Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 10-K

 


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2005   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.)

2100 Rexford Road, Charlotte, North Carolina   28211
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (704) 366-7000

 


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

 

Title of each class

 

Name of each exchange

on which registered

Common stock, par value $0.40 per share   New York Stock Exchange

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

None

 


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indication 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  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨

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

Aggregate market value of common stock held by non-affiliates was approximately $7.23 billion based upon the closing sales price of the registrant’s common stock on the last day of our most recently completed second fiscal quarter, July 2, 2005.

155,411,430 shares of common stock were outstanding at February 28, 2006.

Documents incorporated by reference include: Portions of 2005 Annual Report (Parts I, II and IV), and Notice of 2006 Annual Meeting of Stockholders and Proxy Statement (Part III).

 



Table of Contents

Nucor Corporation

Table of Contents

 

               Page
PART 1      
   Item 1    Business    1
   Item 1A    Risk Factors    4
   Item 1B    Unresolved Staff Comments    6
   Item 2    Properties    7
   Item 3    Legal Proceedings    7
   Item 4    Submission of Matters to a Vote of Security Holders    7
   Executive Officers of the Registrant    8
PART II      
   Item 5    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities    9
   Item 6    Selected Financial Data    9
   Item 7    Management’s Discussion and Analysis of Financial Condition and Results of Operations    10
   Item 7A    Quantitative and Qualitative Disclosures about Market Risk    10
   Item 8    Financial Statements and Supplementary Data    10
   Item 9    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure    10
   Item 9A    Controls and Procedures    11
   Item 9B    Other Information    11
PART III      
   Item 10    Directors and Executive Officers of the Registrant    11
   Item 11    Executive Compensation    11
   Item 12    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters    12
   Item 13    Certain Relationships and Related Transactions    12
   Item 14    Principal Accountant Fees and Services    12
PART IV   
   Item 15    Exhibits and Financial Statement Schedules    12
Signatures    15
Index to Financial Statement Schedule    16
List of Exhibits to Form 10-K    19

 

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PART I

Item 1. Business

Nucor Corporation was incorporated in Delaware in 1958. The business of Nucor Corporation and its subsidiaries is the manufacture and sale of steel and steel products, which accounted for all of the sales and the majority of the earnings in 2005, 2004 and 2003. The earnings in 2005 include other income of $9.2 million in settlement of claims against third parties related to environmental matters. The earnings in 2004 and 2003 include other income of $1.6 million and $4.4 million, respectively, related to pre-tax gains on the sale of equipment. The earnings in 2003 include a pre-tax gain of $7.1 million related to graphite electrodes anti-trust settlements.

Nucor is the nation’s largest recycler, using scrap steel as the primary material in producing our products. In 2005, we recycled over 23 million tons of scrap steel.

Nucor reports its results in two segments: steel mills and steel products. Net sales to external customers, intercompany sales, depreciation expense, earnings (loss) before income taxes, assets and capital expenditures by segment for each of the three years in the period ended December 31, 2005, are set forth in Note 16 of Notes to Consolidated Financial Statements of the 2005 Annual Report, which note is hereby incorporated by reference.

Principal products from the steel mills segment are hot-rolled steel (angles, rounds, flats, channels, sheet, wide-flange beams, pilings, billets, blooms, beam blanks and plate) and cold-rolled steel. Principal products from the steel products segment are steel joists and joist girders, steel deck, cold finished steel, steel fasteners, metal building systems and light gauge steel framing. Hot-rolled steel is manufactured principally from scrap, utilizing electric arc furnaces, continuous casting and automated rolling mills. Cold-rolled steel, cold finished steel, steel joists and joist girders, and steel fasteners are manufactured by further processing of hot-rolled steel. Steel deck is manufactured from cold-rolled steel.

In the steel mills segment, hot-rolled and cold-rolled sheet steel are produced to customer orders. In addition, other hot-rolled and cold-rolled steel are manufactured in standard sizes and inventories are maintained. In 2005, approximately 92% of the steel mills segment production was sold to non-affiliated customers; the remainder was used internally by the steel products segment. Hot-rolled steel and cold-rolled steel are sold primarily to steel service centers, fabricators and manufacturers throughout the United States. In 2005, approximately 45% of our sheet steel sales were made to contract customers with the balance of sales made in the spot market at prevailing prices at the time of sale. These contracts permit price adjustments to reflect changes in prevailing raw material costs and typically have terms ranging from six to twelve months. In the steel mills segment, Nucor’s backlog of orders was approximately $2.87 billion and $1.63 billion at December 31, 2005 and 2004, respectively. These orders are normally filled within one year.

In the steel products segment, steel joists and joist girders, and steel deck are sold to general contractors and fabricators throughout the United States. Substantially all work is to order and no unsold inventories of finished products are maintained. All sales contracts are firm fixed-price contracts and are normally competitively bid against other suppliers. Cold finished steel and steel fasteners are manufactured in standard sizes and inventories are maintained. Cold finished steel and steel fasteners are sold primarily to distributors and manufacturers throughout the United States. Nucor’s backlog of orders in the steel products segment was approximately $473.7 million and $408.4 million at December 31, 2005 and 2004, respectively. These orders are normally filled within one year.

 

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The primary raw material for the steel mills segment is ferrous scrap, which is acquired from numerous sources throughout the country. The average scrap and scrap substitute cost per ton used increased 74% from $137 per ton in 2003 to $238 per ton in 2004 and increased an additional 3% to $244 per ton in 2005. In response to the escalating scrap steel prices, Nucor successfully implemented a raw material sales price surcharge in 2004. This surcharge has helped offset the impact of significantly higher scrap prices and has ensured that we were able to purchase the scrap needed to fill our customers’ orders. The primary raw material for the steel products segment is steel, which is almost entirely purchased from the steel mills segment.

The steel mills are also large consumers of electricity and natural gas. Nucor uses cash flow hedges and natural gas purchase contracts to partially manage its exposure to price risk of natural gas that is used during the manufacturing process. Historically, U.S.-based manufacturers have enjoyed competitive energy costs that have allowed competition on equal footing in what is becoming more and more a global market. In recent decades, our government has allowed a growing over-reliance on natural gas for the generation of electricity, while at the same time preventing access to some of the most promising areas for natural gas exploration. As a result, natural gas prices have increased from less than $2.00 per mmbtu in the 1990’s (NYMEX Henry-Hub pricing) to a peak of more than $15.00 per mmbtu in December 2005. Since an increasing share of electricity is now generated using natural gas, higher natural gas prices are also increasing costs for consumers of electricity. Nucor actively supports several organizations that are promoting a more rational energy policy. We believe this is critical for not only our future business success, but also for the future of the U.S. economy. Supplies of raw materials and energy have been, and are expected to be, adequate to operate our facilities.

Products from both segments are marketed mainly through in-house sales forces. The principal competitive factors are price and service. The markets that Nucor serves are tied to capital and durable goods spending and are affected by changes in economic conditions. Considerable competition exists from numerous domestic manufacturers and foreign imports. Unfairly traded, illegally dumped steel imports have devastated the U.S. steel industry and its workers. In March 2002, the Bush Administration imposed a series of tariffs, known as Section 201, to help the domestic steel industry recover from the illegal and predatory trading practices of foreign trading competitors. In December 2003, the Administration chose to end the temporary steel safeguard tariffs prior to their scheduled expiration; however, we are optimistic about the Bush Administration’s commitment to strengthen and enforce existing U.S. trade laws and the President’s promise to work with Congress to achieve a long-term solution to illegal dumping and other unfair trade practices that necessitated Section 201. There can be no assurance that such solutions will be achieved. Nucor actively supports several organizations that promote free and fair trade and that oppose currency manipulation.

Nucor has historically focused on optimizing existing operations to ensure that they are among the most productive and efficient facilities in the United States. In recent years, however, our focus has expanded to include growing profitably through acquisitions, particularly in the steel mills segment.

In July 2004, Nucor’s wholly owned subsidiary, Nucor Steel Tuscaloosa, Inc., purchased substantially all of the steelmaking assets of Corus Tuscaloosa for a price of approximately $89.4 million. The facility is a coiled plate mill that manufactures pressure vessel steel coil, discrete plate and cut-to-length plate products with an initial annual capacity of approximately 800,000 tons. Our continued investments in this facility combined with the benefits of our incentive pay program have increased the capacity to 1,200,000 tons currently. This acquisition was immediately accretive to earnings and made a significant operating contribution in the second half of 2004 and in 2005.

In August 2004, Nucor’s wholly owned subsidiary, Nucor Steel Decatur, LLC, purchased certain assets of Worthington Industries, Inc.’s cold rolling mill located adjacent to our steel mill in Decatur, Alabama, for a cash purchase price of approximately $80.3 million. The assets purchased include all of the buildings, the pickle line, four-stand tandem cold mill, temper mill and annealing furnaces. This 1,000,000-ton cold mill facility has 600,000 tons of annealing capacity and provides expanded value-added products to our customers in the Southeast.

 

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In February 2005, Nucor purchased the assets of Fort Howard Steel, Inc.’s operations in Oak Creek, Wisconsin, for a cash purchase price of approximately $44.1 million. This facility produces cold finished bar product and has approximately 140,000 tons of annual capacity.

In June 2005, Nucor’s wholly owned subsidiary, Nucor Steel Marion, Inc., purchased substantially all of the assets of Marion Steel Company for a cash purchase price of approximately $110.7 million. This facility produces angles, flats, rebar, rounds and signposts. This facility has already grown its capacity from 400,000 tons to 450,000 tons largely as a result of our incentive-based compensation program.

Nucor is also growing through “greenfield” projects using new technologies and growing globally through joint ventures.

Nucor began operations of its 100% owned Castrip® facility in Crawfordsville, Indiana, in 2002. This facility uses the breakthrough technology of strip casting, to which Nucor holds exclusive rights in the United States and Brazil. Strip casting involves the direct casting of molten steel into final shape and thickness without further hot or cold rolling, allowing lower investment and operating costs, reduced energy consumption and smaller scale plants than can be economically built with current technology. This process also reduces the overall environmental impact of producing steel by generating significantly lower emissions, particularly NOx. The Castrip process achieved commercial viability in 2004. We have selected Nucor-Yamato Steel in Blytheville, Arkansas as the location for our second Castrip production facility. We also plan to establish at least one joint venture with a partner overseas in 2006 to utilize the Castrip technology.

Nucor established two rebar fabrication joint ventures in 2004 and 2005 with leaders in the reinforcing steel construction markets. In 2004, Nucor purchased a one-half interest in Harris Steel, Inc., a wholly owned subsidiary of Harris Steel Group, Inc., to serve the western and northeastern U.S. rebar fabrication markets. This joint venture continues to grow and to generate strong returns. In 2005, Nucor entered into an agreement with Ambassador Steel Corporation to form Nufab Rebar LLC. Nucor owns 49% of this rebar fabrication joint venture which should allow us to expand Nucor’s rebar fabrication presence into the central and southern regions of the country. These investments in rebar fabrication complement our existing facilities by adding downstream integration from our bar mills into the value-added process.

Nucor’s raw materials strategy includes the goal of controlling between 6,000,000 and 7,000,000 tons per year of our iron units consumption. Three projects in particular represent Nucor’s initial steps towards achieving this goal: the HIsmelt® facility in Australia, the sustainable pig iron project in Brazil, and the direct reduced iron (“DRI”) plant in Trinidad.

In 2002, Nucor entered a joint venture with The Rio Tinto Group, Mitsubishi Corporation and Chinese steelmaker, Shougang Corporation, to construct a commercial HIsmelt plant in Kwinana, Western Australia. The HIsmelt process converts iron ore fines and coal fines directly to liquid metal eliminating the need for a blast furnace, sinter/pellet plants and coke ovens. Additionally, the HIsmelt technology offers an alternative supply of high-quality iron units as a scrap substitute. Nucor has a 25% interest in the joint venture that owns the HIsmelt commercial plant. Construction was completed and the start-up of operations began in 2005. This plant has an initial annual capacity of 800,000 metric tons, which is expandable to over 1,500,000 tons.

In 2003, Nucor entered a joint venture with Companhia Vale do Rio Doce (“CVRD”) to construct and operate an environmentally responsible pig iron project in northern Brazil. The project, named Ferro Gusa Carajás S.A., will utilize two conventional mini-blast furnaces to produce about 380,000 metric tons of pig iron per year in its initial phase, using iron ore from CVRD’s Carajás mine in northern Brazil. The charcoal source will be exclusively from eucalyptus trees grown in a cultivated forest of 82,000 acres with the total forest encompassing approximately 200,000 acres in northern Brazil. The cultivated forest removes more carbon dioxide than the blast furnace process emits. Production of pig iron began in the fourth quarter of 2005. It is anticipated that Nucor will purchase all of the production of the plant.

 

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In September 2004, Nucor exercised its option to acquire the idled assets of American Iron Reduction’s DRI plant located in Convent, Louisiana. These assets have been relocated to Trinidad and construction is well under way. We expect DRI production to begin in the fourth quarter of 2006 with an annual capacity of 1,800,000 metric tons per year. The Trinidad site benefits from a low cost supply of natural gas under a long-term contract and from favorable logistics for receipt of Brazilian iron ore and shipment of DRI to the United States. This new entity is named Nu-Iron Unlimted and has a capital budget of approximately $225.0 million.

Nucor is subject to environmental laws and regulations established by federal, state and local authorities. In December 2000, Nucor entered into a consent decree with the United States Environmental Protection Agency and certain states in order to resolve alleged environmental violations. Under the terms of this decree, Nucor is conducting tests at some of its facilities, performing corrective action where necessary, and piloting certain pollution control technologies.

Nucor has a simple, streamlined organizational structure to allow our employees to make quick decisions and to be innovative. Our organization is highly decentralized, with most day-to-day operating decisions made by our division general managers and their staff. Only 66 employees are located in our executive offices. All of Nucor’s 11,300 employees are engaged in its steel mills and steel products businesses. None of our employees are represented by labor unions.

Additional information on Nucor’s business is incorporated by reference to Nucor’s 2005 Annual Report, pages 10 through 19.

Nucor’s annual report on Form 10-K, quarterly reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to these reports, are available without charge through Nucor’s website, www.nucor.com, as soon as reasonably practicable after Nucor files these reports electronically with, or furnishes them to, the Securities and Exchange Commission (“SEC”). Except as otherwise stated in these reports, the information contained on our website or available by hyperlink from our website is not incorporated into this Annual Report on Form 10-K or other documents we file with, or furnish to, the SEC.

The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room located at 450 Fifth Street NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains electronic versions of our reports on its website, www.sec.gov.

Item 1A. Risk Factors

Many of the factors that affect our business and operations involve risk and uncertainty. The factors described below are some of the risks that could materially negatively affect our business, financial condition and results of operations.

Our industry is cyclical and prolonged economic declines could have a material adverse effect on our business.

Demand for most of our products is cyclical in nature and sensitive to general economic conditions. Our business supports cyclical industries such as the construction, energy, appliance and automotive industries. As a result, downturns in the United States economy or any of these industries could materially adversely affect our results of operations and cash flows. Because steel producers generally have high fixed costs, reduced volumes result in operating inefficiencies. Over the five-year period ended December 31, 2005, our net earnings have varied from a high of $1.31 billion in 2005 to a low of $62.8 million in 2003. Future economic downturns or a prolonged stagnant economy could materially adversely affect our business, results of operations, financial condition and cash flows.

 

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Overcapacity in the steel industry could increase the level of steel imports which may negatively affect our business, results of operations and cash flows.

Global steel-making capacity exceeds global consumption of steel products. This excess capacity results in manufacturers in certain countries exporting significant amounts of steel at prices below their cost of production. These imports, which are also affected by demand in the domestic market, international currency conversion rates and domestic and international government actions, can result in downward pressure on steel prices, which could materially adversely affect our business, results of operations, financial condition and cash flows.

Overcapacity in China, the world’s largest producer and consumer of steel, has the potential to cause steel dumping in U.S. markets. A significant decrease in China’s rate of economic expansion could reduce demand for steel products in that country, resulting in China increasing steel exports.

The results of our operations are sensitive to volatility in steel prices and changes in the cost of raw materials, particularly scrap steel.

We rely to a substantial extent on outside vendors to supply us with raw materials that are critical to the manufacture of our products. We acquire our primary raw material, steel scrap, from numerous sources throughout the country. Although we believe that the supply of scrap is adequate to operate our facilities, purchase prices of these critical raw materials are subject to volatility. At any given time, we may be unable to obtain an adequate supply of these critical raw materials with price and other terms acceptable to us.

If our suppliers increase the price of our critical raw materials, we may not have alternative sources of supply. In addition, to the extent that we have quoted prices to our customers and accepted customer orders for our products prior to purchasing necessary raw materials, we may be unable to raise the price of our products to cover all or part of the increased cost of the raw materials, although we have successfully used a raw material surcharge in the steel mills segment since 2004. If we are unable to obtain adequate and timely deliveries of our required raw materials, we may be unable to timely manufacture sufficient quantities of our products. This could cause us to lose sales, incur additional costs, delay new product introductions and suffer harm to our reputation.

Changes in the availability and cost of electricity and natural gas are subject to volatile market conditions that could adversely affect our business.

Our steel mills are large consumers of electricity and natural gas. We rely upon third parties for our supply of energy resources consumed in the manufacture of our products. The prices for and availability of electricity, natural gas, oil and other energy resources are subject to volatile market conditions. These market conditions often are affected by weather, political and economic factors beyond our control. Disruptions in the supply of our energy resources could temporarily impair our ability to manufacture our products for our customers. Increases in our energy costs could materially adversely affect our business, results of operations, financial condition and cash flows.

We plan to continue to implement acquisition strategies and may encounter difficulties in integrating these businesses.

We plan to continue to seek attractive opportunities to acquire businesses, enter into joint ventures and make other investments that are complementary to our existing strengths. Realization of the anticipated benefits of acquisitions or other transactions will depend on our ability to integrate these transactions with our operations and to cooperate with our strategic partners. Our business, results of operations, financial condition and cash flows could be materially and adversely affected if we are unable to successfully integrate these businesses.

In addition, we may enter into joint ventures or acquisitions located outside the U.S., which may be adversely affected by foreign currency fluctuations, changes in economic conditions and changes in local government regulations and policies.

Some of our competitors who have emerged from bankruptcy have lowered their operating costs, which could negatively impact our competitive position.

Over the past few years, many domestic steel companies have sought protection under Chapter 11 of the United States Bankruptcy Code and have continued to operate. Some have reduced prices to maintain volumes and cash flows and obtained concessions from their labor unions and suppliers. In some cases, they have even expanded and modernized while in bankruptcy. Upon emergence from bankruptcy, these companies, or new entities that purchase their facilities through the bankruptcy process, may be relieved of certain environmental, retiree and other obligations. Additionally, some of our competitors may grow by acquiring less expensive capacity out of bankruptcy. As a result, they may be able to operate with lower costs, a primary competitive factor in the steel industry, which could negatively affect our competitive position.

 

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Competition from other materials may materially adversely affect our business.

In many applications, steel competes with other materials, such as aluminum, cement, composites, glass, plastic and wood. Increased use of these materials in substitution for steel products could materially adversely affect prices and demand for our steel products.

Our operations are subject to business interruptions and casualty losses.

The steel-making business is subject to numerous inherent risks, particularly unplanned events such as explosions, fires, other accidents, inclement weather and transportation interruptions. While our insurance coverage could offset losses relating to some of those types of events, our results of operations and cash flows could be adversely impacted to the extent any such losses are not covered by our insurance.

Our business requires substantial capital investment and maintenance expenditures, and our capital resources may not be adequate to provide for all of our cash requirements.

Our operations are capital intensive. For the five-year period ended December 31, 2005, our total capital expenditures, excluding acquisitions, were approximately $1.34 billion. Our business also requires substantial expenditures for routine maintenance. Although we expect requirements for our business needs, including the funding of capital expenditures, debt service for financings and any contingencies to be financed by internally generated funds or from borrowings under our $700.0 million unsecured revolving credit facility, we cannot assure you that this will be the case. Any future significant acquisitions could require additional financing from external sources.

Environmental compliance and remediation could result in substantially increased costs and materially adversely impact our competitive position.

Our operations are subject to numerous federal, state and local laws and regulations relating to protection of the environment, and we, accordingly, make provision for the estimated costs of compliance. These laws are evolving and becoming increasingly stringent, resulting in inherent uncertainties in these estimates.

We have agreed to a comprehensive consent decree with the United States Environmental Protection Agency and certain states in order to resolve alleged past environmental violations. Under the terms of the consent decree, we are conducting tests at some of our facilities, performing corrective action where necessary, and piloting certain pollution control technologies. The accrued environmental costs include the expenses that we expect to incur as a result of the consent decree.

We believe our competitors are subject to similar environmental laws and regulations. The specific impact on each competitor may vary, however, depending upon a number of factors, including the age and location of operating facilities, production processes (such as a mini-mill versus an integrated producer) and the specific products and services it provides. To the extent that competitors, particularly foreign steel producers and manufacturers of competitive products, are not required to incur equivalent costs, our competitive position could be materially adversely impacted.

Item 1B. Unresolved Staff Comments

None.

