Nucor Corporation — 2011 Form 10-K
Reporting period: Fiscal year ended December 31, 2011. This is an annual filing, not a standalone fourth-quarter report; the supplied filing text does not provide separate Q4 results. Nucor manufactures steel and steel products and produces and processes raw materials, including scrap and direct reduced iron (DRI). Its largest segment, steel mills, represented approximately 70% of external sales.
Financial performance and position
- Net income: $778.2 million in 2011, compared with $134.1 million in 2010 and a $293.6 million net loss in 2009.
- Revenue, operating profit, cash flow, and margins: The supplied filing text does not provide clear values. The statements and detailed MD&A are incorporated by reference to the 2011 Annual Report, which is not included in the supplied text.
- Debt and liquidity: Absolute debt, cash, and current-liquidity figures are not provided in the supplied text. Nucor reported a $1.5 billion unsecured revolving credit facility. At year-end, 24% of long-term debt was variable-rate industrial revenue bonds and 76% was fixed-rate debt.
- Capacity utilization: Average utilization was approximately 74% for steel mills, 57% for steel products, and 70% for raw materials.
- Backlog: Steel mills backlog was approximately $1.80 billion, up from $1.64 billion at year-end 2010; steel products backlog was $1.11 billion, up from $1.02 billion. Most orders were expected to be filled within one year.
- Investment and shareholder returns: The company reported approximately $2.73 billion of capital expenditures, excluding acquisitions, over the five years through 2011. Its 2011 dividend was $1.45 per share, versus $1.44 in 2010.
Changes, outlook, and management commentary
- Nucor returned to profitability in 2010 and increased net income substantially in 2011, though management described economic conditions and the outlook as uncertain.
- Planned growth included approximately $290 million of upgrades to bar mills, expected to add one million tons of special bar quality and wire rod capacity by the end of 2013.
- A 2.5-million-ton-per-year Louisiana DRI facility, budgeted at $750 million, was under construction, with start-up projected for mid-2013. The existing Trinidad DRI facility’s annual capacity had expanded to 2.0 million metric tons.
- Management cited weak or uneven end-market demand, global and domestic steel overcapacity, imports, and volatility in scrap and energy costs as important pressures. U.S. steel imports represented approximately 22% of the market in 2011; domestic sheet capacity had increased by approximately five million tons since early 2010.
- Environmental rules, including greenhouse-gas requirements, could raise compliance and electricity costs; Nucor said impacts remained uncertain and did not expect current requirements to materially harm results based on available guidance. Environmental compliance capital expenditures were estimated at less than $100 million annually for 2012 and 2013.
Risks, contingencies, and unusual items
- Key risks include cyclical steel demand, competitive imports and excess capacity, changing steel prices and raw-material costs, energy-price volatility, and possible inability to pass cost increases through to customers.
- Nucor was a co-defendant in steel-purchaser antitrust litigation. It disputed the claims but said it could not predict the outcome or estimate its potential exposure.
- An Ohio environmental-permitting matter carried a civil penalty that the company said would not materially affect consolidated results; settlement was expected in 2012.
- At December 31, 2011, accumulated other comprehensive income included $40.3 million of unrealized after-tax losses on derivative instruments.
- The company reported effective disclosure controls and no material changes in internal control over financial reporting during the fourth quarter.
Important facts for investors to verify
- Review the incorporated 2011 Annual Report for revenue, segment results, margins, operating and free cash flow, balance-sheet liquidity, and total debt, which are not clear in the supplied filing text.
- Check the timing, remaining costs, and execution risks for the Louisiana DRI facility and planned mill upgrades.
- Assess exposure to steel-market demand and pricing, scrap and energy costs, import competition, and environmental regulation.
- Monitor the antitrust litigation and Ohio environmental matter for developments in potential liability.