Nucor Reports Results for Fourth Quarter and Year Ended 2015

Jan 28, 2016, 09:00 ET from Nucor Corporation

CHARLOTTE, N.C., Jan. 28, 2016 /PRNewswire/ -- Nucor Corporation (NYSE: NUE) announced today fourth quarter of 2015 adjusted consolidated net earnings of $144.7 million, or $0.46 per diluted share. Adjusted fourth quarter of 2015 consolidated net earnings of $0.46 per diluted share was above our quantitative guidance of $0.15-$0.20 per diluted share due to a larger than forecasted LIFO credit and better than forecasted performance in our steel mills segment. This adjusted net earnings excludes a $153.0 million ($0.48 per diluted share) impairment charge related to our Duferdofin Nucor S.r.l. joint venture and an $84.1 million ($0.17 per diluted share) impairment charge on assets which are primarily engineering and equipment related to the current blast furnace project that we concluded in the fourth quarter of 2015 will not be utilized in the future at our St. James Parish, Louisiana site. Including these two impairment charges, Nucor's consolidated net loss for the fourth quarter is $62.0 million, or $0.19 per diluted share. This compares with consolidated net earnings of $227.1 million, or $0.71 per diluted share, for the third quarter of 2015 and consolidated net earnings of $210.4 million, or $0.65 per diluted share, in the fourth quarter of 2014.  Nucor reported consolidated net earnings of $357.7 million, or $1.11 per diluted share, for the full year 2015, which compares with consolidated net earnings of $713.9 million, or $2.22 per diluted share, for the full year 2014. A reconciliation of Adjusted Net Earnings to Net Loss Attributable to Nucor Stockholders for the fourth quarter of 2015 is as follows:

 

Reconciliation Between Adjusted Net Earnings and Net Loss (unaudited)

for the 13 weeks ended December 31, 2015

Diluted Per Share Effect

Amount (in thousands)

(net of tax)

Adjusted net earnings

$                  144,718

$                            0.46

Impairment charges:

Duferdofin-Nucor

153,000

0.48

Louisiana blast furnace assets

84,133

0.17

Total gross impairment charges

237,133

0.65

Tax benefit

(30,393)

Net impairment charges

206,740

Net loss attributable

to Nucor stockholders

$                   (62,022)

$                           (0.19)

 

In our 2015 third quarter Form 10-Q, we noted that "steel market conditions in Europe have continued to be challenging through the third quarter of 2015, and, therefore, it is reasonably possible that material deviation of future performance from the estimates used in our most recent valuation could result in impairment of our investment in Duferdofin Nucor." Due to the recent operating performance and deteriorations in near-term financial projections, we assessed our equity method investment in Duferdofin Nucor S.r.l. for impairment in the fourth quarter of 2015. As a result of that assessment, we recorded a $153.0 million ($0.48 per diluted share) non-cash impairment charge related to our investment in the joint venture. The provision for income taxes is not affected by this impairment charge, which has caused Nucor's effective tax rate for the fourth quarter of 2015 to be unusually high. The team at Duferdofin Nucor S.r.l. has been working extremely hard at implementing new strategies that impact every aspect of its business. The core initiatives of these strategies are a relentless focus on production efficiency and cost reduction; a shift in product mix to increase shipments of value-added products such as engineered bar that have higher margins; and implementing and maintaining a progressive safety and environmental culture. We are already seeing positive results from these initiatives and believe the joint venture is positioning itself for profitability in the future.

Also during the fourth quarter of 2015, we determined that certain assets, the majority of which are engineering and equipment related to the current blast furnace project at our St. James Parish, Louisiana site will not be utilized. If we decide to proceed with a blast furnace at the site in the future, the project design will be evaluated at that time utilizing new equipment and engineering. As a result of this determination, we recorded an $84.1 million ($0.17 per diluted share) non-cash charge to write-down the entire amount of these capitalized assets. In our 2015 third quarter Form 10-Q, we noted that "changes to anticipated development activities at this site could result in full or partial impairment of these capitalized assets." Due to market conditions and overcapacity in the global and domestic steel industries, any decision to construct a redesigned blast furnace at the St. James Parish site will be made at a future date.