 

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Item 2. Properties

Our principal operating facilities by segment are as follows:

 

Location

  

Approximate

square footage

of facilities

  

Principal products

Steel mills:

     

Blytheville, Arkansas

   2,200,000    Steel shapes

Berkeley County, South Carolina

   1,940,000    Flat-rolled steel, steel shapes

Crawfordsville, Indiana

   1,840,000    Flat-rolled steel

Decatur, Alabama

   1,500,000    Flat-rolled steel

Norfolk, Nebraska

   1,400,000    Steel shapes

Hickman, Arkansas

   1,380,000    Flat-rolled steel

Plymouth, Utah

   1,170,000    Steel shapes

Darlington, South Carolina

   1,170,000    Steel shapes

Jewett, Texas

   1,080,000    Steel shapes

Hertford County, North Carolina

   1,000,000    Steel plate

Seattle, Washington

   660,000    Steel shapes

Auburn, New York

   400,000    Steel shapes

Kankakee, Illinois

   400,000    Steel shapes

Marion, Ohio

   390,000    Steel shapes

Tuscaloosa, Alabama

   350,000    Steel plate

Jackson, Mississippi

   340,000    Steel shapes

Birmingham, Alabama

   280,000    Steel shapes

Steel products:

     

Norfolk, Nebraska

   1,010,000    Joists, deck

Brigham City, Utah

   750,000    Joists

Grapeland, Texas

   660,000    Joists, deck

St. Joe, Indiana

   550,000    Joists, deck

Chemung, New York

   550,000    Joists, deck

Florence, South Carolina

   530,000    Joists, deck

Fort Payne, Alabama

   460,000    Joists, deck

Our steel mills segment also includes a distribution center in Pompano Beach, Florida. In the steel products segment, we have additional operating facilities in St. Joe and Waterloo, Indiana; Terrell and Denton, Texas; Swansea, South Carolina; Oak Creek, Wisconsin; and Dallas, Georgia. During 2005, the average utilization rates of all operating facilities in the steel mills and steel products segments were approximately 82% and 78% of production capacity, respectively.

We lease our principal executive office in Charlotte, North Carolina.

Item 3. Legal Proceedings

Nucor is involved in various judicial and administrative proceedings as both plaintiff and defendant, arising in the ordinary course of business. Nucor does not believe that any such proceedings (including matters relating to contracts, torts, taxes, warranties and insurance) will have a material adverse effect on its business, operating results, financial condition or cash flows.

Item 4. Submission of Matters to a Vote of Security Holders

None during the quarter ended December 31, 2005.

 

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Executive Officers of the Registrant

The executive officers of Nucor as of February 28, 2006 are set forth below. Each holds the offices indicated until his successor is elected and qualified at the regular meeting of the Board of Directors to be held immediately following the 2006 Annual Meeting of Stockholders.

Daniel R. DiMicco (55) - Mr. DiMicco has been a director of Nucor since 2000 and was elected as Vice Chairman in June 2001. Mr. DiMicco’s term as director expires at the 2007 annual meeting. Mr. DiMicco has served as Nucor’s President and Chief Executive Officer since September 2000. He was an Executive Vice President of Nucor from 1999 to 2000 and Vice President from 1992 to 1999, serving as General Manager of Nucor-Yamato Steel Company. Mr. DiMicco began his career with Nucor in 1982 at Nucor Steel, Plymouth, Utah.

Terry S. Lisenby (54) - Mr. Lisenby has been Chief Financial Officer, Treasurer and Executive Vice President since January 2000. He previously served as a Vice President and Corporate Controller of Nucor from 1991 to 1999. Mr. Lisenby began his career with Nucor as Corporate Controller in 1985.

John J. Ferriola (53) - Mr. Ferriola has been an Executive Vice President of Nucor since January 2002 and was a Vice President from 1996 to 2001. He was General Manager of Nucor Steel, Crawfordsville, Indiana from 1998 to 2001; General Manager of Nucor Steel, Norfolk, Nebraska from 1995 to 1998; General Manager of Vulcraft, Grapeland, Texas in 1995; and Manager of Maintenance and Engineering at Nucor Steel, Jewett, Texas from 1992 to 1995.

Hamilton Lott, Jr. (56) - Mr. Lott has been an Executive Vice President of Nucor since September 1999 and was a Vice President from 1988 to 1999. He was General Manager of Vulcraft, Florence, South Carolina from 1993 to 1999; General Manager of Vulcraft, Grapeland, Texas from 1987 to 1993; Sales Manager of Vulcraft, St. Joe, Indiana from January 1987 to May 1987 and Engineering Manager there from 1982 to 1986. Mr. Lott began his career with Nucor as Design Engineer at Vulcraft, Florence, South Carolina in 1975.

D. Michael Parrish (53) - Mr. Parrish has been an Executive Vice President of Nucor since November 1998 and was a Vice President from 1990 to 1998. He was General Manager of Nucor Steel, Hickman, Arkansas from 1995 to 1998; General Manager of Nucor Steel, Jewett, Texas from 1991 to 1995; General Manager of Vulcraft, Brigham City, Utah from 1989 to 1991; Production Manager of Vulcraft, Fort Payne, Alabama from 1986 to 1989; Engineering Manager of Vulcraft, Brigham City, Utah from 1981 to 1986; and Engineer at Vulcraft, St. Joe, Indiana from 1975 to 1981.

Joseph A. Rutkowski (51) - Mr. Rutkowski has been an Executive Vice President of Nucor since November 1998 and was a Vice President from 1993 to 1998. He was General Manager of Nucor Steel, Hertford County, North Carolina, from August 1998 to November 1998; General Manager of Nucor Steel, Darlington, South Carolina from 1992 to 1998; Manager of Melting and Casting of Nucor Steel, Plymouth, Utah from 1991 to 1992; and Manager of Nucor Cold Finish, Norfolk, Nebraska from 1989 to 1991.

James M. Coblin (62) - Mr. Coblin has been Vice President of Human Resources since January 2000. He previously served as Nucor’s General Manager of Human Resources from 1996 to 1999. Mr. Coblin began his career with Nucor as Manager of Personnel Service in 1986.

 

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our share repurchase program activity for each of the three months and the quarter ended December 31, 2005 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)

  

Maximum
Number of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs

(2)

October 2, 2005 - October 29, 2005

   817    $ 54.33    817    2,937

October 30, 2005 - November 26, 2005

   28      59.98    28    2,909

November 27, 2005 - December 31, 2005

   —        —      —      12,909
                     

For the Quarter Ended December 31, 2005

   845    $ 54.52    845    12,909
                     

(1) Includes commissions of $0.02 per share.
(2) On September 5, 2000, the Board of Directors approved a stock repurchase program under which the Company is authorized to repurchase up to 5,000,000 shares of the Company’s common stock. On September 8, 2004, the Board of Directors resolved that the number of shares of common stock authorized for repurchase would increase 100% as a result of the 2-for-1 stock split on the record date of October 15, 2004. At that time, the number of remaining shares authorized for repurchase increased from 4,237,900 shares to 8,475,800 shares. On April 21, 2005, the Company publicly announced the reactivation of this stock repurchase program. On December 6, 2005, the Board of Directors authorized the repurchase of up to an additional 10,000,000 shares of its common stock, once the current repurchase authorization is completed. This repurchase authorization does not have a scheduled expiration date.

Nucor has increased its cash dividend every year since it began paying dividends in 1973. In 2005, in addition to raising the base dividend, the board of directors implemented a supplemental dividend based on Nucor’s strong performance in 2004. Nucor paid dividends of $1.33 per share in 2005 compared with $0.44 per share in 2004. In February 2006, the board of directors announced an increase in the base dividend to $0.20 per share and in the supplemental dividend to $0.50 per share, resulting in an annualized dividend of $2.80 per share. The payment of any future supplemental dividends will depend upon many factors, including Nucor’s earnings, cash flows and financial position.

Additional information regarding the market for Nucor’s common stock, quarterly market price ranges, the number of stockholders and dividend payments is incorporated by reference to Nucor’s 2005 Annual Report, pages 33 and 56.

Item 6. Selected Financial Data

Historical financial information is incorporated by reference to Nucor’s 2005 Annual Report, page 33.

 

9


Table of Contents

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Information required by this item is incorporated by reference to Nucor’s 2005 Annual Report, page 3 (Forward-looking Statements) and pages 20 through 29.

Item 7A. 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 appropriate strategies to manage them.

Interest Rate Risk – Nucor manages interest rate risk by using a combination of variable-rate and fixed-rate debt. At December 31, 2005, 43% of Nucor’s long-term debt was in industrial revenue bonds that have variable interest rates that are adjusted weekly or annually. The remaining 57% of Nucor’s debt is at fixed rates. Future changes in interest rates are not expected to significantly impact earnings. Nucor also makes use of interest rate swaps to manage net exposure to interest rate changes. As of December 31, 2005, there were no such contracts outstanding. Nucor’s investment practice is to invest in securities that are highly liquid with short maturities. As a result, we do not expect changes in interest rates to have a significant impact on the value of our investment securities.

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 and natural gas. We attempt to negotiate the best prices for our raw materials and energy requirement and to obtain prices for our steel products that match market price movements in response to supply and demand. In the first quarter of 2004, Nucor initiated a raw material surcharge designed to pass through the historically high cost of scrap steel and other raw materials. Our surcharge mechanism has worked effectively to reduce the normal time lag in passing through higher raw material costs so that we can maintain our gross margins.

Nucor also uses derivative financial instruments to hedge a portion of our exposure to price risk related to natural gas purchases used in the production process when management believes it is prudent to do so. Gains and losses from the use of these instruments are deferred in accumulated other comprehensive income (loss) on the consolidated balance sheets and recognized into cost of products sold in the same period as the underlying physical transaction. At December 31, 2005, accumulated other comprehensive income (loss) includes $55.8 million in unrealized net-of-tax gains for the fair value of these derivative instruments. A sensitivity analysis of changes in the price of hedged natural gas purchases indicates that declines of 10% and 25% in natural gas prices would reduce the fair value of our natural gas hedge position by $20.1 million and $50.0 million, respectively. Any resulting changes in fair value would be recorded as adjustments to other comprehensive income (loss), net of tax. Because these instruments are structured and used as hedges, these hypothetical losses would be offset by the benefit of lower prices paid for the natural gas used in the normal production cycle.

Item 8. Financial Statements and Supplementary Data

Information required by this item is incorporated by reference to Nucor’s 2005 Annual Report, pages 34 through 52.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

 

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Table of Contents

Item 9A. 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 Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting – There were no changes in our internal control over financial reporting during the quarter ended December 31, 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Report on Internal Control Over Financial Reporting – Management’s report on internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002 and the attestation report thereon of PricewaterhouseCoopers LLP, an independent registered public accounting firm, are incorporated by reference to Nucor’s 2005 Annual Report, pages 34 through 35.

Item 9B. Other Information

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

The information regarding Nucor’s directors contained in the Notice of 2006 Annual Meeting of Stockholders and Proxy Statement (the “Proxy Statement”) under the heading Election of Directors and the information regarding Nucor’s directors and executive officers contained in the Proxy Statement under the caption Section 16(a) Beneficial Ownership Reporting Compliance is incorporated by reference. Pursuant to Item 401(b) of Regulation S-K, executive officers of Nucor are reported in Part I of this report. Information regarding the audit committee and the audit committee financial expert appearing under the heading Corporate Governance and Board of Directors in the Proxy Statement is incorporated by reference.

Nucor has adopted a Code of Ethics for Senior Financial Professionals (“Code of Ethics”) that applies to the Company’s Chief Executive Officer, Chief Financial Officer, Corporate Controller and other senior financial professionals, as well as Corporate Governance Principles for our Board of Directors and charters for our board committees. These documents are publicly available on our website, www.nucor.com. Copies of these documents are also available without charge upon written request to the Corporate Secretary at our principal executive offices. If we make any amendments to the Code of Ethics or grant any waiver, including any implicit waiver, from a provision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website.

Item 11. Executive Compensation

Information about director and executive compensation is incorporated by reference to Nucor’s Proxy Statement under the headings Executive Officer Compensation and Director Compensation.

 

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Table of Contents

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information required by this item is incorporated by reference to Nucor’s Proxy Statement under the heading Security Ownership of Management and Certain Beneficial Owners.

The information regarding the number of securities issuable under equity compensation plans and the related weighted average exercise price is incorporated by reference to the Proxy Statement under the heading Equity Compensation Plan Information.

Item 13. Certain Relationships and Related Transactions

None.

Item 14. Principal Accountant Fees and Services

Information about the fees in 2005 and 2004 for professional services rendered by our independent registered public accounting firm is incorporated by reference to Nucor’s Proxy Statement under the heading Fees Paid to Independent Registered Public Accounting Firm. Our audit committee’s policy on pre-approval of audit and permissible non-audit services of our independent registered public accounting firm is also incorporated by reference from the section of the Proxy Statement captioned Fees Paid to Independent Registered Public Accounting Firm.

PART IV

Item 15. Exhibits and Financial Statement Schedules

Financial Statements:

The following consolidated financial statements and the report of independent registered public accounting firm are incorporated by reference to Nucor Corporation’s 2005 Annual Report, pages 34 through 52:

 

    Management’s Report on Internal Control Over Financial Reporting

 

    Report of Independent Registered Public Accounting Firm

 

    Consolidated Statements of Earnings - Years ended December 31, 2005, 2004 and 2003

 

    Consolidated Statements of Stockholders’ Equity - Years ended December 31, 2005, 2004 and 2003

 

    Consolidated Balance Sheets - December 31, 2005 and 2004

 

    Consolidated Statements of Cash Flows - Years ended December 31, 2005, 2004 and 2003

 

    Notes to Consolidated Financial Statements

Financial Statement Schedules:

The following financial statement schedule is included in this report as indicated:

 

     Page

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

   17

Schedule II – Valuation and Qualifying Accounts – Years ended December 31, 2005, 2004 and 2003

   18

 

12


Table of Contents

All other schedules are omitted because they are not required, not applicable, or the information is furnished in the consolidated financial statements or notes.

Exhibits:

 

2     Asset Purchase Agreement, dated May 30, 2002, by and between JAR Acquisition Corp., the Company, Birmingham Steel, Birmingham Southeast, LLC and Port Everglades Steel Corporation (incorporated by reference to Form 8-K dated December 20, 2002)
2(i)     Purchase Agreement, dated as of September 26, 2002, between Nucor Corporation and Banc of America Securities LLC, Wachovia Securities, Inc., Banc One Capital Markets, Inc., CIBC World Markets Corp. and BNY Capital Markets, Inc. (incorporated by reference to Form S-4 filed December 13, 2002)
2(ii)     Asset Purchase Agreement by and among Trico Steel Company, L.L.C., Nucor Steel Decatur, LLC (formerly Nucor Steel Alabama, LLC) and Nucor Corporation, dated as of November 9, 2001 (incorporated by reference to Form 10-K for year ended December 31, 2002)
3     Restated Certificate of Incorporation (incorporated by reference to Form 10-Q for quarter ended July 2, 2005)
3(i)     By-Laws as amended December 4, 2001 (incorporated by reference to Form 10-K for year ended December 31, 2001)
4     Rights Agreement, dated as of March 8, 2001, between Nucor Corporation and American Stock Transfer & Trust Co. (incorporated by reference to Exhibit 4 to Nucor’s Form 8-K filed March 9, 2001)
4(i)     Indenture, dated as of January 12, 1999, between Nucor Corporation and The Bank of New York, as trustee (incorporated by reference to Form S-4 filed December 13, 2002)
4(ii)     Second Supplemental Indenture, dated as of October 1, 2002, between Nucor Corporation and The Bank of New York, as trustee (incorporated by reference to Form S-4 filed December 13, 2002)
4(iii)     Exchange and Registration Rights Agreement, dated as of October 1, 2002, by and among Nucor Corporation, Banc of America Securities LLC and Wachovia Securities, Inc. (incorporated by reference to Form S-4 filed December 13, 2002)
4(iv)     Form of 4.875% Note due 2012 (included in Exhibit 4(ii) above) (incorporated by reference to Form S-4 filed December 13, 2002)
10     1997 Key Employees Incentive Stock Option Plan (incorporated by reference to Form 10-K for year ended December 31, 2000) (1)
10(i)     2003 Key Employees Incentive Stock Option Plan (as amended through Amendment 2003-1) (incorporated by reference to Form 10-Q for quarter ended October 4, 2003) (1)
10(ii)     Non-Employee Director Equity Plan (incorporated by reference to Form 10-K for year ended December 31, 2000) (1)
10(iii)     2005 Stock Option and Award Plan (incorporated by reference to Exhibit 10.1 to Nucor’s Form 8-K filed May 17, 2005) (1)
10(iv)   *   Form of Restricted Stock Unit Award Agreement – time-vested awards (1)
10(v)   *   Form of Restricted Stock Unit Award Agreement – retirement-vested awards (1)
10(vi)     Employment Agreement of Daniel R. DiMicco (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (1)
10(vii)     Employment Agreement of Terry S. Lisenby (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (1)
10(viii)     Employment Agreement of Hamilton Lott, Jr. (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (1)
10(ix)     Employment Agreement of D. Michael Parrish (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (1)
10(x)     Employment Agreement of Joseph A. Rutkowski (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (1)
10(xi)     Employment Agreement of John J. Ferriola (incorporated by reference to Form 10-K for year ended December 31, 2001) (1)

 

13


Table of Contents

Exhibits, continued:

 

10(xii)       Multi-Year Revolving Credit Agreement, dated as of June 17, 2005 (incorporated by reference to Exhibit 10.1 to
Nucor’s Form 8-K filed June 22, 2005)
10(xiii)     Senior Officers Severance Policy as Adopted by the Board of Directors, as amended on December 10, 2002 (incorporated by reference to Form 10-K for year ended December 31, 2002) (1)
10(xiv)     Senior Officers Annual Incentive Plan (incorporated by reference to Form 10-Q for the quarter ended July 5, 2003) (1)
10(xv)     Senior Officers Long-Term Incentive Plan (incorporated by reference to Form 10-Q for the quarter ended July 5, 2003) (1)
10(xvi)     Senior Officers Long-Term Incentive Plan, Amendment No. 1 (incorporated by reference to Form 10-K for the year ended December 31, 2003) (1)
13   *   2005 Annual Report (portions incorporated by reference)
21   *   Subsidiaries
23   *   Consent of Independent Registered Public Accounting Firm
24   *   Powers of attorney
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(i)   *   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(i)   *   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

* Filed herewith.
(1) Indicates a management contract or compensatory plan or arrangement.

 

14


Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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/ Daniel R. DiMicco

  Daniel R. DiMicco
  Vice Chairman, President and
  Chief Executive Officer
Dated: March 7, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated:

 

/s/ Daniel R. DiMicco

Daniel R. DiMicco

Vice Chairman, President and

Chief Executive Officer

       

* PETER C. BROWNING

Peter C. Browning

Non-Executive Chairman

/s/ Terry S. Lisenby

Terry S. Lisenby

Chief Financial Officer, Treasurer and

Executive Vice President

       

* CLAYTON C. DALEY, JR.

Clayton C. Daley, Jr.

Director

     
     

/s/ James D. Frias

James D. Frias

Vice President and Corporate Controller

     

* HARVEY B. GANTT

Harvey B. Gantt

Director

     
     
     

* VICTORIA F. HAYNES

Victoria F. Haynes

Director

     
     

* JAMES D. HLAVACEK

James D. Hlavacek

Director

     
     

* RAYMOND J. MILCHOVICH

Raymond J. Milchovich

Director

     
   *By   

/s/ Terry S. Lisenby

     

Terry S. Lisenby

Attorney-in-fact

     
Dated: March 7, 2006      

 

15


Table of Contents

NUCOR CORPORATION

Index to Financial Statement Schedule

 

     Page

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

   17

Schedule II – Valuation and Qualifying Accounts – Years ended December 31, 2005, 2004 and 2003

   18

 

16


Table of Contents

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

To the Board of Directors and Stockholders of

Nucor Corporation

Our audits of the consolidated financial statements, of management’s assessment of the effectiveness of internal control over financial reporting and of the effectiveness of internal control over financial reporting referred to in our report dated March 7, 2006 appearing in the December 31, 2005 Annual Report to Stockholders of Nucor Corporation and its subsidiaries (which report, consolidated financial statements, and assessment are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 15 of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

 

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Charlotte, North Carolina
March 7, 2006

 

17


Table of Contents

NUCOR CORPORATION

Financial Statement Schedule

SCHEDULE II -VALUATION AND QUALIFYING ACCOUNTS (in thousands)

 

Description

   Balance at
beginning of
year
   Additions
charged to
costs and
expenses
    Deductions    Balance at
end of year

Year ended December 31, 2005
LIFO Reserve

   $ 533,484    $ (151,632 )   $ —      $ 381,852

Year ended December 31, 2004
LIFO Reserve

   $ 157,586    $ 375,898     $ —      $ 533,484

Year ended December 31, 2003
LIFO Reserve

   $ 42,608    $ 114,978     $ —      $ 157,586

 

18


Table of Contents

NUCOR CORPORATION

List of Exhibits to Form 10-K – December 31, 2005

 

Exhibit No.  

Description of Exhibit

10(iv)   Form of Restricted Stock Unit Award Agreement – time-vested awards
10(v)   Form of Restricted Stock Unit Award Agreement – retirement-vested awards
13   2005 Annual Report (portions incorporated by reference)
21   Subsidiaries
23   Consent of Independent Registered Public Accounting Firm
24   Powers of attorney
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(i)   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(i)   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

 

19

Form of Restricted Stock Unit Award Agreement

Exhibit 10(iv)

Nucor Corporation

2005 Form 10-K

NOTICE OF GRANT

to

 


(“Grantee”)

by

NUCOR CORPORATION

of

 


non-transferable Restricted Stock Units (“Units”)

each of which shall represent the right to receive, when and as provided herein, one (1) share of Common Stock, par value $0.40, of Nucor Corporation.

This grant shall be subject in all respects to the provisions of the Nucor Corporation 2005 Stock Option and Award Plan and the terms and conditions set forth in the Restricted Stock Unit Award Agreement attached hereto and incorporated herein by reference.

Unless vested earlier in accordance with Section 2 of the Restricted Stock Unit Award Agreement, the Units shall become vested in the Grantee as follows, provided the Grantee has been continuously employed by the Company from the Grant Date until the applicable date of vesting:

 

Percentage of Units Vested

 

Date of Vesting

33 1/3%   First Anniversary of Grant Date
33 1/3%   Second Anniversary of Grant Date
33 1/3%   Third Anniversary of Grant Date

IN WITNESS WHEREOF, Nucor Corporation, acting by and through its duly authorized officer, has caused this Notice of Grant to be executed as of the Grant Date set forth below.

