01—Abstract
Summary
Summary of the 10-K filed February 26, 2021. Cited figures are marked; the original filing is the authoritative source.
Nucor Corporation's 2020 Form 10-K, filed February 26, 2021, reports that the COVID-19 pandemic was the primary driver of a sharp earnings decline.
Net sales fell 11% to $20.14 billiona from $22.59 billion, and net earnings attributable to Nucor stockholders dropped to $721.5 million, or $2.36 per diluted share, from $1.27 billion, or $4.14 per diluted share, in 2019. Results were hit by a $483.5 million loss and impairment related to the exited Duferdofin Nucor joint venture and $103.2 million of impairments in the steel mills segment. The steel products segment reached record profitability in 2020, while the steel mills segment's pre-tax earnings fell to $720.2 million from $1.79 billion.
Balance sheet liquidity remained strong. Cash, short-term investments and restricted cash totaled $3.16 billionb at year-end 2020, and the company issued $1.0 billion of 2.000% and 2.700% notes in May 2020. Total long-term debt and finance lease obligations rose to $5.49 billion.
Management stated it intends to return at least 40% of net earnings to stockholders, and it reported $1.16 billionc remaining under its share repurchase authorization. Credit ratings were Baa1 (Moody's) and A- (S&P), with stable outlooks. Management expects first-quarter 2021 earnings to increase significantly from the fourth quarter of 2020, with 2021 capital expenditures projected at approximately $2.00 billion.
The filing highlights ongoing risks, including excess global steel capacity (OECD estimate of 776 million tons in 2020), raw material and scrap price volatility, and the impact of the COVID-19 pandemic. Section 232 tariffs kept finished steel imports down 23%d in 2020, to about 18% of U.S. market share.
02—Key points
Key Highlights
- Net sales fell 11% to $20.14 billion in 2020, and net earnings attributable to Nucor stockholders fell to $721.5 million ($2.36 per diluted share) from $1.27 billion ($4.14 per diluted share) in 2019.
- The steel products segment posted record profitability in 2020, with pre-tax earnings of $690.5 million versus $511.1 million in 2019.
- Steel mills segment pre-tax earnings fell to $720.2 million from $1.79 billion, driven by lower average selling prices and a $483.5 million loss and impairment tied to Duferdofin Nucor.
- Year-end 2020 cash, short-term investments and restricted cash totaled $3.16 billion, and net debt to total capital was approximately 13%.
- The company returned about 61% of net income to stockholders over the past three years, and it intends to return at least 40% of net earnings going forward.
- Nucor expects first-quarter 2021 earnings to increase significantly versus the fourth quarter of 2020, with 2021 capital expenditures projected at about $2.00 billion.
- Section 232 tariffs reduced finished steel imports by about 23% in 2020, to roughly 18% of U.S. market share, the lowest level since 2003.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 26, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $20.14B$22.59B | −10.8% |
| Cost of Revenue | $17.91B$19.91B | −10.0% |
| Gross Profit | $2.23B$2.68B | −16.8% |
| SG&A Expenses | $615.04M$711.25M | −13.5% |
| Interest Expense | $166.61M$157.36M | +5.9% |
| Net Income | $721.47M$1.27B | −43.2% |
| EPS (Basic) | $2.37$4.14 | −42.8% |
| EPS (Diluted) | $2.36$4.14 | −43.0% |
| Shares Outstanding (Basic) | 303.17M305.04M | −0.6% |
| Shares Outstanding (Diluted) | 303.27M305.50M | −0.7% |
05—Questions
Frequently Asked Questions
Why did Nucor's earnings decline sharply in 2020?
The filing states that the COVID-19 pandemic and its impact on the domestic economy were the primary factor. Lower average steel selling prices, decreased metal margins in the steel mills segment, and charges of $613.6 million in losses and impairments of assets (including $483.5 million related to Duferdofin Nucor) also contributed. Diluted earnings per share fell to $2.36 from $4.14.
How strong is Nucor's liquidity and balance sheet?
Cash and cash equivalents, short-term investments and restricted cash totaled $3.16 billion at December 31, 2020. The $1.50 billion revolving credit facility was undrawn, and the funded debt to total capital ratio was 32%. Nucor reports the strongest credit ratings in the North American steel sector, at Baa1 and A- with stable outlooks.
How is Nucor returning capital to shareholders?
Nucor paid a total dividend of $1.61 per share in 2020, up from $1.60 in 2019, and declared a quarterly dividend of $0.405 per share in February 2021. It repurchased $39.5 million of stock in 2020, and about $1.16 billion remained available under its repurchase program. The company intends to return at least 40% of net earnings to stockholders.
What is the outlook for 2021?
Management expects first-quarter 2021 earnings to increase significantly compared with the fourth quarter of 2020, driven by higher steel mills selling prices and expected volumes. It anticipates modest growth in domestic steel demand for 2021 and expects capital expenditures of about $2.00 billion.
What are the main risks facing Nucor?
Key risks include global steel overcapacity, particularly from China, which the OECD estimated at 776 million tons in 2020, and the potential removal of Section 232 tariffs. Other risks include volatile scrap, electricity and natural gas prices, the cyclical nature of steel demand, climate-related regulation, and the continuing effects of the COVID-19 pandemic.
06—Continue