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NUE Nucor

Filed: 12 May 21, 9:16am

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 3, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     

Commission File Number: 1-4119

 

NUCOR CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

13-1860817

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

1915 Rexford Road, Charlotte, North Carolina

 

28211

(Address of principal executive offices)

 

(Zip Code)

(704) 366-7000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.40 per share

 

NUE

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

299,241,954 shares of the registrant’s common stock were outstanding at April 3, 2021.

 

 

 


Table of Contents

 

 

Nucor Corporation

Quarterly Report on Form 10-Q

For the Three Months Ended April 3, 2021

Table of Contents

 

 

 

 

 

 

 

Page

Part I

 

Financial Information

 

 

 

 

 

 

 

 

 

 

 

Item 1

 

Financial Statements (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Earnings – Three Months (13 Weeks) Ended April 3, 2021 and April 4, 2020

 

1

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) – Three Months (13 Weeks) Ended April 3, 2021 and April 4, 2020

 

2

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets – April 3, 2021 and December 31, 2020

 

3

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows – Three Months (13 Weeks) Ended April 3, 2021 and April 4, 2020

 

4

 

 

 

 

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

5

 

 

 

 

 

 

 

 

 

Item 2

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

16

 

 

 

 

 

 

 

 

 

Item 3

 

Quantitative and Qualitative Disclosures About Market Risk

 

22

 

 

 

 

 

 

 

 

 

Item 4

 

Controls and Procedures

 

23

 

 

 

 

 

 

 

Part II

 

Other Information

 

 

 

 

 

 

 

 

 

 

 

Item 1

 

Legal Proceedings

 

24

 

 

 

 

 

 

 

 

 

Item 1A

 

Risk Factors

 

24

 

 

 

 

 

 

 

 

 

Item 2

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

24

 

 

 

 

 

 

 

 

 

Item 6

 

Exhibits

 

25

 

 

 

 

 

 

 

Signatures

 

26

 

 

 

 

 

 

 

 

 

i


Table of Contents

 

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Nucor Corporation Condensed Consolidated Statements of Earnings (Unaudited)

(In thousands, except per share amounts)

 

 

 

Three Months (13 Weeks) Ended

 

 

 

April 3, 2021

 

 

April 4, 2020

 

Net sales

 

$

7,017,140

 

 

$

5,624,337

 

Costs, expenses and other:

 

 

 

 

 

 

 

 

Cost of products sold

 

 

5,394,703

 

 

 

4,995,069

 

Marketing, administrative and other expenses

 

 

291,124

 

 

 

153,392

 

Equity in (earnings) losses of unconsolidated affiliates

 

 

(13,239

)

 

 

823

 

Losses on assets

 

 

6,662

 

 

 

287,846

 

Interest expense, net

 

 

39,644

 

 

 

40,910

 

 

 

 

5,718,894

 

 

 

5,478,040

 

Earnings before income taxes and noncontrolling interests

 

 

1,298,246

 

 

 

146,297

 

Provision for income taxes

 

 

310,732

 

 

 

91,918

 

Net earnings

 

 

987,514

 

 

 

54,379

 

Earnings attributable to noncontrolling interests

 

 

45,082

 

 

 

34,048

 

Net earnings attributable to Nucor stockholders

 

$

942,432

 

 

$

20,331

 

Net earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

3.10

 

 

$

0.07

 

Diluted

 

$

3.10

 

 

$

0.07

 

Average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

301,846

 

 

 

302,909

 

Diluted

 

 

302,518

 

 

 

302,932

 

 

See notes to condensed consolidated financial statements.

1


Table of Contents

 

 

Nucor Corporation Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(In thousands)

 

 

 

Three Months (13 Weeks) Ended

 

 

 

April 3, 2021

 

 

April 4, 2020

 

Net earnings

 

$

987,514

 

 

$

54,379

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Net unrealized income (loss) on hedging derivatives, net of

   income taxes of $400 and $(800) for the first

   quarter of 2021 and 2020, respectively

 

 

999

 

 

 

(2,256

)

Reclassification adjustment for settlement of hedging

   derivatives included in net income, net of income

   taxes of $100 and $700 for the first quarter of 2021

   and 2020, respectively

 

 

501

 

 

 

2,056

 

Foreign currency translation gain (loss), net of income

   taxes of $0 for the first quarter of 2021 and 2020

 

 

13,801

 

 

 

(64,461

)

 

 

 

15,301

 

 

 

(64,661

)

Comprehensive income (loss)

 

 

1,002,815

 

 

 

(10,282

)

Comprehensive income attributable to noncontrolling

   interests

 

 

45,082

 

 

 

34,048

 

Comprehensive income (loss) attributable to Nucor stockholders

 

$

957,733

 

 

$

(44,330

)

 

See notes to condensed consolidated financial statements.

2


Table of Contents

 

 

Nucor Corporation Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

 

 

 

April 3, 2021

 

 

December 31, 2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,460,723

 

 

$

2,639,671

 

Short-term investments

 

 

402,595

 

 

 

408,004

 

Accounts receivable, net

 

 

2,828,964

 

 

 

2,298,850

 

Inventories, net

 

 

4,360,122

 

 

 

3,569,089

 

Other current assets

 

 

356,727

 

 

 

573,048

 

Total current assets

 

 

10,409,131

 

 

 

9,488,662

 

Property, plant and equipment, net

 

 

7,031,688

 

 

 

6,899,110

 

Restricted cash and cash equivalents

 

 

115,266

 

 

 

115,258

 

Goodwill

 

 

2,235,183

 

 

 

2,229,672

 

Other intangible assets, net

 

 

647,479

 

 

 

668,021

 

Other assets

 

 

733,661

 

 

 

724,671

 

Total assets

 

$

21,172,408

 

 

$

20,125,394

 

LIABILITIES

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Short-term debt

 

$

56,299

 

 

$

57,906

 

Current portion of long-term debt and finance lease obligations

 

 

10,644

 

 

 

10,885

 

Accounts payable

 

 

1,662,832

 

 

 

1,432,159

 

Salaries, wages and related accruals

 

 

527,412

 

 

 

462,727

 

Accrued expenses and other current liabilities

 

 

713,259

 

 

 

664,183

 

Total current liabilities

 

 

2,970,446

 

 

 

2,627,860

 

Long-term debt and finance lease obligations due after one year

 

 

5,273,036

 

 

 

5,271,789

 

Deferred credits and other liabilities

 

 

1,067,203

 

 

 

993,884

 

Total liabilities

 

 

9,310,685

 

 

 

8,893,533

 

EQUITY

 

 

 

 

 

 

 

 

Nucor stockholders' equity:

 

 

 

 

 

 

 

 

Common stock

 

 

152,061

 

 

 

152,061

 

Additional paid-in capital

 

 

2,160,909

 

 

 

2,121,288

 

Retained earnings

 

 

12,163,626

 

 

 

11,343,852

 

Accumulated other comprehensive loss,

   net of income taxes

 

 

(103,560

)

 

 

(118,861

)

Treasury stock

 

 

(2,925,796

)

 

 

(2,709,675

)

Total Nucor stockholders' equity

 

 

11,447,240

 

 

 

10,788,665

 

Noncontrolling interests

 

 

414,483

 

 

 

443,196

 

Total equity

 

 

11,861,723

 

 

 

11,231,861

 

Total liabilities and equity

 

$

21,172,408

 

 

$

20,125,394

 

 

See notes to condensed consolidated financial statements.

3


Table of Contents

 

 

Nucor Corporation Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

 

 

Three Months (13 Weeks) Ended

 

 

 

April 3, 2021

 

 

April 4, 2020

 

Operating activities:

 

 

 

 

 

 

 

 

Net earnings

 

$

987,514

 

 

$

54,379

 

Adjustments:

 

 

 

 

 

 

 

 

Depreciation

 

 

179,820

 

 

 

175,767

 

Amortization

 

 

21,130

 

 

 

21,508

 

Stock-based compensation

 

 

19,859

 

 

 

10,017

 

Deferred income taxes

 

 

62,705

 

 

 

15,557

 

Distributions from affiliates

 

 

180

 

 

 

2,000

 

Equity in (earnings) losses of unconsolidated affiliates

 

 

(13,239

)

 

 

823

 

Losses on assets

 

 

6,662

 

 

 

287,846

 

Changes in assets and liabilities (exclusive of acquisitions and dispositions):

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(524,570

)

 

 

(124,036

)

Inventories

 

 

(795,940

)

 

 

(41,993

)

Accounts payable

 

 

225,333

 

 

 

(28,033

)

Federal income taxes

 

 

200,888

 

 

 

55,987

 

Salaries, wages and related accruals

 

 

69,780

 

 

 

(216,736

)

Other operating activities

 

 

90,289

 

 

 

(11,880

)

Cash provided by operating activities

 

 

530,411

 

 

 

201,206

 

Investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(313,510

)

 

 

(416,557

)

Investment in and advances to affiliates

 

 

(118

)

 

 

(3,152

)

Disposition of plant and equipment

 

 

5,735

 

 

 

10,256

 

Acquisitions (net of cash acquired)

 

 

300

 

 

 

-

 

Purchase of investments

 

 

(214,427

)

 

 

(24,746

)

Proceeds from the sale of investments

 

 

219,777

 

 

 

178,787

 

Other investing activities

 

 

249

 

 

 

535

 

Cash used in investing activities

 

 

(301,994

)

 

 

(254,877

)

Financing activities:

 

 

 

 

 

 

 

 

Net change in short-term debt

 

 

(1,607

)

 

 

(9,183

)

Proceeds from long-term debt, net of discount

 

 

-

 

 

 

32,000

 

Proceeds from exercise of stock options

 

 

107,524

 

 

 

-

 

Repayment of long-term debt

 

 

-

 

 

 

(47,000

)

Payment of tax withholdings on certain stock-based compensation

 

 

(14,521

)

 

 

(209

)

Distributions to noncontrolling interests

 

 

(73,795

)

 

 

(39,493

)

Cash dividends

 

 

(123,901

)

 

 

(122,940

)

Acquisition of treasury stock

 

 

(301,859

)

 

 

(39,499

)

Other financing activities

 

 

(2,505

)

 

 

(2,290

)

Cash used in financing activities

 

 

(410,664

)

 

 

(228,614

)

Effect of exchange rate changes on cash

 

 

3,307

 

 

 

(7,163

)

Decrease in cash and cash equivalents and restricted cash and cash equivalents

 

 

(178,940

)

 

 

(289,448

)

Cash and cash equivalents and restricted cash and cash

   equivalents - beginning of year

 

 

2,754,929

 

 

 

1,534,605

 

Cash and cash equivalents and restricted cash and cash

   equivalents - end of three months

 

$

2,575,989

 

 

$

1,245,157

 

Non-cash investing activity:

 

 

 

 

 

 

 

 

Change in accrued plant and equipment purchases

 

$

4,461

 

 

$

17,756

 

 

See notes to condensed consolidated financial statements.