 

NUCOR CORPORATION
By:  

 

Name:  

 

Title:  

 

Grant Date: June 1, 20    


NUCOR CORPORATION

2005 Stock Option and Award Plan

Restricted Stock Unit Award Agreement

THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Award Agreement”) is made and entered into as of the 1st day of June, 20__, by and between Nucor Corporation, a Delaware corporation (the “Company”), and the individual (the “Grantee”) identified in the accompanying Notice of Grant of Restricted Stock Units (the “Notice”).

TERMS AND CONDITIONS

1. Grant of Units. The Company hereby grants to the Grantee, subject to the restrictions and the other terms and conditions set forth in the Nucor Corporation 2005 Stock Option and Award Plan (the “Plan”) and in this Award Agreement, the number of restricted stock units (the “Units”) set forth in the Notice, each of which shall represent the right to receive, when and as provided herein, one (1) share of the Stock. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Plan.

2. Vesting of Units. The Units shall vest on the earliest to occur of the following:

(a) As of the Date of Vesting specified in the Notice;

(b) On the date of the termination of the Grantee’s employment with the Company by reason of the Grantee’s death, Disability or Retirement; or

(c) A Change in Control of the Company.

In the event the Grantee’s employment with the Company terminates for any reason, any Units not vested pursuant to this Section shall lapse and be cancelled without further action by the Company.

For purposes of this Award Agreement, the term “Retirement” means the voluntary termination of the Grantee’s employment with the approval of the Committee after the date the Grantee has satisfied the following age and years of service eligibility requirements:

 

Age    65    64    63    62    61    60    59    58    57    56    55
Years of Service    -0-    2    4    6    8    10    12    14    16    18    20

The term “Disability” means the total and permanent disability of the Grantee prior to Retirement or other termination of employment, as evidence by a determination of disability for purposes of entitlement to receive disability benefits under the Company’s long-term disability plan.

The term “Change in Control” means and includes the occurrence of any one of the following events:

(i) individuals who, at the Grant Date, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director after the Grant Date and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest (as described in Rule 14a-11 under the Exchange Act (“Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934,


as amended (the “Exchange Act”)and as used in Section 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Board (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director;

(ii) any person becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control of the Company by virtue of any of the following acquisitions: (A) an acquisition directly by or from the Company or any Subsidiary; (B) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (C) an acquisition by an underwriter temporarily holding securities pursuant to an offering of such securities, or (D) an acquisition pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)); or

(iii) the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company that requires the approval of the Company’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Reorganization”), or the sale or other disposition of all or substantially all of the Company’s assets to an entity that is not an affiliate of the Company (a “Sale”), unless immediately following such Reorganization or Sale: (A) more than fifty percent (50%) of the total voting power of (x) the corporation resulting from such Reorganization or the corporation which as acquired all or substantially all of the assets of the Company (in either case, the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of one hundred percent (100%) of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by the Company Voting Securities that were outstanding immediately prior to such Reorganization or Sale (or, if applicable, is represented by shares into which Company Voting Securities were converted pursuant to such Reorganization or Sale), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Reorganization or Sale, (B) no person (other than (x) the Company, (y) any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation, or (z) a person who immediately prior to the Reorganization or Sale was the beneficial owner of twenty-five percent (25%) or more of the outstanding Company Voting Securities) is the beneficial owner, directly or indirectly, of twenty-five percent (25%) or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation), and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Reorganization or Sale were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Reorganization or Sale.

3. Account; Dividend Equivalent Payments. The Units shall be credited to a bookkeeping account in the name of Grantee on the books and records of the Company (the “Restricted Stock Unit Account”). The Company shall pay to the Grantee in cash, less applicable payroll and withholding taxes, within thirty (30) days after the payment date of any cash dividend

 

2


with respect to shares of Stock, a dividend equivalent payment equal to the number of Units credited to the Grantee’s Restricted Stock Unit Account as of the record date for such dividend multiplied by the per share amount of the dividend.

4. Receipt of Shares. The Company shall issue the shares of Stock represented by the Units to the Grantee, or to the Grantee’s estate in the event of Grantee’s death, as soon as administratively practicable after the Units become vested in the Grantee, and the Units in respect of which such shares of Stock are issued shall be cancelled. In no event shall shares of Stock be issued to the Grantee, or to any person or entity claiming by or through the Grantee, in respect of unvested Units.

5. Limitation of Rights. The Units do not confer upon the Grantee, or the Grantee’s estate in the event of Grantee’s death, any rights as a stockholder of the Company unless and until shares of Stock are in fact issued to such person in respect of the Units. Nothing in this Award Agreement shall interfere with or limit in any way the right of the Company to terminate the Grantee’s service at any time, nor confer upon the Grantee any right to continue in the service of the Company.

6. Restrictions on Transfer and Pledge. No right or interest of Grantee in the Units may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or an affiliate, or shall be subject to any lien, obligation, or liability of Grantee to any other party other than the Company or an affiliate. The Units are not assignable or transferable by Grantee other than by will or the laws of descent and distribution.

7. Plan Controls. The terms contained in the Plan (including without limitation provisions regarding changes in capital structure of the Company) are incorporated into and made a part of this Award Agreement and this Award Agreement shall be governed by and construed in accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Award Agreement, the provisions of the Plan shall be controlling and determinative.

8. Amendment. The Company may amend or terminate this Award Agreement without the consent of Grantee; provided, however, that such amendment or termination shall not, without Grantee’s consent, reduce or diminish the value of this award determined as if it had been fully vested (i.e., as if all restrictions on the Units hereunder had expired) on the date of such amendment or termination.

9. Successors. This Award Agreement shall be binding upon any successor of the Company, in accordance with the terms of this Award Agreement and the Plan.

10. Withholding. The Company shall deduct and withhold from the distribution of Stock pursuant to Section 4 a number of shares having a Fair Market Value equal to the minimum amount of any federal, state and local taxes of any kind (including the Grantee’s FICA obligation) required by law to be withheld.

11. Severability. If any one or more of the provisions contained in this Award Agreement are invalid, illegal or unenforceable, the other provisions of this Award Agreement will be construed and enforced as if the invalid, illegal or unenforceable provision had never been included.

12. Notice. Notices and communications under this Award Agreement must be in writing and either personally delivered or sent by registered or certified United States mail, return receipt requested, postage prepaid. Notices to the Company must be addressed to:

 

3


Nucor Corporation

2100 Rexford Road

Charlotte, North Carolina 28211

Attn: Corporate Secretary

or any other address designated by the Company in a written notice to Grantee. Notices to the Grantee will be directed to the address of Grantee then currently on file with the Company, or at any other address given by Grantee in a written notice to the Company.

13. Incorporation of Notice. The Notice is incorporated by reference and made a part of this Award Agreement.

14. Governing Law. This Agreement shall be construed, interpreted and governed and the legal relationships of the parties determined in accordance with the internal laws of the State of North Carolina without reference to rules relating to conflicts of law.

 

4

Form of Restricted Stock Unit Agreement

Exhibit 10(v)

Nucor Corporation

2005 Form 10-K

NOTICE OF GRANT

to

 


(“Grantee”)

by

NUCOR CORPORATION

of

 


non-transferable Restricted Stock Units (“Units”)

each of which shall represent the right to receive, when and as provided herein, one (1) share of Common Stock, par value $0.40, of Nucor Corporation.

This grant shall be subject in all respects to the provisions of the Nucor Corporation 2005 Stock Option and Award Plan and the terms and conditions set forth in the Restricted Stock Unit Award Agreement attached hereto and incorporated herein by reference.

IN WITNESS WHEREOF, Nucor Corporation, acting by and through its duly authorized officer, has caused this Notice of Grant to be executed as of the Grant Date set forth below.

 

NUCOR CORPORATION
By:  

 

Name:  

 

Title:  

 

Grant Date: June 1, 20    


NUCOR CORPORATION

2005 Stock Option and Award Plan

Restricted Stock Unit Award Agreement

THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Award Agreement”) is made and entered into as of the 1st day of June, 20__, by and between Nucor Corporation, a Delaware corporation (the “Company”), and the individual (the “Grantee”) identified in the accompanying Notice of Grant of Restricted Stock Units (the “Notice”).

TERMS AND CONDITIONS

1. Grant of Units. The Company hereby grants to the Grantee, subject to the restrictions and the other terms and conditions set forth in the Nucor Corporation 2005 Stock Option and Award Plan (the “Plan”) and in this Award Agreement, the number of restricted stock units (the “Units”) set forth in the Notice, each of which shall represent the right to receive, when and as provided herein, one (1) share of the Stock. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Plan.

2. Vesting of Units. The Units shall vest on the earliest to occur of the following:

(a) On the date of the termination of the Grantee’s employment with the Company by reason of the Grantee’s death, Disability or Retirement; or

(b) A Change in Control of the Company.

In the event the Grantee’s employment with the Company terminates for any reason, any Units not vested pursuant to this Section shall lapse and be cancelled without further action by the Company.

For purposes of this Award Agreement, the term “Retirement” means the voluntary termination of the Grantee’s employment with the approval of the Committee after the date the Grantee has satisfied the following age and years of service eligibility requirements:

 

Age    65    64    63    62    61    60    59    58    57    56    55
Years of Service    -0-    2    4    6    8    10    12    14    16    18    20

The term “Disability” means the total and permanent disability of the Grantee prior to Retirement or other termination of employment, as evidence by a determination of disability for purposes of entitlement to receive disability benefits under the Company’s long-term disability plan.

The term “Change in Control” means and includes the occurrence of any one of the following events:

(i) individuals who, at the Grant Date, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director after the Grant Date and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as


a result of an actual or threatened election contest (as described in Rule 14a-11 under the Exchange Act (“Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)and as used in Section 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Board (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director;

(ii) any person becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control of the Company by virtue of any of the following acquisitions: (A) an acquisition directly by or from the Company or any Subsidiary; (B) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (C) an acquisition by an underwriter temporarily holding securities pursuant to an offering of such securities, or (D) an acquisition pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)); or

(iii) the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company that requires the approval of the Company’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Reorganization”), or the sale or other disposition of all or substantially all of the Company’s assets to an entity that is not an affiliate of the Company (a “Sale”), unless immediately following such Reorganization or Sale: (A) more than fifty percent (50%) of the total voting power of (x) the corporation resulting from such Reorganization or the corporation which as acquired all or substantially all of the assets of the Company (in either case, the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of one hundred percent (100%) of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by the Company Voting Securities that were outstanding immediately prior to such Reorganization or Sale (or, if applicable, is represented by shares into which Company Voting Securities were converted pursuant to such Reorganization or Sale), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Reorganization or Sale, (B) no person (other than (x) the Company, (y) any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation, or (z) a person who immediately prior to the Reorganization or Sale was the beneficial owner of twenty-five percent (25%) or more of the outstanding Company Voting Securities) is the beneficial owner, directly or indirectly, of twenty-five percent (25%) or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation), and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Reorganization or Sale were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Reorganization or Sale.

 

2


3. Account; Dividend Equivalent Payments. The Units shall be credited to a bookkeeping account in the name of Grantee on the books and records of the Company (the “Restricted Stock Unit Account”). The Company shall pay to the Grantee in cash, less applicable payroll and withholding taxes, within thirty (30) days after the payment date of any cash dividend with respect to shares of Stock, a dividend equivalent payment equal to the number of Units credited to the Grantee’s Restricted Stock Unit Account as of the record date for such dividend multiplied by the per share amount of the dividend.

4. Receipt of Shares. The Company shall issue the shares of Stock represented by the Units to the Grantee, or to the Grantee’s estate in the event of Grantee’s death, as soon as administratively practicable after the Units become vested in the Grantee, and the Units in respect of which such shares of Stock are issued shall be cancelled. In no event shall shares of Stock be issued to the Grantee, or to any person or entity claiming by or through the Grantee, in respect of unvested Units.

5. Limitation of Rights. The Units do not confer upon the Grantee, or the Grantee’s estate in the event of Grantee’s death, any rights as a stockholder of the Company unless and until shares of Stock are in fact issued to such person in respect of the Units. Nothing in this Award Agreement shall interfere with or limit in any way the right of the Company to terminate the Grantee’s service at any time, nor confer upon the Grantee any right to continue in the service of the Company.

6. Restrictions on Transfer and Pledge. No right or interest of Grantee in the Units may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or an affiliate, or shall be subject to any lien, obligation, or liability of Grantee to any other party other than the Company or an affiliate. The Units are not assignable or transferable by Grantee other than by will or the laws of descent and distribution.

7. Plan Controls. The terms contained in the Plan (including without limitation provisions regarding changes in capital structure of the Company) are incorporated into and made a part of this Award Agreement and this Award Agreement shall be governed by and construed in accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Award Agreement, the provisions of the Plan shall be controlling and determinative.

8. Amendment. The Company may amend or terminate this Award Agreement without the consent of Grantee; provided, however, that such amendment or termination shall not, without Grantee’s consent, reduce or diminish the value of this award determined as if it had been fully vested (i.e., as if all restrictions on the Units hereunder had expired) on the date of such amendment or termination.

9. Successors. This Award Agreement shall be binding upon any successor of the Company, in accordance with the terms of this Award Agreement and the Plan.

10. Withholding. The Company shall deduct and withhold from the distribution of Stock pursuant to Section 4 a number of shares having a Fair Market Value equal to the minimum amount of any federal, state and local taxes of any kind (including the Grantee’s FICA obligation) required by law to be withheld.

 

3


11. Severability. If any one or more of the provisions contained in this Award Agreement are invalid, illegal or unenforceable, the other provisions of this Award Agreement will be construed and enforced as if the invalid, illegal or unenforceable provision had never been included.

12. Notice. Notices and communications under this Award Agreement must be in writing and either personally delivered or sent by registered or certified United States mail, return receipt requested, postage prepaid. Notices to the Company must be addressed to:

Nucor Corporation

2100 Rexford Road

Charlotte, North Carolina 28211

Attn: Corporate Secretary

or any other address designated by the Company in a written notice to Grantee. Notices to the Grantee will be directed to the address of Grantee then currently on file with the Company, or at any other address given by Grantee in a written notice to the Company.

13. Incorporation of Notice. The Notice is incorporated by reference and made a part of this Award Agreement.

14. Governing Law. This Agreement shall be construed, interpreted and governed and the legal relationships of the parties determined in accordance with the internal laws of the State of North Carolina without reference to rules relating to conflicts of law.

 

4

2005 Annual Report ( portions incorporated by reference)

Exhibit 13

Nucor Corporation

2005 Form 10-K

FINANCIAL HIGHLIGHTS

3

FINANCIAL HIGHLIGHTS (dollar amounts in thousands, except per share data)

 

     2005     2004     % CHANGE  
FOR THE YEAR       

Net sales

   $ 12,700,999     $ 11,376,828     12 %

Earnings:

      

Earnings before income taxes

     2,016,368       1,731,276     16 %

Provision for income taxes

     706,084       609,791     16 %
                  

Net earnings

     1,310,284       1,121,485     17 %

Per share:

      

Basic

     8.34       7.08     18 %

Diluted

     8.26       7.02     18 %

Dividends declared per share

     1.85       0.47     294 %

Percentage of net earnings to net sales

     10.3 %     9.9 %   4 %

Return on average equity

     33.9 %     38.7 %   -12 %

Capital expenditures

     331,466       285,925     16 %

Depreciation

     375,054       383,305     -2 %

Sales per employee

     1,159       1,107     5 %

AT YEAR END

      

Working capital

   $ 2,815,854     $ 2,109,158     34 %

Property, plant and equipment, net

     2,855,717       2,818,307     1 %

Long-term debt

     923,550       923,550     —    

Stockholders’ equity

     4,279,788       3,455,985     24 %

Per share

     27.59       21.67     27 %

Shares outstanding

     155,110       159,512     -3 %

Employees

     11,300       10,600     7 %

FORWARD-LOOKING STATEMENTS Certain statements made in this annual report are forward-looking statements that involve risks and uncertainties. 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 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) the sensitivity of the results of our operations to volatility in steel prices and changes in the supply and cost of raw materials, including scrap steel; (2) availability and cost of electricity and natural gas; (3) market demand for steel products; (4) competitive pressure on sales and pricing, including pressure from imports and substitute materials; (5) uncertainties surrounding the global economy, including excess world capacity for steel production and fluctuations in international conversion rates; (6) U.S. and foreign trade policy affecting steel imports or exports; (7) significant changes in government regulations affecting environmental compliance; (8) the cyclical nature of the steel industry; (9) capital investments and their impact on our performance; and (10) our safety performance.


LOGO


AT A GLANCE

11

 

STEEL MILLS SEGMENT

 

BAR MILLS

 

Products: Steel bars, angles and other products for automotive, construction, farm machinery, metal buildings, furniture and recreational equipment.

 

Darlington, South Carolina

Norfolk, Nebraska

Jewett, Texas

Plymouth, Utah

Auburn, New York (Nucor Steel Auburn, Inc.)

Birmingham, Alabama (Nucor Steel Birmingham, Inc.)

Kankakee, Illinois (Nucor Steel Kankakee, Inc.)

Jackson, Mississippi (Nucor Steel Jackson, Inc.)

Seattle, Washington (Nucor Steel Seattle, Inc.)

Marion, Ohio (Nucor Steel Marion, Inc.)

 

SHEET MILLS

 

Products: Flat-rolled steel for automotive, appliance, pipe and tube, construction and other industries.

 

Crawfordsville, Indiana

Hickman, Arkansas

Berkeley County, South Carolina

Decatur, Alabama (Nucor Steel Decatur, LLC)

 

NUCOR-YAMATO STEEL COMPANY

 

Products: Super-wide flange steel beams, pilings and heavy structural steel products for fabricators, construction companies manufacturers and steel service centers.

 

Blytheville, Arkansas

 

BEAM MILL

 

Products: Wide flange steel beams, pilings and heavy structural steel products for fabricators, construction companies, manufacturers and steel service centers.

 

Berkeley County, South Carolina

 

PLATE MILLS

 

Products: Steel plate for manufacturers of heavy equipment, rail cars, ships, barges, refinery tanks, pipe and tube, pressure vessels, construction and others.

 

Hertford County, North Carolina

Tuscaloosa, Alabama (Nucor Steel Tuscaloosa, Inc.)

  

STEEL PRODUCTS SEGMENT

 

VULCRAFT

 

Products: Steel joists, joist girders and steel deck for non-residential building construction.

 

Florence, South Carolina

Norfolk, Nebraska

Fort Payne, Alabama

Grapeland, Texas

St. Joe, Indiana

Brigham City, Utah

Chemung, New York (Vulcraft of New York, Inc.)

 

COLD FINISH

 

Products: Cold finished steel bars for shafting and precision machined parts.

 

Norfolk, Nebraska

Darlington, South Carolina

Brigham City, Utah

Oak Creek, Wisconsin (Nucor Cold Finish Wisconsin, Inc.)

 

BUILDING SYSTEMS

 

Products: Metal buildings and metal building components for commercial, industrial and institutional building markets.

 

Waterloo, Indiana

Swansea, South Carolina

Terrell, Texas

 

FASTENER

 

Products: Steel hexhead cap screws, structural bolts and hex bolts for automotive, machine tools, farm implements, construction and military applications.

 

St. Joe, Indiana

 

NUCON STEEL

 

Products: Load bearing light gauge steel framing systems for the commercial and residential construction markets.

 

Denton, Texas

Dallas, Georgia

 

OTHER

 

NU-IRON UNLIMITED

 

Products: Direct reduced iron for use as a charge material in our steelmaking operations.

 

Point Lisas, Trinidad

 

CORPORATE OFFICE

 

Charlotte, North Carolina


OPERATIONS REVIEW

12

 

STEEL MILLS SEGMENT

BAR MILLS, SHEET MILLS, STRUCTURAL MILLS AND PLATE MILLS

Nucor operates scrap-based steel mills in eighteen facilities. These mills utilize modern steelmaking techniques and produce steel at a cost competitive with steel manufactured anywhere in the world.

BAR MILLS

Nucor has ten bar mills located in South Carolina, Nebraska, Texas, Utah, New York, Alabama, Illinois, Mississippi, Washington and Ohio that produce bars, angles and light structural shapes in carbon and alloy steels. These products have wide usage including automotive, construction, farm equipment, metal buildings, furniture and recreational equipment. Four of the bar mills were constructed by Nucor between 1969 and 1981. Over the years, Nucor has completed extensive capital projects to keep these facilities modernized, including a modernization of the rolling mill at the Nebraska facility, a new melt shop at the Texas facility and a new finishing end at the South Carolina facility. In 2001, Nucor purchased substantially all of the assets of Auburn Steel Company, Inc.’s steel bar facility in Auburn, New York. This facility currently has the capacity to produce up to 480,000 tons of merchant and special bar quality (“SBQ”) steel shapes and rebar. In 2002, Nucor completed the acquisition of substantially all the assets of Birmingham Steel Corporation (“Birmingham Steel”). The four bar mills acquired from Birmingham Steel can produce in excess of 2,600,000 tons annually. In the second quarter of 2005, Nucor purchased substantially all of the assets of Marion Steel Company (“Marion Steel”), which has the capacity to produce up to 450,000 tons annually. The total capacity of our ten bar mills is approximately 7,700,000 tons per year.

SHEET MILLS

The sheet mills produce flat-rolled steel for automotive, appliance, pipe and tube, construction and other industries. The four sheet mills are located in Indiana, Arkansas, South Carolina and Alabama. Nucor constructed three of the sheet mills between 1989 and 1996. The constructed sheet mills utilize thin slab casters to produce hot rolled sheet. In 2002, Nucor’s wholly owned subsidiary Nucor Steel Decatur, LLC purchased substantially all the assets of Trico Steel Company, LLC (“Trico”). This sheet mill is located in Decatur, Alabama, and has an annual capacity of approximately 2,400,000 tons, initially expanding our sheet capacity by 30%. In 2004, Nucor Steel Decatur, LLC purchased the adjacent cold rolling mill of Worthington Industries, Inc. (“Worthington”). All four of our sheet mills are now equipped with cold rolling mills for further processing of hot rolled sheet. The three greenfield constructed mills are also equipped with galvanizing lines. The total capacity of the four sheet mills is approximately 10,800,000 tons per year.

