Nucor Reports Record Annual Earnings for 2018
CHARLOTTE, N.C., Jan. 29, 2019 /PRNewswire/ -- Nucor Corporation (NYSE: NUE) announced today record consolidated net earnings of $2.36 billion, or $7.42 per diluted share, for 2018 compared to $1.32 billion, or $4.10 per diluted share, for 2017. The new earnings record of $7.42 per diluted share in 2018 is a 24% increase as compared to the Company's previous record earnings of $5.98 per diluted share reported in 2008.
Nucor reported consolidated net earnings of $646.8 million, or $2.07 per diluted share, for the fourth quarter of 2018. By comparison, Nucor reported consolidated net earnings of $676.7 million, or $2.13 per diluted share, for the third quarter of 2018 and $383.9 million, or $1.20 per diluted share, for the fourth quarter of 2017. Consolidated net earnings of $646.8 million reported in the fourth quarter of 2018 represents the strongest fourth quarter performance in the Company's history.
"The best way to sum up 2018 is this - it was a record year for Nucor. We posted record earnings per share and record revenue, and we shipped a record amount of steel," said John Ferriola, Nucor's Chairman, Chief Executive Officer and President. "Over the past decade, we have been positioning Nucor to take full advantage of an upturn in the steel market. During that time, we invested more than $9 billion to increase the Company's peak earnings power. These investments enhanced our competitive strengths by building on our product diversity and market leadership positions. Our 2018 financial results demonstrate that Nucor's disciplined strategy of investing for profitable growth is working."
Selected Segment DataIn the first quarter of 2018, the Company began reporting its tubular products and piling businesses as part of the steel products segment. These businesses were previously included in the steel mills segment. All prior period segment data presented in this news release has been recast to reflect this change. Earnings (loss) before income taxes and noncontrolling interests by segment were as follows for the fourth quarter and full year 2018 and 2017 (in thousands):
Three Months (13 Weeks) Ended | Twelve Months (52 Weeks) Ended | |||||||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |||||
Steel mills | $ 882,438 | $ 324,275 | $ 3,500,085 | $ 1,953,075 | ||||
Steel products | 86,837 | 100,515 | 467,105 | 337,978 | ||||
Raw materials | 55,773 | 26,721 | 236,241 | 129,296 | ||||
Corporate/eliminations | (147,772) | (129,270) | (974,040) | (670,392) | ||||
$ 877,276 | $ 322,241 | $ 3,229,391 | $ 1,749,957 | |||||
Financial ReviewFor 2018, Nucor's consolidated net sales increased 24% to $25.07 billion, compared with $20.25 billion for 2017. In 2018, Nucor posted its highest consolidated sales in the Company's history, surpassing Nucor's previous record by 6%. Total tons shipped to outside customers in 2018 were 27,899,000, an increase of 5% from 2017, while average sales price per ton increased 18%.
Nucor's consolidated net sales decreased 7% to $6.30 billion in the fourth quarter of 2018 compared with $6.74 billion in the third quarter of 2018 and increased 24% compared with $5.09 billion in the fourth quarter of 2017. Average sales price per ton decreased 2% compared to the third quarter of 2018 and increased 21% compared to the fourth quarter of 2017. Total tons shipped to outside customers were 6,687,000 tons in the fourth quarter of 2018, a 5% decrease from the third quarter of 2018 and an increase of 2% from the fourth quarter of 2017. Total fourth quarter steel mill shipments decreased 6% from the third quarter of 2018 and increased 2% from the fourth quarter of 2017. Fourth quarter downstream steel products shipments to outside customers decreased 10% from the third quarter of 2018 and decreased 1% from the fourth quarter of 2017.
Third quarter 2018 results included a non-cash impairment charge of $110.0 million, or $0.26 per diluted share, related to our proved producing natural gas well assets. Also included in the third quarter of 2018 earnings was a benefit of $24.8 million, or $0.06 per diluted share, related to insurance recoveries. Fourth quarter of 2017 results included a net benefit of $175.2 million, or $0.55 per diluted share, related to the impacts of U.S. federal tax legislation enacted in the fourth quarter of 2017.
The average scrap and scrap substitute cost per gross ton used in the fourth quarter of 2018 was $359, a 4% decrease compared to $374 in the third quarter of 2018 and a 13% increase compared to $317 in the fourth quarter of 2017. The average scrap and scrap substitute cost per gross ton used for the full year 2018 was $361, an 18% increase from $307 for the full year 2017.
Overall operating rates at our steel mills decreased to 88% in the fourth quarter of 2018 as compared to 92% in the third quarter of 2018 and increased compared to 82% in the fourth quarter of 2017. Steel mill operating rates for the full year 2018 increased to 91% as compared to 86% for the full year 2017.