Earnings (loss) before income taxes and noncontrolling interests by segment were as follows for the fourth quarter and full year 2015 and 2014 (in thousands):

 

Three Months (13 Weeks) Ended

Twelve Months (52 Weeks) Ended

December 31, 2015

December 31, 2014

December 31, 2015

December 31, 2014

Earnings (loss) before income

taxes and noncontrolling interests:

Steel mills

$                 (46,611)

$               405,714

$               629,793

$            1,594,352

Steel products

76,787

58,101

276,048

166,323

Raw materials

(161,160)

(8,456)

(283,938)

(29,053)

Corporate/eliminations

150,684

(104,133)

87,335

(527,045)

$                  19,700

$               351,226

$               709,238

$            1,204,577

 

Nucor's results include a $217.8 million credit ($0.41 per diluted share) to value inventories using the last-in, first-out (LIFO) method of accounting in the fourth quarter of 2015, compared with a credit of $137.0 million ($0.27 per diluted share) recorded in the third quarter of 2015 and a credit of $57.3 million ($0.11 per diluted share) for the fourth quarter and full year 2014. Nucor's full year LIFO credit was $466.8 million ($0.89 per diluted share) in 2015.

The third quarter of 2015 results were impacted by an out-of-period non-cash gain of $10.2 million ($0.03 per diluted share) related to a correction of deferred tax balances. The fourth quarter of 2014 results were impacted by approximately $8.9 million ($0.02 per diluted share) of inventory-related purchase accounting adjustments associated with the acquisition of Nucor Steel Gallatin and a $9.2 million ($0.03 per diluted share) out-of-period non-cash gain related to a correction to tax balances.

For the full year 2015, Nucor's consolidated net sales decreased 22% to $16.44 billion, compared with $21.11 billion for 2014. Total tons shipped to outside customers were 22,680,000, a decrease of 11% from the full year 2014.

Nucor's consolidated net sales decreased 18% to $3.46 billion in the fourth quarter of 2015 compared with $4.23 billion in the third quarter of 2015 and decreased 31% compared with $5.00 billion in the fourth quarter of 2014. Average sales price per ton decreased 6% from the third quarter of 2015 and decreased 18% from the fourth quarter of 2014. Total tons shipped to outside customers were 5,107,000 tons in the fourth quarter of 2015, a 13% decrease from the third quarter of 2015 and a decrease of 16% from the fourth quarter of 2014. Total fourth quarter steel mill shipments decreased 14% from the third quarter of 2015 and decreased 16% from the fourth quarter of 2014. Fourth quarter downstream steel products shipments to outside customers decreased 13% from the third quarter of 2015 and increased 1% over the fourth quarter of 2014.

The average scrap and scrap substitute cost per ton used for the full year 2015 was $270, a 29% decrease from $381 in 2014. The average scrap and scrap substitute cost per ton used in the fourth quarter of 2015 was $219, a decrease of 16% from $262 in the third quarter of 2015 and 40% from $363 in the fourth quarter of 2014.

Overall operating rates at our steel mills decreased to 68% for the full year 2015 from 78% for the full year 2014. Steel mill utilization rates in the fourth quarter (63%) decreased compared to the third quarter of 2015 (69%) and the fourth quarter of 2014 (76%).

For the full year 2015, total steel mill energy costs for natural gas and electricity decreased approximately $3 per ton from the prior year primarily due to lower natural gas and electricity unit costs. In the fourth quarter of 2015, total steel mill energy costs decreased approximately $4 per ton from the third quarter of 2015 and decreased approximately $4 per ton from the fourth quarter of 2014 due to lower electricity and natural gas unit costs.

Our liquidity position remains strong with $2.04 billion in cash and cash equivalents and short-term investments and an untapped $1.5 billion revolving credit facility that does not expire until August 2018. Cash provided by operating activities for 2015 was robust at $2.16 billion compared to $1.34 billion in 2014.

In December, Nucor's board of directors declared a cash dividend of $0.375 per share payable on February 11, 2016 to stockholders of record on December 31, 2015. This dividend is Nucor's 171st consecutive quarterly cash dividend, and it marks 43 consecutive years of an increased base dividend.

Also in December, we repurchased approximately 1.7 million shares of the company's common stock for an average share price of $39.96 under the recently announced share repurchase program. In September, Nucor's board of directors approved the repurchase of up to $900 million of the company's common stock. The December repurchases were the first under the new program.

Operating performance at the steel mills segment in the fourth quarter of 2015 decreased from the third quarter of 2015 due to lower average selling prices and decreased volumes. The steel mills segment was also negatively impacted by the cost of working through higher priced scrap, work-in-process and finished goods inventories to begin the fourth quarter of 2015. Negative pricing trends and low volumes are due to continued deterioration in global steel markets amplified by global excess capacity and historically high import levels. Although the trade remedy process has not moved as quickly as we would like, we believe that preliminary antidumping and countervailing duties and affirmative critical circumstances findings in the steel sheet cases should have a positive impact on domestic sheet mills in the first half of 2016. Nonresidential construction markets, although improved from 2014, are beginning to slow mainly due to seasonal factors.  Energy, heavy equipment and agricultural markets remain weak. The automotive market remains strong.

