $466.9 million in 2009.
- Cash and short-term investments totaled $2.48 billion at December 31, 2010, and cash provided by operating activities was $873.4 million.
- Long-term debt increased to $4.28 billion from $3.09 billion, including $600.0 million of 4.125% notes due 2022 and $600.0 million of Gulf Opportunity Zone bonds that fund the Louisiana DRI facility.
- The quarterly base dividend was increased to $0.3625 per share, and total 2010 dividends declared were $1.44 per share versus $1.40 in 2009.
- Capital expenditures are projected at about $560 million in 2011, compared with $345 million in 2010.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 28, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $15.84B$11.19B | +41.6% |
| Cost of Revenue | $15.06B$11.04B | +36.5% |
| Gross Profit | $783.75M$154.39M | +407.6% |
| SG&A Expenses | $331.45M$351.28M | −5.6% |
| Interest Expense | $161.14M$149.92M | +7.5% |
| Net Income | $134.09M-$293.61M | +145.7% |
| EPS (Basic) | $0.42$-0.94 | +144.7% |
| EPS (Diluted) | $0.42$-0.94 | +144.7% |
| Shares Outstanding (Basic) | 315.96M314.87M | +0.3% |
| Shares Outstanding (Diluted) | 316.51M314.87M | +0.5% |
05—Questions
Frequently Asked Questions
How did Nucor perform in 2010 compared with 2009?
Nucor returned to profitability in 2010. Net sales rose 42% to $15.84 billion, and net earnings attributable to Nucor stockholders were $134.1 million, or $0.42 per diluted share, compared with a net loss of $293.6 million in 2009. The average sales price per ton rose 13% to $720.
What did management say about the outlook for 2011?
Management stated it believes net sales and financial results will be stronger in 2011 than in 2010, though they will continue to be affected by weak general economic conditions. Utilization rates improved through early 2011, and recent price increases were expected to help earnings return to profitability in the first quarter of 2011. Management described raw material costs as likely to remain volatile.
What are the main risks to Nucor's business identified in the filing?
Key risks include a sluggish economic recovery and depressed non-residential construction demand, cyclical demand, global steel overcapacity and low-priced imports (notably from China), volatile scrap steel and energy costs, possible greenhouse gas regulation, and the possibility that new CAFE standards reduce steel use in automobiles.
How much debt does Nucor carry and what is its liquidity position?
Long-term debt was $4.28 billion at December 31, 2010. The company had $2.48 billion in cash and short-term investments, no commercial paper outstanding, and an undrawn $1.3 billion revolving credit facility maturing in November 2012. The funded debt to total capitalization ratio was 37%, against a covenant limit of 60%.
Are there material legal proceedings disclosed?
Nucor is a co-defendant, with other major steel producers, in several antitrust class-action complaints filed in the U.S. District Court for the Northern District of Illinois. Management believes the claims are without merit but states it cannot predict the outcome or estimate the range of potential exposure. A civil penalty is also expected from the Ohio EPA related to the Marion, Ohio facility, which management does not believe will be material.
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