Total steel mill energy costs in the fourth quarter of 2018 increased approximately $2 per ton compared to the third quarter of 2018 and increased approximately $1 compared to the fourth quarter of 2017. The increases from the third quarter of 2018 and fourth quarter of 2017 were mainly due to higher natural gas unit costs. Energy costs for the full year 2018 decreased approximately $1 per ton from the full year 2017 mainly due to lower unit costs for natural gas.
Our liquidity position remains strong with approximately $1.4 billion in cash and cash equivalents as of December 31, 2018 and an untapped $1.5 billion revolving credit facility that does not expire until April 2023.
During the fourth quarter of 2018, Nucor repurchased approximately 8.4 million shares of its common stock for an average price of $60.19 per share. At December 31, 2018, Nucor had approximately 305,591,000 shares outstanding and approximately $1.5 billion available under its share repurchase program.
Recent DevelopmentsIn November 2018, Nucor's board of directors declared a cash dividend of $0.40 per share payable on February 11, 2019 to stockholders of record on December 31, 2018. This dividend is Nucor's 183rd consecutive quarterly cash dividend, and it marks 46 consecutive years of an increased base dividend. Over the past ten years, Nucor has returned more than $5 billion in capital to its stockholders in the form of base dividends, supplemental dividends and share repurchases.
In January 2019, Nucor announced that it will build a state-of-the-art plate mill in the U.S. Midwest. Nucor's board of directors approved an investment of $1.35 billion to build the mill, which is expected to be fully operational in 2022 and will be capable of producing approximately 1.2 million tons per year of steel plate products. This advanced mill will provide us enhanced ability to serve customers in the region, which is the largest plate-consuming area in the U.S., and to meet all the steel needs of customers around the country. The site for the new mill is anticipated to be selected early this year.
Fourth Quarter AnalysisAs expected, the fourth quarter of 2018 was another strong quarter for Nucor. Earnings in the fourth quarter of 2018 declined from the third quarter of 2018 due in part to typical seasonality. The profitability of the steel mills segment decreased from the third quarter of 2018 due to lower shipments across the segment and lower average selling prices at our sheet, bar and structural mills. The performance of our steel products segment decreased from the third quarter of 2018 due to some decline in our tubular products group, which experienced a strong third quarter, and our rebar fabrication businesses. The raw materials segment's performance decreased in the fourth quarter of 2018 as compared to the third quarter of 2018 due to decreased earnings of our DRI businesses.
OutlookFollowing 2018's record-setting earnings performance, we believe that 2019 will be another strong year as we expect the earnings performance to be one of the best in Nucor's history. As we enter 2019, we have a positive outlook on end-use demand and general economic conditions.
We expect another strong quarter for earnings in the first quarter of 2019. Although sheet pricing and margins are expected to decrease in the first quarter of 2019 as compared to the fourth quarter of 2018, this will be partially offset by expected increases in profitability of our bar mills and structural mills. The performance of the raw materials segment is expected to decrease in the first quarter of 2019 as compared to the fourth quarter of 2018 due to the decreased performance of our DRI businesses, which continue to be negatively impacted by declining average selling prices for raw materials that began in the fourth quarter of 2018. The profitability of our steel products segment in the first quarter of 2019 is expected to be similar to the fourth quarter of 2018. We expect first quarter of 2019 earnings to be much stronger than the first quarter of 2018.
About NucorNucor and its affiliates are manufacturers of steel and steel products, with operating facilities primarily in the U.S. and Canada. Products produced include: carbon and alloy steel -- in bars, beams, sheet and plate; hollow structural section tubing; electrical conduit; steel piling; steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; steel grating; and wire and wire mesh. Nucor, through The David J. Joseph Company, also brokers ferrous and nonferrous metals, pig iron and hot briquetted iron / direct reduced iron; supplies ferro-alloys; and processes ferrous and nonferrous scrap. Nucor is North America's largest recycler.
Forward-Looking StatementsCertain statements contained in this news release are "forward-looking statements" that involve risks and uncertainties. The words "believe," "expect," "project," "will," "should," "could" and similar expressions are intended to identify those forward-looking statements. Factors that might cause the Company's actual results to differ materially from those anticipated in forward-looking statements include, but are not limited to: (1) competitive pressure on sales and pricing, including competition from imports and substitute materials; (2) U.S. and foreign trade policies affecting steel imports or exports; (3) the sensitivity of the results of our operations to prevailing steel prices and the changes in the supply and cost of raw materials, including scrap steel; (4) market demand for steel products; and (5) energy costs and availability. These and other factors are discussed in Nucor's regulatory filings with the Securities and Exchange Commission, including those in Nucor's 2017 Annual Report on Form 10-K, Item 1A. Risk Factors. The forward-looking statements contained in this news release speak only as of this date, and Nucor does not assume any obligation to update them.