STRUCTURAL MILLS

The structural mills produce wide flange steel beams, pilings and heavy structural steel products for fabricators, construction companies, manufacturers and steel service centers. In 1988, Nucor and Yamato Kogyo, one of Japan’s major producers of wide-flange beams, completed construction of a beam mill located near Blytheville, Arkansas. Nucor owns a 51% interest in Nucor-Yamato Steel Company. During 1999, Nucor started operations at its 1,000,000 tons-per-year steel beam mill in South Carolina. Both mills use a special continuous casting method that produces a beam blank closer in shape to that of the finished beam than traditional methods. Current annual production capacity of our two structural mills is approximately 3,700,000 tons.

PLATE MILLS

Nucor operates two plate mills. Nucor completed construction of its first plate mill, located in North Carolina, in 2000 with the competitive advantages of new, more efficient production technology. This mill produces plate for manufacturers of heavy equipment, rail cars, ships, barges, refinery tanks and others. In 2004, Nucor’s wholly owned subsidiary, Nucor Steel Tuscaloosa, Inc.,


OPERATIONS REVIEW

13

 

purchased substantially all the assets of Corus Tuscaloosa. The Tuscaloosa mill has an annual capacity of approximately 1,200,000 tons and complements our product offering with thinner gauges of coiled and cut-to-length plate used in the pipe and tube, pressure vessel, transportation and construction industries. Current annual production capacity of our two plate mills is approximately 2,800,000 tons.

OPERATIONS

Nucor’s steel mills are among the most modern and efficient mills in the United States. Recycled steel scrap and other metallics are melted in electric arc furnaces and poured into continuous casting systems. Highly sophisticated rolling mills convert the billets, blooms and slabs into rebar, angles, rounds, channels, flats, sheet, beams, plate and other products.

Production in 2005 was a record 20,332,000 tons, a 3% increase from 19,737,000 tons in 2004. Annual production capacity has grown from 120,000 tons in 1970 to a present total of approximately 25,000,000 tons.

The operations in the rolling mills are highly automated and require fewer operating employees than older mills. All Nucor steel mills have high productivity, which results in employment costs of approximately 8% of the sales dollar. This is lower than the employment costs of integrated steel companies producing comparable products. Employee turnover in Nucor mills is extremely low. All employees have a significant part of their compensation based on their productivity. Production employees work under group incentives that provide increased earnings for increased production. This additional compensation is paid weekly.

Steel mills are large consumers of electricity and gas. Total energy costs increased approximately $7 per ton from 2004 to 2005 due to higher natural gas and electricity prices. Because of the greater efficiency of Nucor steel mills, these energy costs were still less than 10% of the sales dollar in both 2005 and 2004. Nucor is partially hedged against exposure to increases in energy costs.

Scrap and scrap substitutes are the most significant element in the total cost of steel production. The average cost of scrap and scrap substitutes used increased 3% to $244 per ton in 2005 from $238 per ton in 2004. A raw material surcharge implemented in 2004 has allowed Nucor to maintain operating margins and to meet our commitments to customers in spite of highly volatile scrap and scrap substitute costs.

MARKETS AND MARKETING

Approximately 92% of the eighteen steel mills’ production in 2005 was sold to outside customers and the balance was used internally by the Vulcraft, Cold Finish, Building Systems and Fastener divisions. Steel shipments to outside customers in 2005 were a record 19,020,000 tons, 7% higher than the 17,787,000 tons in 2004.

Our steel mill customers are primarily manufacturers, steel service centers and fabricators. The sheet mills continue to build long-term relationships with contract customers who purchase more value added products. We enter 2006 with approximately 45% of our sheet mill volume committed to contract customers. Contract terms are typically six to twelve months in length with various renewal dates. These contracts are non-cancelable agreements with a pricing formula that varies based on raw material costs. Long term, the sheet mills will continue to pursue profitable contract business.

TRADE ISSUES

Nucor’s continued involvement in trade issues is a critical part of our efforts to support the long-term success of our steel-making operations. Unfairly traded, illegally dumped steel imports have devastated the U.S. steel industry and its workers. In 2002, the Bush Administration implemented Section 201 to help the domestic steel industry recover from the illegal and predatory trading practices of foreign competitors. In December 2003, the Administration chose to end prematurely the temporary steel safeguard tariffs; however, we are optimistic about the Administration’s commitment to the vigorous enforcement of U.S. trade laws and the President’s promise to work with Congress to achieve a long-term solution to illegal dumping and other unfair trade practices that necessitated Section 201. Nucor actively supports several organizations that promote free and fair trade and that oppose currency manipulation.

ENERGY

Historically, U.S.-based manufacturers have enjoyed competitive energy costs that have allowed them to compete on an equal footing in what is becoming more and more a global market. In recent decades, our government has allowed a growing over-reliance on natural gas for the generation of electricity, while at the same time preventing access to some of the most promising areas for natural gas exploration. As a result, natural gas prices have increased from less than $2.00 per mmbtu in the 1990’s (NYMEX Henry-Hub pricing) to a peak of more than $15.00 per mmbtu in December 2005. Since an increasing share of electricity is now generated using natural gas, higher natural gas prices are also increasing costs for consumers of electricity.


OPERATIONS REVIEW

14

 

Nucor actively supports several organizations that are promoting a more rational energy policy. We believe this is critical not only for our future business success, but also for the future of the U.S. economy.

NEWER FACILITIES AND EXPANSIONS

As part of our long-term growth strategy, Nucor continues to invest in existing operations, make greenfield investments utilizing advantageous new technologies and pursue acquisitions that are accretive to earnings. Capital expenditures in the steel mill segment totaled $201.1 million, $242.5 million and $216.0 million in 2003, 2004 and 2005, respectively.

In late 2003, the sheet mill in Berkeley County, South Carolina, completed construction and began trials of a vacuum degasser. The degasser has allowed Nucor to expand this facility’s product capacity into deep drawing steel grades. As a result of this successful project, in 2005 Nucor announced two additional vacuum degasser projects at the sheet mills in Decatur, Alabama, and in Hickman, Arkansas, with a capital budget of less than $20.0 million at each location. Nucor also operates vacuum degassers at its sheet mill in Crawfordsville, Indiana, and its SBQ bar mill in Norfolk, Nebraska. We expect to continue advancement and participation in more value-added business in the automotive, appliance, lawn and garden, and heating-ventilation-air conditioning markets in 2006.

During the third quarter of 2004, Nucor purchased substantially all of the assets of Corus Tuscaloosa for a cash purchase price of approximately $89.4 million. This plate mill had an initial annual capacity of about 800,000 tons and complements the product offering of our Hertford County plate mill with thinner gauges of coiled and cut-to-length plate. Our continued investments in this facility combined with the benefits of our incentive pay program have increased capacity to 1,200,000 tons currently. This acquisition was immediately accretive to earnings and made significant operating contributions in 2004 and 2005.

Also in the third quarter of 2004, Nucor purchased certain cold rolling assets from Worthington, located adjacent to our Decatur, Alabama sheet mill, for a cash purchase price of approximately $80.3 million. The purchased assets include all of the buildings, a pickle line, four-stand tandem mill, temper mill and annealing furnaces. This modern 1,000,000-ton cold mill with 600,000 tons of annealing capacity was constructed in 1998 and together with our vacuum degasser project described above complements our strategy to serve value-added customers in the Southeast market.

In September 2004, Nucor acquired the assets of an idled direct reduced iron (“DR1”) plant located in Louisiana. These assets have been moved to Trinidad and construction is well under way. We expect DRI production to begin in the fourth quarter of 2006 with an annual capacity of 1,800,000 metric tons per year. The Trinidad site benefits from a low cost supply of natural gas and favorable logistics for receipt of Brazilian iron ore and shipment of DRI to the U.S. This new entity is named Nu-lron Unlimited (“Nu-lron”) and has a capital budget of approximately $225.0 million.

In June 2005, Nucor’s wholly owned subsidiary, Nucor Steel Marion, Inc., purchased substantially all of the assets of Marion Steel for a cash purchase price of approximately $110.7 million. The facility is a bar products mill that manufactures angles, flats, rebar, rounds and signposts. Located in Marion, Ohio, the mill is in close proximity to 60% of the steel consumption in the United States. The facility has already grown its capacity from 400,000 tons to 450,000 tons largely as a result of our incentive-based compensation program.

COMMERCIALIZATION OF NEW TECHNOLOGIES

In April 2002, Nucor entered a joint venture with The Rio Tinto Group, Mitsubishi Corporation and Chinese steel maker Shougang Corporation to construct a commercial Hlsmelt® plant in Kwinana, Western Australia. The Hlsmelt process converts iron ore fines and coal fines to liquid metal, eliminating the need for a blast furnace, sinter/pellet plants and coke ovens. Nucor has a 25% interest in the joint venture that owns the Hlsmelt commercial plant. Construction was completed in 2005 and on January 24, 2006, the Hlsmelt team completed a 48 consecutive day campaign of iron-making. This plant has an initial annual capacity of 800,000 metric tons and is expandable to over 1,500,000 metric tons at a very attractive capital cost.

Nucor began operations of its 100% owned Castrip facility in Crawfordsville, Indiana, in May 2002. This facility uses the breakthrough technology of strip casting, to which Nucor holds exclusive rights in the United States and Brazil. Strip casting involves the direct casting of molten steel into final shape and thickness without further hot or cold rolling. This process allows lower investment and operating costs, reduced energy consumption and smaller scale plants than can be economically built with current technology. This process also reduces the overall environmental impact of producing steel by generating significantly lower emissions, particularly NOx. In 2005, Nucor announced that the Castrip process had achieved commercial viability and that Blytheville, Arkansas, had been selected as the second Nucor location for a Castrip operation in the United States. Nucor expects to establish at least one joint venture partner overseas in 2006 to utilize the Castrip technology.


OPERATIONS REVIEW

15

 

In April 2003, Nucor entered a joint venture with Companhia Vale do Rio Doce (“CVRD”) to construct and operate an environmentally friendly pig iron project in northern Brazil. The project, named Ferro Gusa Carajás S.A. (“FGC”), will utilize two conventional mini-blast furnaces to produce about 380,000 metric tons of pig iron per year in its initial phase, using iron ore from CVRD’s Carajás mine in northern Brazil. The charcoal source will be exclusively from eucalyptus trees grown in a cultivated forest of 82,000 acres with the total project encompassing approximately 200,000 acres in northern Brazil. The cultivated forest removes more carbon dioxide from the atmosphere than the blast furnace emits. Production of pig iron began in the fourth quarter of 2005. It is anticipated that Nucor will purchase all of the production of the plant.

The FGC project, together with the Nu-Iron and Hlsmelt projects discussed above, represent the initial steps in Nucor’s raw materials strategy to control 6,000,000 to 7,000,000 tons per year of our iron units consumption.

LOGO

 

LOGO    LOGO


OPERATIONS REVIEW

16

 

STEEL PRODUCTS SEGMENT

VULCRAFT Nucor is the nation’s largest producer of open-web steel joists, joist girders and steel deck, which are used for non-residential building construction.

OPERATIONS

Steel joists and joist girders are produced and marketed nationally through seven Vulcraft facilities located in South Carolina, Nebraska, Alabama, Texas, Indiana, Utah and New York. Current annual production capacity is approximately 715,000 tons. In 2005, Vulcraft produced 554,000 tons of steel joists and joist girders, an increase of 6% from the 522,000 tons produced in 2004.

Material costs, primarily steel, were approximately 50% of the joist sales dollar in 2005 (53% in 2004). Vulcraft obtained 99% of its steel requirements for joists and joist girders from the Nucor bar mills in both 2005 and 2004. Freight costs for joists and joist girders were less than 10% of the sales dollar in 2005 and 2004. Vulcraft maintains an extensive fleet of trucks to ensure and control on-time delivery.

The Vulcraft facilities in South Carolina, Nebraska, Alabama, Texas, Indiana and New York produce steel deck. Current deck annual production capacity is approximately 430,000 tons. Vulcraft steel deck sales increased 4% from 364,000 tons in 2004 to a record 380,000 tons in 2005. Coiled sheet steel was approximately 62% of the steel deck sales dollar in 2005 (54% in 2004). In 2005 and 2004, Vulcraft obtained 99% of its steel requirements for steel deck production from the Nucor sheet mills. For 2005 and 2004, freight costs for deck were less than 10% of the sales dollar.

Production employees of Vulcraft work with a group incentive system that provides increased compensation each week for increased performance.

MARKETS AND MARKETING

Steel joists, joist girders and steel decking are used extensively as part of the roof and floor support systems in manufacturing buildings, retail stores, shopping centers, warehouses, schools, churches, hospitals and, to a lesser extent, in multi-story buildings and apartments. Building support systems using joists, joist girders and steel deck are frequently more economical than other systems.

Steel joists and joist girder sales are obtained by competitive bidding. Vulcraft quotes on a significant percentage of the domestic buildings using steel joists and joist girders as part of the support systems. In 2005, Vulcraft supplied more than 40% of total domestic sales of steel joists. Steel deck is specified in the majority of buildings using steel joists and joist girders. In 2005, Vulcraft supplied more than 30% of total domestic sales of steel deck.

Sales of steel joists, joist girders and steel deck are dependent on the non-residential building construction market.


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COLD FINISH AND FASTENER Nucor manufactures a variety of products using steel from Nucor mills.

COLD FINISH

Nucor Cold Finish is the largest producer of cold finished bars in the United States and has facilities in Nebraska, South Carolina, Utah and Wisconsin. Three of these facilities were originally constructed by Nucor between 1978 and 1983. In February 2005, Nucor purchased the assets of Fort Howard Steel, Inc.’s (“Fort Howard Steel”) operations in Oak Creek, Wisconsin. This facility has approximately 140,000 tons of annual capacity. The total capacity of the four facilities is approximately 490,000 tons per year.

These facilities produce cold drawn and turned, ground and polished steel bars that are used extensively for shafting and precision machined parts. Nucor Cold Finish produces rounds, hexagons, flats and squares in carbon, alloy and leaded steels. These bars, in turn, are purchased by the automotive, farm machinery, hydraulic, appliance and electric motor industries, as well as by service centers. Nucor Cold Finish bars are used in tens of thousands of products. A few examples include anchor bolts, farm machinery, hydraulic cylinders, shafting for air conditioner compressors, ceiling fan motors, garage door openers, electric motors and lawn mowers.

All four facilities are among the most modern in the world and use in-line electronic testing to ensure outstanding quality. Nucor Cold Finish obtains most of its steel from the Nucor bar mills. This factor, along with the efficient facilities using the latest technology, results in a highly competitive cost structure.

In 2005, sales of cold finished steel products were a record 342,000 tons, an increase of 26% from 2004’s 271,000 tons. The total cold finish market is estimated to be approximately 2,000,000 tons. The Wisconsin facility represents a continuation of our successful value-added strategy and expands our presence in the midwest market. Nucor Cold Finish anticipates opportunities for significant increases in sales and earnings during the next several years.

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FASTENER

Nucor Fastener’s state-of-the-art steel bolt-making facility in Indiana produces standard steel hexhead cap screws, hex bolts, structural bolts and custom-engineered fasteners. Fasteners are used in a broad range of markets, including automotive, machine tools, farm implements, construction and military applications.

Annual capacity is more than 75,000 tons, which is less than an estimated 10% of the total market for these products. The modern facility allows Nucor Fastener to maintain competitive pricing in a market currently dominated by foreign suppliers. This operation is highly automated and has fewer employees than comparable facilities. Nucor Fastener obtains much of its steel from the Nucor bar mills.


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BUILDING SYSTEMS AND LIGHT GAUGE STEEL FRAMING Nucor manufactures metal buildings and steel framing systems for commercial, industrial and residential construction markets.

BUILDING SYSTEMS

Nucor Building Systems produces metal building systems and components in Indiana, South Carolina and Texas. The annual capacity is more than 145,000 tons. The size of the buildings that can be produced ranges from less than 500 square feet to more than 1,000,000 square feet.

Complete metal building packages can be customized and combined with other materials such as glass, wood and masonry to produce a cost effective, aesthetically pleasing building designed for customers’ special requirements. The buildings are sold primarily through an independent builder distribution network in order to provide fast-track, customized solutions for building owners.

Building systems sales in 2005 were a record 114,000 tons (113,000 tons in 2004). The primary markets are commercial, industrial and institutional buildings, including distribution centers, automobile dealerships, retail centers, schools, warehouses and manufacturing facilities. Nucor Building Systems obtains a significant portion of its steel requirements from the Nucor bar and sheet mills.

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LIGHT GAUGE STEEL FRAMING

Nucon Steel specializes in load bearing light gauge steel framing systems for the commercial and residential construction markets with fabrication facilities in Texas and Georgia. Nucon also sells its proprietary products through a growing network of authorized fabricators located throughout the United States.

In 2004, Nucon introduced two new low cost automated fabrication systems for residential construction: the NuWall automated wall panel system and the NuTruss automated truss system. Nucon uses these systems in its residential wall panel and truss fabrication facility in Texas and has formed a separate group within Nucon to sell and license the systems to third parties. Nucor plans to continue to aggressively broaden Nucon Steel’s opportunities through geographic expansion and the introduction of new products.


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OVERVIEW

Nucor is a domestic manufacturer of steel and steel products whose customers are located primarily in the United States. Additionally, Nucor is the nation’s largest recycler. Nucor reports its results in two segments, steel mills and steel products.

Principal products from the steel mills segment are hot-rolled steel (angles, rounds, flats, channels, sheet, wide-flange beams, pilings, billets, blooms, beam blanks and plate) and cold-rolled steel. Principal products from the steel products segment are steel joists and joist girders, steel deck, cold finished steel, steel fasteners, metal building systems and light gauge steel framing. Hot-rolled steel is manufactured principally from scrap, utilizing electric arc furnaces, continuous casting and automated rolling mills. Cold-rolled steel, cold finished steel, steel joists and joist girders, and steel fasteners are manufactured by further processing of hot-rolled steel. Steel deck is manufactured from cold-rolled steel. In 2005, approximately 92% of the steel mills segment production was sold to non-affiliated customers; the remainder was used internally by the steel products segment.

During the last five years, Nucor’s sales have increased 167% from $4.76 billion in 2000 to $12.70 billion in 2005. Average sales price per ton has increased 46% from $425 in 2000 to $621 in 2005. Total tons sold to external customers have increased 83% from 11,189,000 tons in 2000 to 20,465,000 tons in 2005. This growth has been generated through acquisitions, optimizing existing operations and developing traditional greenfield projects using new technologies. Nucor achieved record sales and net earnings in 2005 due to historically high selling prices, margins and shipments, which were aided by our product line diversity.

 

 

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In addition to Nucor’s traditional strategy of growing by developing greenfield projects and continually improving existing operations, Nucor’s focus over the past several years has included growing profitably through acquisitions. In the steel mills segment, the capacity of our bar mills has more than doubled over the past five years, increasing from 3,000,000 tons in 2000 to 7,700,000 tons in 2005. This growth was driven by the acquisition of the assets of Auburn Steel in 2001, the assets of Birmingham Steel’s four bar mills in late 2002, and the assets of Marion Steel in 2005. These acquisitions were complemented by ongoing productivity gains obtained at existing bar mills.

The capacity of our sheet mills has increased more than 80% from 5,900,000 tons in 2000 to 10,800,000 tons in 2005 due to the acquisition and start-up in late 2002 of our sheet mill in Decatur, Alabama, as well as by continued productivity advances at our three other sheet mills. The sheet mills are well positioned to advance our strategic plan for greater participation in higher value-added sheet markets.


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In 2000, Nucor’s plate mill in Hertford County, North Carolina, was in the early stages of start-up and produced 20,000 tons. With the successful start-up of the North Carolina facility and the acquisition of the assets of the Corus Tuscaloosa plate mill in 2004, Nucor’s plate capacity is now approximately 2,800,000 tons, allowing us to continue to benefit from the current robust plate market conditions.

Nucor has also increased its participation in downstream steel products via acquisitions and joint ventures. With the acquisition of Fort Howard Steel’s operations in Oak Creek, Wisconsin, in 2005, Nucor became the largest U.S. producer of cold finished bars.

Nucor established rebar fabrication joint ventures in 2004 and 2005, forming partnerships to grow in the reinforcing steel construction markets with two leaders in the rebar fabrication industry – Harris Steel Group, Inc. and Ambassador Steel Corporation. In 2004, we formed a joint venture with Harris Steel Group to serve the western and northeastern U.S. rebar fabrication markets. This joint venture continues to grow and to generate strong returns. In 2005, we entered into a rebar fabrication joint venture with Ambassador Steel that will allow us to expand Nucor’s rebar fabrication presence into the central and southern regions of the country. This venture, Nufab Rebar, completed its first acquisition last May, purchasing a rebar fabricator serving Louisiana, Mississippi and the Florida panhandle region.

Over the past five years, we have strengthened Nucor’s position as North America’s most diversified steel producer.

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COMPARISON OF 2005 TO 2004

NET SALES

Net sales for 2005 increased 12% to $12.70 billion, compared with $11.38 billion in 2004. The average sales price per ton increased 4% from $595 in 2004 to $621 in 2005, while total shipments to outside customers increased 7%. In the steel mills segment, net sales to external customers increased 9% from $10.11 billion in 2004 to $11.06 billion in 2005. Approximately 75% of the sales increase was due to higher sales volume resulting from stronger business conditions for bar, plate and structural products, as well as acquisitions made in 2004 and 2005. The remaining 25% of the increase in sales was due to higher average selling prices. Net sales to external customers in the steel products segment increased 29% from $1.27 billion in 2004 to $1.64 billion in 2005. Approximately 60% of the increase was due to higher average selling prices and approximately 40% of the increase was due to increased volume, reflecting a stronger non-residential construction market.