4


Table of Contents

 

Nucor Corporation – Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Basis of Interim Presentation

The information furnished in this Item 1 reflects all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented and are of a normal and recurring nature unless otherwise noted. The information furnished has not been audited; however, the December 31, 2020 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited condensed consolidated financial statements included in this Item 1 should be read in conjunction with the audited consolidated financial statements and the notes thereto included in Nucor’s Annual Report on Form 10-K for the year ended December 31, 2020.

2. Inventories

Inventories consisted of approximately 43% raw materials and supplies and 57% finished and semi-finished products at April 3, 2021 (42% and 58%, respectively, at December 31, 2020). Nucor’s manufacturing process consists of a continuous, vertically integrated process from which products are sold to customers at various stages throughout the process. Since most steel products can be classified as either finished or semi-finished products, these two categories of inventory are combined.

3. Property, Plant and Equipment

Property, plant and equipment is recorded net of accumulated depreciation of $10.03 billion at April 3, 2021 ($9.86 billion at December 31, 2020).

Nucor reviews its natural gas well assets for impairment if and when circumstances indicate that a decline in value below their carrying amounts may have occurred. Nucor last assessed its proved producing natural gas well assets in the fourth quarter of 2020 due to the continued low-price natural gas pricing environment. After completing its assessment, Nucor determined that as of such time there were no impairments of any of its three groups of proved well assets. Changes in the natural gas industry or a prolonged low-price environment beyond what has already been assumed in the assessments could cause management to revise the natural gas and natural gas liquids price assumptions, the estimated reserves or the estimated lease operating costs. Therefore, it is reasonably possible that unfavorable revisions to these assumptions or estimates could result in further impairment of some or all of the groups of proved well assets. The combined carrying value of the three groups of wells was $69.9 million at April 3, 2021 ($71.7 million at December 31, 2020).

Nucor owns a 49% leasehold interest in unproved oil and natural gas properties covering approximately 54,000 acres in the South Piceance Basin located in Colorado. Nucor is subject to forfeiture of a portion of its leasehold interest in these properties if we do not drill new wells within various contractually specified time periods. A decision to not develop a portion of these properties within the specified time periods would likely result in a partial asset impairment in the future. The carrying value of the entire leasehold interest at April 3, 2021 was $138.0 million. Nucor has full discretion on its participation in all future drilling capital investments related to the leasehold interest.

 

 

4. Goodwill and Other Intangible Assets

The change in the net carrying amount of goodwill for the three months ended April 3, 2021 by segment was as follows (in thousands):

 

 

 

Steel Mills

 

 

Steel Products

 

 

Raw Materials

 

 

Total

 

Balance at December 31, 2020

 

$

612,470

 

 

$

887,625

 

 

$

729,577

 

 

$

2,229,672

 

Acquisitions

 

 

1,030

 

 

 

-

 

 

 

-

 

 

 

1,030

 

Translation

 

 

-

 

 

 

4,481

 

 

 

-

 

 

 

4,481

 

Balance at April 3, 2021

 

$

613,500

 

 

$

892,106

 

 

$

729,577

 

 

$

2,235,183

 

 

Nucor completed its most recent annual goodwill impairment testing during the fourth quarter of 2020 and concluded that as of such time there was 0 impairment of goodwill for any of its reporting units.

5


Table of Contents

 

The annual assessment performed in 2020 for one of the Company’s reporting units, Rebar Fabrication, used forward-looking projections in future cash flows. The fair value of this reporting unit exceeded its carrying value by approximately 99% in the most recent assessment. The reporting unit was profitable in 2020 and we expect it to be profitable in 2021. If our assessment of the relevant facts and circumstances changes, or the actual performance of this reporting unit falls short of expected results, non-cash impairment charges may be required. Total goodwill associated with the Rebar Fabrication reporting unit was $368.2 million as of April 3, 2021 ($364.3 million as of December 31, 2020). An impairment of goodwill may also lead us to record an impairment of other intangible assets. Total finite-lived intangible assets associated with the Rebar Fabrication reporting unit were $56.8 million as of April 3, 2021 ($58.8 million as of December 31, 2020). There have been no triggering events requiring an interim assessment for impairment of the Rebar Fabrication reporting unit since the most recent annual goodwill impairment testing date.

The annual assessment performed in 2020 for one of the Company’s reporting units, Grating, used forward-looking projections and included continued positive future cash flows. The fair value of this reporting unit exceeded its carrying value by approximately 88% in the most recent assessment. If our assessment of the relevant facts and circumstances changes, or the actual performance of this reporting unit falls short of expected results, non-cash impairment charges may be required. Total goodwill associated with the Grating reporting unit was $37.2 million as of April 3, 2021 ($37.0 million as of December 31, 2020).

Intangible assets with estimated useful lives of five to 22 years are amortized on a straight-line or accelerated basis and were comprised of the following as of April 3, 2021 and December 31, 2020 (in thousands):

 

 

 

April 3, 2021

 

 

December 31, 2020

 

 

 

Gross Amount

 

 

Accumulated

Amortization

 

 

Gross Amount

 

 

Accumulated

Amortization

 

Customer relationships

 

$

1,422,453

 

 

$

856,406

 

 

$

1,421,962

 

 

$

838,443

 

Trademarks and trade names

 

 

162,462

 

 

 

101,991

 

 

 

162,365

 

 

 

100,000

 

Other

 

 

63,822

 

 

 

42,861

 

 

 

63,822

 

 

 

41,685

 

 

 

$

1,648,737

 

 

$

1,001,258

 

 

$

1,648,149

 

 

$

980,128

 

 

Intangible asset amortization expense in the first quarter of 2021 and 2020 was $21.1 million and $21.5 million, respectively. Annual amortization expense is estimated to be $82.7 million in 2021; $81.1 million in 2022; $80.4 million in 2023; $79.6 million in 2024; and $78.6 million in 2025.

 

5. Current Liabilities

Book overdrafts, included in accounts payable in the condensed consolidated balance sheets, were $72.9 million at April 3, 2021 ($210.5 million at December 31, 2020). Dividends payable, included in accrued expenses and other current liabilities in the condensed consolidated balance sheets, were $122.7 million at April 3, 2021 ($123.9 million at December 31, 2020).

6


Table of Contents

 

6. Fair Value Measurements

The following table summarizes information regarding Nucor’s financial assets and financial liabilities that were measured at fair value as of April 3, 2021 and December 31, 2020 (in thousands). Nucor does not have any non-financial assets or non-financial liabilities that are measured at fair value on a recurring basis.

 

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

Description

 

Carrying

Amount in

Condensed

Consolidated

Balance

Sheets

 

 

Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

As of April 3, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

1,933,390

 

 

$

1,933,390

 

 

$

-

 

 

$

-

 

Short-term investments

 

 

402,595

 

 

 

402,595

 

 

 

-

 

 

 

-

 

Restricted cash and cash equivalents

 

 

115,266

 

 

 

115,266

 

 

 

-

 

 

 

-

 

Total assets

 

$

2,451,251

 

 

$

2,451,251

 

 

$

-

 

 

$

-

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts

 

$

(9,408

)

 

$

-

 

 

$

(9,408

)

 

$

-

 

As of December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

2,186,820

 

 

$

2,186,820

 

 

$

-

 

 

$

-

 

Short-term investments

 

 

408,004

 

 

 

408,004

 

 

 

-

 

 

 

-

 

Restricted cash and cash equivalents

 

 

115,258

 

 

 

115,258

 

 

 

-

 

 

 

-

 

Total assets

 

$

2,710,082

 

 

$

2,710,082

 

 

$

-

 

 

$

-

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts

 

$

(14,361

)

 

$

-

 

 

$

(14,361

)

 

$

-

 

 

Fair value measurements for Nucor’s cash equivalents, short-term investments and restricted cash and cash equivalents are classified under Level 1 because such measurements are based on quoted market prices in active markets for identical assets. Our short-term investments at April 3, 2021 consisted of certificates of deposit, commercial paper and corporate notes. Fair value measurements for Nucor’s derivatives are classified under Level 2 because such measurements are based on published market prices for similar assets or are estimated based on observable inputs such as interest rates, yield curves, credit risks, spot and future commodity prices, and spot and future exchange rates. There were no transfers between the levels in the fair value hierarchy for the periods presented.