Broadcast of Conference CallYou are invited to listen to the live broadcast of Nucor's conference call in which management will discuss Nucor's fourth quarter results on January 29, 2019 at 2:00 p.m. Eastern time. The conference call will be available over the Internet at www.nucor.com.
TONNAGE DATA | ||||||||||||
(in thousands) | ||||||||||||
Three Months (13 Weeks) Ended | Twelve Months (52 Weeks) Ended | |||||||||||
Dec. 31, 2018 | Dec. 31, 2017 | Percentage Change | Dec. 31, 2018 | Dec. 31, 2017 | Percentage Change | |||||||
Steel mills total shipments: | ||||||||||||
Sheet | 2,573 | 2,566 | - | 10,789 | 10,607 | 2% | ||||||
Bars | 2,014 | 1,982 | 2% | 8,895 | 8,009 | 11% | ||||||
Structural | 615 | 504 | 22% | 2,437 | 2,111 | 15% | ||||||
Plate | 630 | 556 | 13% | 2,418 | 2,300 | 5% | ||||||
Other | 56 | 173 | -68% | 350 | 590 | -41% | ||||||
5,888 | 5,781 | 2% | 24,889 | 23,617 | 5% | |||||||
Sales tons to outside customers: | ||||||||||||
Steel mills | 4,765 | 4,629 | 3% | 19,890 | 19,137 | 4% | ||||||
Joist | 135 | 140 | -4% | 490 | 472 | 4% | ||||||
Deck | 127 | 128 | -1% | 479 | 457 | 5% | ||||||
Cold finished | 132 | 126 | 5% | 569 | 487 | 17% | ||||||
Fabricated concrete | ||||||||||||
reinforcing steel | 274 | 285 | -4% | 1,225 | 1,142 | 7% | ||||||
Piling | 127 | 144 | -12% | 565 | 564 | - | ||||||
Tubular products | 229 | 225 | 2% | 1,058 | 917 | 15% | ||||||
Other | 898 | 865 | 4% | 3,623 | 3,316 | 9% | ||||||
6,687 | 6,542 | 2% | 27,899 | 26,492 | 5% | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) | |||||||
(In thousands, except per share data) | |||||||
Three Months (13 Weeks) Ended | Twelve Months (52 Weeks) Ended | ||||||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | ||||
Net sales | $ 6,295,884 | $ 5,092,328 | $ 25,067,279 | $ 20,252,393 | |||
Costs, expenses and other: | |||||||
Cost of products sold | 5,183,622 | 4,571,760 | 20,771,871 | 17,682,986 | |||
Marketing, administrative and other expenses | 209,300 | 168,102 | 860,722 | 687,531 | |||
Equity in earnings of unconsolidated affiliates | (6,083) | (11,860) | (40,240) | (41,661) | |||
Impairment of assets | - | - | 110,000 | - | |||
Interest expense, net | 31,769 | 42,085 | 135,535 | 173,580 | |||
5,418,608 | 4,770,087 | 21,837,888 | 18,502,436 | ||||
Earnings before income taxes and | |||||||
noncontrolling interests | 877,276 | 322,241 | 3,229,391 | 1,749,957 | |||
Provision for income taxes | 196,206 | (72,853) | 748,307 | 369,386 | |||
Net earnings | 681,070 | 395,094 | 2,481,084 | 1,380,571 | |||
Earnings attributable to | |||||||
noncontrolling interests | 34,291 | 11,203 | 120,317 | 61,883 | |||
Net earnings attributable to | |||||||
Nucor stockholders | $ 646,779 | $ 383,891 | $ 2,360,767 | $ 1,318,688 | |||
Net earnings per share: | |||||||
Basic | $2.08 | $1.20 | $7.44 | $4.11 | |||
Diluted | $2.07 | $1.20 | $7.42 | $4.10 | |||
Average shares outstanding: | |||||||
Basic | 309,804 | 319,210 | 315,858 | 319,990 | |||
Diluted | 310,447 | 319,967 | 316,733 | 320,773 | |||
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | ||||||
(In thousands) | ||||||
Dec. 31, 2018 | Dec. 31, 2017 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ 1,398,886 | $ 949,104 | ||||
Short-term investments | - | 50,000 | ||||
Accounts receivable, net | 2,505,568 | 2,028,545 | ||||
Inventories, net | 4,553,500 | 3,461,686 | ||||
Other current assets | 178,311 | 335,085 | ||||
Total current assets | 8,636,265 | 6,824,420 | ||||
Property, plant and equipment, net | 5,334,748 | 5,093,147 | ||||
Goodwill | 2,184,336 | 2,196,058 | ||||
Other intangible assets, net | 828,504 | 914,646 | ||||
Other assets | 936,735 | 812,987 | ||||
Total assets | $ 17,920,588 | $ 15,841,258 | ||||
LIABILITIES | ||||||
Current liabilities: | ||||||
Short-term debt | $ 57,870 | $ 52,833 | ||||
Long-term debt due within one year | - | 500,000 | ||||
Accounts payable | 1,428,191 | 1,181,346 | ||||
