Nucor Reports Results for Third Quarter of 2019

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Oct 22, 2019, 08:00 ET

CHARLOTTE, N.C., Oct. 22, 2019 /PRNewswire/ -- Nucor Corporation (NYSE: NUE) today announced consolidated net earnings of $275.0 million, or $0.90 per diluted share, for the third quarter of 2019. By comparison, Nucor reported consolidated net earnings of $386.5 million, or $1.26 per diluted share, for the second quarter of 2019 and $676.7 million, or $2.13 per diluted share, for the third quarter of 2018. Included in the third quarter of 2018 earnings is a non-cash impairment charge of $110.0 million, or $0.26 per diluted share, related to our proved producing natural gas well assets, as well as a benefit of $24.8 million, or $0.06 per diluted share, related to insurance recoveries.

In the first nine months of 2019, Nucor reported consolidated net earnings of $1.16 billion, or $3.78 per diluted share, compared with consolidated net earnings of $1.71 billion, or $5.35 per diluted share, in the first nine months of 2018.

"After a brief summer rally, plate and sheet market conditions softened in the third quarter. Excess inventory throughout the supply chain has resulted in continued destocking by our customers. However, spending in the nonresidential construction market remained at healthy levels during the third quarter, and we delivered continued strong performance from our metal buildings, piling, joist and deck divisions; as well as improved performance in our rebar fabrication divisions," said John Ferriola, Nucor's Chairman and Chief Executive Officer.

Mr. Ferriola added, "We continue to have great confidence in Nucor's business fundamentals and long-term strategy. Our strong cash flow generation through the cycle underscores the benefits of our low and highly variable cost structure, as well as of our highly diversified business model. Looking to 2020 and beyond, Nucor is uniquely well positioned to build on our competitive advantages and extend our long track record of shareholder value creation."

Selected Segment Data
Earnings (loss) before income taxes and noncontrolling interests by segment for the third quarter and first nine months of 2019 and 2018 were as follows (in thousands):

Three Months (13 Weeks) Ended

Nine Months (39 Weeks) Ended

Sept. 28, 2019

Sept. 29, 2018

Sept. 28, 2019

Sept. 29, 2018

Steel mills

309,939

1,095,360

1,578,257

2,617,647

Steel products

170,214

138,688

363,731

380,268

Raw materials

(10,599)

(29,074)

64,333

180,468

Corporate/eliminations

(89,215)

(282,472)

(401,744)

(826,268)

380,339

922,502

1,604,577

2,352,115

Financial Review
Nucor's consolidated net sales decreased 7% to $5.46 billion in the third quarter of 2019 compared with $5.90 billion in the second quarter of 2019 and decreased 19% compared with $6.74 billion in the third quarter of 2018. Average sales price per ton in the third quarter of 2019 decreased 5% compared with the second quarter of 2019 and decreased 13% compared with the third quarter of 2018. A total of 6,555,000 tons were shipped to outside customers in the third quarter of 2019, a 3% decrease from the second quarter of 2019 and a 7% decrease from the third quarter of 2018. Total steel mill shipments in the third quarter of 2019 were similar to total steel mill shipments from the second quarter of 2019 and decreased 8% from the third quarter of 2018. Steel mill shipments to internal customers represented 21% of total steel mill shipments in the third quarter of 2019, which compares to 19% in the second quarter of 2019 and 20% in the third quarter of 2018. Downstream steel product shipments to outside customers in the third quarter of 2019 increased 5% from the second quarter of 2019 and were similar to downstream steel product shipments to outside customers in the third quarter of 2018.

In the first nine months of 2019, Nucor's consolidated net sales decreased 7% to $17.46 billion, compared with $18.77 billion in the first nine months of 2018. Total tons shipped to outside customers in the first nine months of 2019 were 20,046,000, a decrease of 5% from the first nine months of 2018, while the average sales price per ton decreased 2%.

The average scrap and scrap substitute cost per ton used in the third quarter of 2019 was $299, a 9% decrease compared to $330 in the second quarter of 2019 and a decrease of 20% compared to $374 in the third quarter of 2018. The average scrap and scrap substitute cost per ton used in the first nine months of 2019 was $328, a decrease of 9% from $361 in the first nine months of 2018.

Pre-operating and start-up costs related to the Company's growth projects were approximately $28 million, or $0.07 per diluted share, in the third quarter of 2019, compared with approximately $21 million, or $0.05 per diluted share, in the second quarter of 2019 and approximately $11 million, or $0.03 per diluted share, in the third quarter of 2018.

In the first nine months of 2019, pre-operating and start-up costs related to the Company's growth projects were approximately $68 million, or $0.17 per diluted share, compared with approximately $19 million, or $0.05 per diluted share, in the first nine months of 2018.

Overall operating rates at the Company's steel mills decreased to 83% in the third quarter of 2019 as compared to 84% in the second quarter of 2019 and 92% in the third quarter of 2018. Operating rates for the first nine months of 2019 decreased to 85% as compared to 93% for the first nine months of 2018.