The fair value of short-term and long-term debt, including current maturities, was approximately $5.76 billion at April 3, 2021 ($6.05 billion at December 31, 2020). The debt fair value estimates are classified under Level 2 because such estimates are based on readily available market prices of our debt at April 3, 2021 and December 31, 2020, or similar debt with the same maturities, ratings and interest rates.

7. Contingencies

Nucor is subject to environmental laws and regulations established by federal, state and local authorities and, accordingly, makes provisions for the estimated costs of compliance. Of the undiscounted total of $14.4 million of accrued environmental costs at April 3, 2021 ($16.0 million at December 31, 2020), $3.0 million was classified in accrued expenses and other current liabilities ($5.6 million at December 31, 2020) and $11.4 million was classified in deferred credits and other liabilities ($10.4 million at December 31, 2020). Inherent uncertainties exist in these estimates primarily due to unknown conditions, evolving remediation technology and changing governmental regulations, legal standards and enforcement priorities.

We are from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. With respect to all such lawsuits, claims and proceedings, we record reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. We do not believe that any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on our results of operations, financial position or cash flows. Nucor maintains liability insurance with self-insurance limits for certain risks.

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8. Stock-Based Compensation

Overview

The Company maintains the Nucor Corporation 2014 Omnibus Incentive Compensation Plan (the “Omnibus Plan”) under which the Company may award stock-based compensation to key employees, officers and non-employee directors. The Company’s stockholders approved an amendment and restatement of the Omnibus Plan on May 14, 2020. The Omnibus Plan, as amended and restated, permits the award of stock options, restricted stock units, restricted shares and other stock-based awards for up to 19.0 million shares of the Company’s common stock. As of April 3, 2021, 7.6 million shares remained available for award under the Omnibus Plan.

The Company also maintains a number of inactive plans under which stock-based awards remain outstanding but no further awards may be made. As of April 3, 2021, 0.6 million shares were reserved for issuance upon the future settlement of outstanding awards under such inactive plans.

Stock Options

Stock options may be granted to Nucor’s key employees, officers and non-employee directors with exercise prices at 100% of the market value on the date of the grant. The stock options granted are generally exercisable at the end of three years and have a term of 10 years.

A summary of activity under Nucor’s stock option plans for the first quarter of 2021 is as follows (shares in thousands):

 

 

 

 

 

 

 

Weighted-

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

Average

 

 

Average

 

Aggregate

 

 

 

 

 

 

 

Exercise

 

 

Remaining

 

Intrinsic

 

 

 

Shares

 

 

Price

 

 

Contractual Life

 

Value

 

Number of shares under stock options:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at beginning of year

 

 

3,916

 

 

$

50.03

 

 

 

 

 

 

 

Granted

 

 

-

 

 

$

-

 

 

 

 

 

 

 

Exercised

 

 

(2,135

)

 

$

50.37

 

 

 

 

$

32,387

 

Canceled

 

 

-

 

 

$

-

 

 

 

 

 

 

 

Outstanding at April 3, 2021

 

 

1,781

 

 

$

49.62

 

 

6.3 years

 

$

53,902

 

Stock options exercisable at April 3, 2021

 

 

1,034

 

 

$

51.84

 

 

4.6 years

 

$

28,990

 

 

Stock options granted to employees who are eligible for retirement on the date of the grant are expensed immediately since these awards vest upon retirement from the Company. Retirement, for purposes of vesting in these stock options, means termination of employment after satisfying age and years of service requirements. Similarly, stock options granted to employees who will become retirement-eligible prior to the end of the vesting term are expensed over the period through which the employee will become retirement-eligible. Compensation expense for stock options granted to employees who will not become retirement-eligible prior to the end of the vesting term is recognized on a straight-line basis over the vesting period. Compensation expense for stock options was $0.3 million in the first quarter of both 2021 and 2020. As of April 3, 2021, unrecognized compensation expense related to stock options was $2.2 million, which is expected to be recognized over a weighted-average period of 2.0 years.

Restricted Stock Units

Nucor annually grants restricted stock units (“RSUs”) to key employees, officers and non-employee directors. The RSUs granted to key employees and officers vest and are converted to common stock in three equal installments on each of the first three anniversaries of the grant date. Retirement, for purposes of vesting in these RSUs only, means termination of employment with approval of the Compensation and Executive Development Committee of the Board of Directors after satisfying age and years of service requirements. RSUs granted to a non-employee director are fully vested on the grant date and are payable to the non-employee director in the form of common stock after the termination of the director’s service on the Board of Directors.

RSUs granted to employees who are eligible for retirement on the date of the grant are expensed immediately, and RSUs granted to employees who will become retirement-eligible prior to the end of the vesting term are expensed over the period through which the employee will become retirement-eligible since these awards vest upon retirement from the Company. Compensation expense for RSUs granted to employees who will not become retirement-eligible prior to the end of the vesting term is recognized on a straight-line basis over the vesting period.

Cash dividend equivalents are paid to holders of RSUs each quarter. Dividend equivalents paid on RSUs expected to vest are recognized as a reduction in retained earnings.

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The fair value of an RSU is determined based on the closing price of Nucor’s common stock on the date of the grant.

A summary of Nucor’s RSU activity for the first quarter of 2021 is as follows (shares in thousands):

 

 

 

Shares

 

 

Grant Date

Fair Value

 

Restricted stock units:

 

 

 

 

 

 

 

 

Unvested at beginning of year

 

 

1,830

 

 

$

47.33

 

Granted

 

 

-

 

 

$

-

 

Vested

 

 

(9

)

 

$

48.52

 

Canceled

 

 

(48

)

 

$

46.89

 

Unvested at April 3, 2021

 

 

1,773

 

 

$

47.34

 

 

Compensation expense for RSUs was $9.3 million in the first quarter of 2021 ($10.0 million in the first quarter of 2020). As of April 3, 2021, unrecognized compensation expense related to unvested RSUs was $42.7 million, which is expected to be recognized over a weighted-average period of 1.0 years.

Restricted Stock Awards

Prior to their expiration effective December 31, 2017, the Nucor Corporation Senior Officers Long-Term Incentive Plan and the Nucor Corporation Senior Officers Annual Incentive Plan authorized the award of shares of common stock to officers subject to certain conditions and restrictions. Effective January 1, 2018, the Company adopted supplements to the Omnibus Plan with terms that permit the award of shares of common stock to officers subject to the conditions and restrictions described below, which are substantially similar to those of the expired Senior Officers Long-Term Incentive Plan and Senior Officers Annual Incentive Plan. The expired Senior Officers Long-Term Incentive Plan, together with the applicable supplement, is referred to below as the “LTIP,” and the expired Senior Officers Annual Incentive Plan, together with the applicable supplement, is referred to below as the “AIP.”

The LTIP provides for the award of shares of restricted common stock at the end of each LTIP performance measurement period at no cost to officers if certain financial performance goals are met during the period. One-third of the LTIP restricted stock award vests upon each of the first three anniversaries of the award date or, if earlier, upon the officer’s attainment of age 55 while employed by Nucor. Although participants are entitled to cash dividends and may vote such awarded shares, the sale or transfer of such shares is limited during the restricted period.

The AIP provides for the payment of annual cash incentive awards. An AIP participant may elect, however, to defer payment of up to one-half of an AIP award. In such event, the deferred AIP award is converted into common stock units and credited with a deferral incentive, in the form of additional common stock units, equal to 25% of the number of common stock units attributable to the deferred AIP award. Common stock units attributable to deferred AIP awards are fully vested. Common stock units credited as a deferral incentive vest upon the AIP participant’s attainment of age 55 while employed by Nucor. Vested common stock units are paid to AIP participants in the form of shares of common stock following their termination of employment with Nucor.

A summary of Nucor’s restricted stock activity under the AIP and the LTIP for the first quarter of 2021 is as follows (shares in thousands):

 

 

 

 

 

 

Grant Date

 

 

 

Shares

 

 

Fair Value

 

Restricted stock units and restricted stock awards:

 

 

 

 

 

 

 

 

Unvested at beginning of year

 

 

127

 

 

$

49.94

 

Granted

 

 

262

 

 

$

65.61

 

Vested

 

 

(235

)

 

$

63.28

 

Canceled

 

 

(9

)

 

$

48.75

 

Unvested at April 3, 2021

 

 

145

 

 

$

56.70

 

 

Compensation expense for common stock and common stock units awarded under the AIP and the LTIP is recorded over the performance measurement and vesting periods based on the anticipated number and market value of shares of common stock and common stock units to be awarded. Compensation expense for anticipated awards based upon Nucor’s financial performance, exclusive of amounts payable in cash, was $10.2 million in the first quarter of 2021 ($0.3 million of benefit in the first quarter of 2020). As of April 3, 2021, unrecognized compensation expense related to unvested restricted stock awards was $1.0 million, which is expected to be recognized over a weighted-average period of 1.9 years.

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9. Employee Benefit Plan

Nucor makes contributions to a Profit Sharing and Retirement Savings Plan for qualified employees based on the profitability of the Company. Nucor’s expense for these benefits totaled $129.0 million and $11.6 million in the first quarter of 2021 and 2020, respectively. The related liability for these benefits is included in salaries, wages and related accruals in the condensed consolidated balance sheets.

