Table of Contents

 

 

2007

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

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

THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2007   Commission file number 1-4119

OR

¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to                         

 

 

NUCOR CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware    13-1860817
(State or other jurisdiction of
incorporation or organization)
   (I.R.S. Employer Identification No.)
1915 Rexford Road, Charlotte, North Carolina    28211
(Address of principal executive offices)    (Zip Code)
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 the definitive proxy or statement 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, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x            Accelerated filer  ¨            Non-accelerated filer  ¨             Smaller reporting company  ¨

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 $17.50 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, June 30, 2007.

288,047,067 shares of common stock were outstanding at February 21, 2008.

Documents incorporated by reference include: Portions of 2007 Annual Report (Parts I, II and IV), and Notice of 2008 Annual Meeting of Stockholders and Proxy Statement (Part III) to be filed within 120 days after Nucor’s fiscal year end.

 

 

 


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    7
Item 2    Properties    8
Item 3    Legal Proceedings    8
Item 4    Submission of Matters to a Vote of Security Holders    8
Executive Officers of the Registrant    9
PART II     
Item 5    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
   10
Item 6    Selected Financial Data    10
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    11
Item 9    Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
   11
Item 9A    Controls and Procedures    11
Item 9B    Other Information    11
PART III     
Item 10    Directors, Executive Officers and Corporate Governance    12
Item 11    Executive Compensation    12
Item 12    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
   12
Item 13    Certain Relationships and Related Transactions, and Director Independence    12
Item 14    Principal Accountant Fees and Services    12
PART IV     
Item 15    Exhibits and Financial Statement Schedules    13
Signatures    16
Index to Financial Statement Schedule    17
List of Exhibits to Form 10-K    20

 

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Table of Contents

PART I

 

Item 1. Business

Overview

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 the majority of the sales and earnings in 2007, 2006 and 2005. The earnings in 2005 include other income of $9.2 million in settlement of claims against third parties related to environmental matters.

Nucor is North America’s largest recycler, using scrap steel as the primary material in producing our products. In 2007, we recycled approximately 21 million tons of scrap steel.

Segments

Nucor reports its results in the following segments: steel mills and steel products. Net sales to external customers, intercompany sales, depreciation expense, earnings before income taxes, assets and capital expenditures by segment for each of the three years in the period ended December 31, 2007 as well as geographic information for the two years ended December 31, 2007, are set forth in Note 21 of Notes to Consolidated Financial Statements of the 2007 Annual Report, which note is hereby incorporated by reference.

Principal Products Produced

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, fabricated concrete reinforcing steel, cold finished steel, steel fasteners, metal building systems, light gauge steel framing, steel grating and expanded metal, and wire and wire mesh. 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, fabricated concrete reinforcing steel, grating and expanded metal, cold drawn wire and steel fasteners are manufactured by further processing of hot-rolled steel. Steel deck, light gauge steel framing and wire mesh are manufactured from cold-rolled and cold drawn steel.

Markets and Marketing

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 2007, 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 2007, approximately 50% 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 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. The majority of sales contracts are firm fixed-price contracts and are normally competitively bid against other suppliers. Longer term contracts may permit price adjustments to reflect changes in prevailing raw materials costs. Reinforcing products are sold on a construction contract bid basis. Product applications include highways, bridges, reservoirs, utilities, hospitals, schools, airports, stadiums and high-rise buildings. Cold finished steel, steel fasteners, steel grating, wire and wire mesh 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 and Canada.

 

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Item 1. Business, continued

 

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 steel imports have devastated the U.S. steel industry and its workers. We have continued the aggressive trade case work in which we have engaged over the years with our participation in the current statutory five-year sunset reviews of existing duties. In late 2006, the United States International Trade Commission chose to remove the duties that were in place on many of the countries involved in dumping these products into the United States. As a result, more foreign steel may continue to enter our borders with negative effects on our business. We will continue to fight illegally dumped foreign steel in support of free and fair trade through the legal process. In 2007, Nucor aggressively supported the adoption of a Chinese Currency bill that would identify the mercantilist practices of currency manipulation that result in distorted trade, an insurmountable trade deficit and the loss of manufacturing jobs in the United States. Several bills were generated in the House and Senate, but none were put into law. Our effort was broad, reaching across multiple industries, and ultimately drew attention to the domestic manufacturing job loss issue. In 2008, we hope that newly proposed legislation will unite Congress in an effort to maintain and enforce laws ensuring free and fair trade. Nucor actively supports several organizations that promote free and fair trade and that oppose currency manipulation.

Backlog

In the steel mills segment, Nucor's backlog of orders was approximately $2.74 billion and $2.52 billion at December 31, 2007 and 2006, respectively. Nucor's backlog of orders in the steel products segment was approximately $1.51 billion and $572.4 million at December 31, 2007 and 2006, respectively. This increase in backlog of orders is due to the numerous acquisitions in the steel products segment in 2007. The majority of these orders will be filled within one year.

Raw Materials

The primary raw material for the steel mills segment is ferrous scrap, which is acquired from numerous sources throughout the country. With the escalation of scrap steel prices in 2003 and 2004, years in which prices increased 25% and 74%, respectively, Nucor successfully implemented a raw material sales price surcharge in 2004. This surcharge has helped offset the impact of significantly more volatile scrap prices and allowed us to purchase the scrap needed to fill our customers’ orders. The average scrap and scrap substitute cost per ton remained at historically high levels in 2006 and 2007, increasing slightly from $244 per ton in 2005 to $246 per ton in 2006 and increasing 13% to $278 in 2007. 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 them to compete 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 delaying or halting the construction of new coal-fired and nuclear power plants. At the same time, our government has prevented 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 and to a calendar 2008 average price currently exceeding $8.00 per mmbtu. 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.

 

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Item 1. Business, continued

 

Strategy

Nucor has historically focused on greenfield growth and on optimizing existing operations in order to keep them state-of-the-art and globally competitive. Capital expenditures are currently projected to be approximately $800 million in 2008, an increase of more than 50% from 2007. While more than $300 million of the 2008 capital spending is allocated to our greenfield projects, the remainder is an estimate of what we will spend to maintain the productivity and efficiency of our existing facilities. In recent years, our focus has expanded to include growing profitably through acquisitions and through joint ventures that leverage new technologies.

Recent Acquisitions, Joint Ventures and Greenfield Projects

Nucor’s acquisitions over the past few years have strengthened our position as North America’s most diversified producer of steel and steel products. This diversity has been a significant factor in Nucor’s profitability.

The annual capacity of Nucor’s downstream value-added products has more than doubled since late 2006 to just under four million tons. We have done this with our very successful acquisitions of Verco Manufacturing Company in steel decking; Harris Steel Group Inc. in rebar fabrication, cold finished bars and metal grating; LMP Steel & Wire Company in cold finished bars; Magnatrax Corporation in metal buildings; and Nelson Steel, Inc. in wire mesh. We are looking forward to growing the already strong returns generated by these businesses.

We continue to increase our presence in the steel mills segment through greenfield projects such as our special bar quality (“SBQ”) mill in Memphis, Tennessee, which will have an estimated annual capacity of 850,000 tons. Complementing our mills in South Carolina and Nebraska, the Memphis mill positions Nucor to provide the most diverse, highest quality and lowest cost SBQ offering in North America. We are encouraged by the strong level of marketplace interest in what Memphis will be able to provide our customers. Production start-up is on schedule for the second quarter of this year.

Another greenfield project is the Castrip® facility under construction in Blytheville, Arkansas. 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. In 2007, the Castrip facility in Indiana continued setting monthly production and shipping records. In 2005, we selected Blytheville, Arkansas, as the location for our second Castrip production facility. The Arkansas Castrip facility is expected to begin operating in the second half of 2008. We continue to explore potential new joint ventures utilizing the Castrip technology.

Raw Materials Projects

Recently, we expanded our vertical integration strategy to include upstream control of raw materials. Nucor’s raw materials strategy includes the goal of controlling approximately 6,000,000 to 7,000,000 tons per year of high quality scrap substitutes for consumption by the steel mills.

Implementation of Nucor’s raw materials strategy is off to an excellent start with 2007’s very successful start-up of Nu-Iron Unlimited, our direct reduced iron (“DRI”) plant in Trinidad. In its start-up year, Nu-Iron established itself as one of the world’s most productive DRI facilities, producing over 1.4 million metric tons of DRI. We expect to produce 1.8 million metric tons in 2008, and the Nu-Iron team is working on plans to expand this capacity. 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.

 

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Item 1. Business, continued

 

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 metric tons.

In February 2008, Nucor announced the acquisition of SHV North America Corporation, which owns 100% of The David J. Joseph Company (“DJJ”) and certain affiliates, for a cash purchase price of approximately $1.44 billion. Since scrap is our largest single cost, this strategic investment provides an ideal growth platform for Nucor to expand its direct ownership in the steel scrap supply chain and further its raw materials strategy. DJJ operates over 30 scrap processing facilities with an annual capacity to process 3.5 million tons of ferrous scrap. Additionally, DJJ brokers over 20 million tons of ferrous scrap, internationally sources scrap, pig iron, and scrap substitutes, and brokers ferro-alloys and over one half billion pounds of non-ferrous metals. The DJJ Mill and Industrial Services business provides logistics and metallurgical blending operations and offers on-site handling and trading of industrial scrap. The DJJ Rail Services business oversees the largest private fleet of rail cars dedicated to scrap movement and offers complete railcar fleet management and leases for third parties. All of these businesses have strategic value to Nucor as the most diversified North American steel producer. We expect this acquisition to be completed in the first quarter of 2008.

Employees

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 80 employees are located in our executive offices. The majority of Nucor's 18,000 employees are engaged in its steel mills and steel products businesses and are not represented by labor unions.

Additional Information Incorporated by Reference

Additional information on Nucor's business is incorporated by reference to Nucor's 2007 Annual Report, pages 10 through 21.

Available Information

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 on our website at 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.

 

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.

 

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Item 1A. Risk Factors, continued

 

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 commercial 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, 2007, our net earnings have varied from a high of $1.76 billion in 2006 to a low of $64.8 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.

Overcapacity in the global 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 and steel products 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 result in a further increase in imports of low-priced, unfairly traded steel and steel products to the United States. In recent years, capacity growth in China has significantly exceeded the growth in Chinese market demand. A continuation of this unbalanced growth trend or a significant decrease in China’s rate of economic expansion could result 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 and growing scrap exports to satisfy the scrap demand of global competitors. 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 prices 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. Also, 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 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 and political and economic factors beyond our control. Disruptions in the supply of

 

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Item 1A. Risk Factors, continued

 

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.

Our steel making processes, and the manufacturing processes of many of our customers and suppliers, are energy intensive and generate carbon dioxide and other “Greenhouse Gasses” (GHG’s).

In 2007, several bills were introduced in the United States Senate that would regulate GHG and carbon dioxide emissions. This legislation, when adopted, will increase our energy and other operating costs. This legislation regulates domestic production but excludes imports from the same standards for a period of eight years, which will make domestic manufacturing uncompetitive with imported products during this time. These increased costs could also encourage more of our customers to relocate their manufacturing facilities to foreign countries that do not regulate GHG emissions and where Nucor is not positioned to sell or distribute our products. This legislation is also likely to increase energy costs for all U.S. consumers resulting in a weaker domestic economy.

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

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. Realizing the anticipated benefits of acquisitions or other transactions will depend on our ability to integrate these businesses 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.

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.

Congress has recently raised the Corporate Average Fuel Economy (“CAFE”) mileage requirements for new cars and light trucks produced beginning in 2011. Automobile producers may reduce the steel content of cars and trucks to achieve the new CAFE fuel economy standards, reducing demand for steel and resulting in an over-supply in North America.

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, 2007, our total capital expenditures, excluding acquisitions, were approximately $1.69 billion. Our business also requires substantial

 

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Item 1A. Risk Factors, continued

 

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 $1 billion unsecured revolving credit facility, we cannot assure you that this will be the case. Additional acquisitions could require 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 in our financial statements for the estimated costs of compliance. These laws are becoming increasingly stringent, resulting in inherent uncertainties in these estimates. To the extent that competitors, particularly foreign steel producers and manufacturers of competitive steel products, are not required to incur equivalent costs, our competitive position could be materially adversely impacted.

Changes in foreign currency may adversely affect our financial results.

Some of our steel products and other subsidiaries conduct their business in local currency and, for purposes of financial reporting, their results are translated into U.S. dollars based on average exchange rates prevailing during a reporting period. During times of a strengthening U.S. dollar, our reported net revenues and operating income will be reduced because the local currency will translate to fewer U.S. dollars.

The accounting treatment of goodwill and other intangible assets could result in future asset impairments, which would reduce our earnings.

We periodically calculate the fair value of our goodwill and intangible assets to test for impairment. This calculation may be affected by the market conditions noted above, as well as interest rates and general economic conditions. If impairment is determined to exist, we will incur impairment losses, which will reduce our earnings.

 

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

   2,210,000    Steel shapes

Berkeley County, South Carolina

   2,020,000    Flat-rolled steel, steel shapes

Crawfordsville, Indiana

   1,850,000    Flat-rolled steel

Decatur, Alabama

   1,500,000    Flat-rolled steel

Hickman, Arkansas

   1,440,000    Flat-rolled steel

Norfolk, Nebraska

   1,400,000    Steel shapes

Plymouth, Utah

   1,190,000    Steel shapes

Darlington, South Carolina

   1,170,000    Steel shapes

Jewett, Texas

   1,090,000    Steel shapes

Hertford County, North Carolina

   1,020,000    Steel plate

Seattle, Washington

   660,000    Steel shapes

Marion, Ohio

   650,000    Steel shapes

Auburn, New York

   450,000    Steel shapes

Kankakee, Illinois

   400,000    Steel shapes

Tuscaloosa, Alabama

   350,000    Steel plate

Jackson, Mississippi

   340,000    Steel shapes

Birmingham, Alabama

   280,000    Steel shapes

Wallingford, Connecticut

   240,000    Steel shapes
Steel products:      

Norfolk, Nebraska

   1,040,000    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

   470,000    Joists, deck
Other products:      

Point Lisas, Trinidad

   2,030,000    Direct reduced iron

Our steel mills segment also includes a distribution center in Pompano Beach, Florida.

In the steel products segment, we have 22 additional operating facilities in 16 states. Harris Steel has 29 operating facilities in 18 states and 33 operating facilities in Canada and other foreign locations.

During 2007, the average utilization rates of all operating facilities in the steel mills and steel products segments were approximately 87% and 77% of production capacity, respectively.

We also own 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, 2007.