Salaries, wages and related accruals | 709,397 | 516,660 | ||||
Accrued expenses and other current liabilities | 610,842 | 573,925 | ||||
Total current liabilities | 2,806,300 | 2,824,764 | ||||
Long-term debt due after one year | 4,233,276 | 3,242,242 | ||||
Deferred credits and other liabilities | 679,044 | 689,464 | ||||
Total liabilities | 7,718,620 | 6,756,470 | ||||
EQUITY | ||||||
Nucor stockholders' equity: | ||||||
Common stock | 152,061 | 151,960 | ||||
Additional paid-in capital | 2,073,715 | 2,021,339 | ||||
Retained earnings | 10,337,445 | 8,463,709 | ||||
Accumulated other comprehensive loss, | ||||||
net of income taxes | (304,133) | (254,681) | ||||
Treasury stock | (2,467,010) | (1,643,291) | ||||
Total Nucor stockholders' equity | 9,792,078 | 8,739,036 | ||||
Noncontrolling interests | 409,890 | 345,752 | ||||
Total equity | 10,201,968 | 9,084,788 | ||||
Total liabilities and equity | $ 17,920,588 | $ 15,841,258 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | ||||||||
(In thousands) | ||||||||
Twelve Months (52 Weeks) Ended | ||||||||
Dec. 31, 2018 | Dec. 31, 2017 | |||||||
Operating activities: | ||||||||
Net earnings | $ 2,481,084 | $ 1,380,571 | ||||||
Adjustments: | ||||||||
Depreciation | 630,879 | 635,833 | ||||||
Amortization | 88,758 | 91,228 | ||||||
Stock-based compensation | 73,422 | 64,176 | ||||||
Deferred income taxes | 3,017 | (221,173) | ||||||
Distributions from affiliates | 30,196 | 49,295 | ||||||
Equity in earnings of unconsolidated affiliates | (40,240) | (41,661) | ||||||
Impairment of assets | 110,000 | - | ||||||
Changes in assets and liabilities (exclusive of acquisitions and dispositions): | ||||||||
Accounts receivable | (485,433) | (329,501) | ||||||
Inventories | (1,092,101) | (900,946) | ||||||
Accounts payable | 235,572 | 314,817 | ||||||
Federal income taxes | 163,743 | (107,577) | ||||||
Salaries, wages and related accruals | 204,796 | 87,700 | ||||||
Other operating activities | (9,741) | 32,576 | ||||||
Cash provided by operating activities | 2,393,952 | 1,055,338 | ||||||
Investing activities: | ||||||||
Capital expenditures | (982,531) | (448,555) | ||||||
Investment in and advances to affiliates | (121,412) | (59,000) | ||||||
Disposition of plant and equipment | 31,589 | 25,315 | ||||||
Acquisitions (net of cash acquired) | (33,063) | (544,041) | ||||||
Purchases of investments | - | (50,000) | ||||||
Proceeds from the sale of investments | 50,000 | 150,000 | ||||||
Other investing activities | 25,348 | 7,389 | ||||||
Cash used in investing activities | (1,030,069) | (918,892) | ||||||
Financing activities: | ||||||||
Net change in short-term debt | 5,037 | 34,872 | ||||||
Proceeds from long-term debt, net of discount | 995,710 | - | ||||||
Repayment of long-term debt | (500,000) | (600,000) | ||||||
Bond issuance related costs | (7,625) | - | ||||||
Issuance of common stock | 24,101 | 7,070 | ||||||
Payment of tax withholdings on certain stock-based compensation | (22,123) | (14,408) | ||||||
Distributions to noncontrolling interests | (56,179) | (90,974) | ||||||
Cash dividends | (485,376) | (485,321) | ||||||
Acquisition of treasury stock | (853,997) | (90,304) | ||||||
Other financing activities | (7,725) | (3,241) | ||||||
Cash used in financing activities | (908,177) | (1,242,306) | ||||||
Effect of exchange rate changes on cash | (5,924) | 9,003 | ||||||
Increase (decrease) in cash and cash equivalents | 449,782 | (1,096,857) | ||||||
Cash and cash equivalents - beginning of year | 949,104 | 2,045,961 | ||||||
Cash and cash equivalents - end of year | $ 1,398,886 | $ 949,104 | ||||||
Non-cash investing activity: | ||||||||
Change in accrued plant and equipment purchases and | ||||||||
assets acquired by capital lease arrangements | $ 14,725 | $ 58,519 | ||||||
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SOURCE Nucor Corporation