10. Interest Expense (Income)

The components of net interest expense for the first quarter of 2021 and 2020 are as follows (in thousands):

 

 

 

Three Months (13 Weeks) Ended

 

 

 

April 3, 2021

 

 

April 4, 2020

 

Interest expense

 

$

40,970

 

 

$

47,596

 

Interest income

 

 

(1,326

)

 

 

(6,686

)

Interest expense, net

 

$

39,644

 

 

$

40,910

 

 

11. Income Taxes

The effective tax rate for the first quarter of 2021 was 23.9% as compared to 62.8% for the first quarter of 2020. The effective tax rate for the first quarter of 2020 was elevated, relative to the first quarter of 2021, primarily due to a $250.0 million non-cash impairment charge to an equity method investment which had no corresponding impact to the provision for income taxes.

Nucor has concluded U.S. federal income tax matters for tax years through 2014 and for tax year 2016. The tax years 2015 and 2017 through 2019 remain open to examination by the Internal Revenue Service. The 2015 Canadian income tax returns for Harris Steel Group Inc. and certain related affiliates are currently under examination by the Canada Revenue Agency. The tax years 2014 through 2019 remain open to examination by other major taxing jurisdictions to which Nucor is subject (primarily Canada and other state and local jurisdictions).

Non-current deferred tax liabilities included in deferred credits and other liabilities in the condensed consolidated balance sheets were $659.8 million at April 3, 2021 ($596.4 million at December 31, 2020).

 

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12. Stockholders’ Equity

The following tables reflect the changes in stockholders’ equity attributable to both Nucor and the noncontrolling interests of Nucor’s joint ventures, primarily Nucor-Yamato Steel Company (Limited Partnership) of which Nucor owns 51%, for the three months ended April 3, 2021 and April 4, 2020 (in thousands):

 

 

 

 

 

 

 

Three Months (13 Weeks) Ended April 3, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Treasury Stock

 

 

Nucor

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

(at cost)

 

 

Stockholders'

 

 

Noncontrolling

 

 

 

Total

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Shares

 

 

Amount

 

 

Equity

 

 

Interests

 

BALANCES, December 31, 2020

 

$

11,231,861

 

 

 

380,154

 

 

$

152,061

 

 

$

2,121,288

 

 

$

11,343,852

 

 

$

(118,861

)

 

 

77,909

 

 

$

(2,709,675

)

 

$

10,788,665

 

 

$

443,196

 

Net earnings

 

 

987,514

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

942,432

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

942,432

 

 

 

45,082

 

Other comprehensive income (loss)

 

 

15,301

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

15,301

 

 

 

-

 

 

 

-

 

 

 

15,301

 

 

 

-

 

Stock options exercised

 

 

107,524

 

 

 

-

 

 

 

-

 

 

 

30,488

 

 

 

-

 

 

 

-

 

 

 

(2,135

)

 

 

77,036

 

 

 

107,524

 

 

 

-

 

Stock option expense

 

 

333

 

 

 

-

 

 

 

-

 

 

 

333

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

333

 

 

 

-

 

Issuance of stock under award plans,

   net of forfeitures

 

 

15,602

 

 

 

-

 

 

 

-

 

 

 

6,900

 

 

 

-

 

 

 

-

 

 

 

(242

)

 

 

8,702

 

 

 

15,602

 

 

 

-

 

Amortization of unearned

   compensation

 

 

1,900

 

 

 

-

 

 

 

-

 

 

 

1,900

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,900

 

 

 

-

 

Treasury stock acquired

 

 

(301,859

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,380

 

 

 

(301,859

)

 

 

(301,859

)

 

 

-

 

Cash dividends declared

 

 

(122,658

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(122,658

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(122,658

)

 

 

-

 

Distributions to noncontrolling

   interests

 

 

(73,795

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(73,795

)

BALANCES, April 3, 2021

 

$

11,861,723

 

 

 

380,154

 

 

$

152,061

 

 

$

2,160,909

 

 

$

12,163,626

 

 

$

(103,560

)

 

 

80,912

 

 

$

(2,925,796

)

 

$

11,447,240

 

 

$

414,483

 

 

 

 

 

 

 

 

Three Months (13 Weeks) Ended April 4, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Treasury Stock

 

 

Nucor

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

(at cost)

 

 

Stockholders'

 

 

Noncontrolling

 

 

 

Total

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Shares

 

 

Amount

 

 

Equity

 

 

Interests

 

BALANCES, December 31, 2019

 

$

10,791,176

 

 

 

380,154

 

 

$

152,061

 

 

$

2,107,646

 

 

$

11,115,056

 

 

$

(302,966

)

 

 

78,342

 

 

$

(2,713,931

)

 

$

10,357,866

 

 

$

433,310

 

Net earnings

 

 

54,379

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

20,331

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

20,331

 

 

 

34,048

 

Other comprehensive income (loss)

 

 

(64,661

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(64,661

)

 

 

-

 

 

 

-

 

 

 

(64,661

)

 

 

-

 

Stock options exercised

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock option expense

 

 

275

 

 

 

-

 

 

 

-

 

 

 

275

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

275

 

 

 

-

 

Issuance of stock under award plans,

   net of forfeitures

 

 

16,189

 

 

 

-

 

 

 

-

 

 

 

11,049

 

 

 

-

 

 

 

-

 

 

 

(148

)

 

 

5,140

 

 

 

16,189

 

 

 

-

 

Amortization of unearned

   compensation

 

 

400

 

 

 

-

 

 

 

-

 

 

 

400

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

400

 

 

 

-

 

Treasury stock acquired

 

 

(39,499

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

825

 

 

 

(39,499

)

 

 

(39,499

)

 

 

-

 

Cash dividends declared

 

 

(122,697

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(122,697

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(122,697

)

 

 

-

 

Distributions to noncontrolling

   interests

 

 

(39,493

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(39,493

)

BALANCES, April 4, 2020

 

$

10,596,069

 

 

 

380,154

 

 

$

152,061

 

 

$

2,119,370

 

 

$

11,012,690

 

 

$

(367,627

)

 

 

79,019

 

 

$

(2,748,290

)

 

$

10,168,204

 

 

$

427,865

 

 

 

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Dividends declared per share were $0.405 per share in the first quarter of 2021 ($0.4025 per share in the first quarter of 2020).

On September 6, 2018, the Company announced that the Board of Directors had approved a new share repurchase program under which the Company is authorized to repurchase up to $2.00 billion of the Company’s common stock and terminated any previously authorized share repurchase programs. Share repurchases will be made from time to time in the open market at prevailing market prices or through private transactions or block trades. The timing and amount of repurchases will depend on market conditions, share price, applicable legal requirements and other factors. The share repurchase authorization is discretionary and has no expiration date. As of April 3, 2021, the Company had approximately $857.5 million remaining available for share repurchases under the program.

13. Accumulated Other Comprehensive Income (Loss)

The following tables reflect the changes in accumulated other comprehensive income (loss) by component for the three months ended April 3, 2021 and April 4, 2020 (in thousands):

 

 

 

Three-Month (13-Week) Period Ended

 

 

 

April 3, 2021

 

 

 

Gains and Losses on

 

 

Foreign Currency

 

 

Adjustment to Early

 

 

 

 

 

 

 

Hedging Derivatives

 

 

Gain (Loss)

 

 

Retiree Medical Plan

 

 

Total

 

Accumulated other comprehensive

  income (loss) at December 31, 2020

 

$

(4,700

)

 

$

(120,827

)

 

$

6,666

 

 

$

(118,861

)

Other comprehensive income (loss)

   before reclassifications

 

 

999

 

 

 

13,801

 

 

 

-

 

 

 

14,800

 

Amounts reclassified from accumulated

   other comprehensive income (loss)

   into earnings (1)

 

 

501

 

 

 

-

 

 

 

-

 

 

 

501

 

Net current-period other comprehensive

   income (loss)

 

 

1,500

 

 

 

13,801

 

 

 

-

 

 

 

15,301

 

Accumulated other comprehensive

   income (loss) at April 3, 2021

 

$

(3,200

)

 

$

(107,026

)

 

$

6,666

 

 

$

(103,560

)

 

 

 

Three-Month (13-Week) Period Ended

 

 

 

April 4, 2020

 

 

 

Gains and Losses on

 

 

Foreign Currency

 

 

Adjustment to Early

 

 

 

 

 

 

 

Hedging Derivatives

 

 

Gain (Loss)

 

 

Retiree Medical Plan

 

 

Total

 

Accumulated other comprehensive

  income (loss) at December 31, 2019

 

$

(14,000

)

 

$

(296,773

)

 

$

7,807

 

 

$

(302,966

)

Other comprehensive income (loss)

   before reclassifications

 

 

(2,256

)

 

 

(64,461

)

 

 

-

 

 

 

(66,717

)

Amounts reclassified from accumulated

   other comprehensive income (loss)

   into earnings (1)

 

 

2,056

 

 

 

-

 

 

 

-

 

 

 

2,056

 

Net current-period other comprehensive

   income (loss)

 

 

(200

)

 

 

(64,461

)

 

 

-

 

 

 

(64,661

)

Accumulated other comprehensive

   income (loss) at April 4, 2020

 

$

(14,200

)

 

$

(361,234

)

 

$

7,807

 

 

$

(367,627

)

 

(1)   Includes $501 and $2,056 of accumulated other comprehensive income (loss) reclassifications into cost of products sold for net losses on commodity contracts in the first quarter of 2021 and 2020, respectively. The tax impact of those reclassifications was $100 and $700 in the first quarter of 2021 and 2020, respectively.