 

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Executive Officers of the Registrant

Daniel R. DiMicco (57)—Mr. DiMicco has been a director of Nucor since 2000 and was elected Chairman in May 2006. Mr. DiMicco has served as Nucor’s President and Chief Executive Officer since September 2000 and served as Vice Chairman from June 2001 to May 2006. 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 (56)—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 (55)—Mr. Ferriola has been Chief Operating Officer of Steelmaking Operations since September 2007. He previously served as an Executive Vice President of Nucor from 2002 to 2007 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.

Ladd R. Hall (51)—Mr. Hall has been an Executive Vice President of Nucor since September 2007 and was Vice President and General Manager of Nucor Steel, Berkeley County, South Carolina from 2000 to 2007; Vice President and General Manager of Nucor Steel, Darlington, South Carolina from 1998 to 2000; Vice President of Vulcraft, Brigham City, Utah from 1994 to 1998 and General Manager there from 1993 to 1994; General Manager of Vulcraft, Grapeland, Texas from June 1993 to September 1993; Sales Manager of Vulcraft, Brigham City, Utah from 1988 to 1993; and Inside Sales at Nucor Steel Plymouth, Utah from 1981 to 1988.

Hamilton Lott, Jr. (58)—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 (55)—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 (53)—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.

R. Joseph Stratman (51)—Mr. Stratman has been an Executive Vice President of Nucor since September 2007 and was Vice President and General Manager of Nucor-Yamato Steel Company from 1999 to 2007. He was Vice President of Nucor Steel, Norfolk, Nebraska in 1999 and General Manager there from 1998 to 1999; Controller of Nucor-Yamato Steel Company from 1991 to 1998; and Controller of Nucor Building Systems, Waterloo, Indiana from 1989 to 1991.

James M. Coblin (64)—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.

 

9


Table of Contents

PART II

 

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

Nucor has increased its base cash dividend every year since the Company began paying dividends in 1973. In 2007, in addition to increasing the base dividend, the board of directors approved a supplemental dividend based on Nucor’s strong performance during the year. As a result, Nucor paid a total dividend of $2.43 per share in 2007 compared with $1.88 per share in 2006. In February 2008, the board of directors approved a 7% increase in Nucor’s quarterly base dividend to $0.32 per share and announced a supplemental dividend of $0.20 per share, for a total quarterly dividend of $0.52 per share. The payment of any future supplemental dividends depends on Nucor’s earnings, cash flows and financial position during the balance of the current year, all of which could be adversely affected by many factors, including many over which the Company has little or no control. See the discussion of the factors that affect Nucor’s business and operations and involve risk and uncertainty in Item 1A. Risk Factors in this Annual Report on Form 10-K.

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 2007 Annual Report, page 62.

 

Item 6. Selected Financial Data

Historical financial information is incorporated by reference to Nucor’s 2007 Annual Report, page 36.

 

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 2007 Annual Report, page 4 (Forward-looking Statements) and pages 22 through 32.

 

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, 2007, 19% of Nucor’s long-term debt was in industrial revenue bonds that have variable interest rates that are adjusted weekly or annually. The remaining 81% 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, 2007, 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 requirements and to obtain prices for our steel products that match market price movements in response to supply and demand. Nucor has a raw material surcharge designed to pass through the 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.

 

10


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Item 7A. Quantitative and Qualitative Disclosures about Market Risk, continued

 

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, 2007, accumulated other comprehensive income (loss) includes $4.0 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 $32.5 million and $81.3 million, respectively. Any resulting changes in fair value would be recorded as adjustments to accumulated 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.

Foreign Currency Risk—Prior to the acquisition of Harris Steel, Nucor was principally a domestic manufacturer of steel and steel products with customers located primarily in the U.S. Nucor was exposed to currency fluctuations, however, due to its joint ventures in Brazil and Australia and the direct reduced iron facility in Trinidad. When the Company entered into the agreement to acquire Harris Steel in January 2007, Nucor became exposed to Canadian currency fluctuations and hedged a portion of the exposure associated with the closing of the transaction in March 2007. The Company continues to be exposed to foreign currency risk through its operations in Canada.

 

Item 8. Financial Statements and Supplementary Data

Information required by this item is incorporated by reference to Nucor’s 2007 Annual Report, pages 37 through 58.

 

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

None.

 

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 evaluation date.

Changes in Internal Control Over Financial Reporting—There were no changes in our internal control over financial reporting during the quarter ended December 31, 2007 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 of PricewaterhouseCoopers LLP, an independent registered public accounting firm, on the effectiveness of Nucor’s internal control over financial reporting as of December 31, 2007 are incorporated by reference to Nucor’s 2007 Annual Report, pages 37 and 38.

 

Item 9B. Other Information

None.

 

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PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

The information regarding Nucor’s directors contained in the Notice of 2008 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 substantive 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

The information required by this item is included under the headings Compensation Discussion and Analysis, Corporate Governance and Board of Directors, Compensation and Executive Development Committee Report on Executive Compensation and Director Compensation in Nucor’s Proxy Statement and is incorporated herein by reference.

 

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

Information required by this item with respect to security ownership of certain beneficial owners and management 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, and Director Independence

Information required by this item is incorporated by reference to Nucor’s Proxy Statement under the heading Corporate Governance and Board of Directors.

 

Item 14. Principal Accountant Fees and Services

Information about the fees in 2007 and 2006 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. The description of 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 same section of the Proxy Statement.

 

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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’s 2007 Annual Report, pages 37 through 58:

 

   

Management’s Report on Internal Control Over Financial Reporting

 

   

Report of Independent Registered Public Accounting Firm

 

   

Consolidated Statements of Earnings—Years ended December 31, 2007, 2006 and 2005

 

   

Consolidated Statements of Stockholders’ Equity—Years ended December 31, 2007, 2006 and 2005

 

   

Consolidated Balance Sheets—December 31, 2007 and 2006

 

   

Consolidated Statements of Cash Flows—Years ended December 31, 2007, 2006 and 2005

 

   

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

   18

Schedule II—Valuation and Qualifying Accounts—Years ended December 31, 2007, 2006 and 2005

   19

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:

 

3    Restated Certificate of Incorporation (incorporated by reference to Form 10-Q for quarter ended July 2, 2005)
3(i)    Certificate of amendment dated May 11, 2006 to Restated Certificate of Incorporation (incorporated by reference to Form 10-Q for quarter ended July 1, 2006)
3(ii)    By-Laws as amended and restated December 20, 2007 (incorporated by reference to Form 8-K filed December 20, 2007)
4    Rights Agreement, dated as of March 8, 2001, between Nucor Corporation and American Stock Transfer & Trust Co. (incorporated by reference to 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)    Third Supplemental Indenture, dated as of December 3, 2007, between Nucor Corporation and The Bank of New York, as trustee (incorporated by reference to Form 8-K filed December 4, 2007)
4(iv)    Form of 4.875% Notes due 2012 (included in Exhibit 4(ii) above) (incorporated by reference to Form S-4 filed December 13, 2002)

 

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Table of Contents

Exhibits, continued:

 

4(v)    Form of 5.00% Notes due 2012 (included in Exhibit 4(iii) above) (incorporated by reference to Form 8-K filed December 4, 2007)
4(vi)    Form of 5.75% Notes due 2017 (included in Exhibit 4(iii) above) (incorporated by reference to Form 8-K filed December 4, 2007)
4(vii)    Form of 6.40% Notes due 2037 (included in Exhibit 4(iii) above) (incorporated by reference to Form 8-K filed December 4, 2007)
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 Form 8-K filed May 17, 2005) (1)
10(iv)    2005 Stock Option and Award Plan, Amendment No. 1 (incorporated by reference to Form 10-Q for quarter ended September 29, 2007) (1)
10(v)    Form of Restricted Stock Unit Award Agreement – time-vested awards (incorporated by reference to Form 10-K for year ended December 31, 2005) (1)
10(vi)    Form of Restricted Stock Unit Award Agreement – retirement-vested awards (incorporated by reference to Form 10-K for year ended December 31, 2005) (1)
10(vii)    Form of Restricted Stock Unit Award Agreement for Non-Employee Directors (incorporated by reference to Form 10-Q for quarter ended April 1, 2006) (1)
10(viii)    Employment Agreement of Daniel R. DiMicco (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (1)
10(ix)*    Amendment to Employment Agreement of Daniel R. DiMicco (1)
10(x)    Employment Agreement of Terry S. Lisenby (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (1)
10(xi)*    Amendment to Employment Agreement of Terry S. Lisenby (1)
10(xii)    Employment Agreement of Hamilton Lott, Jr. (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (1)
10(xiii)*    Amendment to Employment Agreement of Hamilton Lott, Jr. (1)
10(xiv)    Employment Agreement of D. Michael Parrish (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (1)
10(xv)*    Amendment to Employment Agreement of D. Michael Parrish (1)
10(xvi)    Employment Agreement of Joseph A. Rutkowski (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (1)
10(xvii)*    Amendment to Employment Agreement of Joseph A. Rutkowski (1)
10(xviii)    Employment Agreement of John J. Ferriola (incorporated by reference to Form 10-K for year ended December 31, 2001) (1)
10(xix)*    Amendment to Employment Agreement of John J. Ferriola (1)

 

14


Table of Contents

Exhibits, continued:

 

10(xx)    Employment Agreement of Ladd R. Hall (incorporated by reference to Form 10-Q for quarter ended September 29, 2007) (1)
10(xxi)    Employment Agreement of R. Joseph Stratman (incorporated by reference to Form 10-Q for quarter ended September 29, 2007) (1)
10(xxii)    Severance Plan for Senior Officers and General Managers (incorporated by reference to Form 10-Q for quarter ended September 29, 2007) (1)
10(xxiii)    Senior Officers Annual Incentive Plan (incorporated by reference to Form 10-Q for quarter ended July 5, 2003) (1)
10(xxiv)    Senior Officers Annual Incentive Plan, Amendment No. 1 (incorporated by reference to Form 10-Q for quarter ended September 29, 2007) (1)
10(xxv)    Senior Officers Long-Term Incentive Plan (incorporated by reference to Form 10-Q for quarter ended July 5, 2003) (1)
10(xxvi)    Senior Officers Long-Term Incentive Plan, Amendment No. 1 (incorporated by reference to Form 10-K for year ended December 31, 2003) (1)
10(xxvii)    Senior Officers Long-Term Incentive Plan, Amendment No. 2 (incorporated by reference to Form 10-Q for quarter ended September 29, 2007) (1)
10(xxviii)    Underwriting Agreement dated November 28, 2007 among Nucor Corporation, Banc of America Securities LLC, Citigroup Capital Markets Inc. and J.P. Morgan Securities, Inc. (incorporated by reference to Form 8-K filed December 4, 2007)
13*    2007 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.

 

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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
Chairman, President and
Chief Executive Officer

Dated: February 27, 2008

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

Chairman, President and

Chief Executive Officer

   

* PETER C. BROWNING   

Peter C. Browning

Lead Director

/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

   

* BERNARD L. KASRIEL   

Bernard L. Kasriel

Director

   

* JOHN H. WALKER   

John H. Walker

Director

  *By:  

/S/ TERRY S. LISENBY    

   

Terry S. Lisenby

Attorney-in-fact

Dated: February 27, 2008

 

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NUCOR CORPORATION

Index to Financial Statement Schedule

 

     Page

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

   18

Schedule II – Valuation and Qualifying Accounts — Years ended December 31, 2007, 2006 and 2005

   19

 

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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 and of the effectiveness of internal control over financial reporting referred to in our report dated February 27, 2008 appearing in the 2007 Annual Report to Stockholders of Nucor Corporation (which report and consolidated financial statements 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(a)(2) 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

Charlotte, North Carolina

February 27, 2008

 

18


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, 2007

          

LIFO Reserve

   $ 387,241    $ 194,287     $  —      $ 581,528

Year ended December 31, 2006

          

LIFO Reserve

   $ 381,852    $ 5,389     $ —      $ 387,241

Year ended December 31, 2005

          

LIFO Reserve

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

 

19


Table of Contents

NUCOR CORPORATION

List of Exhibits to Form 10-K – December 31, 2007

 

Exhibit No.

 

Description of Exhibit

10(ix)   Amendment to Employment Agreement of Daniel R. DiMicco
10(xi)   Amendment to Employment Agreement of Terry S. Lisenby
10(xiii)   Amendment to Employment Agreement of Hamilton Lott, Jr.
10(xv)   Amendment to Employment Agreement of D. Michael Parrish
10(xvii)   Amendment to Employment Agreement of Joseph A. Rutkowski
10(xix)   Amendment to Employment Agreement of John J. Ferriola
13   2007 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

 

20

Amendment to Employment Agreement of Daniel R. DiMicco

Exhibit 10(ix)

AMENDMENT AGREEMENT

THIS AMENDMENT AGREEMENT (this “Agreement”) is made and entered into between Nucor Corporation, a Delaware corporation, on behalf of itself and its affiliates (collectively “Nucor”), and Daniel R. DiMicco (“Employee”).

WHEREAS, Employee and Nucor are parties to an Executive Employment Agreement dated as of April 10, 2001 (the “Employment Agreement”);

WHEREAS, Employee and Nucor desire to amend the Employment Agreement to comply with the requirements of Section 409A of the Internal Revenue Code;

NOW, THEREFORE, in consideration for the promises and mutual agreements contained herein, the parties agree as follows:

1. The following new paragraph 22 is added to the end of the Employment Agreement effective as of November 5, 2007:

“22. Compliance with Code Section 409A. Notwithstanding anything in this Agreement to the contrary, if any amount or benefit that Nucor determines constitutes non-exempt “deferred compensation” for purposes of Section 409A of the Internal Revenue Code of 1986 would otherwise be payable or distributable under this Agreement by reason of Employee’s separation from service, then to the extent necessary to comply with Code Section 409A: (i) if the payment or distribution is payable in a lump sum, Employee’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of Employee’s death or the first day of the seventh month following Employee’s separation from service, and (ii) if the payment, distribution or benefit is payable or provided over time, the amount of such non-exempt deferred compensation or benefit that would otherwise be payable or provided during the six-month period immediately following Employee’s separation from service will be accumulated, and Employee’s right to receive payment or distribution of such accumulated amount or benefit will be delayed until the earlier of Employee’s death or the first day of the seventh month following Employee’s separation from service and paid or provided on the earlier of such dates, without interest, and the normal payment or distribution schedule for any remaining payments, distributions or benefits will commence.”

2. Except as expressly or by necessary implication amended hereby, the Employment Agreement shall continue in full force and effect.


IN WITNESS WHEREOF, the parties have executed this Agreement on the dates specified below.