The performance of our downstream products segment decreased from the third quarter of 2015 due to typical fourth quarter seasonality, but increased from the fourth quarter of 2014.  This improved performance compared to the prior year reflects the gradual improvement in nonresidential construction markets. 

We experienced lower performance in the raw materials segment in the fourth quarter compared to the third quarter of 2015 due to lower scrap and metallic commodity prices causing margin compression at our scrap processing businesses. During the fourth quarter of 2015, we completed a planned maintenance outage at Nucor Steel Louisiana. However, due to market conditions, the Louisiana direct reduced iron (DRI) facility did not immediately resume operations after completion of the planned maintenance outage. Nucor Steel Louisiana has recently resumed operations and is producing DRI at a high quality level.

We currently expect a LIFO expense of $13.5 million ($0.03 per diluted share) in the first quarter of 2016.  We anticipate some improvement in the steel mills segment in the first quarter of 2016 compared to the fourth quarter of 2015 due to a lower average cost of inventory to begin the first quarter and a modest improvement in market conditions. Positive market factors include a small decline in import volumes and more balanced inventory levels at service center customers. The profitability of our downstream products segment in the first quarter of 2016 is expected to decrease from the fourth quarter of 2015 as typical winter seasonality has its greatest impact on nonresidential construction markets in the first quarter. Conditions in nonresidential construction markets will improve as we enter the construction season in the second quarter, and we expect another strong year in 2016 for this segment. We anticipate some slight improvement in the performance of the raw materials segment in the first quarter of 2016 primarily due to the absence of the maintenance outage at Nucor Steel Louisiana that occurred in the fourth quarter of 2015 and improved margins in our scrap recycling business. However, market conditions in the raw materials segment will continue to be extremely challenging due to the overall depressed and volatile levels of pricing for raw materials. 

Nucor and its affiliates are manufacturers of 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; 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 HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap. Nucor is North America's largest recycler.

Certain 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) 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; (3) market demand for steel products; and (4) 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 fiscal 2014 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.

You 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 28, 2016 at 2:00 p.m. eastern time. The conference call will be available over the Internet at www.nucor.com, under Investor Relations.

 

 TONNAGE DATA 

 (in thousands) 

 Quarter Ended December 31, 

 Year Ended December 31, 

2015

2014

Percentage Change

2015

2014

Percentage Change

Steel mills production

4,398

5,205

-16%

19,294

21,135

-9%

Steel mills total shipments

4,459

5,317

-16%

19,860

21,967

-10%

Sales tons to outside customers:

Steel mills

3,823

4,584

-17%

17,006

18,681

-9%

Joist

117

104

13%

427

421

1%

Deck

110

95

16%

401

396

1%

Cold finished

95

104

-9%

449

504

-11%

Fabricated concrete

reinforcing steel

265

283

-6%

1,190

1,185

-

Other

697

900

-23%

3,207

4,226

-24%

5,107

6,070

-16%

22,680

25,413

-11%

 

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)

(In thousands, except per share data)

Quarter Ended December 31,

Year Ended December 31,

2015

2014

2015

2014

Net sales

$     3,456,713

$     5,003,753

$      16,439,276

$ 21,105,141

Costs, expenses and other:

  Cost of products sold

3,073,875

4,489,882

14,858,014

19,198,615

  Marketing, administrative and other expenses

89,197

123,500

458,989

520,805

  Equity in earnings of

unconsolidated affiliates

(4,779)

(3,477)

(5,329)

(13,505)

  Impairments and losses on assets

237,133

3,847

244,833

25,393

  Interest expense, net

41,587

38,775

173,531

169,256

3,437,013

4,652,527

15,730,038

19,900,564

Earnings before income taxes and

noncontrolling interests

19,700

351,226

709,238

1,204,577

Provision for income taxes

34,988

106,268

213,154

388,787

Net (loss) earnings

(15,288)

244,958

496,084

815,790

Earnings attributable to

noncontrolling interests

46,734

34,531

138,425

101,844

Net (loss) earnings attributable to 

Nucor stockholders

$         (62,022)

$        210,427

$          357,659

$      713,946

Net (loss) earnings per share:

  Basic

($0.19)