Nucor established new annual tonnage records in the steel mills segment for total steel shipments and steel shipments to outside customers in 2005. Total steel shipments, including those to the steel products segment, increased 6% to 20,669,000 tons in 2005, compared with 19,464,000 tons in the previous year. Steel sales to outside customers increased 7% to 19,020,000 tons in 2005, compared with 17,787,000 tons in 2004. In the steel products segment, production and shipment volumes increased over the prior year across all major product lines. Steel joist production for 2005 was 554,000 tons, compared with 522,000 tons in the previous year. Steel deck sales were a record 380,000 tons in 2005, compared with 364,000 tons in 2004. Cold finished steel sales were a record 342,000 tons in 2005, compared with 271,000 tons in the previous year aided by the successful integration of the Fort Howard Steel acquisition.


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COST OF PRODUCTS SOLD

The major component of cost of products sold is raw material costs. The average volume of raw materials used increased approximately 5% from 2004 to 2005, consisting of an increase of 4% in the steel mills segment and an increase of 14% in the steel products segment. The average price of raw materials increased approximately 5% from 2004 to 2005. The average price of raw materials in the steel mills segment and the steel products segment increased 3% and 25%, respectively, from 2004 to 2005. The average scrap and scrap substitute cost per ton used in our steel mills segment was $244 in 2005, an increase of 3% from $238 in 2004. By the fourth quarter of 2005, the average scrap and scrap substitute cost per ton used had decreased to $240 compared with the quarterly high of $278 in the fourth quarter of 2004. The average scrap cost per ton purchased decreased $40 (14%) from December 2004 to December 2005.

Primarily as a result of the decreases in the cost of scrap and scrap substitutes during the year, Nucor incurred a credit to value inventories using the last-in, first-out (“LIFO”) method of accounting of $151.6 million in 2005, compared with a charge of $375.9 million in 2004 when scrap prices were increasing.

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Another significant component of cost of products sold for the steel mills segment is energy costs, since steel mills are large consumers of electricity and natural gas. Total energy costs increased approximately $7 per ton from 2004 to 2005 as natural gas prices increased approximately 31% and electricity prices increased approximately 19%. Due to the efficiency of Nucor’s steel mills, however, energy costs remained less than 10% of the sales dollar in 2005 and 2004. We expect that our total energy costs will remain high in 2006. Nucor is hedging a portion of its exposure to the variability of future cash flows for forecasted natural gas purchases over various time periods not exceeding two years. In 2005, the settlement of these hedging transactions reduced cost of products sold by approximately $12.4 million. In addition to these hedges, Nucor has entered into natural gas purchase contracts that commit Nucor to purchase $17.6 million, $22.7 million and $21.5 million of natural gas for production in 2006, 2007 and 2008, respectively, and $562.3 million between 2009 and 2028. These natural gas purchase contracts will primarily supply our direct reduced iron (“DRI”) facility in Trinidad.

In December 2000, Nucor entered into a consent decree with the United States Environmental Protection Agency (“USEPA”) and certain states in order to resolve alleged environmental violations. Under the terms of this decree, Nucor is conducting testing at some of its facilities, performing corrective action where necessary and piloting certain pollution control technologies.

Nucor revises estimates for environmental reserves as additional information becomes available and projects are completed. In 2005, Nucor made approximately $12.2 million in cash payments for remedial efforts and reduced reserves by approximately $9.4 million ($0.4 million and $10.0 million, respectively, in 2004). The most significant components of the decreases of reserves in 2005 are related to successful implementation of alternate environmental technologies that achieve full compliance with the agreement between Nucor and the USEPA through minor operational changes. The most significant components of the decreases in 2004 related to an agreement with the USEPA that certain technologies identified in the consent decree are not feasible and a favorable court ruling that implicated additional potentially responsible parties for the cleanup of an off-site waste-recycling facility.

GROSS MARGIN

Gross margins increased slightly from 20% in 2004 to 21% in 2005. In addition to the events and trends discussed above, gross margins are affected by pre-operating and start-up costs. 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. Pre-operating and start-up costs of new facilities decreased to $14.4 million in 2005, compared with $28.8 million in 2004. In 2005, these costs primarily related to the relocation of our DRI facility to Trinidad and its refurbishment and to our Hlsmelt project in Australia. In 2004, these costs primarily related to the continuing start-up of the Castrip facility at our sheet mill in Crawfordsville, Indiana. Late in 2004, the Castrip process achieved commercial viability; therefore, the costs associated with this facility have not been included in start-up costs in 2005.


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MARKETING, ADMINISTRATIVE AND OTHER EXPENSES

The major components of marketing, administrative and other expenses are freight and profit sharing costs. Unit freight costs increased 12% from 2004 to 2005 primarily due to higher fuel costs. Profit sharing costs, which are based upon and fluctuate with pre-tax earnings, increased approximately 6% from 2004 to 2005. In 2005, profit sharing costs included $206.0 million for contributions to a Profit Sharing and Retirement Savings Plan for qualified employees, compared with $172.3 million in 2004. In both 2004 and 2005, all employees except for senior officers received a special cash bonus of $2,000 in addition to their regular profit-sharing payments. These extraordinary bonuses were paid to employees for the achievement of record earnings during the year, resulting in additional profit sharing costs of approximately $22.6 million in 2005 and $21.0 million in 2004. Profit sharing costs also fluctuate based on Nucor’s achievement of certain financial performance goals, including comparisons of Nucor’s financial performance to peers in the steel industry and to other high performing companies.

INTEREST EXPENSE

Net interest expense is detailed below (in thousands):

 

Year Ended December 31,

   2005     2004  

Interest expense

   $ 36,571     $ 29,335  

Interest income

     (32,370 )     (6,983 )
                

Interest expense, net

   $ 4,201     $ 22,352  
                

Gross interest expense increased approximately 25% primarily due to increased average interest rates, accompanied by an increase in average long-term debt. Gross interest income increased more than fourfold due to increases in average short-term investments and to a lesser extent due to increases in average interest rates.

MINORITY INTERESTS

Minority interests represent the income attributable to the minority partners of Nucor’s joint venture, Nucor-Yamato Steel Company. Income attributable to minority interests increased from $80.9 million in 2004 to $110.7 million in 2005. Cash distributions to minority interests increased from $84.9 million in 2004 to $89.9 million in 2005. Under the partnership agreement, the minimum amount of cash to be distributed each year to the partners of Nucor-Yamato Steel Company is the amount needed by each partner to pay applicable U.S. federal and state income taxes. In some years, such as 2004, the amount of cash distributed to minority interests exceeds amounts allocated to minority interests based on mutual agreement of the general partners; however, the cumulative amount of cash distributed to partners is less than the cumulative net earnings of the partnership.

OTHER INCOME

In 2005, Nucor received $9.2 million in settlement of claims against third parties related to environmental matters. Nucor has made claims for reimbursement of additional amounts. No amounts have been recorded for such reimbursements, if any, that may be received. In 2004, Nucor sold equipment resulting in pre-tax gains of $1.6 million.

PROVISION FOR INCOME TAXES

Nucor had an effective tax rate of 35.02% in 2005 compared with 35.22% in 2004. In both 2005 and 2004, Nucor recorded refundable state income tax credits of $10.4 million. The Internal Revenue Service is currently examining Nucor’s 2002 and 2003 federal income tax returns. Management believes that it has adequately provided for any adjustments that may arise from this audit.

NET EARNINGS AND RETURN ON EQUITY

Net earnings and earnings per share for 2005 increased 17% and 18%, respectively, to a record $1.31 billion and $8.26 per diluted share, compared with $1.12 billion and $7.02 per diluted share in 2004. Net earnings as a percentage of net sales were 10.3% in 2005 compared with 9.9% in 2004. The 18% increase in earnings per share also reflects the effect of repurchasing approximately 5.6 million shares of outstanding common stock during 2005. Return on average stockholders’ equity was 33.9% and 38.7% in 2005 and 2004, respectively.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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COMPARISON OF 2004 TO 2003

NET SALES

Net sales for 2004 increased 82% to $11.38 billion, compared with $6.27 billion in 2003. The average sales price per ton increased 66% from $359 in 2003 to $595 in 2004, while total shipments to outside customers increased 9%. In the steel mills segment, net sales to external customers increased 86% from $5.45 billion in 2003 to $10.11 billion in 2004. Approximately 85% of the increase was due to higher average selling prices resulting from increased demand for our products, which affected base prices, and the implementation of a raw materials surcharge to address historically high scrap costs. The remaining 15% of the sales increase was due to higher sales volume resulting from increased demand and the additional production capacity obtained from the acquisition of assets from Corus Tuscaloosa and Worthington in the second half of 2004 and the ramp-up of production at Nucor Steel Decatur, LLC throughout the year. Net sales to external customers in the steel products segment were $819.7 million in 2003, compared with $1.27 billion in 2004, an increase of 55%. Approximately 75% of the increase was due to higher average selling prices, and approximately 25% of the increase was due to increased volume, reflecting an improved non-residential construction market.

Total steel shipments, including those to the steel products segment, increased 10% to 19,464,000 tons in 2004, compared with 17,656,000 tons in the previous year. Steel sales to outside customers increased 9% to 17,787,000 tons in 2004, compared with 16,263,000 tons in 2003. In the steel products segment, production and shipment volumes increased in 2004 over 2003 across all major product lines. Steel joist production for 2004 was 522,000 tons, compared with 503,000 tons in the previous year. Steel deck sales were 364,000 tons, compared with 353,000 tons in 2003. Cold finished steel sales were 271,000 tons in 2004, compared with 237,000 tons in the previous year.

COST OF PRODUCTS SOLD

The average volume of raw materials used increased 12% from 2003 to 2004, consisting of an increase of 12% in the steel mills segment and an increase of 14% in the steel products segment. The average price of raw materials increased 67% from 2003 to 2004. The average price of raw materials in the steel mills segment and the steel products segment increased 71% and 24%, respectively, from 2003 to 2004. The average scrap and scrap substitute cost per ton used in our steel mills segment was $238 in 2004, an increase of 74% from $137 in 2003.

As a result of the increases in the cost of scrap and scrap substitutes, Nucor incurred a charge to value inventories using the LIFO method of accounting of $375.9 million in 2004, compared with a charge of $115.0 million in 2003.

Total energy costs per ton were flat from 2003 to 2004 as higher natural gas prices of approximately 8% were offset by increased production efficiency at our steel mills. These energy costs were less than 10% of the sales dollar in 2004 and 2003.

Nucor made approximately $19.0 million in cash payments for environmental remedial efforts during 2003 and reduced reserves by approximately $8.3 million. In 2004, Nucor made approximately $0.4 million in cash payments for remedial efforts and reduced reserves by approximately $10.0 million. The most significant components of the decreases of reserves in 2003 and 2004 related to an agreement with the USEPA that certain technologies identified in the consent decree are not feasible and a favorable court ruling that implicated additional potentially responsible parties for the cleanup of an off-site waste-recycling facility.

GROSS MARGIN

Gross margins increased from 4% in 2003 to 20% in 2004. In addition to the events and trends discussed above, gross margins improved due to the turnaround achieved at our sheet mill in Decatur, Alabama, and the plate mill in Hertford County, North Carolina, and to the acquisitions we made in the third quarter of 2004. Pre-operating and start-up costs of new facilities decreased to $28.8 million in 2004, compared with $117.5 million in 2003. In 2004, these costs primarily related to the continuing start-up of the Castrip facility at our sheet mill in Crawfordsville, Indiana. In 2003, these costs primarily related to the start-up of the sheet mill in Decatur, Alabama, and the Castrip facility.

MARKETING, ADMINISTRATIVE AND OTHER EXPENSES

Unit freight costs increased 2% from 2003 to 2004. Profit sharing costs, which are based upon and fluctuate with pre-tax earnings, increased fifteen-fold from 2003 to 2004. In 2004, profit sharing costs included $172.3 million for contributions to a Profit Sharing and Retirement Savings Plan for qualified employees, compared with $8.9 million in 2003. Profit sharing costs in 2004 included an additional $21.0 million in extraordinary bonuses paid to employees for the achievement of record earnings during the year. All employees except for senior officers received two special cash bonuses of $1,000 each in July and November in addition to their regular profit-sharing payments.


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INTEREST EXPENSE

Net interest expense is detailed below (in thousands):

 

Year Ended December 31,

   2004     2003  

Interest expense

   $ 29,335     $ 27,152  

Interest income

     (6,983 )     (2,525 )
                

Interest expense, net

   $ 22,352     $ 24,627  
                

Interest expense, net of interest income, decreased from 2003 to 2004 primarily due to an increase in average short-term investments, partially offset by an increase in average long-term debt.

MINORITY INTERESTS

Income attributable to minority interests increased from $23.9 million in 2003 to $80.9 million in 2004. Cash distributions to minority interests increased from $63.3 million in 2003 to $84.9 million in 2004.

OTHER INCOME

In 2004 and 2003, Nucor sold equipment resulting in pre-tax gains of $1.6 million and $4.4 million, respectively. In 2003, Nucor received $7.1 million, related to graphite electrodes anti-trust settlements. Producers of graphite electrodes, which are used by Nucor to deliver energy in electric arc furnaces, have entered into several settlement agreements with their customers as the result of a price fixing investigation by the Department of Justice that became public in 1997. No settlements have been received since 2003, and we do not expect to receive any further graphite electrodes settlements.

PROVISION FOR INCOME TAXES

Nucor had an effective tax rate of 35.22% in 2004 compared with 6.12% in 2003. The higher tax rate in 2004 is primarily due to the effect of increased pre-tax earnings, partially offset by the resolution of certain tax issues in the second half of 2004. In 2004 and 2003, Nucor recorded refundable state income tax credits of $10.4 million and $10.5 million, respectively.

NET EARNINGS AND RETURN ON EQUITY

Net earnings and earnings per share for 2004 increased approximately eighteen-fold to $1.12 billion and $7.02 per diluted share, respectively, compared with $62.8 million and $0.40 per diluted share in 2003. Net earnings as a percentage of net sales were 9.9% in 2004 compared with 1.0% in 2003. Return on average equity was 38.7% and 2.7% in 2004 and 2003, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows provided by operating activities provide us with a significant source of liquidity. When needed, we also have external short-term financing sources available including the issuance of commercial paper and borrowings under our bank credit facilities. We also issue long-term debt from time to time. We have earned long-term debt ratings of A+ by Standard and Poor’s and Al by Moody’s Investors Services, the highest ratings of any metals and mining company in North America. We believe our strong financial position and our industry-high credit rating provide us with flexibility and significant capacity to obtain additional capital on a cost-effective basis.

We anticipate that cash flows from operations and our existing borrowing capacity will be sufficient to fund expected normal operating costs, working capital, dividends and capital expenditures for our existing facilities. Any future significant acquisitions could require additional financing from external sources.

During 2005, cash and short-term investments increased 136% from $779.0 million to $1.84 billion and working capital increased 34% from $2.11 billion to $2.82 billion. The current ratio increased from 3.0 at December 31, 2004 to 3.2 at December 31, 2005. Approximately $144.1 million and $71.1 million of the cash and short-term investments position at December 31, 2005 and December 31, 2004, respectively, was held by our 51%-owned joint venture, Nucor-Yamato Steel Company. We have a simple capital structure with no off-balance sheet arrangements or relationships with unconsolidated special purpose entities. Nucor uses derivative financial instruments from time-to-time primarily to manage the exposure to price risk related to natural gas purchases used in the production process and to manage exposure to changes in interest rates on outstanding debt instruments.


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2005

  

(in thousands)

 

2004

December 31,

     

Cash and short-term investments

   $ 1,837,510    $ 779,049

Cash and short-term investments held by Nucor-Yamato

     144,079      71,081

Working capital

     2,815,854      2,109,158

Current ratio

     3.2      3.0

OPERATING ACTIVITIES

Nucor generated cash provided by operating activities of a record $2.14 billion in 2005 compared with $1.02 billion in 2004, an increase of 108%. This increase was the result of the 17% increase in net earnings and the increase in changes in operating assets and liabilities (exclusive of acquisitions) that provided cash of $357.6 million in 2005 compared with using cash of $580.8 million in 2004. Accounts receivable increased $19.4 million in 2005 versus an increase of $354.9 million in 2004. Net sales in the fourth quarter of 2004 were significantly higher than in the fourth quarter of the previous year, resulting in more accounts receivable at year-end. In 2004, inventories increased to a record high level due to increased quantities and increased purchase costs. Inventories decreased in 2005 due to reduced inventory levels accompanied by purchase costs declining from the record highs experienced in the fourth quarter of 2004.

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INVESTING ACTIVITIES

Our business is capital intensive; therefore, cash used in investing activities primarily represents capital expenditures for new facilities, the expansion and upgrading of existing facilities and the acquisition of the assets of other companies. Cash used in investing activities decreased slightly to $527.5 million in 2005 compared with $534.9 million in 2004. Nucor invested $331.5 million in new facilities (exclusive of acquisitions) and expansion or upgrading of existing facilities in 2005 compared with $285.9 million in 2004.

Existing cash and short-term investments funded the acquisitions of the assets of Fort Howard Steel and Marion Steel in 2005 and of Corus Tuscaloosa and Worthington in 2004. Nucor expects to continue to pursue profitable growth through acquisitions.

FINANCING ACTIVITIES

Cash used in financing activities increased to $550.7 million in 2005 compared with $61.1 million in 2004. In 2005, Nucor increased its base dividend and paid a quarterly supplemental dividend, resulting in dividend payments tripling from $69.7 million in 2004 to $209.8 million in 2005. In 2004, Nucor issued $20.0 million aggregate principal amount of variable rate industrial revenue bonds due 2020.

During 2005, the board of directors reactivated the previously approved stock repurchase program, and Nucor repurchased approximately 5.6 million shares of common stock at a cost of approximately $291.2 million. In December 2005, the board approved the repurchase of up to an additional 10.0 million shares. A total of approximately 12.9 million shares remains authorized for repurchase. There were no repurchases during 2004.

The percentage of long-term debt to total capital (long-term debt plus minority interests plus stockholders’ equity) was 17% and 20% at year-end 2005 and 2004, respectively.

In 2005, Nucor entered into a new five-year unsecured revolving credit facility maturing in June 2010 that provides for up to $700.0 million in revolving loans. Up to the equivalent of $600.0 million of the new credit facility will be available for foreign currency loans, and up to $450.0 million is available for the issuance of letters of credit. The new credit facility


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may be increased by up to $300.0 million at the election of the Company in accordance with the terms set forth in the credit agreement. No borrowings were outstanding under the credit facility as of December 31, 2005. In connection with the new credit facility, in 2005 Nucor terminated (a) a $125.0 million 364-day revolver maturing in September 2005, and (b) a $300.0 million multi-currency revolver maturing October 2007. At the date of termination, there were no borrowings under either terminated credit facility.

MARKET RISK

All of Nucor’s industrial revenue bonds have variable interest rates that are adjusted weekly or annually. These industrial revenue bonds represent 43% of Nucor’s long-term debt outstanding at December 31, 2005. The remaining 57% of Nucor’s long-term debt is at fixed rates. Future changes in interest rates are not expected to significantly impact earnings. From time to time, Nucor makes use of interest rate swaps to manage interest rate risk. As of December 31, 2005, there were no such contracts outstanding. Nucor’s investment practice is to invest in securities that are highly liquid with short maturities. As a result, we do not expect changes in interest rates to have a significant impact on the value of our investment securities.

Nucor also uses derivative financial instruments from time to time primarily to manage its exposure to price risk related to natural gas purchases used in the production process. Nucor, generally, does not enter into derivative instruments for any purpose other than hedging the cash flows associated with specific volumes of commodities that will be purchased and consumed in future periods and hedging the exposures related to changes in the fair value of outstanding fixed rate debt instruments. Nucor recognizes all derivative instruments in the consolidated balance sheets at fair value.

Nucor has ventures in Brazil and Australia that are in the early stages of operations and owns the DRI facility in Trinidad that is currently under construction. Accordingly, Nucor is exposed to the effects of currency fluctuations in those countries. Nucor presently does not hedge its exposure to foreign currency risk.

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

The following table sets forth our contractual obligations and other commercial commitments as of December 31, 2005 for the periods presented (in thousands).

 

     Payments Due By Period

Contractual Obligations

   Total    2006    2007 - 2008    2009 - 2010    2011 and
thereafter

Long-term debt

   $ 923,550    $ 1,250    $ —      $ 180,400    $ 741,900

Estimated interest on long-term debt(1)

     514,778      42,048      84,051      62,776      325,903

Operating leases

     13,402      3,041      1,976      660      7,725

Raw material purchase commitments(2)

     2,724,388      769,146      561,575      603,921      789,746

Utility purchase commitments(2)

     928,999      170,972      148,710      73,625      535,692

Other unconditional purchase obligations(3)

     142,842      140,601      2,241      —        —  

Other long-term obligations(4)

     118,233      7,247      6,309      1,947      102,730
                                  

Total contractual obligations

   $ 5,366,192    $ 1,134,305    $ 804,862    $ 923,329    $ 2,503,696
                                  

(1) Interest is estimated using applicable rates at December 31, 2005 for Nucor’s outstanding fixed and variable rate debt.
(2) Nucor enters into contracts for the purchase of scrap and scrap substitutes, iron-ore, electricity, natural gas and other raw materials and related services, a significant portion of which pertain to our DRI facility in Trinidad. These contracts include multi-year commitments and minimum annual purchase requirements and are valued at prices in effect on December 31, 2005 or according to the contract terms. These contracts are part of normal operations and are reflected in historical operating cash flow trends. We do not believe such commitments will adversely affect our liquidity position.
(3) Purchase obligations include commitments for capital expenditures on operating machinery and equipment.
(4) Other long-term obligations include amounts associated with Nucor’s early retiree medical benefits and management compensation.

DIVIDENDS

Nucor has increased its cash dividend every year since it began paying dividends in 1973. In 2005, in addition to raising the base dividend, the board of directors implemented a supplemental dividend based on Nucor’s strong performance in 2004.


MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

28

 

Nucor paid dividends of $1.33 per share in 2005 compared with $0.44 per share in 2004. In February 2006, the board of directors announced an increase in the base dividend to $0.20 per share and in the supplemental dividend to $0.50 per share, resulting in an annualized dividend rate of $2.80 per share. The supplemental dividend of $0.50 per share represents a portion of a total supplemental dividend estimated to be $2.00 per share to be paid over the next four quarterly dividend payments. The payment of any future supplemental dividends will depend upon many factors, including Nucor’s earnings, cash flows and financial position.

OUTLOOK

Our objective is to maintain a strong balance sheet while pursuing profitable growth. We expect to obtain additional capacity through expansions at our existing steel mills, greenfield construction utilizing advantageous new technologies and future acquisitions. Capital expenditures are currently projected to be approximately $400.0 million in 2006, an increase of 21% over 2005. This expected increase in capital expenditures is primarily due to the cost of construction and refurbishment of the DRI plant that we have relocated to Trinidad. Funds provided from operations, existing credit facilities and new borrowings are expected to be adequate to meet future capital expenditure and working capital requirements for existing operations. Nucor believes that it has the financial ability to borrow significant additional funds and still maintain reasonable leverage in order to finance major acquisitions.

In the steel mills segment, total steel production is anticipated to increase over the next several years from the record 20,332,000 tons produced in 2005. Our current estimated annual capacity is approximately 25,000,000 tons, and additional capacity may be obtained through upgrading existing facilities as well as through acquisitions. We expect that demand in non-residential construction will continue to strengthen throughout 2006 and that Nucor will continue to benefit from product line diversification. Although scrap prices remain at high levels, higher average selling prices, achieved through increased demand and the raw material surcharge, will continue to provide appropriate margins for our products. This surcharge will continue to ensure that we will be able to purchase the scrap needed to fill our customers’ needs.

Nucor continues to build market leadership positions in attractive downstream steel products businesses. We anticipate that the continued improvement in non-residential building will increase sales and the volume supplied by Vulcraft and Nucor Building Systems in 2006. Cold Finish sales will increase as additional capacity from our recent acquisition expands our presence in the midwest market and as our product line expands to include larger sizes and more leaded bars.

We recognize that uncertainty in external factors such as raw materials costs, growth rate of the economy, the level of imports and consolidation in the industry will have a significant impact on our results. In 2006, we will continue working towards our goal of controlling approximately 6,000,000 to 7,000,000 tons of our supply of high-quality scrap substitutes. Our raw materials strategy is driven by Nucor’s ongoing expansion of our steel product portfolio into higher quality grades. We will continue our defense of fair trade and will continue to point out examples of unfair trade policies and practices until they are fixed. We will continue to pursue strategic acquisitions that expand our platform for generating earnings and attractive returns on our stockholders’ capital. While we cannot control these outside forces, Nucor will continue to be at the forefront of anticipating and addressing the issues that this uncertainty in external factors raises for us and other steel producers.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at year end and the reported amount of revenues and expenses during the year. On an ongoing basis, we evaluate our estimates, including those related to the valuation allowances for receivables; the carrying value of property, plant and equipment; reserves for environmental obligations; and income taxes. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Accordingly, actual costs could differ materially from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our significant judgments and estimates used in the preparation of our consolidated financial statements.


MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

29

 

REVENUE RECOGNITION

We recognize revenue when title passes to the customer, which is typically upon shipment.

ALLOWANCES FOR DOUBTFUL ACCOUNTS

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

INVENTORIES

Inventories are stated at the lower of cost or market. The cost of most inventories is measured on the LIFO method of accounting. The LIFO method allocates the most recent costs to cost of products sold, thereby recognizing into operating results fluctuations in raw material, energy and other capitalizable costs more quickly than other methods. The cost of other inventories is determined on the first-in, first-out (“FIFO”) method.

ASSET IMPAIRMENTS

We evaluate the impairment of our property, plant and equipment on an individual asset basis or by logical groupings of assets. Asset impairments are recognized whenever changes in circumstances indicate that the carrying amounts of those productive assets exceed their projected undiscounted cash flows. When it is determined that an impairment exists, the related assets are written down to estimated fair market value.

ENVIRONMENTAL REMEDIATION

We are subject to environmental laws and regulations established by federal, state and local authorities, and we make provision for the estimated costs related to compliance. Undiscounted remediation liabilities are accrued based on estimates of known environmental exposures. The accruals are reviewed periodically and, as investigations and remediation proceed, adjustments are made as we believe are necessary. The accruals are not reduced by possible recoveries from insurance carriers or other third parties. Our measurement of environmental liabilities is based on currently available facts, present laws and regulations, and current technology.

INCOME TAXES

We account for income taxes in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes.” We estimate our actual current tax expense and assess temporary differences that exist due to differing treatments of items for tax and financial statement purposes. These differences result in the recognition of deferred tax assets and liabilities. The deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period in which the change is enacted. We assess the realizability of deferred tax assets on an ongoing basis by considering whether it is more likely than not that some portion of the deferred tax assets will not be realized. If it is more likely than not, in our judgment, that the deferred tax assets will not be realized, we provide a valuation allowance.

RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (“FASB”) has issued SFAS No. 123(R), “Share Based Payment,” which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. As required by SFAS No. 123(R), Nucor will begin recognizing compensation costs in the Consolidated Statements of Earnings for all of the equity-based compensation plans in the first quarter of 2006. Compensation cost will be determined using the modified prospective method. Management believes the effect of the adoption of SFAS No. 123(R) on our earnings will be comparable to the pro forma disclosures included in Note 1 to our Consolidated Financial Statements and does not expect the adoption to have a material impact on Nucor’s consolidated financial position.

The FASB has issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4,” which clarifies that abnormal amounts of idle facility expense, freight, handling costs and spoilage should be recognized as current period charges and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. We are required to adopt the provisions of this statement in the first quarter of 2006. Management does not expect the adoption of SFAS No. 151 to have a material impact on Nucor’s consolidated financial position and results of operations.


SIX-YEAR FINANCIAL REVIEW

33

(dollar amounts in thousands, except per share data)

 

     2005     2004     2003     2002     2001     2000  

FOR THE YEAR

            

Net sales

   $ 12,700,999     $ 11,376,828     $ 6,265,823     $ 4,801,777     $ 4,333,707     $ 4,756,521  

Costs, expenses and other:

            

Cost of products sold

     10,085,396       9,128,872       5,996,547       4,332,277       3,914,278       3,929,182  

Marketing, administrative and other expenses

     493,560       415,030       165,369       175,589       150,666       183,175  

Interest expense (income), net

     4,201       22,352       24,627       14,286       6,525       (816 )

Minority interests

     110,674       80,894       23,950       79,472       103,069       151,462  

Other income

     (9,200 )     (1,596 )     (11,547 )     (29,900 )     (20,200 )     —    
                                                
     10,684,631       9,645,552       6,198,946       4,571,724       4,154,338       4,263,003  

Earnings before income taxes

     2,016,368       1,731,276       66,877       230,053       179,369       493,518  

Provision for income taxes

     706,084       609,791       4,096       67,973       66,408       182,610  
                                                

Net earnings

     1,310,284       1,121,485       62,781       162,080       112,961       310,908  

Net earnings per share:

            

Basic

     8.34       7.08       0.40       1.04       0.73       1.90  

Diluted

     8.26       7.02       0.40       1.04       0.73       1.90  

Dividends declared per share

     1.85       0.47       0.40       0.38       0.34       0.30  

Percentage of net earnings to net sales

     10.3 %     9.9 %     1.0 %     3.4 %     2.6 %     6.5 %

Return on average equity

     33.9 %     38.7 %     2.7 %     7.2 %     5.2 %     14.2 %

Capital expenditures

     331,466       285,925       215,408       243,598       261,146       415,405  

Depreciation

     375,054       383,305       364,112       307,101       289,063       259,365  

Sales per employee

     1,159       1,107       637       528       531       619  

AT YEAR END

            

Current assets

   $ 4,071,553     $ 3,174,948     $ 1,620,560     $ 1,415,362     $ 1,373,666     $ 1,379,529  

Current liabilities

     1,255,699       1,065,790       629,595       591,536       484,159       558,068  
                                                

Working capital

     2,815,854       2,109,158       990,965       823,826       889,507       821,461  

Cash provided by operating activities

     2,136,615       1,024,756       493,801       497,220       495,115       820,755  

Current ratio

     3.2       3.0       2.6       2.4       2.8       2.5  

Property, plant and equipment

     2,855,717       2,818,307       2,817,135       2,932,058       2,365,655       2,329,421  

Total assets

     7,138,787       6,133,207       4,492,353       4,381,001       3,759,348       3,710,868  

Long-term debt

     923,550       923,550       903,550       894,550       460,450       460,450  

Percentage of debt to capital

     17.1 %     20.3 %     26.4 %     26.0 %     15.6 %     15.9 %

Stockholders’ equity

     4,279,788       3,455,985       2,342,077       2,322,990       2,201,461       2,130,952  

Per share

     27.59       21.67       14.90       14.86       14.15       13.73  

Shares outstanding

     155,110       159,512       157,180       156,360       155,630       155,166  

Stockholders

     120,000       82,000       61,000       64,000       47,000       51,000  

Employees

     11,300       10,600       9,900       9,800       8,400       7,900  


MANAGEMENT’S REPORT AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

34

MANAGEMENTS REPORT on internal control over financial reporting

Nucor’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934, as amended.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of Nucor’s internal control over financial reporting as of December 31, 2005. In making this assessment, management used criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

Based on its assessment, management concluded that Nucor’s internal control over financial reporting was effective as of December 31, 2005. PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited management’s assessment of Nucor’s internal control over financial reporting as stated in their report, which is included herein.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PricewaterhouseCoopers LLP

March 7, 2006

To Stockholders and Board of Directors

Nucor Corporation:

We have completed integrated audits of Nucor Corporation’s 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2005, and an audit of its 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions on Nucor Corporation’s 2005, 2004 and 2003 consolidated financial statements and on its internal control over financial reporting as of December 31, 2005, based on our audits, are presented below.

CONSOLIDATED FINANCIAL STATEMENTS

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, stockholders’ equity and cash flows present fairly, in all material respects, the financial position of Nucor Corporation and its subsidiaries at December 31, 2005 and December 31, 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

35

INTERNAL CONTROL OVER FINANCIAL REPORTING

Also, in our opinion, management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that the Company maintained effective internal control over financial reporting as of December 31, 2005 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Charlotte, North Carolina


CONSOLIDATED STATEMENTS OF EARNINGS

36

CONSOLIDATED STATEMENTS OF EARNINGS (in thousands, except per share data)

 

Year Ended December 31,

   2005     2004     2003  

NET SALES

   $ 12,700,999     $ 11,376,828     $ 6,265,823  
                        

COSTS, EXPENSES AND OTHER:

      

Cost of products sold

     10,085,396       9,128,872       5,996,547  

Marketing, administrative and other expenses

     493,560       415,030       165,369  

Interest expense, net (Note 12)

     4,201       22,352       24,627  

Minority interests

     110,674       80,894       23,950  

Other income (Note 13)

     (9,200 )     (1,596 )     (11,547 )
                        
     10,684,631       9,645,552       6,198,946  
                        

EARNINGS BEFORE INCOME TAXES

     2,016,368       1,731,276       66,877  

PROVISION FOR INCOME TAXES (Note 14)

     706,084       609,791       4,096  
                        

NET EARNINGS

   $ 1,310,284     $ 1,121,485     $ 62,781  
                        

NET EARNINGS PER SHARE (Note 15):

      

Basic

   $ 8.34     $ 7.08     $ 0.40  
                        

Diluted

   $ 8.26     $ 7.02     $ 0.40  
                        

See notes to consolidated financial statements.


CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

37

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except per share data)

 

     COMMON STOCK    ADDITIONAL
PAID-IN
CAPITAL
    RETAINED
EARNINGS
    UNEARNED
COMPENSATION
   

ACCUMULATED OTHER
COMPREHENSIVE

INCOME (LOSS)

    TREASURY STOCK
(at cost)
    TOTAL
STOCKHOLDERS’
EQUITY
 
     Shares    Amount            Shares     Amount    

BALANCES, December 31, 2002

   90,679    $ 36,272    $ 99,396     $ 2,641,581     $ —       $ —       12,499     $ (454,259 )   $ 2,322,990  
                                                                  

Comprehensive income:

                    

Net earnings in 2003

             62,781               62,781  
                          

Total comprehensive income

                       62,781  

Stock options

   388      155      16,273                 16,428  

Employee stock compensation and service awards

           1,730           (22 )     802       2,532  

Cash dividends ($0.40 per share)

             (62,654 )             (62,654 )
                                                                  

BALANCES, December 31, 2003

   91,067      36,427      117,399       2,641,708       —         —       12,477       (453,457 )     2,342,077  
                                                                  

Comprehensive income:

                    

Net earnings in 2004

             1,121,485               1,121,485  

Net unrealized loss on hedging derivatives, net of income taxes

                 (1,177 )         (1,177 )
                          

Total comprehensive income

                       1,120,308  

Stock options

   1,333      533      54,685                 55,218  

Employee stock compensation and service awards

           11,915         (592 )     (43 )     1,497       12,820  

Amortization of unearned compensation

               200             200  

2-for-1 stock split

   91,983      36,793      (36,793 )         12,437         —    

Cash dividends ($0.47 per share)

             (74,638 )             (74,638 )
                                                                  

BALANCES, December 31, 2004

   184,383      73,753      147,206       3,688,555       (392 )     (1,177 )   24,871       (451,960 )     3,455,985  
                                                                  

Comprehensive income:

                    

Net earnings in 2005

             1,310,284               1,310,284  

Net unrealized gain on hedging derivatives, net of income taxes

                 55,842           55,842  

Reclassification adjustment for gain on settlement of hedging derivatives included in net income, net of income taxes

                 (8,065 )         (8,065 )
                          

Total comprehensive income

                       1,358,061  

Stock options

   916      367      26,709                 27,076  

Employee stock compensation and service awards

           17,935         (5,095 )     (249 )     4,598       17,438  

Amortization of unearned compensation

               2,200             2,200  

Treasury stock acquired

                 5,567       (291,244 )     (291,244 )

Cash dividends ($1.85 per share)

             (289,728 )             (289,728 )
                                                                  

BALANCES, December 31, 2005

   185,299    $ 74,120    $ 191,850     $ 4,709,111     $ (3,287 )   $ 46,600     30,189     $ (738,606 )   $ 4,279,788  
                                                                  

See notes to consolidated financial statements.


CONSOLIDATED BALANCE SHEETS

38

 

CONSOLIDATED BALANCE SHEETS (in thousands)

 

December 31,

   2005     2004  

ASSETS

    

CURRENT ASSETS:

    

Cash and short-term investments

   $ 1,837,510     $ 779,049  

Accounts receivable, net (Note 2)

     1,000,629       962,755  

Inventories (Note 3)

     945,054       1,239,888  

Other current assets (Notes 9, 14 and 17)

     288,360       193,256  
                

Total current assets

     4,071,553       3,174,948  

PROPERTY, PLANT AND EQUIPMENT, NET (Note 4)

     2,855,717       2,818,307  

OTHER ASSETS (Notes 9 and 17)

     211,517       139,952  
                

TOTAL ASSETS

   $ 7,138,787     $ 6,133,207  
                

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

CURRENT LIABILITIES:

    

Long-term debt due within one year (Note 6)

   $ 1 ,250     $ —    

Accounts payable (Note 5)

     501,624       471,549  

Federal income taxes payable

     —         28,957  

Salaries, wages and related accruals (Notes 7 and 11)

     368,568       320,276  

Accrued expenses and other current liabilities (Notes 5 and 10)

     384,257       245,008  
                

Total current liabilities

     1,255,699       1,065,790  
                

LONG-TERM DEBT DUE AFTER ONE YEAR (Note 6)

     922,300       923,550  
                

DEFERRED CREDITS AND OTHER LIABILITIES (Notes 7, 9, 10, 11 and 14)

     486,910       514,569  
                

MINORITY INTERESTS

     194,090       173,313  
                

STOCKHOLDERS’ EQUITY (Note 7):

    

Common stock

     74,120       73,753  

Additional paid-in capital

     191,850       147,206  

Retained earnings

     4,709,111       3,688,555  

Unearned compensation

     (3,287 )     (392 )

Accumulated other comprehensive income (loss), net of income taxes (Note 9)

     46,600       (1,177 )
                
     5,018,394       3,907,945  

Treasury stock

     (738,606 )     (451,960 )
                

Total stockholders’ equity

     4,279,788       3,455,985  
                

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 7,138,787     $ 6,133,207  
                

See notes to consolidated financial statements.


CONSOLIDATED STATEMENTS OF CASH FLOWS

39

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

 

Year Ended December 31,

   2005     2004     2003  

OPERATING ACTIVITIES

      

Net earnings

   $ 1,310,284     $ 1,121,485     $ 62,781  

Adjustments:

      

Depreciation

     375,054       383,305       364,112  

Impairment of assets

     —         13,200       —    

Deferred income taxes

     (29,379 )     6,693       74,300  

Minority interests

     110,663       80,892       23,942  

Settlement of natural gas hedges

     12,365       —         —    

Changes in (exclusive of acquisitions):

      

Accounts receivable

     (19,425 )     (354,897 )     (88,871 )

Inventories

     337,862       (635,641 )     28,973  

Accounts payable

     17,259       130,604       82,634  

Federal income taxes

     (68,331 )     35,403       (15,396 )

Salaries, wages and related accruals

     46,376       228,203       (25,060 )

Other

     43,887       15,509       (13,614 )
                        

Cash provided by operating activities

     2,136,615       1,024,756       493,801  
                        

INVESTING ACTIVITIES

      

Capital expenditures

     (331,466 )     (285,925 )     (215,408 )

Investment in affiliates

     (41,903 )     (82,458 )     (22,125 )

Disposition of plant and equipment

     752       3,094       11,634  

Acquisitions (net of cash acquired)

     (154,864 )     (169,646 )     (34,941 )

Other investing activities

     —         —         (6,742 )
                        

Cash used in investing activities

     (527,481 )     (534,935 )     (267,582 )
                        

FINANCING ACTIVITIES

      

Proceeds from long-term debt

     —         20,000       25,000  

Repayment of long-term debt

     —         —         (16,000 )

Issuance of common stock

     40,209       68,630       18,961  

Distributions to minority interests

     (89,886 )     (84,858 )     (63,318 )

Cash dividends

     (209,752 )     (69,676 )     (61,835 )

Acquisition of treasury stock

     (291,244 )     —         —    

Termination of interest rate swap agreement

     —         4,800       2,300  
                        

Cash used in financing activities

     (550,673 )     (61,104 )     (94,892 )
                        

INCREASE IN CASH AND SHORT-TERM INVESTMENTS

     1,058,461       428,717       131,327  

CASH AND SHORT-TERM INVESTMENTS–BEGINNING OF YEAR

     779,049       350,332       219,005  
                        

CASH AND SHORT-TERM INVESTMENTS–END OF YEAR

   $ 1,837,510     $ 779,049     $ 350,332  
                        

See notes to consolidated financial statements.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

40

 

YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

NATURE OF OPERATIONS Nucor is a domestic manufacturer of steel products whose customers are located primarily in the United States of America.

PRINCIPLES OF CONSOLIDATION The consolidated financial statements include Nucor and its controlled subsidiaries, including Nucor-Yamato Steel Company, a limited partnership of which Nucor owns 51%. Investments in joint ventures with ownership of 50% or less are accounted for under the equity method. All significant intercompany transactions are eliminated.

Distributions are made to minority interest partners in Nucor-Yamato Steel Company in accordance with the limited partnership agreement by mutual agreement of the general partners. At a minimum, sufficient cash is distributed so that each partner may pay applicable U.S. federal and state income taxes payable.

Other assets includes $161.0 million at December 31, 2005 ($125.5 million at December 31, 2004) of equity investments in less than 50%-owned domestic and foreign affiliated companies. The results of these investments are included in marketing, administrative and other expenses and are immaterial for all periods presented.

CASH AND SHORT-TERM INVESTMENTS Short-term investments are recorded at cost plus accrued interest, which approximates market, and have original maturities of three months or less at the date of purchase. Cash and short-term investments are maintained primarily with a few high-credit quality financial institutions.

INVENTORIES VALUATION Inventories are stated at the lower of cost or market. Cost is determined principally using the last-in, first-out (LIFO) method of accounting. Cost of other inventories is determined on the first-in, first-out (FIFO) method.

PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets. Repairs and maintenance for planned major maintenance activities are accrued on a pro-rata basis prior to the next scheduled major maintenance activity. All other repairs and maintenance activities are expensed when incurred. Impairments of long-lived assets are recognized whenever changes in circumstances indicate that the carrying amount of those productive assets exceeds their projected undiscounted cash flows. When it is determined that an impairment exists, the related assets are written down to estimated fair market value.

DERIVATIVE FINANCIAL INSTRUMENTS Nucor uses derivative financial instruments from time to time primarily to partially manage its exposure to price risk related to natural gas purchases used in the production process and to partially manage its exposure to changes in interest rates on outstanding debt instruments. Nucor, generally, does not enter into derivative instruments for any purpose other than hedging the cash flows associated with specific volumes of commodities that will be purchased and processed in future periods and hedging the exposure related to changes in the fair value of outstanding fixed rate debt instruments.

REVENUE RECOGNITION Revenue is recognized when title passes to the customer, which is principally upon shipment.

FREIGHT COSTS Internal fleet and some common carrier costs are included in marketing, administrative and other expenses. These costs included in marketing, administrative and other expenses were $67.1 million in 2005 ($55.6 million in 2004 and $47.4 million in 2003). All other freight costs are included in cost of products sold.