 

 

/S/ DANIEL R. DIMICCO
Date:   November 8, 2007

 

NUCOR CORPORATION
By:   /S/ TERRY S. LISENBY
Its:   Chief Financial Officer, Treasurer and Executive Vice President
Date:   November 21, 2007
Amendment to Employment Agreement of Terry S. Lisenby

Exhibit 10(xi)

AMENDMENT AGREEMENT

THIS AMENDMENT AGREEMENT (this “Agreement”) is made and entered into between Nucor Corporation, a Delaware corporation, on behalf of itself and its affiliates (collectively “Nucor”), and Terry S. Lisenby (“Employee”).

WHEREAS, Employee and Nucor are parties to an Executive Employment Agreement dated as of April 10, 2001 (the “Employment Agreement”);

WHEREAS, Employee and Nucor desire to amend the Employment Agreement to comply with the requirements of Section 409A of the Internal Revenue Code;

NOW, THEREFORE, in consideration for the promises and mutual agreements contained herein, the parties agree as follows:

1.    The following new paragraph 22 is added to the end of the Employment Agreement effective as of November 5, 2007:

“22.    Compliance with Code Section 409A. Notwithstanding anything in this Agreement to the contrary, if any amount or benefit that Nucor determines constitutes non-exempt “deferred compensation” for purposes of Section 409A of the Internal Revenue Code of 1986 would otherwise be payable or distributable under this Agreement by reason of Employee’s separation from service, then to the extent necessary to comply with Code Section 409A: (i) if the payment or distribution is payable in a lump sum, Employee’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of Employee’s death or the first day of the seventh month following Employee’s separation from service, and (ii) if the payment, distribution or benefit is payable or provided over time, the amount of such non-exempt deferred compensation or benefit that would otherwise be payable or provided during the six-month period immediately following Employee’s separation from service will be accumulated, and Employee’s right to receive payment or distribution of such accumulated amount or benefit will be delayed until the earlier of Employee’s death or the first day of the seventh month following Employee’s separation from service and paid or provided on the earlier of such dates, without interest, and the normal payment or distribution schedule for any remaining payments, distributions or benefits will commence.”

2. Except as expressly or by necessary implication amended hereby, the Employment Agreement shall continue in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Agreement on the dates specified below.

 

/s/ Terry S. Lisenby
Date:   November 7, 2007
 

 

NUCOR CORPORATION

By:   /s/ Daniel R. DiMicco
Its:   Chairman, President and Chief Executive Officer
Date:   November 7, 2007
Amendment ot Employment Hamilton Lott, Jr.

Exhibit 10(xiii)

AMENDMENT AGREEMENT

THIS AMENDMENT AGREEMENT (this “Agreement”) is made and entered into between Nucor Corporation, a Delaware corporation, on behalf of itself and its affiliates (collectively “Nucor”), and Hamilton Lott, Jr. (“Employee”).

WHEREAS, Employee and Nucor are parties to an Executive Employment Agreement dated as of April 10, 2001 (the “Employment Agreement”);

WHEREAS, Employee and Nucor desire to amend the Employment Agreement to comply with the requirements of Section 409A of the Internal Revenue Code;

NOW, THEREFORE, in consideration for the promises and mutual agreements contained herein, the parties agree as follows:

1.    The following new paragraph 22 is added to the end of the Employment Agreement effective as of November 5, 2007:

“22.    Compliance with Code Section 409A. Notwithstanding anything in this Agreement to the contrary, if any amount or benefit that Nucor determines constitutes non-exempt “deferred compensation” for purposes of Section 409A of the Internal Revenue Code of 1986 would otherwise be payable or distributable under this Agreement by reason of Employee’s separation from service, then to the extent necessary to comply with Code Section 409A: (i) if the payment or distribution is payable in a lump sum, Employee’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of Employee’s death or the first day of the seventh month following Employee’s separation from service, and (ii) if the payment, distribution or benefit is payable or provided over time, the amount of such non-exempt deferred compensation or benefit that would otherwise be payable or provided during the six-month period immediately following Employee’s separation from service will be accumulated, and Employee’s right to receive payment or distribution of such accumulated amount or benefit will be delayed until the earlier of Employee’s death or the first day of the seventh month following Employee’s separation from service and paid or provided on the earlier of such dates, without interest, and the normal payment or distribution schedule for any remaining payments, distributions or benefits will commence.”

2.    Except as expressly or by necessary implication amended hereby, the Employment Agreement shall continue in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Agreement on the dates specified below.

 

/s/ Hamilton Lott, Jr.
Date:   November 7, 2007
 

 

NUCOR CORPORATION

By:   /s/ Terry S. Lisenby
Its:   Chief Financial Officer, Treasurer and Executive Vice President
Date:   November 21, 2007
Amendment to Employment Agreement of D. Michael Parrish

Exhibit 10(xv)

AMENDMENT AGREEMENT

THIS AMENDMENT AGREEMENT (this “Agreement”) is made and entered into between Nucor Corporation, a Delaware corporation, on behalf of itself and its affiliates (collectively “Nucor”), and D. Michael Parrish (“Employee”).

WHEREAS, Employee and Nucor are parties to an Executive Employment Agreement dated as of April 10, 2001 (the “Employment Agreement”);

WHEREAS, Employee and Nucor desire to amend the Employment Agreement to comply with the requirements of Section 409A of the Internal Revenue Code;

NOW, THEREFORE, in consideration for the promises and mutual agreements contained herein, the parties agree as follows:

1.    The following new paragraph 22 is added to the end of the Employment Agreement effective as of November 5, 2007:

“22.    Compliance with Code Section 409A. Notwithstanding anything in this Agreement to the contrary, if any amount or benefit that Nucor determines constitutes non-exempt “deferred compensation” for purposes of Section 409A of the Internal Revenue Code of 1986 would otherwise be payable or distributable under this Agreement by reason of Employee’s separation from service, then to the extent necessary to comply with Code Section 409A: (i) if the payment or distribution is payable in a lump sum, Employee’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of Employee’s death or the first day of the seventh month following Employee’s separation from service, and (ii) if the payment, distribution or benefit is payable or provided over time, the amount of such non-exempt deferred compensation or benefit that would otherwise be payable or provided during the six-month period immediately following Employee’s separation from service will be accumulated, and Employee’s right to receive payment or distribution of such accumulated amount or benefit will be delayed until the earlier of Employee’s death or the first day of the seventh month following Employee’s separation from service and paid or provided on the earlier of such dates, without interest, and the normal payment or distribution schedule for any remaining payments, distributions or benefits will commence.”

2.    Except as expressly or by necessary implication amended hereby, the Employment Agreement shall continue in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Agreement on the dates specified below.

 

/s/ D. Michael Parrish
Date:   November 8, 2007
 

 

NUCOR CORPORATION

By:   /s/ Terry S. Lisenby
Its:   Chief Financial Officer, Treasurer and Executive Vice President
Date:   November 21, 2007
Amendment to Employment Agreement of Joseph A Rutkowski

Exhibit 10(xvii)

AMENDMENT AGREEMENT

THIS AMENDMENT AGREEMENT (this “Agreement”) is made and entered into between Nucor Corporation, a Delaware corporation, on behalf of itself and its affiliates (collectively “Nucor”), and Joseph A. Rutkowski (“Employee”).

WHEREAS, Employee and Nucor are parties to an Executive Employment Agreement dated as of April 10, 2001 (the “Employment Agreement”);

WHEREAS, Employee and Nucor desire to amend the Employment Agreement to comply with the requirements of Section 409A of the Internal Revenue Code;

NOW, THEREFORE, in consideration for the promises and mutual agreements contained herein, the parties agree as follows:

1.    The following new paragraph 22 is added to the end of the Employment Agreement effective as of November 5, 2007:

“22.    Compliance with Code Section 409A. Notwithstanding anything in this Agreement to the contrary, if any amount or benefit that Nucor determines constitutes non-exempt “deferred compensation” for purposes of Section 409A of the Internal Revenue Code of 1986 would otherwise be payable or distributable under this Agreement by reason of Employee’s separation from service, then to the extent necessary to comply with Code Section 409A: (i) if the payment or distribution is payable in a lump sum, Employee’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of Employee’s death or the first day of the seventh month following Employee’s separation from service, and (ii) if the payment, distribution or benefit is payable or provided over time, the amount of such non-exempt deferred compensation or benefit that would otherwise be payable or provided during the six-month period immediately following Employee’s separation from service will be accumulated, and Employee’s right to receive payment or distribution of such accumulated amount or benefit will be delayed until the earlier of Employee’s death or the first day of the seventh month following Employee’s separation from service and paid or provided on the earlier of such dates, without interest, and the normal payment or distribution schedule for any remaining payments, distributions or benefits will commence.”

2.    Except as expressly or by necessary implication amended hereby, the Employment Agreement shall continue in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Agreement on the dates specified below.

 

/S/ JOSEPH A. RUTKOWSKI
Date:   November 12, 2007
 

 

NUCOR CORPORATION

By:   /S/ TERRY S. LISENBY
Its:   Chief Financial Officer, Treasurer and Executive Vice President
Date:   November 21, 2007
Amendment to Employment Agreement of John J. Ferriola

Exhibit 10(xix)

AMENDMENT AGREEMENT

THIS AMENDMENT AGREEMENT (this “Agreement”) is made and entered into between Nucor Corporation, a Delaware corporation, on behalf of itself and its affiliates (collectively “Nucor”), and John J. Ferriola (“Employee”).

WHEREAS, Employee and Nucor are parties to an Executive Employment Agreement dated as of January 30, 2002 (the “Employment Agreement”);

WHEREAS, Employee and Nucor desire to amend the Employment Agreement to comply with the requirements of Section 409A of the Internal Revenue Code;

NOW, THEREFORE, in consideration for the promises and mutual agreements contained herein, the parties agree as follows:

1.    The following new paragraph 22 is added to the end of the Employment Agreement effective as of November 5, 2007:

“22.    Compliance with Code Section 409A. Notwithstanding anything in this Agreement to the contrary, if any amount or benefit that Nucor determines constitutes non-exempt “deferred compensation” for purposes of Section 409A of the Internal Revenue Code of 1986 would otherwise be payable or distributable under this Agreement by reason of Employee’s separation from service, then to the extent necessary to comply with Code Section 409A: (i) if the payment or distribution is payable in a lump sum, Employee’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of Employee’s death or the first day of the seventh month following Employee’s separation from service, and (ii) if the payment, distribution or benefit is payable or provided over time, the amount of such non-exempt deferred compensation or benefit that would otherwise be payable or provided during the six-month period immediately following Employee’s separation from service will be accumulated, and Employee’s right to receive payment or distribution of such accumulated amount or benefit will be delayed until the earlier of Employee’s death or the first day of the seventh month following Employee’s separation from service and paid or provided on the earlier of such dates, without interest, and the normal payment or distribution schedule for any remaining payments, distributions or benefits will commence.”

2.    Except as expressly or by necessary implication amended hereby, the Employment Agreement shall continue in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Agreement on the dates specified below.

 

/S/ JOHN J. FERRIOLA
Date:   November 8, 2007
 

 

NUCOR CORPORATION

By:   /S/ TERRY S. LISENBY
Its:   Chief Financial Officer, Treasurer and Executive Vice President
Date:   November 21, 2007
2007 Nucor Annual Report
4    FINANCIAL HIGHLIGHTS

 

F I N A N C I A L H I G H L I G H T S (dollar amounts in thousands, except per share data)

 

      2007     2006     % CHANGE  

FOR THE YEAR

      

Net sales

   $ 16,592,976     $ 14,751,270     12 %

Earnings:

      

Earnings before income taxes

     2,253,315       2,692,435     -16 %

Provision for income taxes

     781,368       935,653     -16 %
                  

Net earnings

     1,471,947       1,756,782     -16 %

Per share:

      

Basic

     4.98       5.73     -13 %

Diluted

     4.94       5.68     -13 %

Dividends declared per share

     2.44       2.15     13 %

Percentage of net earnings to net sales

     8.9 %     11.9 %   -25 %

Return on average equity

     29.5 %     38.3 %   -23 %

Capital expenditures

     520,353       338,404     54 %

Depreciation

     403,172       363,936     11 %

Acquisitions (net of cash acquired)

     1,542,666       223,920     589 %

Sales per employee

     1,085       1,273     -15 %

AT YEAR END

      

Working capital

   $ 3,491,213     $ 3,261,148     7 %

Property, plant and equipment, net

     3,232,998       2,856,415     13 %

Long-term debt

     2,250,300       922,300     144 %

Stockholders’ equity

     5,112,917       4,857,351     5 %

Per share

     17.75       16.14     10 %

Shares outstanding

     287,993       300,949     -4 %

Employees

     18,000       11,900     51 %

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, which, in the case of many of our products, is driven by the level of non-residential construction activity in the U.S.; (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 currency 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.)

Wallingford, Connecticut (Nucor Steel Connecticut, Inc.)

Memphis, Tennessee (Nucor Steel Memphis, 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 AND VERCO

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.)

Phoenix, Arizona (Verco Decking, Inc.)

Fontana, California (Verco Decking, Inc.)

Antioch, California (Verco Decking, Inc.)

COLD FINISH

Products: Cold finished steel bars for shafting and precision machined parts and bright basic wire for point of purchase display racks, wire shelving and miscellaneous wire forms.

Norfolk, Nebraska

Darlington, South Carolina

Brigham City, Utah

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

Maryville, Missouri (Nucor LMP Steel, Inc)

BUILDINGS GROUP

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

Waterloo, Indiana

Swansea, South Carolina

Terrell, Texas

Brigham City, Utah (Nucor Building Systems Utah, LLC)

Eufaula, Alabama (American Buildings Company South)

Carson City, Nevada (American Buildings Company West)

El Paso, Illinois (American Buildings Company Midwest)

LaCrosse, Virginia (American Buildings Company Atlantic)

Lathrop, California (CBC Steel Buildings LLC)

Portland, Tennessee (Kirby Building Systems LLC)

Starkville, Mississippi (Gulf States Manufacturers LLC)

FASTENER

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

St. Joe, Indiana

HARRIS STEEL

Products: Concrete reinforcing steel and concrete post-tensioning systems.

Stoney Creek, Ontario

WIRE PRODUCTS

Products: Welded wire mesh for reinforcing concrete and mine reinforcement applications.

Wallingford, Connecticut (Nucor Steel Connecticut, Inc.)

New Salem, Pennsylvania (Nucor Wire Products Pennsylvania, Inc.)