$0.66

$1.11

$2.22

  Diluted

($0.19)

$0.65

$1.11

$2.22

Average shares outstanding:

  Basic

320,629

320,157

320,565

319,838

  Diluted

320,687

320,449

320,693

320,127

 

 CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) 

 (In thousands) 

Dec. 31, 2015

Dec. 31, 2014

 ASSETS 

 Current assets: 

 Cash and cash equivalents 

$       1,939,469

$   1,024,144

 Short-term investments 

100,000

100,000

 Accounts receivable, net 

1,383,823

2,068,298

 Inventories, net 

2,145,444

2,745,032

 Other current assets 

185,644

504,414

 Total current assets 

5,754,380

6,441,888

 Property, plant and equipment, net 

4,891,153

5,287,639

 Goodwill 

2,011,278

2,068,664

 Other intangible assets, net 

770,672

862,093

 Other assets 

822,916

955,643

 Total assets 

$     14,250,399

$ 15,615,927

 LIABILITIES 

 Current liabilities: 

 Short-term debt 

$           51,315

$     207,476

 Long-term debt due within one year 

-

16,335

 Accounts payable 

566,527

993,872

 Salaries, wages and related accruals 

289,004

352,488

 Accrued expenses and other current liabilities 

478,327

527,605

 Total current liabilities 

1,385,173

2,097,776

 Long-term debt due after one year 

4,360,600

4,360,600

 Deferred credits and other liabilities 

718,613

1,082,433

 Total liabilities 

6,464,386

7,540,809

 EQUITY 

 Nucor stockholders' equity: 

 Common stock 

151,426

151,237

 Additional paid-in capital 

1,918,970

1,883,356

 Retained earnings 

7,255,972

7,378,214

 Accumulated other comprehensive loss, 

 net of income taxes 

(351,362)

(145,708)

 Treasury stock 

(1,558,128)

(1,494,629)

 Total Nucor stockholders' equity 

7,416,878

7,772,470

 Noncontrolling interests 

369,135

302,648

 Total equity 

7,786,013

8,075,118

 Total liabilities and equity 

$     14,250,399

$ 15,615,927

 

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 

 (In thousands) 

Twelve Months (52 Weeks) Ended

Dec. 31, 2015

Dec. 31, 2014

Operating activities:

Net earnings 

$               496,084

$               815,790

Adjustments:

Depreciation

625,757

652,000

Amortization

74,260

72,423

Stock-based compensation

45,794

46,384

Deferred income taxes

(82,518)

90,864

Distributions from affiliates

15,132

53,738

Equity in earnings of unconsolidated affiliates

(5,329)

(13,505)

Impairments and losses on assets

244,833

25,393

Changes in assets and liabilities (exclusive of

     acquisitions and dispositions):

Accounts receivable

655,489

(179,181)

Inventories

593,830

(45,963)

Accounts payable

(438,788)

(111,859)

Federal income taxes

62,656

(111,687)

Salaries, wages and related accruals

(56,267)

67,973

Other operating activities

(73,890)

(19,472)

Cash provided by operating activities

2,157,043

1,342,898

Investing activities:

Capital expenditures

(374,123)

(667,982)

Investment in and advances to affiliates

(80,409)

(97,841)

Repayment of advances to affiliates

-

122,000

Disposition of plant and equipment

29,390

36,563

Acquisitions (net of cash acquired)

(19,089)

(768,581)

Purchases of investments

(111,927)

(100,000)

Proceeds from the sale of investments

111,452

27,529

Other investing activities

3,010

10,250

Cash used in investing activities

(441,696)

(1,438,062)

Financing activities:

Net change in short-term debt

(155,816)

178,308

Repayment of long-term debt

(16,300)

(5,358)

Issuance of common stock

423

5,614

Excess tax benefits from stock-based compensation

2,000

3,400

Distributions to noncontrolling interests

(71,938)

(63,705)

Cash dividends

(479,432)

(475,123)

Acquisition of treasury stock

(66,505)

-

Other financing activities

(2,183)

(2,183)

Cash used in financing activities 

(789,751)

(359,047)

Effect of exchange rate changes on cash

(10,271)

(4,897)

Increase (decrease) in cash and cash equivalents

915,325

(459,108)

Cash and cash equivalents - beginning of year

1,024,144

1,483,252

Cash and cash equivalents - end of year

$            1,939,469

$            1,024,144

Non-cash investing activity:

Change in accrued plant and equipment purchases

$                 (9,355)

$               (99,115)

 

SOURCE Nucor Corporation



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