 

 

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14. Segments

Nucor reports its results in the following segments: steel mills, steel products and raw materials. The steel mills segment includes carbon and alloy steel in sheet, bars, structural and plate; steel trading businesses; rebar distribution businesses; and Nucor’s equity method investments in NuMit and Nucor-JFE. The steel products segment includes steel joists and joist girders, steel deck, fabricated concrete reinforcing steel, cold finished steel, precision castings, steel fasteners, metal building systems, steel grating, tubular products businesses, piling products business, and wire and wire mesh. The raw materials segment includes The David J. Joseph Company and its affiliates (“DJJ”), primarily a scrap broker and processor; Nu-Iron Unlimited and Nucor Steel Louisiana LLC, two facilities that produce direct reduced iron (“DRI”) used by the steel mills; and our natural gas production operations.

Net interest expense on long-term debt, charges and credits associated with changes in allowances to eliminate intercompany profit in inventory, profit sharing expense and stock-based compensation are shown under Corporate/eliminations. Corporate assets primarily include cash and cash equivalents, short-term investments, restricted cash and cash equivalents, allowances to eliminate intercompany profit in inventory, deferred income tax assets, federal and state income taxes receivable and investments in and advances to affiliates.

Nucor’s results by segment for the first quarter of 2021 and 2020 were as follows (in thousands):

 

 

 

Three Months (13 Weeks) Ended

 

 

 

April 3, 2021

 

 

April 4, 2020

 

Net sales to external customers:

 

 

 

 

 

 

 

 

Steel mills

 

$

4,608,777

 

 

$

3,519,270

 

Steel products

 

 

1,810,055

 

 

 

1,726,854

 

Raw materials

 

 

598,308

 

 

 

378,213

 

 

 

$

7,017,140

 

 

$

5,624,337

 

Intercompany sales:

 

 

 

 

 

 

 

 

Steel mills

 

$

1,225,113

 

 

$

869,092

 

Steel products

 

 

71,219

 

 

 

83,369

 

Raw materials

 

 

3,646,195

 

 

 

2,423,805

 

Corporate/eliminations

 

 

(4,942,527

)

 

 

(3,376,266

)

 

 

$

-

 

 

$

-

 

Earnings (loss) before income taxes and noncontrolling

   interests:

 

 

 

 

 

 

 

 

Steel mills

 

$

1,314,974

 

 

$

156,506

 

Steel products

 

 

211,812

 

 

 

162,559

 

Raw materials

 

 

223,235

 

 

 

(7,911

)

Corporate/eliminations

 

 

(451,775

)

 

 

(164,857

)

 

 

$

1,298,246

 

 

$

146,297

 

 

 

 

April 3, 2021

 

 

Dec. 31, 2020

 

Segment assets:

 

 

 

 

 

 

 

 

Steel mills

 

$

10,785,872

 

 

$

9,708,260

 

Steel products

 

 

4,838,456

 

 

 

4,461,042

 

Raw materials

 

 

3,605,884

 

 

 

3,324,489

 

Corporate/eliminations

 

 

1,942,196

 

 

 

2,631,603

 

 

 

$

21,172,408

 

 

$

20,125,394

 

 

 

 

 

 

 

 

 

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15. Revenue

The following tables disaggregate our revenue by major source for the first quarter of 2021 and 2020 (in thousands):

 

 

 

Three Months (13 Weeks) Ended April 3, 2021

 

 

 

Steel

Mills

 

 

Steel

Products

 

 

Raw

Materials

 

 

Total

 

Sheet

 

$

2,351,455

 

 

$

-

 

 

$

-

 

 

$

2,351,455

 

Bar

 

 

1,261,042

 

 

 

-

 

 

 

-

 

 

 

1,261,042

 

Structural

 

 

477,195

 

 

 

-

 

 

 

-

 

 

 

477,195

 

Plate

 

 

519,085

 

 

 

-

 

 

 

-

 

 

 

519,085

 

Tubular Products

 

 

-

 

 

 

374,653

 

 

 

-

 

 

 

374,653

 

Rebar Fabrication

 

 

-

 

 

 

386,557

 

 

 

-

 

 

 

386,557

 

Other Steel Products

 

 

-

 

 

 

1,048,845

 

 

 

-

 

 

 

1,048,845

 

Raw Materials

 

 

-

 

 

 

-

 

 

 

598,308

 

 

 

598,308

 

 

 

$

4,608,777

 

 

$

1,810,055

 

 

$

598,308

 

 

$

7,017,140

 

 

 

 

Three Months (13 Weeks) Ended April 4, 2020

 

 

 

Steel

Mills

 

 

Steel

Products

 

 

Raw

Materials

 

 

Total

 

Sheet

 

$

1,578,429

 

 

$

-

 

 

$

-

 

 

$

1,578,429

 

Bar

 

 

1,062,666

 

 

 

-

 

 

 

-

 

 

 

1,062,666

 

Structural

 

 

450,499

 

 

 

-

 

 

 

-

 

 

 

450,499

 

Plate

 

 

427,676

 

 

 

-

 

 

 

-

 

 

 

427,676

 

Tubular Products

 

 

-

 

 

 

305,057

 

 

 

-

 

 

 

305,057

 

Rebar Fabrication

 

 

-

 

 

 

423,316

 

 

 

-

 

 

 

423,316

 

Other Steel Products

 

 

-

 

 

 

998,481

 

 

 

-

 

 

 

998,481

 

Raw Materials

 

 

-

 

 

 

-

 

 

 

378,213

 

 

 

378,213

 

 

 

$

3,519,270

 

 

$

1,726,854

 

 

$

378,213

 

 

$

5,624,337

 

 

Contract liabilities are primarily related to deferred revenue resulting from cash payments received in advance from customers to protect against credit risk. Contract liabilities totaled $173.1 million as of April 3, 2021 ($120.2 million as of December 31, 2020), and are included in accrued expenses and other current liabilities in the condensed consolidated balance sheets.

 


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16. Earnings Per Share

The computations of basic and diluted net earnings per share for the first quarter of 2021 and 2020 are as follows (in thousands, except per share amounts):

 

 

Three Months (13 Weeks) Ended

 

 

 

April 3, 2021

 

 

April 4, 2020

 

Basic net earnings per share:

 

 

 

 

 

 

 

 

Basic net earnings

 

$

942,432

 

 

$

20,331

 

Earnings allocated to participating securities

 

 

(5,376

)

 

 

(630

)

Net earnings available to common stockholders

 

$

937,056

 

 

$

19,701

 

Basic average shares outstanding

 

 

301,846

 

 

 

302,909

 

Basic net earnings per share

 

$

3.10

 

 

$

0.07

 

Diluted net earnings per share:

 

 

 

 

 

 

 

 

Diluted net earnings

 

$

942,432

 

 

$

20,331

 

Earnings allocated to participating securities

 

 

(5,363

)

 

 

(630

)

Net earnings available to common stockholders

 

$

937,069

 

 

$

19,701

 

Diluted average shares outstanding:

 

 

 

 

 

 

 

 

Basic average shares outstanding

 

 

301,846

 

 

 

302,909

 

Dilutive effect of stock options and other

 

 

672

 

 

 

23

 

 

 

 

302,518

 

 

 

302,932

 

Diluted net earnings per share

 

$

3.10

 

 

$

0.07

 

 

The following stock options were excluded from the computation of diluted net earnings per share for the first quarter of 2021 and 2020 because their effect would have been anti-dilutive (shares in thousands):

 

 

 

Three Months (13 Weeks) Ended

 

 

 

April 3, 2021

 

 

April 4, 2020

 

Anti-dilutive stock options:

 

 

 

 

 

 

 

 

Weighted-average shares

 

 

249

 

 

 

3,701

 

Weighted-average exercise price

 

$

65.80

 

 

$

51.38

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements made in this Quarterly Report on Form 10-Q, or in other public filings, press releases, or other written or oral communications made by Nucor, which are not historical facts are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties which we expect will or may occur in the future and may impact our business, financial condition and results of operations. The words “anticipate,” “believe,” “expect,” “intend,” “project,” “may,” “will,” “should,” “could” and similar expressions are intended to identify those forward-looking statements. These forward-looking statements reflect the Company’s best judgment 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 report. 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 market steel prices and changes in the supply and cost of raw materials, including pig iron, iron ore and scrap steel; (4) the availability and cost of electricity and natural gas which could negatively affect our cost of steel production or result in a delay or cancellation of existing or future drilling within our natural gas drilling programs; (5) critical equipment failures and business interruptions; (6) 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; (7) impairment in the recorded value of inventory, equity investments, fixed assets, goodwill or other long-lived assets; (8) uncertainties surrounding the global economy, including excess world capacity for steel production; (9) fluctuations in currency conversion rates; (10) significant changes in laws or government regulations affecting environmental compliance, including legislation and regulations that result in greater regulation of greenhouse gas emissions that could increase our energy costs, capital expenditures and operating costs or cause one or more of our permits to be revoked or make it more difficult to obtain permit modifications; (11) the cyclical nature of the steel industry; (12) capital investments and their impact on our performance; (13) our safety performance; (14) the impact of the COVID-19 pandemic; and (15) the risks discussed in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and elsewhere in this report.

Caution should be taken not to place undue reliance on the forward-looking statements included in this report. We assume no obligation to update any forward-looking statements except as may be required by law. In evaluating forward-looking statements, these risks and uncertainties should be considered, together with the other risks described from time to time in our reports and other filings with the Securities and Exchange Commission.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this report, as well as the audited consolidated financial statements and the notes thereto, “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Nucor’s Annual Report on Form 10-K for the year ended December 31, 2020.

Overview

Nucor and its affiliates manufacture steel and steel products. Nucor also produces DRI for use in its steel mills. Through DJJ, the Company also processes ferrous and nonferrous metals and brokers ferrous and nonferrous metals, pig iron, hot briquetted iron and DRI. Most of Nucor’s operating facilities and customers are located in North America. Nucor’s operations include international trading and sales companies that buy and sell steel and steel products manufactured by the Company and others. Nucor is North America’s largest recycler, using scrap steel as the primary raw material in producing steel and steel products.