NUCONSTEEL

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

 

¢    STEEL MILLS
¿    STEEL PRODUCTS
p    OTHER
ê    CORPORATE OFFICE


12    OPERATIONS REVIEW

 

STEEL MILLS SEGMENT

 

 

BAR MILLS, SHEET MILLS, STRUCTURAL MILLS AND PLATE MILLS

Nucor operates scrap-based steel mills in nineteen 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 eleven bar mills located in South Carolina, Nebraska, Texas, Utah, New York, Alabama, Illinois, Mississippi, Washington, Ohio and Connecticut that produce concrete reinforcing bars, hot rolled bars, rod, light shapes, structural angles and channel, wire mesh and guard rail in carbon and alloy steels. These products have a wide usage serving primarily the agricultural, automotive, construction, energy, furniture, machinery, metal building, railroad, recreational equipment, shipbuilding, heavy truck and trailer market segments. 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 modern and globally competitive. Nucor acquired the remaining seven bar mills since 2000, including the purchase of substantially all of the assets of Marion Steel Company (“Marion Steel”) in the second quarter of 2005 and substantially all of the assets of Connecticut Steel Corporation (“Connecticut Steel”) in the second quarter of 2006. Nucor Steel Marion, Inc. has the capacity to produce up to 450,000 tons annually and Nucor Steel Connecticut, Inc. has the capacity to produce up to 300,000 tons annually. With these recent acquisitions, the total capacity of our eleven bar mills is approximately 8,060,000 tons per year.

SHEET MILLS

The sheet mills produce flat-rolled steel for the 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. 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. In 2008 Nucor plans to complete the construction of its fourth sheet steel galvanizing facility at the Decatur mill. Upon completion of this facility, all four of our sheet mills will be fully equipped with cold rolling mills and galvanizing lines for further processing of hot rolled sheet. 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., purchased substantially all the assets of Corus Tuscaloosa. The Tuscaloosa mill has an annual capacity of 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.


  13

 

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 2007 was 22,089,000 tons, a decrease of 1% from a record of 22,382,000 tons in 2006. Annual production capacity has grown from 120,000 tons in 1970 to a present total of more than 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 7% of the sales dollar. 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 per ton remained flat from 2006 to 2007. Because of the efficiency of Nucor steel mills, these energy costs were less than 10% of the sales dollar in both years. 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 13% to $278 per ton in 2007 from $246 per ton in 2006. 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 nineteen steel mills’ production in 2007 was sold to outside customers and the balance was used internally by the Vulcraft, Cold Finish, Rebar Fabrication, Buildings Group and Fastener divisions. Steel shipments to outside customers decreased 2% to 20,235,000 tons in 2007 from a record 20,649,000 tons in 2006.

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 2008 with approximately 40% 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. The sheet mills will continue to pursue profitable contract business.

GOVERNMENT AFFAIRS

In 2007, Nucor aggressively supported the adoption of a China Currency Bill that would identify the mercantilist practices of currency manipulation that result in distorted trade, an insurmountable trade deficit and the loss of manufacturing jobs in the United States. Several bills were generated in the House and Senate, but none were put into law. Our effort was broad, reaching across multiple industries, and ultimately drew attention to the domestic manufacturing job loss issue. In 2008, we hope that newly proposed legislation will unite Congress in an effort to maintain and enforce laws ensuring free and fair trade.

Climate change legislation also became a paramount issue in 2007 with several bills generated in the Senate and multiple hearings held to discuss the implications on industry. The development of green house gas legislation will continue to evolve in 2008 and possibly 2009. Nucor’s carbon emissions per ton produced remain the lowest in the industry and, collectively, the steel industry in the United States has lowered its emissions by almost 30% since 1990. It is our intent that any new legislation will recognize these reductions and our recycling efforts. Finally, Nucor has worked aggressively to ensure that any legislation implemented maintains global standards so U.S. manufacturing jobs are not lost as a result of companies moving overseas to avoid the cost of climate change legislation.

We continued our grass roots push with both Town Hall Meetings and Trade and Environmental Boot Camps. These events educate voters and legislators regarding the issues manufacturers are facing domestically and globally. Nucor will continue these events in 2008. Our goal remains to help state and federal legislators recognize the importance of domestic manufacturing and the serious threat these issues have for our customer base.

We have also developed a well-embedded grass roots effort with our state legislators to help build support toward many other issues beyond trade, including currency manipulation, climate change, energy and taxes.


14   

 

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, pursue acquisitions that are accretive to earnings and to pursue international growth. Capital expenditures in the steel mill segment totaled $216.0 million, $195.5 million and $410.0 million in 2005, 2006 and 2007, respectively.

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 existing technology. This process also reduces the overall environmental impact of producing steel by generating significantly lower emissions. Although we announced the successful commercialization of Castrip in 2004, this technology is still in its infancy, and we are making new and exciting discoveries every year. In December 2007, we achieved a new production record, continuously casting a sequence of 24 ladles of steel in a 38-hour period. In 2005, Nucor selected Blytheville, Arkansas, as the second Nucor location for a Castrip operation in the United States. The Blytheville, Arkansas, Castrip facility is expected to begin operating in the second half of 2008.

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.

In May 2006, Nucor’s wholly owned subsidiary, Nucor Steel Connecticut, Inc., purchased substantially all of the assets of Connecticut Steel Corporation for a cash purchase price of approximately $43.9 million. This facility produces wire rod, rebar, wire mesh and structural mesh products. Located in Wallingford, Connecticut, the bar products mill has an annual capacity of approximately 300,000 tons of wire rod and rebar and approximately 80,000 tons of wire mesh fabrication and structural mesh fabrication.

In June 2006, Nucor announced plans to construct its fourth sheet steel galvanizing facility at its sheet mill in Decatur, Alabama, with a capital budget of about $152 million. Annual capacity will be approximately 500,000 tons per year and the facility will galvanize up to 72-inch wide sheet steel. Start-up is expected in mid-2008. The addition of this facility will increase Nucor’s total galvanizing annual capacity by one-third to 2,000,000 tons.

In October 2006, Nucor announced plans to construct a special bar quality products steel mill in Memphis, Tennessee. The planned site was acquired in 2002 from the bankrupt Birmingham Steel Company and the project is utilizing some of the infrastructure existing at this location. The project is expected to cost approximately $300 million and to have an estimated annual capacity of 850,000 tons. The facility will produce high quality carbon and alloy rounds and round cornered squares from 2.25” to 9”, complementing the product offerings of Nucor’s Nebraska and South Carolina SBQ mills. Start-up is expected in the second quarter of 2008.

In January 2008, Nucor announced the signing of a Memorandum of Understanding with the Duferco Group to establish a 50/50 joint venture for the production of beams and other long products in Italy, with distribution in Europe and North Africa. This joint venture will initially consist of the beam mills of Duferdofin, a wholly owned subsidiary of the Duferco Group, with a melt shop located in San Zeno, rolling mills in Pallanzeno and Giamorro and a new merchant bar mill that is under construction at the Giamorro site. The combined annual capacity of these mills exceeds 1,000,000 tons and will be closer to 2,000,000 tons with the Giamorro expansion. The joint venture partners will consider additional growth investments. We expect this joint venture to be established in the first half of 2008, pending completion of due diligence, approval of regulatory bodies and approval of the boards of directors of both companies.


  15

 

LOGO

LOGO


16   

 

STEEL PRODUCTS SEGMENT

 

 

VULCRAFT AND VERCO are the nation’s largest producers and leading innovators of open-web steel joists, joist girders and steel deck, which are used primarily 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 2007, Vulcraft produced 542,000 tons of steel joists and joist girders, a decrease of 5% from the 570,000 tons produced in 2006.

Material costs, primarily steel, were approximately 55% of the joist sales dollar in 2007 (53% in 2006). Vulcraft obtained 99% of its steel requirements for joists and joist girders from the Nucor bar mills in both 2007 and 2006. Freight costs for joists and joist girders were less than 10% of the sales dollar in both years. Vulcraft maintains an extensive fleet of trucks to ensure on-time delivery.

Steel decking is produced and marketed nationally through nine deck plants located in South Carolina, Nebraska, Alabama, Texas, Indiana, New York, Arizona and two in California. Six of these plants were constructed by Nucor adjacent to Vulcraft joist facilities. In November 2006, Nucor’s wholly owned subsidiary, Verco Decking, Inc, purchased substantially all of the assets of Verco Manufacturing Company (“Verco”) for a cash purchase price of approximately $183.5 million. This acquisition included three deck plants located in Arizona and California, positioning Nucor to better supply the large western construction market. Current deck annual production capacity is approximately 530,000 tons. The addition of Verco contributed to record steel deck sales of 478,000 tons in 2007, an increase of 20% from 398,000 tons in 2006. Coiled sheet steel was approximately 65% of the steel deck sales dollar in 2007 (64% in 2006). In 2007, Nucor obtained 76% of its steel requirements for steel deck production from the Nucor sheet mills (99% in 2006). In 2007 and 2006, 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.

The majority of 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 2007, 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. Steel deck is also used as concrete floor support in high rise buildings. In 2007, 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.


  17

 

LOGO


18   

 

 

REINFORCING PRODUCTS Harris Steel fabricates rebar for highways, bridges and other infrastructure, as well as commercial and multi-tenant residential construction markets.

 

 

OPERATIONS

In February 2004, Nucor acquired a one-half interest in Harris Steel, Inc., the U.S. reinforcing steel (“rebar”) fabrication business of Harris Steel Group, Inc. (“Harris Steel”), for a cash purchase price of approximately $21.0 million. After three successful years working together in this joint venture, in March 2007, Nucor acquired Harris Steel for a cash purchase price of approximately $1.06 billion with $68.4 million in debt assumed related to the net assets acquired. Harris Steel now operates as a subsidiary of Nucor, fabricating products in Canada and the U.S. At the acquisition date, Harris Steel had rebar fabrication annual capacity of about 770,000 tons per year. Harris Steel is operating as a growth platform within Nucor and completed the following rebar fabrication acquisitions in 2007: South Pacific Steel Corporation in June, Consolidated Rebar, Inc. in August and Rockford Fabricators in December. In November 2007, Harris Steel obtained a 90% equity interest in Barker Steel LLC, an entity created by combining the rebar operations of Barker Steel Company Inc. and Harris Steel locations in the northeastern U.S. The Harris Steel rebar fabrication business has grown by over 37% to an annual capacity of about 1,058,000 tons. Sales of fabricated rebar were 583,000 tons during the nine months that Harris Steel operated as a subsidiary of Nucor.

MARKETS AND MARKETING

Reinforcing products are essential to concrete construction. They supply tensile strength as well as additional compressive strength, and protect the concrete from cracking. Harris Steel bids on and executes a wide variety of construction work primarily classified as infrastructure, including highways, bridges, reservoirs, utilities, hospitals, schools, airports and stadiums. Harris Steel is also active in commercial office building and multi-tenant residential (high-rise) construction. In most markets, Harris Steel sells reinforcing products on an installed basis; i.e., Harris Steel fabricates the reinforcing products for a specific application and performs installation. Harris Steel operates facilities across the U.S. and Canada, with each facility serving a local market.

 

 

STEEL MESH, GRATING AND FASTENER Nucor and its subsidiaries manufacture wire products, grating and industrial bolts.

 

 

STEEL MESH

Harris Steel produces steel mesh at its Laurel Steel and Laurel-LEC Steel operations. Nucor also produces steel mesh at Nucor Steel Connecticut, Inc. In October 2007, Nucor acquired substantially all of the assets of steel mesh producer Nelson Steel, Inc. (“Nelson”) for a cash purchase price of approximately $53.2 million. Nelson currently operates as Nucor Wire Products of Pennsylvania, Inc. The combined annual production capacity of the steel mesh facilities is approximately 233,000 tons.

GRATING

With the acquisition of Harris Steel, Nucor continued to expand existing product offerings by entering into the steel grating market. Fisher & Ludlow, a division of Harris Steel, fabricates steel and aluminum bar grating, safety grating and expanded metal products in facilities located throughout North America. Fisher & Ludlow serves the new construction and maintenance-related markets with annual production capacity of approximately 90,000 tons.

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. Nucor Fastener’s dedication to quality, on-time delivery and exceptional customer service yields a competitive advantage in a very import-sensitive market. Nucor Fastener obtains much of its steel from the Nucor bar mills.


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BUILDINGS GROUP AND LIGHT GAUGE STEEL FRAMING

Nucor manufactures custom-engineered and standard metal buildings and components and load bearing light gauge steel framing systems for the commercial, residential and institutional construction markets.

 

 

BUILDINGS GROUP

Nucor produces metal buildings and components throughout the U.S. Prior to 2007, Nucor had a single brand, Nucor Building Systems, which consisted of three facilities in Indiana, South Carolina and Texas. These plants have an annual capacity of 145,000 tons. In March 2008, Nucor expects to begin production at its newest Nucor Building Systems facility in Brigham City, Utah. The projected capacity at this plant is approximately 45,000 tons.

In August of 2007, Nucor completed the acquisition of Magnatrax Corporation (“Magnatrax”) via the merger of Magnatrax with a wholly owned subsidiary of Nucor, for a cash purchase price of approximately $275.2 million. Magnatrax’s seven fabricating plants located throughout the U.S. have annual capacity of approximately 290,000 tons. Magnatrax was a leading provider of custom-engineered metal buildings and components for the growing North American non-residential construction market. Although Nucor has retired the Magnatrax name, we retained Magnatrax’s four metal buildings brands: American Buildings Company, Kirby Building Systems, Gulf States Manufacturers and CBC Steel Buildings.

Once the Brigham City, Utah, plant is operational, Nucor’s newly-named Buildings Group will have eleven metal buildings plants with an annual capacity of approximately 480,000 tons. The size of the buildings that can be produced ranges from less than 1,000 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.

The Buildings Group sales in 2007 were a record 195,000 tons (116,000 tons in 2006). The primary markets are commercial, industrial and institutional buildings, including distribution centers, automobile dealerships, retail centers, schools, warehouses and manufacturing facilities. The Buildings Group obtains a significant portion of its steel requirements from the Nucor bar and sheet mills.

LIGHT GAUGE STEEL FRAMING

NUCONSTEEL™ (“Nucon”) 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 NUFRAME™ 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.

In March 2006, Nucor formed a joint venture with Lennar Corporation. NEXFRAME, LP was established to provide comprehensive light gauge steel framing solutions for residential construction markets across the nation. Nucor plans to continue to aggressively broaden Nucon’s opportunities through geographic expansion and the introduction of new products.

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COLD FINISH Nucor is North America’s largest producer of cold finish products for a wide range of industrial markets.