STOCK-BASED COMPENSATION Nucor accounts for its stock-based compensation plans under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. Accordingly, no compensation expense is recorded, other than for restricted stock grants, since the exercise price of the stock options is equal to the market price of the underlying stock on the grant date. Had compensation cost for the stock options issued been determined consistent with Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” net earnings and net earnings per share would have been reduced to the following pro forma amounts:


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

41

 

    

(in thousands, except per share data)

 

Year Ended December 31,

   2005     2004     2003  

Net earnings – as reported

   $ 1,310,284     $ 1,121,485     $ 62,781  

Add: Stock-based employee compensation expense included in reported net earnings, net of income taxes

     12,717       12,017       362  

Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of income taxes

     (21,305 )     (18,296 )     (7,738 )
                        

Net earnings – pro forma

   $ 1,301,696     $ 1,115,206     $ 55,405  
                        

Net earnings per share – as reported:

      

Basic

   $ 8.34     $ 7.08     $ 0.40  

Diluted

     8.26       7.02       0.40  

Net earnings per share – pro forma:

      

Basic

     8.28       7.04       0.35  

Diluted

     8.21       6.98       0.35  

The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and experience.

COMPREHENSIVE INCOME (LOSS) Nucor reports comprehensive income (loss) in its consolidated statement of stockholders’ equity. Comprehensive income (loss) consists of net income and other gains and losses affecting stockholders’ equity that, under United States generally accepted accounting principles, are excluded from net income, such as gains and losses related to certain derivative instruments, which are presented net of tax, and the translation effect of foreign currency assets and liabilities of non-U.S. entities.

RECENT ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board (“FASB”) has issued SFAS No. 123(R), “Share Based Payment,” which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. As required by SFAS No. 123(R), Nucor will begin recognizing compensation costs in the Consolidated Statements of Earnings for all of the equity-based compensation plans in the first quarter of 2006. Compensation cost will be determined using the modified prospective method. Management believes the effect of the adoption of SFAS No. 123(R) on our earnings will be comparable to the pro forma disclosures included under the discussion of Stock-Based Compensation, above, and does not expect the adoption to have a material impact or Nucor’s consolidated financial position.

The FASB has issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4,” which clarifies that abnormal amounts of idle facility expense, freight, handling costs and spoilage should be recognized as current period charges and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. We are required to adopt the provisions of this statement in the first quarter of 2006. Management does not expect the adoption of SFAS No. 151 to have a material impact on Nucor’s consolidated financial position and results of operations.

USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.

RECLASSIFICATIONS Certain amounts for prior years have been reclassified to conform to the 2005 presentation.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

42

 

2. ACCOUNTS RECEIVABLE:

An allowance for doubtful accounts is maintained for estimated losses resulting from the inability of our customers to make required payments. Accounts receivable are stated net of the allowance for doubtful accounts of $39.2 million at December 31, 2005 ($40.4 million at December 31, 2004 and $22.7 million at December 31, 2003).

3. INVENTORIES:

Inventories consist of approximately 50% raw materials and supplies and 50% finished and semi-finished products at December 31, 2005 (55% and 45%, respectively, at December 31, 2004). Nucor’s manufacturing operations consist of a continuous, vertically integrated process from which products are sold to customers at various stages. Since most steel products can be classified as either finished or semi-finished products, these two categories of inventory are combined.

Inventories valued using the last-in, first-out (LIFO) method of accounting represent approximately 68% of total inventories at December 31, 2005 (78% at December 31, 2004). If the first-in, first-out (FIFO) method of accounting had been used, inventories would have been $381.9 million higher at December 31, 2005 ($533.5 million higher at December 31, 2004). Use of the lower of cost or market reduced inventories by $1.2 million at December 31, 2005 ($2.4 million at December 31, 2004).

Nucor has entered into supply agreements for certain raw materials, utilities and other items in the ordinary course of business. These agreements extend into 2028 and total approximately $3.7 billion at December 31, 2005.

4. PROPERTY, PLANT AND EQUIPMENT:

 

         

(in thousands)

December 31,

   2005    2004

Land and improvements

   $ 146,471    $ 142,276

Buildings and improvements

     500,526      478,157

Machinery and equipment

     5,183,241      4,980,775

Construction in process and equipment deposits

     226,698      92,411
             
     6,056,936      5,693,619

Less accumulated depreciation

     3,201,219      2,875,312
             
   $ 2,855,717    $ 2,818,307
             

The estimated useful lives range from 10 to 20 years for buildings and land improvements and range from 3 to 12 years for machinery and equipment.

5. CURRENT LIABILITIES:

Drafts payable, included in accounts payable in the balance sheet, was $76.3 million at December 31, 2005 ($91.6 million at December 31, 2004).

Dividends payable, included in accrued expenses and other current liabilities in the balance sheet, was $100.9 million at December 31, 2005 ($20.9 million at December 31, 2004).


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

43

 

6. LONG-TERM DEBT AND FINANCING ARRANGEMENTS:

 

          

(in thousands)

December 31,

   2005     2004

Industrial revenue bonds:

    

3.30% to 3.71%, variable, due from 2006 to 2038

   $ 398,550     $ 398,550

Notes, 6%, due 2009

     175,000       175,000

Notes, 4.875%, due 2012

     350,000       350,000
              
     923,550       923,550

Less current maturities

     (1,250 )     —  
              
   $ 922,300     $ 923,550
              

In 2005, Nucor entered into a new five-year unsecured revolving credit facility maturing in June 2010 that provides for up to $700.0 million in revolving loans. Up to the equivalent of $600.0 million of the new credit facility is available for foreign currency loans, and up to $450.0 million is available for the issuance of letters of credit. The new credit facility may be increased by up to $300.0 million at the election of the Company in accordance with the terms set forth in the credit agreement. No borrowings were outstanding under the credit facility as of December 31, 2005. The new credit facility provides for grid-based interest pricing based upon the credit rating of Nucor’s senior unsecured long-term debt and, alternatively, interest rates quoted by lenders in connection with competitive bidding. The credit facility includes customary financial and other covenants, including a limit on the ratio of debt to total capital of 60%, a limit on Nucor’s ability to pledge the Company’s assets, and a limit on consolidations, mergers and sales of assets.

In connection with the new credit facility, in June 2005 Nucor terminated (a) a $125.0 million 364-day revolver that was scheduled to mature in September 2005 and (b) a $300.0 million multi-currency revolver that was scheduled to mature in October 2007. At the date of termination, there were no borrowings under either terminated credit facility.

Annual aggregate long-term debt maturities are: $1.3 million in 2006; none in 2007; none in 2008; $180.4 million in 2009; and none in 2010.

The fair value of Nucor’s long-term debt approximates the carrying value.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

44

 

7. CAPITAL STOCK:

The par value of Nucor’s common stock is $0.40 per share and there are 400.0 million shares authorized. In addition, 250,000 shares of preferred stock, par value of $4.00 per share, are authorized, with preferences, rights and restrictions as may be fixed by Nucor’s Board of Directors. There are no shares of preferred stock issued or outstanding.

STOCK OPTIONS Nucor’s stock option plans provide that common stock options may be granted to key employees, officers and non-employee directors with exercise prices at 100% of the market value on the date of the grant. Outstanding options are exercisable six months after grant date and have a term of seven years.

A summary of Nucor’s stock option plans is as follows (shares in thousands):

 

Year Ended December 31,

   2005    2004    2003
     Shares     Weighted Average
Exercise Price
   Shares     Weighted Average
Exercise Price
   Shares     Weighted Average
Exercise Price

Number of shares under option:

              

Outstanding at beginning of year

   2,336     $ 29.37    3,424     $ 24.04    2,492     $ 23.92

Granted

   776       59.51    1,184       35.64    1,741       23.01

Exercised

   (916 )     29.55    (2,250 )     24.55    (776 )     21.28

Canceled

   (13 )     54.42    (22 )     31.27    (33 )     24.90
                                      

Outstanding at end of year

   2,183     $ 39.86    2,336     $ 29.37    3,424     $ 24.04
                                      

Options exercisable at end of year

   1,781     $ 35.83    1,787     $ 26.29    2,646     $ 23.57
                                      

Shares reserved for future grants

   9,534        10,298        11,460    
                          

The following table summarizes information about stock options outstanding at December 31, 2005 (shares in thousands):

 

     Options Outstanding    Options Exercisable

Range of Exercise Prices

   Number Outstanding    Weighted
Average Remaining
Contractual Life
   Weighted Average
Exercise Price
   Number Exercisable    Weighted Average
Exercise Price

$18.01 - $ 32.00

   808    3.6 years    $ 24.35    808    $ 24.35

  32.01 -    46.00

   621    5.4 years      36.21    621      36.21

  46.01 -    60.00

   402    6.6 years      57.72    —        —  

  60.01 -    61.46

   352    6.1 years      61.46    352      61.46
                  

  18.01 -    61.46

   2,183    5.1 years      39.86    1,781      35.83
                  

The pro forma net earnings and pro forma net earnings per share amounts calculated according to SFAS No. 123 are disclosed in Note 1, above. The weighted-average per share fair value of options granted was $18.15 in 2005 ($8.09 in 2004 and $7.19 in 2003). The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions:

 

Year Ended December 31,

   2005    2004    2003

Expected dividend yield

   0.98% – 1.04%    1.30% – 1.32%    1.56% – 1.92%

Expected stock price volatility

   38.42% – 38.43%    29.18% – 31.08%    43.37% – 46. 51%

Risk-free interest rate

   3.76% – 3.80%    2.15% – 2.74%    1.91% – 2.62%

Expected life of options (in years)

   3.5    3.5    3.5


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

45

 

RESTRICTED STOCK AWARDS Nucor’s Senior Officers Annual Incentive Plan (the “AIP”) and Long-Term Incentive Plan (the “LTIP”) authorize the award of shares of common stock to officers subject to certain conditions and restrictions. 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 annual incentive 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.

Compensation expense for common stock and common stock units awarded under the AIP and 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 $16.8 million in 2005, $18.5 million in 2004 and $1.5 million in 2003, the year in which the AIP and LTIP were approved by the stockholders. Unearned compensation on restricted stock is recorded in a separate component of stockholders’ equity and is amortized to compensation expense over the vesting period.

A summary of Nucor’s restricted stock is as follows (shares in thousands):

 

Year Ended December 31,

   2005    2004    2003
     Shares     Weighted
Average Price
   Shares     Weighted
Average Price
   Shares

Restricted stock awards and units:

            

Unvested at beginning of year

   38     $ 28.05    —         —     

Granted

   292       57.65    52     $ 28.05   

Vested

   (126 )     53.58    (14 )     28.05   

Canceled

   —         —      —         —     
                            

Unvested at end of year

   204     $ 54.65    38     $ 28.05   
                            

Shares reserved for future grants

   1,656        1,948        2,000
                      


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

46

 

8. STOCKHOLDER RIGHTS PLAN:

In 2001, the Board of Directors adopted a Stockholder Rights Plan (“Plan”) in which one right (“Right”) was declared as a dividend for each Nucor common share outstanding. Each Right entitles Nucor common stockholders to purchase, under certain conditions, one five-thousandth of a share of newly authorized Series A Junior Participating Preferred Stock (“Preferred Stock”), with one five-thousandth of a share of Preferred Stock intended to be the economic equivalent of one share of Nucor common stock. Until the occurrence of certain events, the Rights are represented by and traded in tandem with Nucor common stock. Rights will be exercisable only if a person or group acquires beneficial ownership of 15% or more of the Nucor common shares or commences a tender or exchange offer, upon the consummation of which such person or group would beneficially own 15% or more of the common shares. Upon such an event, the Rights enable dilution of the acquiring person’s or group’s interest by providing that other holders of Nucor common stock may purchase, at an exercise price of $75.00, Nucor common stock, or in the discretion of the Board of Directors, Preferred Stock, having double the value of such exercise price. Nucor will be entitled to redeem the Rights at $.0005 per Right under certain circumstances set forth in the Plan. The Rights themselves have no voting power and will expire on March 8, 2011, unless earlier exercised, redeemed or exchanged. Each one five-thousandth of a share of Preferred Stock has the same voting rights as one share of Nucor common stock, and each share of Preferred Stock has 5,000 times the voting power of one share of Nucor common stock.

9. FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS:

In accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities,” and SFAS 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” Nucor recognizes all derivative instruments, such as natural gas forward purchase contracts and interest rate swaps, in the consolidated balance sheets at fair value. Amounts included in accumulated other comprehensive income related to cash flow hedges are reclassified into earnings when the related derivative instruments settle. Changes in fair-value hedges are reported currently in earnings along with changes in the fair value of the hedged items. When cash flow and fair value hedges affect net earnings, they are included on the same line as the underlying transaction (cost of products sold or interest expense).

During 2005, accumulated other comprehensive income increased by $55.8 million, net of deferred taxes of $30.0 million, due to unrealized gains on cash flow hedges on natural gas forward purchase contracts. The remaining change in accumulated other comprehensive income was due to the reclassification of net gains of approximately $8.1 million, net of deferred taxes of approximately $4.3 million, into earnings due to the settlement of transactions. During 2004, accumulated other comprehensive loss increased by $1.2 million, net of taxes of $0.6 million, due to unrealized losses on cash flow hedges on natural gas forward purchase contracts issued during the year.

Of the total $71.7 million fair value of cash flow hedges on natural gas forward purchase contracts at December 31, 2005, $53.6 million is included in other current assets and $18.1 million is included in other assets. At December 31, 2004, $1.8 million was included in deferred credits and other liabilities. At December 31, 2005, $34.8 million of net deferred gains on cash flow hedges on natural gas forward purchase contracts included in accumulated other comprehensive income are expected to be reclassified into earnings, due to the settlement of forecasted transactions, during the next twelve months assuming no change in the forward commodity prices from December 31, 2005. Nucor is hedging a portion of its exposure to the variability of future cash flows for forecasted natural gas purchases over various time periods not exceeding two years.

Nucor has also entered into various natural gas purchase contracts, which meet the normal purchase normal sale exclusion under SFAS No. 133. These instruments effectively commit Nucor to purchase $17.6 million, $22.7 million and $21.5 million of natural gas for production in 2006, 2007 and 2008, respectively, and $562.3 million between 2009 and 2028. These natural gas purchase contracts will primarily supply our direct reduced iron facility in Trinidad.

During 2004, Nucor entered into, and subsequently terminated, an interest rate swap agreement of $175.0 million that was accounted for as a fair value hedge. Under the agreement, Nucor paid a variable rate of interest and received a fixed rate of interest over the term of the interest rate swap agreement. The interest rate swap agreement converted the $175.0 million note payable from a 6% fixed rate obligation to a variable rate obligation. The change in the fair value of this agreement was recorded in earnings as an equal offset to the change in fair value of the underlying debt obligation. Since the fair value hedge was 100% effective, there was no impact to net earnings. The variable interest rate was the six-month LIBOR rate in arrears plus 1.25%. Nucor terminated this interest rate swap agreement in 2004, resulting in a gain of $4.8 million.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

47

 

At December 31, 2005, there was an aggregate credit of $4.7 million related to this and previous interest rate swaps included in deferred credits and other liabilities in the balance sheet, all of which will be amortized over the remaining life of the debt as adjustments to interest expense.

Nucor does not anticipate non-performance by the counterparties in any of these derivative instruments given their high credit ratings, and no material loss is expected from non-performance by any one of such counterparties.

10. CONTINGENCIES:

Nucor is subject to environmental laws and regulations established by federal, state and local authorities, and, accordingly, makes provision for the estimated costs of compliance. Of the undiscounted total $24.0 million of accrued environmental costs at December 31, 2005 ($44.7 million at December 31, 2004), $20.0 million was classified in accrued expenses and other current liabilities ($22.2 million at December 31, 2004) and $4.0 million was classified in deferred credits and other liabilities ($22.5 million at December 31, 2004). Inherent uncertainties exist in these estimates primarily due to unknown conditions,’ evolving remediation technology, and changing governmental regulations and legal standards regarding liability. During 2005 Nucor revised estimates as additional information was obtained and projects were completed, reducing environmental reserves by $9.4 million ($10.0 million in 2004 and $8.3 million in 2003). The revisions are included in cost of products sold. In December 2000, the United States Environmental Protection Agency and the Department of Justice announced an agreement with Nucor and certain states that resolved alleged violations of environmental laws and regulations. Nucor continues to implement the various components of the consent decree, which involve air and water pollution control technology demonstrations along with other environmental management practices. The accrued environmental costs include the expenses that Nucor expects to incur as a result of the consent decree.

Other contingent liabilities with respect to product warranties, legal proceedings and other matters arise in the normal course of business. In the opinion of management, no such matters exist that would have a material effect on the consolidated financial statements.

11. EMPLOYEE BENEFIT PLANS:

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 $206.0 million in 2005 ($172.3 million in 2004 and $8.9 million in 2003). The related liability for these benefits is included in salaries, wages and related accruals at each year-end. Nucor also has a medical plan covering certain eligible early retirees. The unfunded obligation, included in deferred credits and other liabilities in the balance sheet, totaled $48.0 million at December 31, 2005 ($44.2 million at December 31, 2004). Expense associated with this plan totaled $2.9 million in 2005 ($3.0 million in 2004 and $2.3 million in 2003). The discount rate used was 5.50% in 2005 (5.75% in 2004 and 6% in 2003). The health care cost increase trend rate used was 9% in 2005 (10% in 2004 and 11% in 2003). The health care cost increase in the trend rate is projected to decline gradually to 5% by 2011.

12. INTEREST EXPENSE:

Interest expense is stated net of interest income of $32.4 million in 2005 ($7.0 million in 2004 and $2.5 million in 2003). Interest paid was $37.2 million in 2005 ($32.4 million in 2004 and $33.0 million in 2003).

13. OTHER INCOME:

In 2005, Nucor received $9.2 million in settlement of claims against third parties related to environmental matters. Nucor has made claims for reimbursement of additional amounts. No amounts have been recorded for such reimbursements, if any, that may be received. In 2004 and 2003, Nucor sold equipment resulting in a pre-tax gain of $1.6 million and $4.4 million, respectively. In 2003, Nucor also recognized $7.1 million related to graphite electrodes anti-trust settlements.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

48

 

14. INCOME TAXES:

The provision for income taxes consists of the following (in thousands):

 

Year Ended December 31,

   2005     2004     2003  

Current:

      

Federal

   $ 685,479     $ 574,107     $ (58,500 )

State

     49,984       28,991       (11,704 )
                        

Total current

     735,463       603,098       (70,204 )
                        

Deferred:

      

Federal

     (28,179 )     7,193       71,500  

State

     (1,200 )     (500 )     2,800  
                        

Total deferred

     (29,379 )     6,693       74,300  
                        

Total provision for income taxes

   $ 706,084     $ 609,791     $ 4,096  
                        

A reconciliation of the federal statutory tax rate (35%) to the total provision is as follows:

 

Year Ended December 31,

   2005     2004     2003  

Taxes computed at statutory rate

   35.00 %   35.00 %   35.00 %

State income taxes, net of federal income tax benefit

   1.57     1.07     (8.65 )

Resolution of prior year contingencies

   —       (0.65 )   (15.93 )

Federal research credit

   (0.07 )   (0.12 )   (4.07 )

Domestic manufacturing deduction

   (1.04 )   —       —    

Other, net

   (0.44 )   (0.08 )   (0.23 )
                  

Provision for income taxes

   35.02 %   35.22 %   6.12 %
                  

Deferred tax assets and liabilities resulted from the following (in thousands):

 

December 31,

   2005     2004  

Deferred tax assets:

    

Accrued liabilities and reserves

   $ 85,629     $ 108,777  

Allowance for doubtful accounts

     12,142       12,816  

Inventory

     137,587       105,737  

Post retirement benefits

     18,753       17,224  
                

Total deferred tax assets

     254,111       244,554  
                

Deferred tax liabilities:

    

Natural gas hedges

     (25,541 )     (600 )

Property, plant and equipment

     (370,170 )     (390,754 )
                

Total deferred tax liabilities

     (395,711 )     (391,354 )
                

Total net deferred tax liabilities

   $ (141,600 )   $ (146,800 )
                


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

49

 

Current deferred tax assets were $153.0 million at December 31, 2005 ($163.0 million at December 31, 2004). Non-current deferred tax liabilities were $294.6 million at December 31, 2005 ($309.8 million at December 31, 2004). Nucor paid $806.7 million and $550.1 million in net federal and state income taxes in 2005 and 2004, respectively, and received $54.9 million in refunds in 2003. The Internal Revenue Service is currently examining Nucor’s 2002 and 2003 federal income tax returns. Management believes that it has adequately provided for any adjustments that may arise from this audit.

15. EARNINGS PER SHARE:

The computations of basic and diluted earnings per share are as follows (in thousands, except per share data):

 

Year Ended December 31,

   2005    2004    2003

Basic earnings per share:

        

Basic net earnings

   $ 1,310,284    $ 1,121,485    $ 62,781
                    

Average shares outstanding

     157,128      158,383      156,531
                    

Basic net earnings per share

   $ 8.34    $ 7.08    $ 0.40
                    

Diluted earnings per share:

        

Diluted net earnings

   $ 1,310,284    $ 1,121,485    $ 62,781
                    

Diluted average shares outstanding:

        

Basic shares outstanding

     157,128      158,383      156,531

Dilutive effect of stock options and other

     1,437      1,371      302
                    
     158,565      159,754      156,833
                    

Diluted net earnings per share

   $ 8.26    $ 7.02    $ 0.40
                    


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

50

 

16. SEGMENTS:

Nucor reports its results in two segments: steel mills and steel products. The steel mills segment includes carbon and alloy steel in sheet, bar, structural and plate. The steel products segment includes steel joists and joist girders, steel deck, cold finished steel, steel fasteners, metal building systems and light gauge steel framing. The segments are consistent with the way Nucor manages its business, which is primarily based upon the similarity of the types of products produced and sold by each segment.

Management evaluates the operating performance of each of its segments based upon division contribution. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Nucor accounts for intercompany sales at prices approximating current market value. Interest expense, minority interests, other income, profit sharing expense and changes in the LIFO reserve and environmental accruals are shown under Corporate/eliminations/other. Corporate assets primarily include cash and short-term investments, deferred income tax assets and investments in affiliates.

