01—Abstract
Summary
Summary of the 10-K filed February 27, 2015. Cited figures are marked; the original filing is the authoritative source.
Nucor Corporation (NUE) reported net sales of $21.11 billiona for 2014, up 11% from $19.05 billion in 2013, and net earnings attributable to Nucor stockholders of $713.9 million, or $2.22 per diluted share, compared with $488.0 million, or $1.52 per share, in 2013.
Earnings before income taxes and noncontrolling interests rose to $1.20 billionb from $791.1 million. The steel mills segment, the largest at $14.72 billion of external sales, earned $1.59 billion before taxes, while the raw materials segment swung to a $29.1 million loss, driven largely by operating losses of approximately $135 million at the Louisiana DRI facility, which suspended production in the fourth quarter after a process gas heater failure and is estimated to resume operations in late first quarter 2015. Management cites global steel overcapacity and imports as the central challenge.
Imports of finished and semi-finished steel rose 38% in 2014 and accounted for approximately 34% of the U.S. market, and management states that it expects 2015 net sales and financial results to be similar to 2014. Capital expenditures are projected at approximately $500 millionc for 2015, and the company reported $1.02 billion in cash and cash equivalents and $100 million in short-term investments at year end, with long-term debt of $4.38 billion.
The filing also discloses a pending antitrust judgment in the MM Steel case of $160.8 milliond, which Nucor is appealing to the Fifth Circuit with no reserve recorded, and an acquisition of Gallatin Steel Company for a cash price of $779.1 million in October 2014. The base quarterly dividend was raised to $0.3725 per share in December 2014.
02—Key points
Key Highlights
- Net sales rose 11% to $21.11 billion in 2014; net earnings attributable to Nucor stockholders increased 46% to $713.9 million ($2.22 per diluted share).
- Steel mills segment earnings before income taxes reached $1.59 billion, while the raw materials segment posted a $29.1 million loss, driven by about $135 million of operating losses at the Louisiana DRI facility.
- The Louisiana DRI plant suspended production in November 2014 after a process gas heater failure and is estimated to resume operations in late first quarter 2015.
- Imports of finished and semi-finished steel increased 38% in 2014 and reached about 34% of the U.S. steel market; management expects 2015 results similar to 2014.
- The company acquired Gallatin Steel Company for $779.1 million in cash in October 2014, adding about 1.8 million tons of annual sheet capacity in Ghent, Kentucky.
- An MM Steel antitrust judgment of $160.8 million against Nucor and co-defendants is under appeal to the Fifth Circuit, with no reserve recorded.
- The base quarterly dividend was increased to $0.3725 per share in December 2014; total 2014 dividends declared were $1.4825 per share.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 27, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $21.11B$19.05B | +10.8% |
| Cost of Revenue | $19.26B$17.64B | +9.2% |
| Gross Profit | $1.85B$1.41B | +31.1% |
| SG&A Expenses | $520.80M$467.90M | +11.3% |
| Interest Expense | $174.14M$151.99M | +14.6% |
| Net Income | $679.34M$488.02M | +39.2% |
| EPS (Basic) | $2.12$1.52 | +39.5% |
| EPS (Diluted) | $2.11$1.52 | +38.8% |
| Shares Outstanding (Basic) | 319.84M319.08M | +0.2% |
| Shares Outstanding (Diluted) | 320.13M319.27M | +0.3% |
05—Questions
Frequently Asked Questions
How did Nucor perform financially in 2014 compared with 2013?
Net sales increased 11% to $21.11 billion from $19.05 billion. Net earnings attributable to Nucor stockholders rose 46% to $713.9 million, or $2.22 per diluted share, from $488.0 million, or $1.52 per share. Return on average stockholders' equity was 9.3% versus 6.4% in 2013.
What is driving the problems at the Louisiana DRI facility?
The facility, which began production in December 2013, experienced significant operational losses and start-up costs of $87.8 million in 2014, mainly from yield loss and several outages. In November 2014 a process gas heater failed, suspending production. Nucor estimates the plant will be operational again in late first quarter 2015, and the filing notes the facility's operating losses were approximately $135 million for 2014.
What do management and the filing say about the outlook for 2015?
Management believes net sales and financial results will be similar to 2014. It expects first-quarter 2015 operating results similar to first-quarter 2014, anticipates a more positive earnings trend in the second quarter and second half, and projects capital expenditures of approximately $500 million. Management also cites headwinds from the late-2014 collapse in oil prices and rising imports.
What legal risks does the filing disclose?
Nucor is a co-defendant in antitrust class actions filed by steel purchasers, and the company cannot predict the outcome or estimate its exposure. In the MM Steel case, a judgment of $160.8 million after trebling was entered in June 2014. Nucor has appealed to the U.S. Court of Appeals for the Fifth Circuit and has recorded no reserve for either matter.
How strong is Nucor's balance sheet and liquidity?
At December 31, 2014, cash and cash equivalents were $1.02 billion and short-term investments were $100 million. Long-term debt including current maturities was $4.38 billion, and the funded debt to total capital ratio was 36%. The $1.5 billion unsecured revolving credit facility was undrawn, and about $151 million of commercial paper was outstanding.
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