Nucor reports its results in the following segments: steel mills, steel products and raw materials. The steel mills segment includes carbon and alloy steel in sheet, bars, structural and plate; steel trading businesses; rebar distribution businesses; and Nucor’s equity method investments in NuMit and Nucor-JFE. The steel products segment includes steel joists and joist girders, steel deck, fabricated concrete reinforcing steel, cold finished steel, precision castings, steel fasteners, metal building systems, steel grating, tubular products businesses, piling products business, and wire and wire mesh. The raw materials segment includes DJJ, primarily a scrap broker and processor; Nu-Iron Unlimited and Nucor Steel Louisiana, two facilities that produce DRI used by the steel mills; and our natural gas related assets.

The average utilization rates of all operating facilities in the steel mills, steel products and raw materials segments were approximately 95%, 74% and 79%, respectively, in the first quarter of 2021 compared with approximately 89%, 73% and 73%, respectively, in the first quarter of 2020.

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Results of Operations

 

The first quarter of 2021 was the most profitable quarter in Nucor’s history. The Company reported record consolidated net earnings of $942.4 million, or $3.10 per diluted share, in the first quarter of 2021. By comparison, the Company reported consolidated net earnings of $20.3 million, or $0.07 per diluted share, in the first quarter of 2020.

 

In addition to being the most profitable quarter for Nucor as a whole, the first quarter of 2021 was the most profitable quarter for each segment. The steel mills segment benefited from strong demand and increased average selling prices. Our sheet, bar, plate and structural mills had increased profitability in the first quarter of 2021 as compared to the first quarter of 2020, with the largest increase by our sheet mills. The steel products segment continued its strong performance due to the continued strength in nonresidential construction markets. The raw materials segment’s record-setting quarterly profitability was driven by the strong performance of our scrap brokerage and processing operations and our DRI facilities.  

 

The impact of the COVID-19 pandemic on our business and results of operations continued to subside in the first quarter of 2021. Most of the end use markets we serve remain strong and inventories remain lean across supply chains. Nonresidential construction markets were resilient during the depths of the economic turmoil in 2020 caused by the COVID-19 pandemic and have remained strong in 2021. The automotive market is continuing its recovery from pandemic-induced lows and the industry has been challenged thus far in 2021 due to a shortage of semiconductors and severe weather. However, light vehicle demand is very strong and inventories are low. We continue to see strong demand in the renewable energy market, and agricultural and heavy equipment are also showing strength.

 

Market conditions in the first quarter of 2020 were building off pricing momentum that began in late 2019. However, the onset of the COVID-19 pandemic late in the first quarter of 2020 had a negative impact on the markets we serve and the global economy at large. In addition, Nucor recorded $287.8 million of losses on assets related to our equity method investment in the Duferdofin Nucor S.r.l (“Duferdofin Nucor”) joint venture in the first quarter of 2020, which we would ultimately exit in the fourth quarter of 2020.

 

The following discussion will provide greater quantitative and qualitative analysis of Nucor’s performance in the first quarter of 2021 as compared to the first quarter of 2020.

Net Sales

 

Net sales to external customers by segment for the first quarter of 2021 and 2020 were as follows (in thousands):

 

 

 

Three Months (13 Weeks) Ended

 

 

April 3, 2021

 

April 4, 2020

 

% Change

Steel mills

 

$4,608,777

 

$3,519,270

 

31%

Steel products

 

1,810,055

 

1,726,854

 

5%

Raw materials

 

598,308

 

378,213

 

58%

Total net sales

 

$7,017,140

 

$5,624,337

 

25%

 

Net sales for the first quarter of 2021 increased 25% from the first quarter of 2020. Average sales price per ton increased 25% from $783 in the first quarter of 2020 to $978 in the first quarter of 2021. Total tons shipped to outside customers in the first quarter of 2021 were 7,176,000 tons, a slight decrease from the first quarter of 2020.

In the steel mills segment, sales tons for the first quarter of 2021 and 2020 were as follows (in thousands):

 

 

 

Three Months (13 Weeks) Ended

 

 

April 3, 2021

 

April 4, 2020

 

% Change

Outside steel shipments

 

5,190

 

5,182

 

-

Inside steel shipments

 

1,354

 

1,316

 

3%

Total steel shipments

 

6,544

 

6,498

 

1%

 

Net sales for the steel mills segment increased 31% in the first quarter of 2021 from the first quarter of 2020, due primarily to a 31% increase in the average sales price per ton from $680 to $891 as well as a slight increase in tons sold to outside customers. Average selling prices increased across all product groups within the steel mills segment in the first quarter of 2021 as compared to the first quarter of 2020.

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Outside sales tonnage for the steel products segment for the first quarter of 2021 and 2020 was as follows (in thousands):

 

 

 

Three Months (13 Weeks) Ended

 

 

April 3, 2021

 

April 4, 2020

 

% Change

Joist sales

 

172

 

131

 

31%

Deck sales

 

135

 

125

 

8%

Cold finished sales

 

132

 

126

 

5%

Rebar fabrication sales

 

282

 

311

 

-9%

Piling products sales

 

136

 

180

 

-24%

Tubular products sales

 

250

 

287

 

-13%

Other steel products sales

 

100

 

99

 

1%

Total steel products sales

 

1,207

 

1,259

 

-4%

 

Net sales for the steel products segment increased 5% in the first quarter of 2021 compared to the first quarter of 2020, due primarily to a 9% increase in the average sales price per ton from $1,372 to $1,499 which was partially offset by a 4% decrease in tons sold to outside customers. Average selling price per ton increased across most businesses within the steel products segment in the first quarter of 2021 as compared to the first quarter of 2020, most notably at our tubular products businesses.

Net sales for the raw materials segment increased 58% in the first quarter of 2021 compared to the first quarter of 2020, due primarily to increased average selling prices and volumes at DJJ’s brokerage and scrap processing operations. In the first quarter of both 2021 and 2020, approximately 88% of outside sales for the raw materials segment were from the brokerage operations of DJJ and approximately 9% of outside sales were from the scrap processing operations of DJJ.

Gross Margins

Nucor recorded gross margins of $1.62 billion (23%) in the first quarter of 2021, which was a significant increase compared with $629.3 million (11%) in the first quarter of 2020.

 

The primary driver for the increase in gross margins in the first quarter of 2021 as compared to the first quarter of 2020 was increased metal margin in the steel mills segment. Metal margin is the difference between the selling price of steel and the cost of scrap and scrap substitutes. Backlogs for the steel mills segment were strong at the end of the first quarter of 2021.

 

Partially offsetting the previously mentioned increase in the average selling price of steel in the first quarter of 2021 as compared to the first quarter of 2020 was increased scrap and scrap substitute costs. The average scrap and scrap substitute cost per gross ton used in the first quarter of 2021 was $405, a 38% increase compared to $293 in the first quarter of 2020.

Scrap prices are driven by the global supply and demand for scrap and other iron-based raw materials used to make steel. Scrap prices have increased dramatically since the beginning of 2021 and we expect continued volatility in scrap prices as we begin the second quarter.

 

Pre-operating and start-up costs of new facilities decreased to approximately $19 million in the first quarter of 2021 from approximately $29 million in the first quarter of 2020. The decrease in pre-operating and start-up costs was primarily due to the completion of the bar mills in Missouri and Florida. Pre-operating and start-up costs in the first quarter of 2021 included costs related to the plate mill being built in Kentucky, the sheet mill expansion in Kentucky, the merchant bar quality mill expansion at our bar mill in Illinois and the sheet mill expansion in Arkansas. Nucor defines pre-operating and start-up costs, all of which are expensed, as the losses attributable to facilities or major projects that are either under construction or in the early stages of operation. Once these facilities or projects have attained a utilization rate that is consistent with our similar operating facilities, they are no longer considered by Nucor to be in start-up.

 

Gross margins in the steel products segment increased in the first quarter of 2021 as compared to the first quarter of 2020. The primary driver was the increased margins at our tubular products, rebar and cold finish businesses that were partially offset by decreased margins at our deck, building systems and piling businesses. The largest increase in gross margin was at our tubular products business. Led by large commercial, warehouse and data center projects, demand in nonresidential construction markets continues to be healthy. As we enter the second quarter of 2021, backlogs for the steel products segment are strong.

 

Gross margins in the raw materials segment significantly increased in the first quarter of 2021 as compared to the first quarter of 2020, primarily due to rising raw materials selling prices and margin expansion. The largest improvement in gross margins in the first quarter of 2021 as compared to the first quarter of 2020 was at our

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DRI facilities. The profitability of DJJ’s brokerage and scrap processing operations also significantly increased in the first quarter of 2021 as compared to the first quarter of 2020.

Marketing, Administrative and Other Expenses

A major component of marketing, administrative and other expenses is profit sharing and other incentive compensation costs. These costs, which are based upon and fluctuate with Nucor’s financial performance, increased by $136.1 million in the first quarter of 2021 as compared to the first quarter of 2020. This increase was due to Nucor’s increased profitability in the first quarter of 2021 as compared to the prior year period, which resulted in significantly increased accruals related to profit sharing.

Equity in (Earnings) Losses of Unconsolidated Affiliates

 

Equity in earnings of unconsolidated affiliates was $13.2 million in the first quarter of 2021, which compared to equity in losses of unconsolidated affiliates of $0.8 million in the first quarter of 2020. The increase in equity method investment earnings from the first quarter of 2020 to the first quarter of 2021 was primarily due to increased earnings at NuMit.