Nucor's liquidity position remains very strong with $1.94 billion in cash and cash equivalents and short-term investments at September 28, 2019 and an untapped $1.5 billion revolving credit facility that does not expire until April 2023.

Third Quarter of 2019 Highlights
In September 2019, Nucor's board of directors declared a cash dividend of $0.40 per share payable on November 8, 2019 to stockholders of record on September 27, 2019. This dividend is Nucor's 186^th consecutive quarterly cash dividend, a record the Company expects to continue.

Third Quarter of 2019 Analysis
As expected, the performance of the steel mills segment in the third quarter of 2019 decreased compared to the second quarter of 2019. Plate and sheet market conditions softened in the third quarter, and excess inventory throughout the supply chain has resulted in continued destocking by our customers.

The profitability of the steel products segment in the third quarter of 2019 improved as compared to the second quarter of 2019, as nonresidential construction market conditions remained strong. In addition, efficiency initiatives implemented at our rebar fabrication and metal buildings operations are enhancing the performance of those businesses.

The operating performance of the raw materials segment in the third quarter of 2019 decreased as compared to the second quarter of 2019 due to further margin compression in the Company's direct reduced iron (DRI) businesses. In early September, our DRI facility in Louisiana began a planned outage that is expected to last until mid-November.

Fourth Quarter of 2019 Outlook
Nucor's earnings in the fourth quarter of 2019 are expected to decrease as compared to the third quarter of 2019. We expect earnings in the steel mills segment to further decrease in the fourth quarter of 2019 from the third quarter, as lower steel prices at the end of the third quarter, which we believe have bottomed, impact our fourth quarter results. The profitability of the steel products segment in the fourth quarter of 2019 is expected to decrease slightly from the third quarter of 2019 due to normal year-end seasonality. The performance of the raw materials segment is expected to decline in the fourth quarter of 2019 compared to the third quarter of 2019 due to the impact of our Louisiana DRI plant's planned outage continuing until mid-November – as well as expected further margin pressure throughout our raw materials businesses.

About Nucor
Nucor and its affiliates are manufacturers of steel and steel products, with operating facilities in the United States 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; precision castings; 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 / DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap. Nucor is North America's largest recycler.

Forward-Looking Statements
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. These forward-looking statements reflect the Company's best judgement based on current information, and although we base these statements on circumstances that we believe to be reasonable when made, there can be no assurance that future events will not affect the accuracy of such forward-looking information. As such, the forward-looking statements are not guarantees of future performance, and actual results may vary materially from the projected results and expectations discussed in this news release. 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 pressure 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 changes in the supply and cost of raw materials, including pig iron, iron ore and scrap steel; (4) market demand for steel products, which, in the case of many of our products, is driven by the level of nonresidential construction activity in the United States; 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 "Item 1A. Risk Factors" of Nucor's Annual Report on Form 10-K for the year ended December 31, 2018. 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, except as may be required by applicable law.

Broadcast of Conference Call
You are invited to listen to the live broadcast of Nucor's conference call in which management will discuss Nucor's third quarter results on October 22, 2019 at 2:00 p.m. eastern time. The conference call will be available over the Internet at www.nucor.com, under Investors.

Tonnage Data

(In thousands)

Three Months (13 Weeks) Ended

Nine Months (39 Weeks) Ended

Sept. 28, 2019

Sept. 29, 2018

Percent
Change

Sept. 28, 2019

Sept. 29, 2018

Percent
Change

Steel mills total shipments:

Sheet

2,659

2,733

-3%

7,915

8,216

-4%

Bars

2,029

2,265

-10%

6,050

6,881

-12%

Structural

562

595

-6%

1,682

1,822

-8%

Plate

470

633

-26%

1,605

1,788

-10%

Other

325

294

11%

5,788

6,293

-8%

17,577

19,001

-7%

Sales tons to outside customers:

Steel mills

4,559

5,031

-9%

14,013

15,125

-7%

Joist

133

136

-2%

359

355

Deck

132

130

354

352

Cold finished

116

141

-18%

390

437

-11%

Fabricated concrete reinforcing steel

342

324

929

951

-2%

Piling

160

152

462

438

Tubular products

272

259

780

829

-6%

Other steel products

107

126

-15%

303

343

-12%

Raw materials

734

749

-2%

2,456

2,382

6,555

7,048

-7%

20,046

21,212

-5%

Condensed Consolidated Statements of Earnings (Unaudited)

(In thousands, except per share data)

Three Months (13 Weeks) Ended

Nine Months (39 Weeks) Ended

Sept. 28, 2019

Sept. 29, 2018

Sept. 28, 2019

Sept. 29, 2018

Net sales

5,464,502

6,742,202

17,457,112

18,771,395

Costs, expenses and other:

Cost of products sold

4,891,991

5,452,052

15,213,215

15,588,249

Marketing, administrative and other expenses

159,301

234,081

549,020

651,422

Equity in (earnings) losses of unconsolidated affiliates

1,585

(13,634)

(2,459)

(34,157)

Impairment of assets

110,000

Interest expense, net

31,286

37,201

92,759

103,766

5,084,163

5,819,700

15,852,535

16,419,280

Earnings before income taxes and noncontrolling interests

380,339

922,502

1,604,577

2,352,115

Provision for income taxes

86,752

216,215

367,920

552,101

Net earnings

293,587

706,287

1,236,657

1,800,014

Earnings attributable to noncontrolling interests

18,556

29,631

73,337

86,026

Net earnings attributable to Nucor stockholders

275,031

676,656

1,163,320

1,713,988

Net earnings per share:

Basic

0.90

2.13

3.79

5.37

Diluted

0.90

2.13

3.78

5.35

Average shares outstanding:

Basic

304,637

315,913

305,553

317,928

Diluted

304,980

316,798

306,029

318,882

Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)

	September 28, 2019		December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	1,686,365	$	1,398,886
Short-term investments		249,616		-
Accounts receivable, net		2,312,366		2,505,568
Inventories, net		4,072,464		4,553,500
Other current assets		363,477		178,311
Total current assets		8,684,288		8,636,265
Property, plant and equipment, net		5,886,730		5,334,748
Goodwill		2,186,499		2,184,336
Other intangible assets, net		764,267		828,504
Other assets		984,481		936,735
Total assets	$	18,506,265	$	17,920,588
LIABILITIES
Current liabilities:
Short-term debt	$	47,725	$	57,870
Current portion of long-term debt and finance lease obligations		28,878		-
Accounts payable		1,310,670		1,428,191
Salaries, wages and related accruals		539,360		709,397
Accrued expenses and other current liabilities		659,360		610,842
Total current liabilities		2,585,993		2,806,300
Long-term debt and finance lease obligations due after one year		4,287,597		4,233,276
Deferred credits and other liabilities		771,642		679,044
Total liabilities		7,645,232		7,718,620
EQUITY
Nucor stockholders' equity:
Common stock		152,061		152,061
Additional paid-in capital		2,108,948		2,073,715
Retained earnings		11,130,172		10,337,445
Accumulated other comprehensive loss, net of income taxes		(313,766)		(304,133)
Treasury stock		(2,628,368)		(2,467,010)
Total Nucor stockholders' equity		10,449,047		9,792,078
Noncontrolling interests		411,986		409,890
Total equity		10,861,033		10,201,968
Total liabilities and equity	$	18,506,265	$	17,920,588

Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)

	Nine Months (39 Weeks) Ended
	Sept. 28, 2019		Sept. 29, 2018
Operating activities:
Net earnings	$	1,236,657	$	1,800,014
Adjustments:
Depreciation		477,957		474,330
Amortization		64,655		66,684
Stock-based compensation		74,311		65,597
Deferred income taxes		76,737		54,162
Distributions from affiliates		27,405		29,325
Equity in earnings of unconsolidated affiliates		(2,459)		(34,157)
Impairment of assets		-		110,000
Changes in assets and liabilities (exclusive of acquisitions and dispositions):
Accounts receivable		197,783		(615,118)
Inventories		476,761		(644,865)
Accounts payable		(180,397)		229,552
Federal income taxes		(177,405)		168,639
Salaries, wages and related accruals		(157,317)		173,732
Other operating activities		5,526		23,564
Cash provided by operating activities		2,120,214		1,901,459
Investing activities:
Capital expenditures		(984,646)		(624,739)
Investment in and advances to affiliates		(27,613)		(111,540)
Divestiture of affiliates		67,591		-
Disposition of plant and equipment		32,922		27,964
Acquisitions (net of cash acquired)		(9,495)		-
Purchase of investments		(249,616)		-
Proceeds from the sale of investments		-		50,000
Other investing activities		2,176		25,347
Cash used in investing activities		(1,168,681)		(632,968)
Financing activities:
Net change in short-term debt		(10,145)		(5)
Proceeds from long-term debt, net of discount		-		995,710
Repayment of long-term debt		-		(500,000)
Bond issuance related costs		-		(7,625)
Issuance of common stock		5,892		24,102
Payment of tax withholdings on certain stock-based compensation		(15,723)		(22,123)
Distributions to noncontrolling interests		(71,241)		(49,494)
Cash dividends		(369,270)		(364,982)
Acquisition of treasury stock		(197,511)		(351,392)
Other financing activities		(6,538)		(5,248)
Cash used in financing activities		(664,536)		(281,057)
Effect of exchange rate changes on cash		482		(4,383)
Increase in cash and cash equivalents		287,479		983,051
Cash and cash equivalents - beginning of year		1,398,886		949,104
Cash and cash equivalents - end of nine months	$	1,686,365	$	1,932,155
Non-cash investing activity:
Change in accrued plant and equipment purchases	$	62,700	$	40,996