 

 

Nucor Cold Finish is the largest producer of cold finish bars in North America and has facilities in Nebraska, South Carolina, Utah, Wisconsin, Missouri and Ontario, Canada. Three of these facilities were originally constructed by Nucor between 1978 and 1983 while the remaining facilities were purchased through acquisitions beginning in 2005. As part of the Harris Steel acquisition in March 2007, Nucor added the Laurel Cold Finish operation with annual capacity of approximately 225,000 tons. In August 2007, Nucor purchased the assets of LMP Steel & Wire Company (“LMP”) in Maryville, Missouri for a cash purchase price of approximately $27.2 million. With approximately 100,000 tons of annual capacity, LMP is a producer of cold finish bar and wire, servicing the construction and OEM markets in North America. The total capacity of the Nucor Cold Finish bar and wire facilities is approximately 860,000 tons per year.

These facilities produce cold drawn, 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 and shafting for air conditioner compressors, ceiling fan motors, garage door openers, electric motors and lawn mowers.

All of Nucor’s cold finish facilities are among the most modern in the world and most 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 our facilities’ use of the latest technology, results in a highly competitive cost structure.

In 2007, sales of cold finish steel products were a record 449,000 tons, an increase of 37% from 327,000 tons in 2006. The total U.S. cold finish market is estimated to be approximately 2,000,000 tons. The 2007 acquisitions represent the continuation of our successful growth strategy to expand through strategic acquisitions, both domestically and internationally. Our market presence in the cold finish arena is larger than it has ever been, and Nucor Cold Finish anticipates opportunities for significant increases in sales and earnings during the next several years.

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OTHER

 

 

Nucor is vertically integrated, controlling a growing part of its supply chain from iron production to scrap trading and distribution.

 

 

RAW MATERIALS STRATEGY

Nucor has an established raw materials strategy to control six to seven million tons per year of high quality metallics for consumption at its steel mills. 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 HIsmelt® plant in Kwinana, Western Australia. The HIsmelt 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 and start-up commenced in 2005. This plant has an initial annual capacity of 800,000 metric tons and is expandable to over 1,500,000 metric tons.

In September 2004, Nucor acquired the assets of an idled direct reduced iron (“DRI”) plant located in Louisiana and subsequently moved these assets to Trinidad. Construction is complete and heat-up commenced in December 2006. In January 2007, Nucor announced the successful start-up of Nu-Iron Unlimited. We produced over 1,400,000 metric tons in our first year of operation and expect to produce 1,800,000 metric tons in 2008. The Nu-Iron team is working on plans to expand this capacity. 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.

The Hlsmelt and Nu-Iron projects represent the initial steps in the execution of Nucor’s raw materials strategy.

Nucor announced in February 2008 the acquisition of SHV North America Corporation, which owns 100% of The David J. Joseph Company and certain related affiliates, for a cash purchase price of approximately $1.44 billion. Since scrap is our largest single cost, this strategic investment provides an ideal growth platform for Nucor to expand its direct ownership in the steel scrap supply chain and further its raw materials strategy. DJJ operates over 30 scrap processing facilities with an annual capacity to process 3.5 million tons of ferrous scrap. Additionally, DJJ brokers over 20 million tons of ferrous scrap; internationally sources scrap, pig iron and scrap substitutes; and brokers ferro-alloys and over one half billion pounds of non-ferrous metals. The DJJ Mill and Industrial Services business provides logistics and metallurgical blending operations and offers on-site handling and trading of industrial scrap. The DJJ Rail Services business oversees the largest private fleet of rail cars dedicated to scrap movement and offers complete railcar fleet management and leases for third parties. All of these businesses have strategic value to Nucor as the most diversified North American steel producer. We expect this acquisition to be completed in the first quarter of 2008.

STEEL TRADING & DISTRIBUTION

In March, 2007, Nucor acquired a 75% interest in Novosteel S.A. (“Novosteel”), a Switzerland-based steel trading company, through its acquisition of Harris Steel. Novosteel matches buyers and sellers of steel products on a global basis and offers its customers logistics support, material handling, quality certifications and schedule management. Novosteel provides an excellent platform as Nucor continues to pursue profitable growth on a global basis.

Harris Steel also operates Harris Supply Solutions, a distributor of reinforcing products primarily serving the single family residential and light commercial construction markets in the United States.


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

 

OVERVIEW

Nucor is principally a manufacturer of steel and steel products with operating facilities and customers primarily located in North America. Additionally, Nucor is North America’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, fabricated concrete reinforcing steel, cold finish steel, steel fasteners, metal building systems, light gauge steel framing, steel grating and expanded metal, and wire and wire mesh. 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, fabricated concrete reinforcing steel, grating and expanded metal, cold drawn wire and steel fasteners are manufactured by further processing of hot-rolled steel. Steel deck, light gauge steel framing and wire mesh are manufactured from cold-rolled and cold drawn steel. In 2007, 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 over 245% from $4.80 billion in 2002 to $16.59 billion in 2007. Average sales price per ton more than doubled from $357 in 2002 to $723 in 2007. Total tons sold to external customers have increased 71% from 13,442,000 tons in 2002 to 22,940,000 tons in 2007. This growth has been generated through acquisitions, optimizing existing operations and developing traditional greenfield projects using new technologies. For the sixth consecutive year, Nucor achieved record sales in 2007 due to historically high selling prices and shipments. Although net earnings decreased from 2006’s record high, 2007 is the second-best earnings year in Nucor’s history.

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In recent years, we have strengthened Nucor’s position as North America’s most diversified steel producer. With this product line diversity, Nucor’s short-term performance is not tied to any one market. This diversity has been a significant factor in Nucor’s ability to maintain profitability every year and every quarter since 1966.

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COMPARISON OF 2007 TO 2006

NET SALES

Net sales for 2007 increased 12% to $16.59 billion, compared with $14.75 billion in 2006. The average sales price per ton increased 8% from $667 in 2006 to $723 in 2007, while total shipments to outside customers increased 4%. In the steel mills segment, net sales to external customers increased 2% from $13.03 billion in 2006 to $13.31 billion in 2007. The increase in sales was due to higher average selling prices, which was slightly offset by lower volume. Net sales to external customers in the steel products segment increased 77% from $1.73 billion in 2006 to $3.05 billion in 2007. Approximately 90% of this increase was due to acquisitions made in 2007. Approximately two-thirds of the remaining increase is due to higher average selling prices, with the remaining increase due to increased volume.

Total steel shipments, including those to the steel products segment, remained flat at 22,347,000 tons in 2007, compared with 22,346,000 tons in the previous year. Steel sales to outside customers decreased 2% to 20,235,000 tons in 2007, compared with 20,649,000 tons in 2006. In the steel products segment, steel joist production for 2007 decreased to 542,000 tons, compared with 570,000 tons in the previous year. Steel deck sales increased to a record 478,000 tons in 2007, compared with 398,000 tons in 2006. Cold finish steel sales were a record 449,000 tons in 2007, compared with 327,000 tons in the previous year. With the acquisition of Harris Steel near the end of the first quarter of 2007, sales of fabricated concrete reinforcing steel were 583,000 tons in 2007 (none in 2006).

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 3% from 2006 to 2007. While the volume of raw materials used remained flat in the steel mills segment, the volume used in the steel products segment almost doubled due to the magnitude of the acquisitions made during the year. The average price of raw materials increased 13% in the steel mills segment and increased 9% in the steel products segment from 2006 to 2007. The average scrap and scrap substitute cost per ton used in our steel mills segment increased 13% from $246 in 2006 to $278 in 2007.

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Nucor incurred a charge to value inventories using the last-in, first-out (“LIFO”) method of accounting of $194.3 million in 2007, compared with a charge of $5.4 million in 2006.

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 per ton remained flat from 2006 to 2007 as decreases in natural gas prices offset increases in electricity prices. Due to the efficiency of Nucor’s steel mills, energy costs remained less than 10% of the sales dollar in 2007 and 2006. We expect that our total energy costs will remain high in 2008. 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 three years. In 2007, the settlement of these hedging transactions increased cost of products sold by approximately $18.0 million (increased cost of products sold by $6.8 million in 2006). In addition to these hedges, Nucor has entered into natural gas purchase contracts that commit Nucor to purchase $777.3 million of natural gas through 2028. These natural gas purchase contracts primarily supply our DRI facility in Trinidad.

Environmental costs also affect cost of products sold, primarily in the steel mills segment. Nucor revises estimates for environmental reserves as additional information becomes available and projects are completed. In 2007 Nucor made approximately $4.5 million in cash payments for remedial efforts and increased reserves by approximately $1.2 million ($3.9 million in cash payments and a $2.9 million increase to reserves in 2006).

Amortization expense recorded in cost of products sold increased from $1.3 million in 2006 to $24.4 million in 2007. The increase is due to the acquisitions that occurred in 2007, which resulted in approximately $489.3 million of amortizable intangible assets.

GROSS MARGIN

Gross margins decreased from 24% in 2006 to 19% in 2007. 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 to be in start-up. Pre-operating and start-up costs of new facilities increased to $56.1 million in 2007, compared with $49.1 million in 2006. In 2007, these costs primarily related to the Hlsmelt project in Australia, the construction of our SBQ mill in Memphis, Tennessee, and the start-up of our Nucor Building Systems plant in Brigham City, Utah. In 2006, these costs primarily related to the refurbishment and start-up of our DRI facility in Trinidad and to the Hlsmelt project.

MARKETING, ADMINISTRATIVE AND OTHER EXPENSES

The major components of marketing, administrative and other expenses are freight and profit sharing costs. Unit freight costs increased 3% from 2006 to 2007 primarily due to higher fuel costs. Profit sharing costs, which are based upon and fluctuate with pre-tax earnings, decreased approximately 22% from 2006 to 2007. In 2007, profit sharing costs included $229.9 million for contributions to a Profit Sharing and Retirement Savings Plan for qualified employees, compared with $272.6 million in 2006. In 2006, all employees except for senior officers received a special cash bonus of $2,000 in addition to their regular profit-sharing payments. This extraordinary bonus was paid to employees for the achievement of record earnings during the year, resulting in additional profit sharing costs of approximately $23.8 million in 2006. No such extraordinary bonus was paid in 2007. 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. Stock-based compensation included in marketing, administrative and other expenses remained flat at $17.3 million in 2007 compared with $17.1 million in 2006. Since stock-based compensation is impacted by changes in Nucor’s stock price and net earnings, the 16% decrease in Nucor’s net earnings was offset by the 8% increase in the stock price.

INTEREST EXPENSE (IN COME)

Net interest expense (income) is detailed below:

 

     (in thousands)  

Year Ended December 31,

   2007     2006  

Interest expense

   $ 51,106     $ 40,351  

Interest income

     (45,637 )     (77,716 )
                

Interest expense (income), net

   $ 5,469     $ (37,365 )
                


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Gross interest expense increased approximately 27% primarily due to increased average debt outstanding, accompanied by increased average interest rates. During the fourth quarter of 2007, Nucor issued $1.3 billion in notes at rates slightly higher than the majority of the existing debt. Gross interest income decreased approximately 41% primarily due to a decrease in average investments, partially offset by an increase in the average interest rate earned on investments. Average investments decreased 50% due to the cash payments of $1.54 billion for acquisitions and $754.0 million for repurchases of common stock during the year.

MINORITY INTERESTS

Minority interests represent the income attributable to the minority partners of Nucor’s joint ventures: Nucor-Yamato Steel Company (“NYS”), Novosteel S.A. and Barker Steel Company. Income attributable to minority interests increased approximately 34% from $219.1 million in 2006 to $293.5 million in 2007. Cash distributions to minority interests increased from $174.7 million in 2006 to $263.1 million in 2007. Under the NYS limited partnership agreement, the minimum amount of cash to be distributed each year to the partners is the amount needed by each partner to pay applicable U.S. federal and state income taxes. In some years 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.

PROVISION FOR INCOME TAXES

Nucor had an effective tax rate of 34.68% in 2007 compared with 34.75% in 2006. In 2007, Nucor recorded refundable state income tax credits of $10.7 million ($12.6 million in 2006).

NET EARNINGS AND RETURN ON EQUITY

Net earnings and earnings per share for 2007 decreased 16% and 13%, respectively, to $1.47 billion and $4.94 per diluted share, compared with a record $1.76 billion and $5.68 per diluted share in 2006. Net earnings as a percentage of net sales were 8.9% in 2007 compared with 11.9% in 2006. The 13% decrease in earnings per share also reflects the effect of repurchasing approximately 14.1 million shares of outstanding common stock during 2007. Return on average stockholders’ equity was 29.5% and 38.3% in 2007 and 2006, respectively.

COMPARISON OF 2006 TO 2005

NET SALES

Net sales for 2006 increased 16% to $14.75 billion, compared with $12.70 billion in 2005. The average sales price per ton increased 7% from $621 in 2005 to $667 in 2006, while total shipments to outside customers increased 8%. In the steel mills segment, net sales to external customers increased 18% from $11.06 billion in 2005 to $13.03 billion in 2006. Approximately 50% of the sales increase was due to higher sales volume resulting from increased demand for our products, as well as additional production capacity obtained from acquisitions made in 2005 and 2006. The remaining 50% of the increase in sales was due to higher average selling prices. Net sales to external customers in the steel products segment increased 5% from $1.64 billion in 2005 to $1.73 billion in 2006. Approximately 70% of the increase was due to higher average selling prices and approximately 30% of the increase was due to increased volume, reflecting an improved non-residential construction market.

Nucor established annual tonnage records in the steel mills segment for total steel shipments and steel shipments to outside customers in 2006. Total steel shipments, including those to the steel products segment, increased 8% to 22,346,000 tons in 2006, compared with 20,669,000 tons in the previous year. Steel sales to outside customers increased 9% to 20,649,000 tons in 2006, compared with 19,020,000 tons in 2005. In the steel products segment, production and shipment volumes increased

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over 2005 across most major product lines. Steel joist production for 2006 increased to 570,000 tons, compared with 554,000 tons in the previous year. Steel deck sales increased to a record 398,000 tons in 2006, compared with 380,000 tons in 2005. Cold finish steel sales were 327,000 tons in 2006, compared with 342,000 tons in the previous year.

COST OF PRODUCTS SOLD

The major component of cost of products sold is raw material costs. The volume of raw materials used increased approximately 8% from 2005 to 2006, consisting of an increase of 9% in the steel mills segment and a decrease of 1% in the steel products segment. The average price of raw materials remained unchanged in the steel mills segment and increased 1% in the steel products segment from 2005 to 2006. The average scrap and scrap substitute cost per ton used in our steel mills segment increased 1% from $244 in 2005 to $246 in 2006.

Nucor incurred a charge to value inventories using the last-in, first-out method of accounting of $5.4 million in 2006, compared with a credit of $151.6 million in 2005 when the costs of scrap and scrap substitutes were decreasing.

Total energy costs decreased approximately $1 per ton from 2005 to 2006 as natural gas prices decreased approximately 10% and electricity prices increased approximately 2%. Energy costs remained less than 10% of the sales dollar in 2006 and 2005. In 2006, the settlement of natural gas hedging transactions increased cost of products sold by approximately $6.8 million (reduced cost of products sold by $12.4 million in 2005).