 

Losses on Assets

 

Included in the first quarter of 2021 earnings were losses on assets of $6.7 million in the steel products segment.

 

Included in the first quarter of 2020 earnings were losses on assets of $287.8 million related to our equity method investment in Duferdofin Nucor that we have since exited. Nucor determined that a triggering event occurred in the first quarter of 2020 due to adverse developments in the joint venture’s commercial outlook, which were exacerbated by the COVID19 pandemic, all of which negatively impacted the joint venture’s strategic direction.

 

Interest Expense (Income)

 

Net interest expense for the first quarter of 2021 and 2020 was as follows (in thousands):

 

 

 

Three Months (13 Weeks) Ended

 

 

 

April 3, 2021

 

 

April 4, 2020

 

Interest expense

 

$

40,970

 

 

$

47,596

 

Interest income

 

 

(1,326

)

 

 

(6,686

)

Interest expense, net

 

$

39,644

 

 

$

40,910

 

 

Interest expense decreased in the first quarter of 2021 compared to the first quarter of 2020 due primarily to an increase in capitalized interest. Interest income decreased in the first quarter of 2021 compared to the first quarter of 2020 due to a decrease in average interest rates on investments.

Earnings (Loss) Before Income Taxes and Noncontrolling Interests

 

Earnings (loss) before income taxes and noncontrolling interests by segment for the first quarter of 2021 and 2020 were as follows (in thousands). The changes between periods were driven by the quantitative and qualitative factors previously discussed.

 

 

 

Three Months

 

 

 

(13 Weeks) Ended

 

 

 

April 3, 2021

 

 

April 4, 2020

 

Steel mills

 

$

1,314,974

 

 

$

156,506

 

Steel products

 

 

211,812

 

 

 

162,559

 

Raw materials

 

 

223,235

 

 

 

(7,911

)

Corporate/eliminations

 

 

(451,775

)

 

 

(164,857

)

 

 

$

1,298,246

 

 

$

146,297

 

 

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Noncontrolling Interests

Noncontrolling interests represent the income attributable to the noncontrolling partners of Nucor’s joint ventures, primarily Nucor-Yamato Steel Company (Limited Partnership) (“NYS”) of which Nucor owns 51%. The increase in earnings attributable to noncontrolling interests in the first quarter of 2021 as compared to the first quarter of 2020 was primarily due to the increased earnings of NYS, which was a result of the increased metal margin per ton in the first quarter of 2021 as compared to the first quarter of 2020. Under the NYS limited partnership agreement, the minimum amount of cash to be distributed each year to the partners is the amount needed by each partner to pay applicable U.S. federal and state income taxes. In the first quarter of both 2021 and 2020, the amount of cash distributed to noncontrolling interest holders exceeded the earnings attributable to noncontrolling interests based on mutual agreement of the general partners.

Provision for Income Taxes

The effective tax rate for the first quarter of 2021 was 23.9% as compared to 62.8% for the first quarter of 2020. The effective tax rate for the first quarter of 2020 was elevated, relative to the first quarter of 2021, primarily due to a $250.0 million non-cash impairment charge to an equity method investment which had no corresponding impact to the provision for income taxes. The expected effective tax rate for the full year of 2021 is approximately 23.6%.

We estimate that in the next 12 months our gross unrecognized tax benefits, which totaled $53.0 million at April 3, 2021, exclusive of interest, could decrease by as much as $5.0 million as a result of the expiration of the statute of limitations and closures of examinations, substantially all of which would impact the effective tax rate.

Nucor has concluded U.S. federal income tax matters for tax years through 2014 and for tax year 2016. The tax years 2015 and 2017 through 2019 remain open to examination by the Internal Revenue Service. The 2015 Canadian income tax returns for Harris Steel Group Inc. and certain related affiliates are currently under examination by the Canada Revenue Agency. The tax years 2014 through 2019 remain open to examination by other major taxing jurisdictions to which Nucor is subject (primarily Canada and other state and local jurisdictions).

Net Earnings Attributable to Nucor Stockholders and Return on Equity

Nucor reported consolidated net earnings of $942.4 million, or $3.10 per diluted share, in the first quarter of 2021 as compared to consolidated net earnings of $20.3 million, or $0.07 per diluted share, in the first quarter of 2020. Net earnings attributable to Nucor stockholders as a percentage of net sales were 13.4% and 0.4% in the first quarter of 2021 and 2020, respectively. Annualized return on average stockholders’ equity was 33.9% and 0.8% in the first quarter of 2021 and 2020, respectively.


Outlook

We expect earnings in the second quarter of 2021 to be the highest quarterly earnings in Nucor history, surpassing the record set in the first quarter of 2021. The primary drivers for the expected increase in earnings in the second quarter of 2021 as compared to the first quarter of 2021 are improved pricing and margins in the steel mills segment. The segment’s largest increases in performance are expected at our sheet and plate mills. The steel products segment is expected to have another strong quarter in the second quarter of 2021 that will be comparable to the first quarter of 2021. The profitability of the raw materials segment is expected to decrease in the second quarter of 2021 as compared to the first quarter of 2021 due to rising raw materials input costs.

Nucor’s largest exposure to market risk is via our steel mills and steel products segments. Our largest single customer in the first quarter of 2021 represented approximately 5% of sales and has consistently paid within terms. In the raw materials segment, we are exposed to price fluctuations related to the purchase of scrap and scrap substitutes, pig iron and iron ore. Our exposure to market risk is mitigated by the fact that our steel mills use a significant portion of the products of the raw materials segment.

Liquidity and Capital Resources

Nucor operates a capital-intensive business in highly cyclical markets. We therefore utilize conservative financial practices that maximize our financial strength during economic downturns like the one we experienced as a result of the COVID-19 pandemic. Our liquidity position, consisting of cash and cash equivalents, short-term investments and restricted cash and cash equivalents, remained strong at $2.98 billion as of April 3, 2021. Additionally, Nucor has no significant debt maturities until September 2022.

We believe that our conservative financial practices have served us well in the past and are serving us well today. Nucor’s financial strength allows for a consistent, balanced approach to capital allocation throughout the business cycle.

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Nucor’s highest capital allocation priority is to reinvest in our business to ensure our continued profitable growth over the long term. We have historically done this by investing to optimize our existing operations, initiate greenfield expansions and make acquisitions. Our second priority is to return capital to our stockholders through cash dividends and share repurchases. We intend to return a minimum of 40% of our net earnings to our stockholders, while maintaining a debt-to-capital ratio that supports a strong investment grade credit rating. In September 2018, Nucor’s Board of Directors approved a share repurchase program under which the Company is authorized to repurchase up to $2.00 billion of its common stock. As of April 3, 2021, the Company had approximately $857.5 million remaining for share repurchases under the program.

Cash provided by operating activities was $530.4 million in the first quarter of 2021 as compared to $201.2 million in the first quarter of 2020. Net earnings improved by $933.1 million over the prior year period. Included in the first quarter of 2020 was a non-cash loss on assets of $287.8 million related to our previously held equity method investment in Duferdofin Nucor. In addition, changes in operating assets and operating liabilities (exclusive of acquisitions) used cash of $734.2 million in the first quarter of 2021 compared with $366.7 million in the first quarter of 2020. The funding of our working capital in the first quarter of 2021 increased over the first quarter of 2020 mainly due to larger increases in inventories and accounts receivable from year-end 2020 than the increase from year-end 2019 to the end of the first quarter of 2020. Inventories increased due to a 27% increase in the cost of scrap and scrap substitutes in inventory on hand from year-end 2020 to the end of the first quarter of 2021, as compared to a 4% increase in the cost of scrap and scrap substitutes during the same prior year period. Accounts receivable increased in the first quarter of 2021 from the fourth quarter of 2020 due to a 21% increase in composite sales price for the quarter and an 11% increase in tons shipped to outside customers, whereas the first quarter of 2020 saw a similar increase in tons shipped to outside customers from year-end 2019, but composite sales price was flat quarter-over-quarter.  

The current ratio was 3.5 at the end of the first quarter of 2021 and 3.6 at year-end 2020. The current ratio decreased slightly due to the following: a 38% decrease in other current assets, most notably the federal income tax receivable; a 16% increase in accounts payable driven by the previously discussed increased inventory costs; and a 14% increase in salaries, wages and related accruals due to increased profit sharing accruals resulting from the increased earnings of the Company. Partially offsetting these items were a 23% and 22% increase in accounts receivable and inventories, respectively, due to the previously discussed increases in inventory costs and selling prices. In the first three months of both 2021 and 2020, accounts receivable turned approximately every five weeks and inventories turned approximately every 10 weeks.

Cash used in investing activities during the first three months of 2021 was $302.0 million as compared to $254.9 million in the prior year period. Nucor purchased $214.4 million of investments in the first three months of 2021, as opposed to $24.7 million in the first three months of 2020. Offsetting the increase in cash used for purchasing investments was a 25%, or $103.0 million, decrease in capital expenditures during the first quarter of 2021 as compared to the first quarter of 2020. The decrease in capital expenditures was primarily related to completion of three significant strategic growth projects in 2020: the micro mill in Sedalia, Missouri; the rolling mill upgrade in Kankakee, Illinois; and the micro mill in Frostproof, Florida. The first quarter of 2021 also benefitted from an additional $41.0 million of cash provided by the sale of investments when compared to the prior year period.

