Nucor Corporation — FY 2018 Form 10-K
Business context and reporting period. Nucor manufactures steel and steel products, produces direct reduced iron (DRI), and processes and brokers metals and scrap. Most facilities and customers are in North America. This filing covers the fiscal year ended December 31, 2018; it is an annual report, not a standalone Q4 report.
Financial and operating highlights
- The steel mills segment generated approximately 65% of 2018 sales to external customers. Average facility utilization was approximately 91% in steel mills, 71% in steel products, and 72% in raw materials.
- Steel mills backlog was approximately $2.08 billion at year-end, up from $1.62 billion in 2017. Steel products backlog was approximately $2.26 billion, up from $1.83 billion; most orders were expected to ship within one year.
- Nucor recycled approximately 19.9 million gross tons of scrap steel. About 20% of steel mills shipments were consumed internally, versus 16% in 2016.
- Dividends totaled $1.52 per share in 2018, compared with $1.51 in 2017. The quarterly base dividend increased to $0.40 from $0.38 in November. The company reported $1.45 billion of dividends paid over the prior three years, equal to 28% of operating cash flow during that period.
- Nucor repurchased $854 million of shares in 2018, compared with $90.3 million in 2017 and $5.2 million in 2016. A new $2.0 billion authorization was approved in September; approximately $1.5 billion remained at year-end.
- The filing excerpt does not provide clear consolidated revenue, earnings, cash-flow, margin, total debt, cash, or current-liquidity values. Those statements are incorporated by reference to the 2018 Annual Report to Stockholders.
- At year-end, approximately 24% of long-term debt was variable-rate industrial revenue bonds and 76% was fixed-rate debt. Nucor also disclosed a $1.5 billion unsecured revolving credit facility; drawn amounts are not stated in the excerpt.
Changes, outlook, and risks
- Management described stronger U.S. steel demand and said 2018 U.S. imports fell more than 10% year over year, with imports representing approximately 23% of the U.S. market. It attributed improved domestic production partly to the strong economy and Section 232 tariffs.
- Growth spending included ongoing projects expected to start or complete in 2019, including a Kentucky galvanizing line, Arkansas specialty cold mill, and Missouri rebar micro mill. Announced projects included a Florida rebar micro mill and Arkansas galvanizing line expected in 2020–2021, and a Kentucky sheet mill expansion expected by mid-2021. In January 2019, Nucor announced a proposed $1.35 billion Midwest plate mill, expected to be completed in 2022.
- Management’s capital allocation priorities are investment in profitable growth, dividends, and opportunistic share repurchases. The excerpt does not provide formal earnings or revenue guidance.
- Key risks include global steel overcapacity and possible renewed import pressure if tariffs are lifted; cyclical demand; volatility in steel prices, scrap, energy and other inputs; energy and environmental regulation; operational interruptions; cybersecurity threats; acquisition integration; and international-market exposures.
- The company said it believed it was in substantial compliance with environmental requirements and did not expect ordinary-course legal proceedings to have a material adverse effect. Environmental compliance capital spending was estimated at less than $100 million annually for 2019 and 2020. These are management assessments, not guarantees.
Investor verification points
- Review the incorporated annual-report statements for 2018 revenue, net income, operating cash flow, margins, balance-sheet liquidity, total debt, and year-over-year comparisons.
- Verify segment earnings and the extent to which higher prices, shipments, tariffs, and raw-material costs affected results.
- Assess funding and expected returns for the announced capital projects, including their schedules and cost assumptions.
- Check actual repurchases, dividend payments, and available borrowing capacity after year-end.
- Monitor steel imports, trade-policy changes, scrap and energy costs, and environmental or permitting developments.