In 2006 Nucor made approximately $3.9 million in cash payments for environmental remedial efforts and increased reserves by approximately $2.9 million ($12.2 million in cash payments and a $9.4 million decrease to reserves in 2005).

GROSS MARGIN

Gross margins increased from 20% in 2005 to 24% in 2006. In addition to the events and trends discussed above, gross margins are affected by pre-operating and start-up costs. Pre-operating and start-up costs of new facilities increased to $49.1 million in 2006, compared with $14.4 million in 2005. In 2006, these costs primarily related to the refurbishment and start-up of our DRI facility in Trinidad, and to the Hlsmelt project in Australia. In 2005, these costs primarily related to the relocation of the DRI plant and its refurbishment, and to the Hlsmelt project.

MARKETING, ADMINISTRATIVE AND OTHER EXPENSES

Unit freight costs increased 8% from 2005 to 2006 primarily due to higher fuel costs. Profit sharing costs, which are based upon and fluctuate with pre-tax earnings, increased approximately 30% from 2005 to 2006. In 2006, profit sharing costs included $272.6 million for contributions to a Profit Sharing and Retirement Savings Plan for qualified employees, compared with $206.0 million in 2005. Profit sharing costs in 2006 and 2005 included an additional $23.8 million and $22.6 million, respectively, in extraordinary bonuses paid to employees for the achievement of record earnings during the year. Stock-based compensation expense in marketing, administrative and other expenses increased from $6.7 million in 2005 to $17.1 million in 2006. Since stock based compensation is impacted by changes in Nucor’s stock price, this increase was primarily due to the 64% increase in Nucor’s stock price from 2005 to 2006, compared with an increase of 27% from 2004 to 2005. The additional stock-based compensation expense incurred in 2006 was also due to the granting of restricted stock units to key employees, officers and non-employee directors for the first time in 2006 and the expensing of stock options for the first time in 2006 due to the adoption of Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment.”

INTEREST (INCOME) EXPENSE

Net interest (income) expense is detailed below:

 

     (in thousands)  

Year Ended December 31,

   2006     2005  

Interest income

   $ (77,716 )   $ (32,370 )

Interest expense

     40,351       36,571  
                

Interest (income) expense, net

   $ (37,365 )   $ 4,201  
                

Gross interest income more than doubled due to increases in average cash equivalents and short-term investments and, to a lesser extent, due to increases in average interest rates. Gross interest expense increased approximately 10% primarily due to increased average interest rates.


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MINORITY INTERESTS

Income attributable to minority interests almost doubled from $110.7 million in 2005 to $219.1 million in 2006. Cash distributions to minority interests increased from $89.9 million in 2005 to $174.7 million in 2006.

OTHER INCOME

In 2005, Nucor received $9.2 million in settlement of claims against third parties related to environmental matters (none in 2006).

PROVISION FOR INCOME TAXES

Nucor had an effective tax rate of 34.75% in 2006 compared with 35.02% in 2005. In 2006, the Internal Revenue Service completed its examination of our 2002 through 2004 tax returns. The 2006 tax rate reflects an approximately 0.26% reduction to the federal statutory tax rate as a result of the reevaluation of our liabilities and contingencies in light of the completion of the examination. In 2006, Nucor recorded refundable state income tax credits of $12.6 million ($10.4 million in 2005).

NET EARNINGS AND RETURN ON EQUITY

Net earnings and earnings per share for 2006 increased 33% and 37%, respectively, to a record $1.76 billion and $5.68 per diluted share, compared with $1.32 billion and $4.15 per diluted share in 2005. Net earnings as a percentage of net sales were 11.9% in 2006 compared with 10.4% in 2005. The 37% increase in earnings per share also reflects the effect of repurchasing approximately 11.7 million shares of outstanding common stock during 2006. Return on average stockholders’ equity was 38.3% and 33.8% in 2006 and 2005, 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 A1 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 the ability 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 2007, cash and cash equivalents increased 77% to $1.39 billion, short-term investments decreased 87% to $182.5 million, and working capital increased 7% to $3.49 billion. Short-term investments consist solely of variable rate demand notes (“VRDNs”), which are variable rate bonds tied to short-term interest rates, but with stated maturities in excess of 90 days. All VRDNs in which Nucor invests are secured by direct-pay letters of credit issued by high-credit quality financial institutions. This credit enhancement provides a high degree of security and liquidity to the VRDNs. Nucor is able to receive a cash payment in the amount of its principal invested and interest accrued on the VRDNs no later than seven days after notifying the financial institution that it has elected to tender the VRDNs.

 

     (in thousands)

December 31,

   2007    2006

Cash and cash equivalents

   $ 1,393,943    $ 785,651

Short-term investments

     182,450      1,410,633

Working capital

     3,491,213      3,261,148

Current ratio

     3.2      3.3

The current ratio decreased to 3.2 at December 31, 2007 compared with 3.3 at December 31, 2006. Approximately $225.3 million and $199.6 million of the cash and cash equivalents position at December 31, 2007 and December 31, 2006, respectively, was held by our 51%-owned joint venture, Nucor-Yamato Steel Company. We have a simple capital structure with no off-balance sheet financing 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, to manage exposure to changes in interest rates on outstanding debt instruments and to manage foreign currency risk.


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OPERATING ACTIVITIES

Nucor generated cash provided by operating activities of $1.94 billion in 2007 compared with a record $2.25 billion in 2006, a decrease of 14%. This decrease was primarily the result of the 16% decrease in net earnings. In addition, changes in operating assets and liabilities (exclusive of acquisitions) used cash of $202.5 million in 2007 compared with $83.8 million cash used in 2006. Accounts receivable increased in 2007 due to increased sales volumes and increased average prices. Salaries, wages and related accruals decreased due to the reduction in profit sharing.

INVESTING ACTIVITIES

Our business is capital intensive; therefore, cash used in investing activities represents capital expenditures for new facilities, the expansion and upgrading of existing facilities, and the acquisition of other companies. Additionally, the cash used in investing activities includes investments in joint ventures and purchases of and proceeds from the sale of investments. Cash used in investing activities decreased to $856.1 million in 2007 compared with $1.15 billion in 2006. Nucor invested $520.4 million in new facilities (exclusive of acquisitions) and expansion or upgrading of existing facilities in 2007 compared with $338.4 million in 2006, an increase of 54%.

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Existing cash and cash equivalents and short-term investments of approximately $1.54 billion funded the acquisitions of Harris Steel, Magnatrax Corporation and several other companies in 2007. In 2006, Nucor acquired the assets of Connecticut Steel and Verco for $223.9 million.

In the first quarter of 2007, Nucor sold its interest in Ferro Gusa Carajás S. A., a pig iron joint venture in northern Brazil, to its partner, Companhia Vale do Rio Doce (“CVRD”). Nucor has entered into an off-take agreement with CVRD for the production of this facility.

FINANCING ACTIVITIES

Cash used in financing activities decreased to $470.9 million in 2007 compared with $1.30 billion in 2006. In November 2007, Nucor issued $300 million in 5.00% notes due in 2012, $600 million of 5.75% notes due in 2017 and $400 million of 6.40% notes due in 2037.

Also in 2007, Nucor increased its base dividend and paid a quarterly supplemental dividend, resulting in dividend payments increasing from $577.8 million in 2006 to $726.1 million in 2007.

During 2007, Nucor repurchased approximately 14.1 million shares of Nucor’s common stock at a cost of approximately $754.0 million under the stock repurchase program. In September 2007, the board of directors approved the repurchase of up to an additional 30 million shares of common stock, all of which remain available for repurchase.

The percentage of long-term debt to total capital (long-term debt plus minority interests plus stockholders’ equity) was 29% and 15% at year-end 2007 and 2006, respectively.

In 2007, Nucor amended its five-year unsecured revolving credit facility which now matures in November 2012 and provides for up to $1.0 billion in revolving loans. Up to the equivalent of $850.0 million of the credit facility will be available for foreign currency loans, and up to $500.0 million is available for the issuance of letters of credit. The 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, 2007.

MARKET RISK

All of Nucor’s industrial revenue bonds have variable interest rates that are adjusted weekly or annually. These industrial revenue bonds represent 19% of Nucor’s long-term debt outstanding at December 31, 2007. The remaining 81% 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, 2007, there were no such contracts outstanding. Nucor’s 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.


  29

 

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 processed 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.

Prior to the acquisition of Harris Steel, Nucor was principally a domestic manufacturer of steel and steel products with customers located primarily in the U.S. Nucor was exposed to currency fluctuations, however, due to its joint ventures in Brazil and Australia and the direct reduced iron facility in Trinidad. When the Company entered into the agreement to acquire Harris Steel in January 2007, Nucor became exposed to Canadian currency fluctuations and hedged a portion of the exposure associated with the closing of the transaction in March 2007. The Company continues to be exposed to foreign currency risk through its operations in Canada, Trinidad and Australia.

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

The following table sets forth our contractual obligations and other commercial commitments as of December 31, 2007 for the periods presented.

 

                    (in thousands)
      Payments Due By Period

Contractual Obligations

   Total    2008    2009 - 2010    2011 - 2012    2013 and thereafter

Long-term debt

   $ 2,250,300    $ —      $ 180,400    $ 650,000    $ 1,419,900

Estimated interest on long-term debt(1)

     1,639,387      118,016      214,762      209,134      1,097,475

Operating leases

     40,532      9,134      11,718      5,480      14,200

Raw material purchase commitments(2)

     2,940,978      893,047      870,011      681,676      496,244

Utility purchase commitments(2)

     1,170,304      270,551      219,669      101,732      578,352

Other unconditional purchase obligations(3)

     366,603      366,447      153      3      —  

Other long-term obligations(4)

     249,983      104,410      44,301      6,504      94,768
                                  

Total contractual obligations

   $ 8,658,087    $ 1,761,605    $ 1,541,014    $ 1,654,529    $ 3,700,939
                                  

 

(1)

Interest is estimated using applicable rates at December 31, 2007 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. These contracts include multi-year commitments and minimum annual purchase requirements and are valued at prices in effect on December 31, 2007 or according to the contract language. 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.

 

Note: In addition to the amounts shown in the table above, $102.2 million of unrecognized tax benefits have been recorded as liabilities in accordance with FIN 48, and we are uncertain as to if or when such amounts may be settled. Related to these unrecognized tax benefits, we have also recorded a liability for potential penalties and interest of $30 million at December 31, 2007.

DIVIDENDS

Nucor has increased its base cash dividend every year since it began paying dividends in 1973. In 2007, in addition to increasing the base dividend, the board of directors approved a supplemental dividend based on Nucor’s strong performance. Nucor paid dividends of $2.43 per share in 2007 compared with $1.88 per share in 2006. In February 2008, the board of directors approved a 7% increase in Nucor’s quarterly base dividend to $0.32 per share and announced a supplemental dividend of $0.20 per share, for a total quarterly dividend of $0.52 per share. The payment of any future supplemental dividends will depend upon many factors, including Nucor’s earnings, cash flows and financial position. Nucor’s dividends paid to stockholders have increased more than eleven-fold since 2003: $62 million paid in 2003, $70 million paid in 2004, $210 million paid in 2005, $578 million paid in 2006 and $726 million paid in 2007.


30   

 

OUTLOOK

Our objective is to maintain a strong balance sheet while pursuing profitable growth. We expect to obtain additional capacity through optimizing existing operations, pursuing strategic acquisitions, continuing greenfield construction utilizing advantageous new technologies and growing globally with an emphasis on opportunities that leverage technologies and strategic partnerships.

Capital expenditures are currently projected to be approximately $800 million in 2008, an increase of more than 50% over our capital expenditures in 2007. Nucor continues to invest capital in our core operations to keep them state-of-the-art and globally competitive.

In the steel mills segment, total steel production is anticipated to increase over the next several years from the 22,089,000 tons produced in 2007. Our current estimated annual capacity is approximately 25,400,000 tons, and additional capacity may be obtained through upgrading existing facilities, completion of greenfield projects and through acquisitions. More than $300 million of the 2008 capital spending is allocated to our greenfield projects, including significant projects in the steel mills segment such as the SBQ steel mill in Memphis, Tennessee; the Castrip facility in Blytheville, Arkansas; and the sheet steel galvanizing facility at our mill in Decatur, Alabama. In January 2008, Nucor announced signing a Memorandum of Understanding with the Duferco group to establish a 50/50 joint venture for the production of steel beams and other long products in Italy, with distribution in Europe and North Africa. We are working toward establishing this joint venture in the first half of 2008.

We also expect our acquisition of SHV North America Corporation, which owns 100% of The David J. Joseph Company and certain related affiliates, to close in the first quarter of 2008. Since scrap is our largest single cost, this strategic investment provides an ideal growth platform for Nucor to expand its direct ownership in the steel scrap supply chain and further its raw materials strategy.

Nucor has a 25% interest in a joint venture that has constructed 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. Although this investment continues to make encouraging progress, the Hlsmelt process has not yet achieved commercial success.

Our growth strategy has also expanded our participation in attractive downstream steel products businesses. Our value-added steel products provide a valuable base load of volume for our steel mills and are less vulnerable to competition from imports. We anticipate that as non-residential construction markets slow in 2008 due to a weakening economy, our vertical integration and financial strength, combined with the Nucor “can-do” attitude, will allow us to continue our history of exiting weak economic cycles with a very strong competitive position.

With the 2005 purchase of our Wisconsin cold finish bar plant, Nucor became the largest U.S. producer of cold finish bars. Our acquisition of Verco has enhanced our market leadership in the steel decking market. The Magnatrax, LMP Steel & Wire and Nelson acquisitions in 2007 further diversified Nucor’s product offerings and increased Nucor’s market presence in the non-residential building, cold finish, wire and wire mesh industries. The addition of our fourth Nucor Building Systems plant in Brigham City, Utah, gives us a national presence as we execute our strategy to grow profitable market share in this industry.

Harris Steel completed four acquisitions and one joint venture during the first nine months following Nucor’s acquisition of the company, increasing our rebar fabrication capacity by more than 35% over their original capacity. Harris Steel will continue to serve as an avenue for our growth in the rebar fabrication market and to strengthen our leadership position in the cold finish bar market.

We are beginning 2008 with a reasonably strong non-residential construction backlog, but see signs of a slowing economy in our quotation and new order rates. However, we expect infrastructure construction spending to remain strong and Nucor to continue benefiting from product line diversification. We have recently announced price increases for many of our products. Inventory levels at service centers and OEM’s are currently at much lower levels than recent years due to a decreased rate of imports in the second half of 2007. We expect these lower inventory levels and lower imports to reduce the impact of a slowing economy in 2008.