Nucor’s segment results are as follows (in thousands):

 

Year Ended December 31,

   2005     2004     2003  

Net sales to external customers:

      

Steel mills

   $ 11,063,681     $ 10,109,430     $ 5,446,127  

Steel products

     1,637,318       1,267,398       819,696  
                        
   $ 12,700,999     $ 11,376,828     $ 6,265,823  
                        

Intercompany sales:

      

Steel mills

   $ 896,432     $ 852,897     $ 520,207  

Steel products

     36,246       9,857       5,275  

Corporate/eliminations/other

     (932,678 )     (862,754 )     (525,482 )
                        
   $ —       $ —       $ —    
                        

Depreciation expense:

      

Steel mills

   $ 355,887     $ 366,023     $ 346,136  

Steel products

     19,167       17,282       17,976  
                        
   $ 375,054     $ 383,305     $ 364,112  
                        

Earnings (loss) before income taxes:

      

Steel mills

   $ 2,207,621     $ 2,191,335     $ 209,400  

Steel products

     180,756       149,610       (14,328 )

Corporate/eliminations/other

     (372,009 )     (609,669 )     (128,195 )
                        
   $ 2,016,368     $ 1,731,276     $ 66,877  
                        

Segment assets:

      

Steel mills

   $ 4,623,462     $ 4,978,616     $ 3,927,392  

Steel products

     519,562       488,571       324,235  

Corporate/eliminations/other

     1,995,763       666,020       240,726  
                        
   $ 7,138,787     $ 6,133,207     $ 4,492,353  
                        

Capital expenditures:

      

Steel mills

   $ 216,047     $ 242,486     $ 201,134  

Steel products

     18,378       7,253       14,274  

Corporate/other

     97,041       36,186       —    
                        
   $ 331,466     $ 285,925     $ 215,408  
                        


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

51

 

Net sales by product were as follows (in thousands). Further product group breakdown is impracticable.

 

Year Ended December 31,

   2005    2004    2003

Net sales to external customers:

        

Sheet

   $ 4,805,391    $ 4,856,469    $ 2,371,611

Bar

     3,061,326      2,632,966      1,746,805

Structural

     1,702,720      1,500,878      1,005,859

Plate

     1,494,244      1,119,117      321,852

Steel products

     1,637,318      1,267,398      819,696
                    
   $ 12,700,999    $ 11,376,828    $ 6,265,823
                    

17. INVESTMENTS AND ACQUISITIONS:

In January 2005, Nucor entered into an agreement with Ambassador Steel Corporation to form Nufab Rebar LLC (“Nufab”), a rebar fabrication joint venture. Nucor owns 49% of the joint venture. At December 31, 2005, Nucor held a note receivable from Nufab in the amount of $6.9 million. This note receivable bears interest, payable quarterly, at a rate of LIBOR plus 120 basis points. The note was classified in other assets.

In February 2005, Nucor purchased the assets of Fort Howard Steel, Inc.’s operations in Oak Creek, Wisconsin, for a cash purchase price of approximately $44.1 million. This facility produces cold finish bar products.

In June 2005, Nucor’s wholly owned subsidiary, Nucor Steel Marion, Inc., purchased substantially all of the assets of Marion Steel Company for a cash purchase price of approximately $110.7 million. This facility produces angles, flats, rebar, rounds and signposts.

These acquisitions in 2005 were not material to the consolidated financial statements and did not result in material goodwill or other intangible assets.

In February 2004, Nucor purchased a one-half interest in Harris Steel, Inc., a wholly owned subsidiary of Harris Steel Group, Inc., for a cash purchase price of approximately $21.0 million. At December 31, 2005, Nucor held a note receivable from Harris Steel, Inc. in the amount of $10.0 million. This note receivable bears interest, payable upon maturity, at a rate of LIBOR plus 100 basis points. The note was classified in other current assets. In 2005, Harris Steel Group received an additional $1.2 million based upon the achievement of certain operating results. Harris Steel Group may receive up to an additional $4.8 million upon the achievement of certain operating results of the venture through 2008.

In July 2004, Nucor’s wholly owned subsidiary, Nucor Steel Tuscaloosa, Inc., purchased substantially all of the steelmaking assets of Corus Tuscaloosa for a price of approximately $89.4 million. The facility is a coiled plate mill that manufactures pressure vessel steel coil, discrete plate and cut-to-length plate products.

In August 2004, Nucor’s wholly owned subsidiary, Nucor Steel Decatur, LLC, purchased certain assets of Worthington Industries, Inc. cold rolling mill in Decatur, Alabama, for a cash purchase price of approximately $80.3 million. The assets include all of the buildings, the pickle line, four-stand tandem cold mill, temper mill and annealing furnaces adjacent to the current Nucor Steel Decatur, LLC steel plant.

In March 2003, Nucor’s wholly owned subsidiary, Nucor Steel Kingman, LLC, purchased substantially all of the assets of the Kingman, Arizona, steel facility of North Star Steel (“North Star”) for approximately $35.0 million. The purchase price did not include working capital and Nucor assumed no material liabilities of the North Star operation. Nucor Steel Kingman is currently not operating. After evaluating options for this facility, Nucor decided not to restart the melt shop. Accordingly, in 2004 Nucor recognized an impairment charge of $13.2 million based on appraised values. This charge has been reflected in cost of products sold.

Non-cash investing and financing activities included the assumption of $17.8 million of liabilities acquired with the purchase of Fort Howard Steel, Inc. and Marion Steel Company in 2005 and included the assumption of $27.2 million of liabilities acquired with the purchase of Corus Tuscaloosa in 2004.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

52

 

18. QUARTERLY INFORMATION (UNAUDITED):

 

         

(in thousands except per share data)

     First Quarter    Second Quarter    Third Quarter    Fourth Quarter
2005            

Net sales

   $ 3,322,621    $ 3,145,003    $ 3,025,911    $ 3,207,464

Gross margin(1)

     701,993      624,911      590,635      698,064

Net earnings(2)

     354,666      322,707      291,877      341,034

Net earnings per share:

           

Basic

     2.22      2.04      1.87      2.20

Diluted

     2.20      2.03      1.86      2.18
2004            

Net sales

   $ 2,286,416    $ 2,761,822    $ 3,239,592    $ 3,088,998

Gross margin(3)

     270,047      527,906      806,074      643,929

Net earnings(4)

     113,238      251,442      415,387      341,418

Net earnings per share:

           

Basic

     0.72      1.59      2.62      2.14

Diluted

     0.72      1.58      2.59      2.12

(1) LIFO credits totaled $26.1 million, $69.9 million, $52.0 million and $3.6 million in the first, second, third and fourth quarters of 2005, respectively.
(2) The first quarter of 2005 includes $9.2 million for the settlement of claims against third parties related to environmental matters.
(3) LIFO charges totaled $32.2 million, $67.1 million, $124.1 million and $152.5 million in the first, second, third and fourth quarters of 2004, respectively.
(4) The first quarter of 2004 includes a gain of $1.6 million on the sale of equipment.


CORPORATE AND STOCK DATA

56

 

EXECUTIVE OFFICES

2100 Rexford Road

Charlotte, North Carolina 28211

Phone 704/366-7000

Fax 704/362-4208

STOCK TRANSFERS

DIVIDEND DISBURSING

DIVIDEND REINVESTMENT

American Stock Transfer & Trust Company

59 Maiden Lane

New York, New York 10038

Phone 800/937-5449

Fax 718/236-2641

ANNUAL MEETING

Place

The Park Hotel

2200 Rexford Road

Morrison A & B

Charlotte, North Carolina

Time/Date

10:00 a.m., Thursday

May 11, 2006

STOCK LISTING

New York Stock Exchange

Trading Symbol – NUE

STOCK PRICE AND DIVIDENDS PAID

 

     First
Quarter
   Second
Quarter
   Third
Quarter
   Fourth
Quarter

2005

           

Stock price:

           

High

   $ 65.53    $ 59.35    $ 61.40    $ 70.21

Low

     47.05      45.55      46.29      51.83

Dividends paid

     0.13      0.40      0.40      0.40

2004

           

Stock price:

           

High

   $ 33.29    $ 38.97    $ 46.57    $ 55.47

Low

     26.08      28.18      36.27      37.52

Dividends paid

     0.10      0.105      0.105      0.13

FORM 10-K

A copy of Nucor’s 2005 annual report filed with the Securities and Exchange Commission (“SEC”) on Form 10-K is available to stockholders on request.

The certifications of Nucor’s Chief Executive Officer and Chief Financial Officer regarding the quality of Nucor’s public disclosure that are required by Section 302 of The Sarbane’s-Oxley Act of 2002 are included as exhibits to Nucor’s annual report on Form 10-K. In addition, in 2005, Nucor’s Chief Executive Officer provided to the New York Stock Exchange (“NYSE”) the Annual CEO Certification regarding Nucor’s compliance with the NYSE’s corporate governance standards.

INTERNET ACCESS

Nucor’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports are available without charge through Nucor’s website, www.nucor.com, as soon as reasonably practicable after Nucor files these reports electronically with or furnishes them to the SEC. Additional information available on our website includes our Corporate Governance Principles, Board of Directors Committee Charters, Standards of Business Conduct and Ethics, and Code of Ethics for Senior Financial Professionals as well as various other financial and statistical data. Written copies are available to stockholders on request.

THIS ANNUAL REPORT HAS BEEN PRINTED ON RECYCLED PAPER. LOGO

Subsidiaries

Exhibit 21

Nucor Corporation

2005 Form 10-K

SUBSIDIARIES

Nucor-Yamato Steel Company, a Delaware limited partnership.

All other subsidiaries are not significant.

Consent of Independent Registered Public Accounting Firm

Exhibit 23

Nucor Corporation

2005 Form 10-K

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Numbers 2-84117 (including 2-50058), 2-51735, 33-27120 (including 2-55941 and 2-69914), 33-56649, 333-85375, 333-108749 and 333-108751) and Form S-4 (Number 333-101852) of Nucor Corporation of our report dated March 7, 2006 relating to the financial statements, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in the Annual Report to Stockholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated March 7, 2006 relating to the financial statement schedule, which appears in this Form 10-K.

 

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Charlotte, North Carolina
March 7, 2006
Power of Attorney

Exhibit 24

Nucor Corporation

2005 Form 10-K

LIMITED POWER OF ATTORNEY

NUCOR CORPORATION FORM 10-K ANNUAL REPORTS

KNOW ALL MEN BY THESE PRESENTS:

That I, Peter C. Browning, the grantor, do by these presents hereby make, constitute and appoint Daniel R. DiMicco and Terry S. Lisenby, or either of them, true and lawful attorneys-in-fact for me and in my name, place and stead, to sign my name in the capacity stated and where required to the Form 10-K Annual Report of Nucor Corporation for calendar year 2005 filed with the Securities and Exchange Commission, and any and all amendments thereto.

Granting and giving unto my attorneys-in-fact authority and power to do and perform any and all other acts necessary or incident to the performance and execution of the powers herein expressly granted, with power to do and perform all acts authorized hereby, as fully as to all intents and purposes as I, the grantor, might or could do if personally present, with full power of substitution.

IN WITNESS WHEREOF, I have hereunto set my hand as of the 22nd day of February, 2006.

 

/s/ Peter C. Browning

Peter C. Browning

 

STATE OF North Carolina   )   
  ) ss:   
COUNTY OF Union   )   

I, Kelly J. Wilmoth, a Notary Public in and for the State and County aforesaid, do hereby certify that Peter C. Browning, the grantor of the foregoing Limited Power of Attorney, bearing date on the 22nd day of February, 2006, personally appeared before me in this jurisdiction, being personally well known to me as the person who executed the said instrument, and acknowledged the same to be the act and deed of the grantor.

Given under my hand and seal this 22nd day of February, 2006.

 

 

/s/ Kelly J. Wilmoth

Notary Public
My commission expires on August 23, 2008


LIMITED POWER OF ATTORNEY

NUCOR CORPORATION FORM 10-K ANNUAL REPORTS

KNOW ALL MEN BY THESE PRESENTS:

That I, Clayton C. Daley, Jr., the grantor, do by these presents hereby make, constitute and appoint Daniel R. DiMicco and Terry S. Lisenby, or either of them, true and lawful attorneys-in-fact for me and in my name, place and stead, to sign my name in the capacity stated and where required to the Form 10-K Annual Report of Nucor Corporation for calendar year 2005 filed with the Securities and Exchange Commission, and any and all amendments thereto.

Granting and giving unto my attorneys-in-fact authority and power to do and perform any and all other acts necessary or incident to the performance and execution of the powers herein expressly granted, with power to do and perform all acts authorized hereby, as fully as to all intents and purposes as I, the grantor, might or could do if personally present, with full power of substitution.

IN WITNESS WHEREOF, I have hereunto set my hand as of the 22nd day of February, 2006.

 

/s/ Clayton C. Daley, Jr.

Clayton C. Daley, Jr.

 

STATE OF North Carolina   )   
  ) ss:   
COUNTY OF Union   )   

I, Kelly J. Wilmoth, a Notary Public in and for the State and County aforesaid, do hereby certify that Clayton C. Daley, Jr., the grantor of the foregoing Limited Power of Attorney, bearing date on the 22nd day of February, 2006, personally appeared before me in this jurisdiction, being personally well known to me as the person who executed the said instrument, and acknowledged the same to be the act and deed of the grantor.

Given under my hand and seal this 22nd day of February, 2006.

 

 

/s/ Kelly J. Wilmoth

Notary Public
My commission expires on August 23, 2008


LIMITED POWER OF ATTORNEY

NUCOR CORPORATION FORM 10-K ANNUAL REPORTS

KNOW ALL MEN BY THESE PRESENTS:

That I, Harvey B. Gantt, the grantor, do by these presents hereby make, constitute and appoint Daniel R. DiMicco and Terry S. Lisenby, or either of them, true and lawful attorneys-in-fact for me and in my name, place and stead, to sign my name in the capacity stated and where required to the Form 10-K Annual Report of Nucor Corporation for calendar year 2005 filed with the Securities and Exchange Commission, and any and all amendments thereto.

Granting and giving unto my attorneys-in-fact authority and power to do and perform any and all other acts necessary or incident to the performance and execution of the powers herein expressly granted, with power to do and perform all acts authorized hereby, as fully as to all intents and purposes as I, the grantor, might or could do if personally present, with full power of substitution.

IN WITNESS WHEREOF, I have hereunto set my hand as of the 22nd day of February, 2006.

 

/s/ Harvey B. Gantt

Harvey B. Gantt

 

STATE OF North Carolina   )   
  ) ss:   
COUNTY OF Union   )   

I, Kelly J. Wilmoth, a Notary Public in and for the State and County aforesaid, do hereby certify that Harvey B. Gantt, the grantor of the foregoing Limited Power of Attorney, bearing date on the 22nd day of February, 2006, personally appeared before me in this jurisdiction, being personally well known to me as the person who executed the said instrument, and acknowledged the same to be the act and deed of the grantor.

Given under my hand and seal this 22nd day of February, 2006.

 

 

/s/ Kelly J. Wilmoth

Notary Public
My commission expires on August 23, 2008


LIMITED POWER OF ATTORNEY

NUCOR CORPORATION FORM 10-K ANNUAL REPORTS

KNOW ALL MEN BY THESE PRESENTS:

That I, Victoria F. Haynes, the grantor, do by these presents hereby make, constitute and appoint Daniel R. DiMicco and Terry S. Lisenby, or either of them, true and lawful attorneys-in-fact for me and in my name, place and stead, to sign my name in the capacity stated and where required to the Form 10-K Annual Report of Nucor Corporation for calendar year 2005 filed with the Securities and Exchange Commission, and any and all amendments thereto.

Granting and giving unto my attorneys-in-fact authority and power to do and perform any and all other acts necessary or incident to the performance and execution of the powers herein expressly granted, with power to do and perform all acts authorized hereby, as fully as to all intents and purposes as I, the grantor, might or could do if personally present, with full power of substitution.

IN WITNESS WHEREOF, I have hereunto set my hand as of the 22nd day of February, 2006.

 

/s/ Victoria F. Haynes

Victoria F. Haynes

 

STATE OF North Carolina   )   
  ) ss:   
COUNTY OF Union   )   

I, Kelly J. Wilmoth, a Notary Public in and for the State and County aforesaid, do hereby certify that Victoria F. Haynes, the grantor of the foregoing Limited Power of Attorney, bearing date on the 22nd day of February, 2006, personally appeared before me in this jurisdiction, being personally well known to me as the person who executed the said instrument, and acknowledged the same to be the act and deed of the grantor.

Given under my hand and seal this 22nd day of February, 2006.

 

 

/s/ Kelly J. Wilmoth

Notary Public
My commission expires on August 23, 2008


LIMITED POWER OF ATTORNEY

NUCOR CORPORATION FORM 10-K ANNUAL REPORTS

KNOW ALL MEN BY THESE PRESENTS:

That I, James D. Hlavacek, the grantor, do by these presents hereby make, constitute and appoint Daniel R. DiMicco and Terry S. Lisenby, or either of them, true and lawful attorneys-in-fact for me and in my name, place and stead, to sign my name in the capacity stated and where required to the Form 10-K Annual Report of Nucor Corporation for calendar year 2005 filed with the Securities and Exchange Commission, and any and all amendments thereto.

Granting and giving unto my attorneys-in-fact authority and power to do and perform any and all other acts necessary or incident to the performance and execution of the powers herein expressly granted, with power to do and perform all acts authorized hereby, as fully as to all intents and purposes as I, the grantor, might or could do if personally present, with full power of substitution.

IN WITNESS WHEREOF, I have hereunto set my hand as of the 22nd day of February, 2006.

 

/s/ James D. Hlavacek

James D. Hlavacek

 

STATE OF North Carolina   )   
  ) ss:   
COUNTY OF Union   )   

I, Kelly J. Wilmoth, a Notary Public in and for the State and County aforesaid, do hereby certify that James D. Hlavacek, the grantor of the foregoing Limited Power of Attorney, bearing date on the 22nd day of February, 2006, personally appeared before me in this jurisdiction, being personally well known to me as the person who executed the said instrument, and acknowledged the same to be the act and deed of the grantor.

Given under my hand and seal this 22nd day of February, 2006.

 

 

/s/ Kelly J. Wilmoth

Notary Public
My commission expires on August 23, 2008


LIMITED POWER OF ATTORNEY

NUCOR CORPORATION FORM 10-K ANNUAL REPORTS

KNOW ALL MEN BY THESE PRESENTS:

That I, Raymond J. Milchovich, the grantor, do by these presents hereby make, constitute and appoint Daniel R. DiMicco and Terry S. Lisenby, or either of them, true and lawful attorneys-in-fact for me and in my name, place and stead, to sign my name in the capacity stated and where required to the Form 10-K Annual Report of Nucor Corporation for calendar year 2005 filed with the Securities and Exchange Commission, and any and all amendments thereto.

Granting and giving unto my attorneys-in-fact authority and power to do and perform any and all other acts necessary or incident to the performance and execution of the powers herein expressly granted, with power to do and perform all acts authorized hereby, as fully as to all intents and purposes as I, the grantor, might or could do if personally present, with full power of substitution.

IN WITNESS WHEREOF, I have hereunto set my hand as of the 22nd day of February, 2006.

 

/s/ Raymond J. Milchovich

Raymond J. Milchovich

 

STATE OF North Carolina   )   
  ) ss:   
COUNTY OF Union   )   

I, Kelly J. Wilmoth, a Notary Public in and for the State and County aforesaid, do hereby certify that Raymond J. Milchovich, the grantor of the foregoing Limited Power of Attorney, bearing date on the 22nd day of February, 2006, personally appeared before me in this jurisdiction, being personally well known to me as the person who executed the said instrument, and acknowledged the same to be the act and deed of the grantor.

Given under my hand and seal this 22nd day of February, 2006.

 

 

/s/ Kelly J. Wilmoth

Notary Public
My commission expires on August 23, 2008
Certification of Principal Executive Officer

Exhibit 31

Nucor Corporation

2005 Form 10-K

NUCOR CORPORATION

Section 302 Certifications

I, Daniel R. DiMicco, certify that:

 

  1. I have reviewed this annual report on Form 10-K of Nucor Corporation;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

March 7, 2006  

/s/ Daniel R. DiMicco

  Daniel R. DiMicco
 

Vice Chairman, President and

Chief Executive Officer

Certification of Principal Financial Officer

Exhibit 31(i)

Nucor Corporation

2005 Form 10-K

NUCOR CORPORATION

Section 302 Certifications

I, Terry S. Lisenby, certify that:

 

  1. I have reviewed this annual report on Form 10-K of Nucor Corporation;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

March 7, 2006  

/s/ Terry S. Lisenby

  Terry S. Lisenby
 

Chief Financial Officer, Treasurer

and Executive Vice President

Certification of Principal Executive Officer

Exhibit 32

Nucor Corporation

2005 Form 10-K

Certification of Principal Executive Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(18 U.S.C. 1350)

In connection with the Annual Report of Nucor Corporation (the “Registrant”), on Form 10-K for the year ended December 31, 2005, as filed with the Securities and Exchange Commission (the “Report”), I, Daniel R. DiMicco, Vice Chairman, President and Chief Executive Officer (principal executive officer) of the Registrant, certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

/s/ Daniel R. DiMicco

Name:   Daniel R. DiMicco
Date:   March 7, 2006

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exhange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Form 10-K and shall not be considered filed as part of the Form 10-K.

Certification of Principal Financial Officer

Exhibit 32(i)

Nucor Corporation

2005 Form 10-K

Certification of Principal Financial Officer

Pursuant to 18 U.S.C. 1350

(Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with the Annual Report of Nucor Corporation (the “Registrant”), on Form 10-K for the year ended December 31, 2005, as filed with the Securities and Exchange Commission (the “Report”), I, Terry S. Lisenby, Chief Financial Officer, Treasurer and Executive Vice President (principal financial officer) of the Registrant, certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

/s/ Terry S. Lisenby

Name:   Terry S. Lisenby
Date:   March 7, 2006

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exhange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Form 10-K and shall not be considered filed as part of the Form 10-K.