01—Abstract
Summary
Summary of the 10-K filed February 28, 2013. Cited figures are marked; the original filing is the authoritative source.
Nucor Corporation (NYSE: NUE) reported 2012 net sales of $19.43 billiona, down 3% from $20.02 billion in 2011, and net earnings attributable to Nucor stockholders of $504.6 million, or $1.58 per diluted share, versus $778.2 million, or $2.45 per share, in 2011.
Earnings before income taxes and noncontrolling interests fell to $852.9 millionb from $1.25 billion. The decline was driven primarily by a 3% drop in the average sales price per ton to $841, with the steel mills segment's average price falling each quarter of 2012 amid high imports (imports accounted for about 24% of the U.S. steel market) and new domestic sheet capacity. The company also recorded a $30.0 million impairment on its Duferdofin Nucor investment, a $17.6 million loss on the sale of Nucor Wire Products Pennsylvania assets, and $48.8 million of inventory purchase accounting adjustments related to the Skyline Steel acquisition, which closed June 20, 2012 for about $675.4 million in cash.
Balance sheet and cash flow remained strong. Cash and cash equivalents plus short-term investments totaled $1.16 billionc at year end, cash provided by operating activities was $1.20 billion, and long-term debt including current maturities declined to $3.63 billion from $4.28 billion after a $650 million repayment. The company paid a total dividend of $1.46 per share in 2012 and raised its quarterly base dividend to $0.3675.
Management expects 2013 net sales and financial results to be stronger than 2012 but remains cautious, citing continued import pressure and weak nonresidential construction, and projects capital expenditures of approximately $1.1 billiond in 2013, including the Louisiana direct reduced iron (DRI) facility expected to start up in mid-2013. Strategically, Nucor is building its raw materials position, with a 2.5 million metric ton DRI plant under construction in St. James Parish, Louisiana, and natural gas working interest drilling programs with Encana Oil & Gas (USA) Inc. Nucor faces an antitrust class action filed by steel purchasers, which management believes is without merit and whose outcome it cannot predict. Financial statements and most MD&A content are incorporated by reference from the 2012 Annual Report (Exhibit 13), which is included with this filing.
02—Key points
Key Highlights
- Net sales fell 3% to $19.43 billion in 2012, with the average sales price per ton down 3% to $841.
- Net earnings attributable to Nucor stockholders were $504.6 million ($1.58 per diluted share), down from $778.2 million ($2.45 per share) in 2011.
- Steel mills segment earnings before income taxes fell to $1.16 billion from $1.81 billion, as average steel mill prices declined each quarter of 2012 amid import pressure.
- Skyline Steel acquisition closed June 20, 2012 for approximately $675.4 million in cash, adding steel piling distribution.
- Recorded a $30.0 million impairment on the Duferdofin Nucor equity investment and a $17.6 million loss on sale of Nucor Wire Products Pennsylvania assets.
- Long-term debt including current maturities was reduced to $3.63 billion from $4.28 billion after a $650 million repayment; cash and short-term investments totaled $1.16 billion.
- Quarterly base dividend raised to $0.3675 per share; 2013 capital expenditures projected at approximately $1.1 billion, including the Louisiana DRI facility expected to start up in mid-2013.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 28, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $19.43B$20.02B | −3.0% |
| Cost of Revenue | $17.92B$18.14B | −1.2% |
| Gross Profit | $1.51B$1.88B | −19.6% |
| SG&A Expenses | $454.90M$439.53M | +3.5% |
| Interest Expense | $173.50M$178.81M | −3.0% |
| Net Income | $504.62M$778.19M | −35.2% |
| EPS (Basic) | $1.58$2.45 | −35.5% |
| EPS (Diluted) | $1.58$2.45 | −35.5% |
| Shares Outstanding (Basic) | 318.17M317.00M | +0.4% |
| Shares Outstanding (Diluted) | 318.24M317.16M | +0.3% |
05—Questions
Frequently Asked Questions
Why did Nucor's earnings decline in 2012?
Net earnings attributable to Nucor stockholders fell 35% to $504.6 million, driven mainly by lower steel selling prices. The company cites an import surge that began in late 2011, new domestic sheet capacity, and declining scrap selling prices that compressed margins at its DJJ scrap processing operations. Results were also hit by a $30.0 million Duferdofin Nucor impairment and $48.8 million of Skyline inventory purchase accounting adjustments.
What is Nucor's growth strategy?
Nucor describes a five-part strategy: optimizing existing operations, executing its raw materials strategy (targeting six to seven million tons of annual scrap substitute capacity), pursuing greenfield projects, acquiring companies such as Skyline Steel, and growing internationally through partnerships. Key projects include the 2.5 million metric ton DRI plant in Louisiana, expected to start in mid-2013, and about $290 million of bar mill expansions to add one million tons of special bar quality and wire rod capacity.
How strong is Nucor's balance sheet and liquidity?
Nucor reported cash and cash equivalents of $1.05 billion and short-term investments of $104.2 million at year end 2012, plus $275.2 million of restricted cash for the Louisiana DRI facility. Operating cash flow was $1.20 billion. The company had no borrowings under its $1.5 billion revolving credit facility, and its funded debt to total capital ratio was 32%, well below the 60% covenant limit.
What are the main risks Nucor highlights?
Key risks include a slow economic recovery and depressed nonresidential construction, cyclical demand, overcapacity in global steel and resulting imports (including from China), volatile scrap and energy costs, greenhouse gas and environmental regulation, and natural gas price declines that could affect its working interest drilling programs with Encana.
What is the outlook for Nucor's dividend and 2013?
Nucor has increased its base cash dividend every year since 1973. In February 2013 the board declared a quarterly dividend of $0.3675 per share, payable May 10, 2013. Management expects 2013 net sales and financial results to be stronger than 2012 but is only cautiously optimistic, given continued import pressure and the challenges in residential and nonresidential construction markets.
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