We recognize that uncertainty in external factors such as the rate of increase in raw materials costs, the slowing growth rate of the economy, the level of imports and consolidation in the industry will have a significant impact on our results. In 2008, we will continue working toward our goal of controlling approximately six to seven million 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 expanding our ownership of the scrap supply-chain using the DJJ acquisition as a growth platform. We will continue our defense of fair trade and to point out examples of unfair trade policies and practices until these abuses are remedied. 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.


  31

 

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.

REVENUE RECOGNITION

We recognize revenue when products are shipped, which represents when title and risk of loss have passed to the customer, and when collection is reasonably assured.

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 some inventories is measured on the last in, first out 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.

GOODWILL AND OTHER IN TANGIBLES

Goodwill is the excess of cost over the fair value of net assets of businesses acquired. Goodwill is not amortized but is evaluated annually for impairment or if circumstances indicate a possible impairment may exist. Intangible assets that do not have indefinite lives are amortized over their useful lives and are tested for impairment if certain circumstances indicate an impairment may exist. When it is determined that an impairment exists, the intangible assets are written down to estimated fair value.

ENVIRONMENTAL REMEDIATION

We are subject to environmental laws and regulations established by federal, state and local authorities, and 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 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 utilize the liability method of accounting for income taxes as set forth in Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes,” (“SFAS 109”). Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized.


32   

 

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109.” FIN 48 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements in accordance with SFAS 109. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. We adopted FIN 48 effective January 1, 2007, and the provisions of FIN 48 have been applied to all income tax positions commencing from that date. We recognize potential accrued interest and penalties related to unrecognized tax benefits within operations as a component of income before taxes, which is consistent with the recognition of these items in prior reporting periods. The cumulative effect of applying the provisions of FIN 48 has been reported as an adjustment to retained earnings as of January 1, 2007.

Prior to 2007, we determined our tax contingencies in accordance with SFAS No. 5, “Accounting for Contingencies.” We recorded estimated tax liabilities to the extent the contingencies were probable and could be reasonably estimated.

RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures. SFAS 157 will be effective for Nucor in 2008 for all financial assets and liabilities and effective for non-financial assets and liabilities in 2009. Management does not expect the initial adoption of this statement in 2008 to have a material impact on our consolidated financial statements. Management has not yet determined the impact on our consolidated financial statements from the adoption of SFAS 157 as it pertains to non-financial assets and liabilities.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”), under which companies may elect to measure certain financial instruments and certain other items at fair value. The standard requires that unrealized gains and losses on items for which the fair value option has been elected be reported in earnings. SFAS 159 is effective for Nucor in 2008. This standard is not expected to have a material impact on Nucor’s consolidated financial position and results of operations.

In December 2007, the FASB issued Statement No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”), and Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51” (“SFAS 160”). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. SFAS 160 outlines the accounting and reporting for ownership interest in a subsidiary held by parties other than the parent. SFAS 141R and SFAS 160 are effective for Nucor in 2009. Management is currently evaluating the impact of these statements.


36    FIVE-YEAR FINANCIAL REVIEW

 

 

     (dollar amounts in thousands, except per share data)  
      2007     2006     2005     2004     2003  

FOR THE YEAR

          

Net sales

   $ 16,592,976     $ 14,751,270     $ 12,700,999     $ 11,376,828     $ 6,265,823  

Costs, expenses and other:

          

Cost of products sold

     13,462,927       11,284,606       10,108,805       9,174,611       5,993,492  

Marketing, administrative and other expenses

     577,764       592,473       459,460       374,730       165,369  

Interest expense (income), net

     5,469       (37,365 )     4,201       22,352       24,627  

Minority interests

     293,501       219,121       110,650       80,840       23,904  

Other income

     —         —         (9,200 )     (1,596 )     (11,547 )
                                        
     14,339,661       12,058,835       10,673,916       9,650,937       6,195,845  

Earnings before income taxes

     2,253,315       2,692,435       2,027,083       1,725,891       69,978  

Provision for income taxes

     781,368       935,653       709,834       607,906       5,181  
                                        

Net earnings

     1,471,947       1,756,782       1,317,249       1,117,985       64,797  

Net earnings per share:

          

Basic

     4.98       5.73       4.19       3.53       0.21  

Diluted

     4.94       5.68       4.15       3.50       0.21  

Dividends declared per share

     2.44       2.15       0.93       0.24       0.20  

Percentage of net earnings to net sales

     8.9 %     11.9 %     10.4 %     9.8 %     1.0 %

Return on average equity

     29.5 %     38.3 %     33.8 %     38.2 %     2.7 %

Capital expenditures

     520,353       338,404       331,466       285,925       215,408  

Depreciation

     403,172       363,936       375,054       383,305       364,112  

Acquisitions (net of cash acquired)

     1,542,666       223,920       154,864       169,646       34,941  

Sales per employee

     1,085       1,273       1,159       1,107       637  

AT YEAR END

          

Current assets

   $ 5,073,249     $ 4,683,065     $ 4,081,611     $ 3,182,132     $ 1,639,784  

Current liabilities

     1,582,036       1,421,917       1,228,618       1,042,776       615,067  
                                        

Working capital

     3,491,213       3,261,148       2,852,993       2,139,356       1,024,717  

Cash provided by operating activities

     1,935,306       2,251,233       2,136,615       1,024,756       493,801  

Current ratio

     3.2       3.3       3.3       3.1       2.7  

Property, plant and equipment, net

     3,232,998       2,856,415       2,855,717       2,818,307       2,817,135  

Total assets

     9,826,122       7,893,018       7,148,845       6,140,391       4,511,577  

Long-term debt

     2,250,300       922,300       923,550       923,550       903,550  

Percentage of debt to capital

     29.4 %     15.3 %     17.0 %     20.2 %     26.1 %

Stockholders’ equity

     5,112,917       4,857,351       4,312,049       3,481,281       2,370,873  

Per share

     17.75       16.14       13.90       10.91       7.54  

Shares outstanding

     287,993       300,949       310,220       319,024       314,361  

Employees

     18,000       11,900       11,300       10,600       9,900  


MANAGEMENT’S REPORT   37

 

 

 

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 Exchange Act 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, 2007. 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, 2007. PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of Nucor’s internal control over financial reporting as of December 31, 2007 as stated in their report which is included herein.


38   

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Stockholders and Board of Directors

Nucor Corporation:

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, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included 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. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Notes 2 and 19 to the consolidated financial statements, Nucor Corporation changed the manner in which it accounts for uncertain tax positions in fiscal 2007.

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.

 

LOGO

PricewaterhouseCoopers LLP
Charlotte, North Carolina
February 27, 2008


CONSOLIDATED BALANCE SHEETS

  39

 

CONSOLIDATED BALANCE SHEETS   (in thousands)

December 31,

   2007     2006  

ASSETS

    

CURRENT ASSETS:

    

Cash and cash equivalents

   $ 1,393,943     $ 785,651  

Short-term investments (Note 4)

     182,450       1,410,633  

Accounts receivable, net (Note 5)

     1,611,844       1,067,322  

Inventories (Note 6)

     1,601,600       1,141,194  

Other current assets (Note 19)

     283,412       278,265  
                

Total current assets

     5,073,249       4,683,065  

PROPERTY, PLANT AND EQUIPMENT, NET (Note 7)

     3,232,998       2,856,415  

GOODWILL (Note 8)

     847,887       143,265  

OTHER INTANGIBLE ASSETS, NET (Note 8)

     469,936       5,015  

OTHER ASSETS (Notes 1 and 13)

     202,052       205,258  
                

TOTAL ASSETS

   $ 9,826,122     $ 7,893,018  
                

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

CURRENT LIABILITIES:

    

Short-term debt (Note 10)

   $ 22,868     $ —    

Accounts payable (Note 9)

     691,668       516,640  

Salaries, wages and related accruals (Notes 15 and 16)

     436,352       455,051  

Accrued expenses and other current liabilities (Notes 9, 13 and 14)

     431,148       450,226  
                

Total current liabilities

     1,582,036       1,421,917  
                

LONG-TERM DEBT DUE AFTER ONE YEAR (Note 10)

     2,250,300       922,300  
                

DEFERRED CREDITS AND OTHER LIABILITIES (Notes 14, 15, 16 and 19)

     593,423       448,084  
                

MINORITY INTERESTS

     287,446       243,366  
                

COMMITMENTS AND CONTINGENCIES (Notes 6 and 14)

    

STOCKHOLDERS’ EQUITY (Notes 11, 12 and 15):

    

Common stock

     149,302       149,006  

Additional paid-in capital

     256,406       195,543  

Retained earnings

     6,621,646       5,840,067  

Accumulated other comprehensive income, net of income taxes (Notes 2 and 13)

     163,362       4,470  
                
     7,190,716       6,189,086  

Treasury stock

     (2,077,799 )     (1,331,735 )
                

Total stockholders’ equity

     5,112,917       4,857,351  
                

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 9,826,122     $ 7,893,018  
                

See notes to consolidated financial statements.


40   

CONSOLIDATED STATEMENTS OF EARNINGS

 

 

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

Year Ended December 31,

   2007    2006     2005  

NET SALES

   $ 16,592,976    $ 14,751,270     $ 12,700,999  
                       

COSTS, EXPENSES AND OTHER:

       

Cost of products sold

     13,462,927      11,284,606       10,108,805  

Marketing, administrative and other expenses

     577,764      592,473       459,460  

Interest expense (income), net (Note 17)

     5,469      (37,365 )     4,201  

Minority interests

     293,501      219,121       110,650  

Other income (Note 18)

     —        —         (9,200 )
                       
     14,339,661      12,058,835       10,673,916  
                       

EARNINGS BEFORE INCOME TAXES

     2,253,315      2,692,435       2,027,083  

PROVISION FOR INCOME TAXES (Note 19)

     781,368      935,653       709,834  
                       

NET EARNINGS

   $ 1,471,947    $ 1,756,782     $ 1,317,249  
                       

NET EARNINGS PER SHARE (Note 20):

       

Basic

   $ 4.98    $ 5.73     $ 4.19  
                       

Diluted

   $ 4.94    $ 5.68     $ 4.15  
                       

See notes to consolidated financial statements.


CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

  41

 

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, 2004

  184,383   $ 73,753   $ 147,206     $ 3,713,851     $ (392 )   $ (1,177 )   24,871     $ (451,960 )   $ 3,481,281  

Comprehensive income:

                 

Net earnings in 2005

          1,317,249               1,317,249  

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

                    1,365,026  

Stock options exercised

  916     367     26,709                 27,076  

Issuance of stock under award plans, net of forfeitures

        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 ($0.93 per share)

          (289,728 )             (289,728 )

BALANCES, December 31, 2005

  185,299     74,120     191,850       4,741,372       (3,287 )     46,600     30,189       (738,606 )     4,312,049  

Comprehensive income:

                 

Net earnings in 2006

          1,756,782               1,756,782  

Net unrealized loss on hedging derivatives, net of income taxes

              (57,900 )         (57,900 )

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

              4,400           4,400  

Foreign currency translation gain, net of income taxes

              11,370           11,370  
                       

Total comprehensive income

                    1,714,652  

Stock options exercised

  1,253     500     36,731                 37,231  

Issuance of stock under award plans, net of forfeitures

  15     6     37,442         3,287       (262 )     6,317       47,052  

Amortization of unearned compensation

        3,900                 3,900  

Treasury stock acquired

              11,248       (599,446 )     (599,446 )

2-for-1 stock split

  185,949     74,380     (74,380 )         30,392         —    

Cash dividends ($2.15 per share)

          (658,087 )             (658,087 )

BALANCES, December 31, 2006

  372,516     149,006     195,543       5,840,067       —         4,470     71,567       (1,331,735 )     4,857,351  

Comprehensive income:

                 

Net earnings in 2007

          1,471,947               1,471,947  

Net unrealized loss on hedging derivatives, net of income taxes

              (819 )         (819 )

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

              11,719           11,719  

Foreign currency translation gain, net of income taxes

              142,971           142,971  

Adjustment to early-retiree medical, plan, net of income taxes

              10,313           10,313  

Other

              (5,292 )         (5,292 )
                       

Total comprehensive income

                    1,630,839  

Adjustment to initially apply FIN 48

          31,135               31,135  

Stock options exercised

  609     244     11,759                 12,003  

Issuance of stock under award plans, net of forfeitures

  130     52     43,554           (423 )     7,965       51,571  

Amortization of unearned compensation

        5,550                 5,550  

Treasury stock acquired

              14,118       (754,029 )     (754,029 )

Cash dividends ($2.44 per share)

          (721,503 )             (721,503 )

BALANCES, December 31, 2007

  373,255   $ 149,302   $ 256,406     $ 6,621,646     $ —       $ 163,362     85,262     $ (2,077,799 )   $ 5,112,917  

See notes to consolidated financial statements.


42   

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

CONSOLIDATED STATEMENTS OF CASH FLOWS        (in thousands)  

Year Ended December 31,

   2007     2006     2005  

OPERATING ACTIVITIES

      

Net earnings

   $ 1,471,947     $ 1,756,782     $ 1,317,249  

Adjustments:

      

Depreciation

     403,172       363,936       375,054  

Amortization

     24,384       1,333       1,072  

Stock-based compensation

     44,001       40,106       16,791  

Deferred income taxes

     (81,206 )     (39,394 )     (25,629 )

Minority interests

     293,498       219,107       110,639  

Settlement of natural gas hedges

     (18,019 )     (6,793 )     12,365  

Changes in assets and liabilities (exclusive of acquisitions):

      

Accounts receivable

     (174,326 )     (33,878 )     (19,425 )

Inventories

     (102,490 )     (143,971 )     337,862  

Accounts payable

     57,259       (8,517 )     17,259  

Federal income taxes

     13,332       (7,233 )     (68,331 )

Salaries, wages and related accruals

     (42,931 )     86,475       39,869  

Other

     46,685       23,280       21,840  
                        

Cash provided by operating activities

     1,935,306       2,251,233       2,136,615  

INVESTING ACTIVITIES

      

Capital expenditures

     (520,353 )     (338,404 )     (331,466 )

Sale of interest in affiliate

     29,500       —         —    

Investment in affiliates

     (31,435 )     (34,324 )     (41,903 )

Disposition of plant and equipment

     2,787       2,177       752  

Acquisitions (net of cash acquired)

     (1,542,666 )     (223,920 )     (154,864 )

Purchases of investments

     (487,395 )     (1,082,378 )     (919,950 )

Proceeds from the sale of investments

     1,687,578       529,105       62,590  

Proceeds from currency derivative contracts

     517,241       —         —    

Settlement of currency derivative contracts

     (511,394 )     —         —    
                        

Cash used in investing activities

     (856,137 )     (1,147,744 )     (1,384,841 )

FINANCING ACTIVITIES

      

Net change in short-term debt

     (65,871 )     —         —    

Repayment of long-term debt

     —         (1,250 )     —    

Proceeds from issuance of long-term debt

     1,322,445       —         —    

Debt issuance costs

     (9,200 )     —         —    

Issuance of common stock

     12,003       37,233       40,209  

Excess tax benefits from stock-based compensation

     13,000       18,000       —    

Distributions to minority interests

     (263,086 )     (174,709 )     (89,886 )

Cash dividends

     (726,139 )     (577,816 )     (209,752 )

Acquisition of treasury stock

     (754,029 )     (599,446 )     (291,244 )
                        

Cash used in financing activities

     (470,877 )     (1,297,988 )     (550,673 )

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

     608,292       (194,499 )     201,101  

CASH AND CASH EQUIVALENTS – BEGINNING OF YEAR

     785,651       980,150       779,049  
                        

CASH AND CASH EQUIVALENTS – END OF YEAR

   $ 1,393,943     $ 785,651     $ 980,150  
                        

See notes to consolidated financial statements.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

  43

 

YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION:

NATURE OF OPERATIONS Nucor is principally a manufacturer of steel and steel products with operating facilities and customers primarily located in North 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 in which Nucor shares control over the financial and operating decisions but in which Nucor is not the primary beneficiary 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 their U.S. federal and state income taxes.