Cash used in financing activities during the first three months of 2021 was $410.7 million as compared to $228.6 million in the prior year period. Stock repurchases were $301.9 million in the first three months of 2021 as compared to $39.5 million in the first three months of 2020. Offsetting the increase in cash used for acquisition of stock was $107.5 million of proceeds from the exercise of stock options.

Nucor’s $1.50 billion revolving credit facility is undrawn and was amended and restated in April 2018 to extend the maturity date to April 2023. We believe our financial strength is a key strategic advantage among domestic steel producers, particularly during recessionary business cycles. We carry the highest credit ratings of any steel producer headquartered in North America, with an A- long-term rating from Standard & Poor’s and a Baa1 long-term rating from Moody’s. Our credit ratings are dependent, however, upon a number of factors, both qualitative and quantitative, and are subject to change at any time. The disclosure of our credit ratings is made in order to enhance investors’ understanding of our sources of liquidity and the impact of our credit ratings on our cost of funds.

Our credit facility includes only one financial covenant, which is a limit of 60% on the ratio of funded debt to total capitalization. In addition, the credit facility contains customary non-financial covenants, including a limit on Nucor’s ability to pledge the Company’s assets and a limit on consolidations, mergers and sales of assets. As of April 3, 2021, our funded debt to total capital ratio was 31% and we were in compliance with all non-financial covenants under our credit facility. No borrowings were outstanding under the credit facility as of April 3, 2021.

Our financial strength allows a number of capital preservation options. Nucor’s robust capital investment and maintenance practices give us the flexibility to reduce spending by prioritizing our capital projects, potentially rescheduling

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certain projects and selectively allocating capital to investments with the greatest impact on our long-term earnings power. Capital expenditures for 2021 are estimated to be around $2.00 billion as compared to $1.53 billion in 2020. The projects that we anticipate will have the largest capital expenditures in 2021 are the hot band galvanizing line at Nucor Steel Arkansas, the sheet mill expansion at Nucor Steel Gallatin, and the plate mill under construction in Brandenburg, Kentucky.

In February 2021, Nucor’s Board of Directors declared a quarterly cash dividend on Nucor’s common stock of $0.405 per share payable on May 11, 2021 to stockholders of record on March 31, 2021. This dividend is Nucor’s 192nd consecutive quarterly cash dividend.

Funds provided from operations, cash and cash equivalents, short-term investments, restricted cash and cash equivalents and new borrowings under our existing credit facilities are expected to be adequate to meet future capital expenditure and working capital requirements for existing operations for at least the next 24 months.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the ordinary course of business, Nucor is exposed to a variety of market risks. We continually monitor these risks and develop strategies to manage them.

Interest Rate Risk

Nucor manages interest rate risk by using a combination of variable-rate and fixed-rate debt. Nucor also occasionally makes use of interest rate swaps to manage net exposure to interest rate changes. Management does not believe that Nucor’s exposure to interest rate risk has significantly changed since December 31, 2020. There were no interest rate swaps outstanding at April 3, 2021.

Commodity Price Risk

In the ordinary course of business, Nucor is exposed to market risk for price fluctuations of raw materials and energy, principally scrap steel, other ferrous and nonferrous metals, alloys and natural gas. We attempt to negotiate the best prices for our raw material and energy requirements and to obtain prices for our steel products that match market price movements in response to supply and demand. In periods of strong or stable demand for our products, we are more likely to be able to effectively reduce the normal time lag in passing through higher raw material costs so that we can maintain our gross margins. When demand for our products is weaker, this becomes more challenging. Our DRI facilities in Trinidad and Louisiana provide us with flexibility in managing our input costs. DRI is particularly important for operational flexibility when demand for prime scrap increases due to increased domestic steel production.

Natural gas produced by Nucor’s drilling operations is being sold to third parties to offset our exposure to changes in the price of natural gas consumed by our Louisiana DRI facility and our steel mills in the United States.

Nucor also periodically uses derivative financial instruments to hedge a portion of our exposure to price risk related to natural gas purchases used in the production process and to hedge a portion of our scrap, aluminum and copper purchases and sales. Gains and losses from derivatives designated as hedges are deferred in accumulated other comprehensive loss, net of income taxes on the condensed consolidated balance sheets and recognized in net earnings in the same period as the underlying physical transaction. At April 3, 2021, accumulated other comprehensive loss, net of income taxes included $3.2 million in unrealized net-of-tax losses for the fair value of these derivative instruments. Changes in the fair values of derivatives not designated as hedges are recognized in net earnings each period. The following table presents the negative effect on pre-tax earnings of a hypothetical change in the fair value of derivative instruments outstanding at April 3, 2021, due to an assumed 10% and 25% change in the market price of each of the indicated commodities (in thousands):

 

Commodity Derivative

 

10% Change

 

 

25% Change

 

Natural gas

 

$

5,228

 

 

$

13,069

 

Aluminum

 

$

5,772

 

 

$

14,431

 

Copper

 

$

4,390

 

 

$

10,995

 

 

Any resulting changes in fair value would be recorded as adjustments to accumulated other comprehensive loss, net of income taxes or recognized in net earnings, as appropriate. These hypothetical losses would be partially offset by the benefit of lower prices paid or higher prices received for the physical commodities.


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Foreign Currency Risk

Nucor is exposed to foreign currency risk primarily through its operations in Canada, Europe and Mexico. We periodically use derivative contracts to mitigate the risk of currency fluctuations. Open foreign currency derivative contracts at April 3, 2021 were insignificant.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the evaluation date.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended April 3, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Nucor is from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. With respect to all such lawsuits, claims and proceedings, we record reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. We do not believe that any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on our results of operations, financial position or cash flows. Nucor maintains liability insurance with self-insurance limits for certain risks.

There were no proceedings that were pending or contemplated under federal, state or local environmental laws that the Company reasonably believes may result in monetary sanctions of at least $1.0 million (the threshold chosen by Nucor as permitted by Item 103 of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended, and which Nucor believes is reasonably designed to result in disclosure of any such proceeding that is material to its business or financial condition).

Item 1A. Risk Factors

There have been no material changes in Nucor’s risk factors from those included in “Item 1A. Risk Factors” in Nucor’s Annual Report on Form 10-K for the year ended December 31, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Our share repurchase program activity for each of the three months and the quarter ended April 3, 2021 was as follows (in thousands, except per share amounts):

 

 

 

Total

Number

of Shares

Purchased

 

 

Average

Price Paid

per Share (1)

 

 

Total Number of

Shares Purchased

as Part of Publicly

Announced Plans

or Programs (2)

 

 

Approximate

Dollar Value of

Shares that

May Yet Be

Purchased

Under the

Plans or

Programs (2)

 

January 1, 2021 - January 30, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

$

1,159,357

 

January 31, 2021 - February 27, 2021

 

 

5,380

 

 

$

56.11

 

 

 

5,380

 

 

 

857,485

 

February 28, 2021 - April 3, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

857,485

 

For the Quarter Ended April 3, 2021

 

 

5,380

 

 

 

 

 

 

 

5,380

 

 

 

 

 

 

(1)

Includes commissions of $0.02 per share.

(2)

On September 6, 2018, the Company announced that the Board of Directors had approved a new share repurchase program under which the Company is authorized to repurchase up to $2.00 billion of the Company’s common stock and terminated any previously authorized share repurchase program. The share repurchase authorization is discretionary and has no expiration date.


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Item 6. Exhibits

 

Exhibit No.

 

Description of Exhibit

 

 

3

  

Restated Certificate of Incorporation of Nucor Corporation (incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K filed September 14, 2010 (File No. 001-04119))

 

 

3.1

  

Bylaws of Nucor Corporation, as amended and restated February 22, 2021 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed February 24, 2021 (File No. 001-04119))

 

 

 

10

 

Executive Employment Agreement of David A. Sumoski (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K/A filed January 5, 2021 (File No. 001-04119)) (#)

 

 

 

10.1

 

Executive Employment Agreement of Douglas J. Jellison (incorporated by reference to Exhibit 10(xxx) to the Annual Report on Form 10-K for the year ended December 31, 2020 (File No. 001-04119)) (#)

 

 

 

10.2

 

Executive Employment Agreement of Gregory J. Murphy (incorporated by reference to Exhibit 10(xxxi) to the Annual Report on Form 10-K for the year ended December 31, 2020 (File No. 001-04119)) (#)

 

 

 

10.3

 

Executive Employment Agreement of Daniel R. Needham (incorporated by reference to Exhibit 10(xxxii) to the Annual Report on Form 10-K for the year ended December 31, 2020 (File No. 001-04119)) (#)

 

 

 

10.4

 

Executive Employment Agreement of K. Rex Query (incorporated by reference to Exhibit 10(xxxiii) to the Annual Report on Form 10-K for the year ended December 31, 2020 (File No. 001-04119)) (#)

 

 

 

31*

  

Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

31.1*

  

Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

32**

  

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

32.1**

  

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

101*

  

Financial Statements (Unaudited) from the Quarterly Report on Form 10-Q of Nucor Corporation for the quarter ended April 3, 2021, filed May 12, 2021, formatted in Inline XBRL: (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements.

 

 

 

104*

 

Cover Page from the Quarterly Report on Form 10-Q of Nucor Corporation for the quarter ended April 3, 2021, filed on May 12, 2021, formatted in Inline XBRL (included in Exhibit 101).

 

*

Filed herewith.

**

Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of Regulation S-K.

(#)

Indicates a management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

NUCOR CORPORATION

 

 

 

 

 

By:

 

/s/ James D. Frias

 

 

 

James D. Frias

 

 

 

Chief Financial Officer, Treasurer and Executive

 

 

 

Vice President

 

Dated: May 12, 2021

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