01—Abstract
Summary
Summary of the 10-K filed February 28, 2019. Cited figures are marked; the original filing is the authoritative source.
Nucor Corporation (NYSE: NUE) reported record 2018 results in this Form 10-K filed February 28, 2019.
Net sales rose 24% to $25.07 billiona from $20.25 billion, and net earnings attributable to Nucor stockholders reached $2.36 billion, or $7.42 per diluted share, compared with $1.32 billion, or $4.10 per diluted share, in 2017. Return on average stockholders' equity was 25.5%, up from 15.9%. The steel mills segment drove the results, with earnings before income taxes and noncontrolling interests of $3.50 billion.
Management attributed the gains to higher average selling prices, higher volumes, improved metal margins, and the Section 232 steel tariffs, which the filing says reduced steel imports by about 4.1 million tons in 2018. Nucor is pursuing a growth agenda, with capital expenditures of $997.3 millionb in 2018 and about $1.8 billion projected for 2019. Projects include a $1.35 billion plate mill in the U.S. Midwest, a $650 million expansion of the Ghent, Kentucky sheet mill, and joint venture Nucor-JFE's galvanized sheet plant in Mexico.
The company repurchased $854.0 millionc of its stock in 2018 under a $2.0 billion authorization, and cash dividends were $1.54 per share declared for the year. Cash and cash equivalents were $1.40 billion at year-end, and long-term debt including current maturities was $4.23 billion.
The filing also notes risks tied to global steel overcapacity, primarily in China, the possibility that tariffs could be lifted, volatility in scrap and energy costs, and greenhouse gas regulation. Management expects 2019 to be another strong year, with first-quarter 2019 earnings expected to be much stronger than first-quarter 2018, though sheet pricing and margins are expected to decline from the fourth quarter of 2018.
02—Key points
Key Highlights
- Record 2018 performance: net sales of $25.07 billion (up 24%) and net earnings attributable to Nucor stockholders of $2.36 billion ($7.42 per diluted share), versus $4.10 per diluted share in 2017.
- Steel mills segment earnings before income taxes and noncontrolling interests of $3.50 billion, the greatest factor in making 2018 the most profitable year in Nucor's history.
- Average sales price per ton rose 18% to $899, and total tons shipped to outside customers rose 5% to 27.9 million tons.
- Capital expenditures of $997.3 million in 2018; 2019 capital expenditures are projected at about $1.8 billion, including a $1.35 billion plate mill announced in January 2019.
- Shareholder returns: $854.0 million of share repurchases in 2018 under a $2.0 billion authorization (about $1.5 billion remaining at year-end), and a base quarterly dividend increased to $0.40 per share from $0.38.
- Section 232 steel tariffs cited as a key tailwind; steel imports fell more than 10% in 2018 and represented about 23% of U.S. market share.
- Impairment charge of $110.0 million on proved natural gas well assets in the Piceance Basin, recorded in the raw materials segment in the third quarter of 2018.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 28, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $25.07B$20.25B | +23.8% |
| Cost of Revenue | $20.77B$17.68B | +17.5% |
| Gross Profit | $4.30B$2.57B | +67.2% |
| SG&A Expenses | $860.72M$687.53M | +25.2% |
| Interest Expense | $161.26M$187.28M | −13.9% |
| Net Income | $2.36B$1.32B | +79.0% |
| EPS (Basic) | $7.44$4.11 | +81.0% |
| EPS (Diluted) | $7.42$4.10 | +81.0% |
| Shares Outstanding (Basic) | 315.86M319.99M | −1.3% |
| Shares Outstanding (Diluted) | 316.73M320.77M | −1.3% |
05—Questions
Frequently Asked Questions
What drove Nucor's record 2018 earnings?
The filing attributes the increase mainly to higher average selling prices, higher volumes, and improved metal margins in the steel mills segment, supported by strong U.S. economic growth, tax reform, and the Section 232 steel tariffs. Gross margin rose to $4.30 billion (17% of sales) from $2.57 billion (13%) in 2017.
How much did Nucor return to shareholders in 2018?
Nucor paid dividends declared at $1.54 per share for 2018, compared with $1.51 in 2017, and repurchased $854.0 million of common stock during the year. The filing states that over the past 10 years Nucor has returned more than $5 billion to stockholders through dividends and share repurchases.
What major growth investments is Nucor making?
The filing describes several projects, including a $650 million expansion of the Ghent, Kentucky sheet mill to about 3.0 million tons annually, a $240 million galvanizing line at Nucor Steel Arkansas, two rebar micro mills in Sedalia, Missouri and Frostproof, Florida, and a plate mill in the U.S. Midwest with an expected investment of $1.35 billion, expected to be completed in 2022.
What are the main risks identified in the filing?
Key risks include global steel overcapacity, particularly in China, which could increase imports if Section 232 tariffs are lifted; cyclical demand tied to construction and other industries; volatility in scrap steel, electricity, and natural gas prices; and greenhouse gas and other environmental regulation that could raise costs.
How strong is Nucor's balance sheet?
At December 31, 2018, Nucor had cash and cash equivalents of $1.40 billion, long-term debt including current maturities of $4.23 billion, and total Nucor stockholders' equity of $9.79 billion. The company reported a current ratio of 3.1 and a funded debt to total capital ratio of 30%. Its $1.5 billion revolving credit facility was undrawn at year-end, and the filing notes a credit rating of A- from S&P and Baa1 from Moody's.
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