Other assets include $146.0 million at December 31, 2007 ($201.4 million at December 31, 2006) 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. Nucor periodically evaluates its equity investments for potential impairment resulting from declines in value considered to be other than temporary.

USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles 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 2007 presentation.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

CASH AND CASH EQUIVALENTS Cash and cash equivalents 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 cash equivalents are maintained primarily with a few high-credit quality financial institutions.

SHORT-TERM INVESTMENTS Short-term investments are recorded at cost plus accrued interest, which approximates market. Unrealized gains and losses on investments classified as available-for-sale are recorded as a component of accumulated other comprehensive income. Management determines the appropriate classification of its investments at the time of purchase and reevaluates such determination at each balance sheet date.

INVENTORIES VALUATION Inventories are stated at the lower of cost or market. Cost of some inventories is determined using the last-in, first-out (LIFO) method of accounting, and cost of the remaining 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. The costs of planned major maintenance activities are capitalized and amortized over the period until 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 exceeds the assets’ undiscounted cash flows. When it is determined that an impairment exists, the related assets are written down to estimated fair market value.

GOODWILL AND OTHER INTANGIBLES Goodwill is the excess of cost over the fair value of net assets of businesses acquired. Goodwill is not amortized but is evaluated annually for impairment or if circumstances indicate a possible impairment may exist.

Intangible assets that do not have indefinite lives are amortized over their useful lives and are tested for impairment if certain circumstances indicate an impairment may exist. When it is determined that an impairment exists, the intangible assets are written down to estimated fair 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. In addition, Nucor utilizes forward foreign exchange contracts to hedge cash flows associated with certain assets and liabilities, firm commitments and anticipated transactions.

In accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” (“SFAS 133”), as amended by SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities,” and SFAS No. 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 underlying transaction is recognized


44   

 

in net earnings. 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). If these instruments do not meet hedge accounting criteria, the change in fair value is recognized immediately in earnings in the same line as the underlying transaction.

REVENUE RECOGNITION Nucor recognizes revenue when products are shipped, which represents when title and risk of loss have passed to the customer, and when collection is reasonably assured.

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 $81.5 million in 2007 ($73.7 million in 2006 and $67.1 million in 2005). All other freight costs are included in cost of products sold.

INCOME TAXES Nucor utilizes the liability method of accounting for income taxes as set forth in Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes,” (“SFAS 109”). Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized.

Nucor’s intention is to permanently reinvest the earnings of certain foreign investments. Accordingly, no provisions have been made for taxes that may be payable upon remittance of such earnings.

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109.” FIN 48 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements in accordance with SFAS 109. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. We adopted FIN 48 effective January 1, 2007, and the provisions of FIN 48 have been applied to all income tax positions commencing from that date. We recognize potential accrued interest and penalties related to unrecognized tax benefits within operations as a component of income before taxes, which is consistent with the recognition of these items in prior reporting periods. The cumulative effect of applying the provisions of FIN 48 has been reported as an adjustment to retained earnings as of January 1, 2007.

Prior to 2007, we determined our tax contingencies in accordance with SFAS No. 5, “Accounting for Contingencies.” We recorded estimated tax liabilities to the extent the contingencies were probable and could be reasonably estimated.

STOCK-BASED COMPENSATION Effective January 1, 2006, Nucor adopted SFAS No. 123(R), “Share-Based Payment” (“SFAS 123(R)”), applying the modified prospective approach. As a result, the Company began to recognize the cost of stock-based compensation as an expense using fair value measurement methods.

Through 2005, Nucor accounted for 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 was recorded, other than for restricted stock grants, since the exercise price of the stock options was equal to the market price of Nucor’s common stock on the grant date.

The following presents pro forma net earnings and per share data as if a fair value based method had been used to account for stock-based compensation in 2005:

 

(in thousands, except per share data)  

Year Ended December 31,

   2005  

Net earnings – as reported

   $ 1,317,249  

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

     12,717  

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

     (21,305 )
        

Net earnings – pro forma

   $ 1,308,661  
        

Net earnings per share – as reported:

  

Basic

   $ 4.19  

Diluted

     4.15  

Net earnings per share – pro forma:

  

Basic

     4.16  

Diluted

     4.13  


  45

 

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 Nucor reports comprehensive income and the changes in accumulated other comprehensive income (loss) in its consolidated statement of stockholders’ equity. Accumulated other comprehensive income is comprised of the following:

 

     (in thousands)  

December 31,

   2007    2006  

Foreign currency translation, net of income taxes when applicable

   $ 149,049    $ 11,370  

Early retirement medical plan adjustments, net of income taxes

     10,313      —    

Fair market value of derivatives, net of income taxes

     4,000      (6,900 )
               
   $ 163,362    $ 4,470  
               

FOREIGN CURRENCY TRANSLATION For Nucor’s legal entities where the functional currency is other than the U.S. dollar, assets and liabilities have been translated at year-end exchange rates, and income and expenses translated using average exchange rates for the respective periods. Adjustments resulting from the process of translating an entity’s financial statements into the U.S. dollar have been recorded in accumulated other comprehensive income and are included in net earnings only upon sale or liquidation of the underlying investments. Foreign currency transaction gains and losses are included in operations in the period they occur.

RECENT ACCOUNTING PRONOUNCEMENTS In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures. SFAS 157 will be effective for Nucor in 2008 for all financial assets and liabilities and effective for non-financial assets and liabilities in 2009. Management does not expect the initial adoption of this statement in 2008 to have a material impact on our consolidated financial statements. Management has not yet determined the impact on our consolidated financial statements from the adoption of SFAS 157 as it pertains to non-financial assets and liabilities.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”), under which companies may elect to measure certain financial instruments and certain other items at fair value. The standard requires that unrealized gains and losses on items for which the fair value option has been elected be reported in earnings. SFAS 159 is effective for Nucor in 2008. This standard is not expected to have a material impact on Nucor’s consolidated financial position and results of operations.

In December 2007, the FASB issued Statement No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”), and Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51” (“SFAS 160”). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. SFAS 160 outlines the accounting and reporting for ownership interest in a subsidiary held by parties other than the parent. SFAS 141R and SFAS 160 are effective for Nucor in 2009. Management is currently evaluating the impact of these statements.

3. ACQUISITIONS:

In 2004, Nucor acquired a one-half interest in the rebar fabricator Harris Steel Inc., the remaining one-half interest of which was owned by Harris Steel Group Inc. (“Harris Steel”). In March 2007, a wholly owned subsidiary of Nucor acquired all of the issued and outstanding shares of Harris Steel for a cash purchase price of Cdn$46.25 per Harris Steel share. The purchase price includes approximately $1.06 billion paid in cash and $68.4 million of short-term debt assumed related to the net assets acquired. Nucor also consolidated an additional $18.2 million of short-term debt related to its previous 50% ownership in Harris Steel Inc. As a result of the acquisition, Nucor has consolidated Harris Steel Inc., which was previously accounted for under the equity method. Harris Steel, which now operates as a subsidiary of Nucor, manufactures industrial products principally in the U.S. and Canada. Harris Steel also participates in steel trading on a worldwide basis and distributes reinforcing steel and related products to U.S. customers.


46   

 

We have obtained independent appraisals for the purpose of allocating the purchase price to the individual assets acquired and liabilities assumed. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed of Harris Steel as of the date of acquisition:

 

As of the date of acquisition    (in thousands)  

Current assets

   $ 460,037  

Property, plant and equipment

     122,187  

Goodwill

     478,008  

Other intangible assets

     305,217  

Other assets

     565  
        

Total assets acquired

     1,366,014  
        

Short-term debt

     (68,365 )

Other current liabilities

     (108,862 )

Deferred credits and other liabilities

     (125,813 )

Minority interests

     (3,522 )
        

Total liabilities assumed

     (306,562 )
        

Net assets acquired

   $ 1,059,452  
        

The purchase price allocation to the identifiable intangible assets is as follows (in thousands, except years):

 

          Weighted

Identifiable Intangibles

        Average Life

Customer relationships

   $ 271,462    22 years

Trade names

     33,755    20 years
           
   $ 305,217    22 years
           

The majority of the goodwill has been allocated to the steel products segment (see Note 8).

The results of Harris Steel have been included in the consolidated financial statements from the date of acquisition. Unaudited pro forma results for Nucor, assuming the acquisition of Harris Steel occurred at the beginning of each period are as follows:

 

     (in thousands, except per share data)

December 31,

   2007    2006

Net sales

   $ 16,769,601    $ 15,886,239

Net earnings

     1,480,597      1,829,463

Net earnings per share:

     

Basic

   $ 5.01    $ 5.97
             

Diluted

   $ 4.97    $ 5.91
             

Since Nucor’s acquisition of Harris Steel in March 2007, Harris Steel has continued to grow its rebar fabrication business. In June, Harris Steel purchased the stock of South Pacific Steel Corp. for a cash purchase price of approximately $24.9 million. In addition, in August, Harris Steel acquired Consolidated Rebar, Inc. for a cash purchase price of approximately $23.4 million. Consolidated Rebar, Inc. has two rebar fabrication facilities in Arizona.


  47

 

In November 2007, Harris Steel formed a new entity that combined Harris Rebar fabrication operations in the northeastern U.S. market with the northeastern facilities of Barker Steel Company, Inc. (“Barker”). Harris Steel contributed two facilities and distributed cash of approximately $61.1 million for a 90% equity interest in the new venture. Barker contributed eight facilities in exchange for a 10% interest and the $61.1 million distribution. The new venture resulted in approximately $6.8 million of goodwill that has been allocated to the steel products segment, as well as approximately $6.7 million of identifiable intangibles, primarily trade names that are being amortized over 20 years.

In August 2007, Nucor purchased substantially all the assets of LMP Steel & Wire Company (“LMP”) for a cash purchase price of approximately $27.2 million. Located in Maryville, Missouri, LMP is a producer of cold finished bar.

Also in August 2007, a wholly owned subsidiary of Nucor acquired Magnatrax Corporation (“Magnatrax”), a leading provider of custom-engineered metal building systems with seven fabricating plants located across the United States. The cash purchase price of $275.2 million includes approximately $164.7 million of goodwill that has been allocated to the steel products segment. The cash purchase price also includes $116.2 million of identifiable intangibles, primarily customer relationships that are being amortized over 22 years.

In October 2007, Nucor acquired substantially all the assets of Nelson Steel, Inc. (“Nelson”) for a cash purchase price of approximately $53.2 million. Located in New Salem, Pennsylvania, Nelson is a producer of wire mesh and related products.

In May 2006, Nucor’s wholly owned subsidiary, Nucor Steel Connecticut, Inc., purchased substantially all of the assets of Connecticut Steel Corporation for a cash purchase price of approximately $43.9 million. This facility produces wire rod, rebar, wire mesh and structural mesh products.

In November 2006, Nucor’s wholly owned subsidiary, Verco Decking, Inc., purchased substantially all of the assets of Verco Manufacturing Company (“Verco”), a producer of steel floor and roof decking in three locations in the western United States. The cash purchase price of approximately $183.5 million includes approximately $110.5 million of goodwill that has been allocated to the steel products segment.

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.

Non-cash investing and financing activities included the assumption of $457.7 million of liabilities with the acquisitions in 2007 ($26.1 million in 2006 and $17.8 million in 2005).

4. SHORT-TERM INVESTMENTS:

As of December 31, 2007, short-term investments consisted entirely of variable rate demand notes (“VRDNs”), which are variable rate bonds tied to short-term interest rates with stated original maturities in excess of 90 days. All of the VRDNs in which Nucor invests are secured by a direct-pay letter of credit issued by a high-credit quality financial institution. Nucor can receive the principal invested and interest accrued thereon no later than seven days after notifying the financial institution that Nucor has elected to tender the VRDNs. Since VRDNs trade at par value, no realized or unrealized gains or losses were incurred. Aggregate contractual maturities of the Company’s short-term investments are $182.5 million in 2024 and thereafter.

5. 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 $50.0 million at December 31, 2007 ($38.0 million at December 31, 2006 and $39.2 million at December 31, 2005).

6. INVENTORIES:

Inventories consist of approximately 43% raw materials and supplies and 57% finished and semi-finished products at December 31, 2007 (48% and 52%, respectively, at December 31, 2006). Nucor’s manufacturing process is a continuous, vertically integrated process from which products are sold to customers at various stages throughout the process. Since most steel products can be classified as either finished or semi-finished products, these two categories of inventory are combined.

Inventories valued using the last-in, first-out (LIFO) method of accounting represent approximately 46% of total inventories at December 31, 2007 (63% at December 31, 2006). If the first-in, first-out (FIFO) method of accounting had been used, inventories would have been $581.5 million higher at December 31, 2007 ($387.2 million higher at December 31, 2006).


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Nucor has entered into supply agreements for certain raw materials, utilities and other items in the ordinary course of business. These agreements extend into 2035 and total approximately $4.11 billion at December 31, 2007.

7. PROPERTY, PLANT AND EQUIPMENT:

 

          (in thousands)

December 31,

   2007    2006

Land and improvements

   $ 231,583    $ 170,259

Buildings and improvements

     623,961      520,930

Machinery and equipment

     5,903,335      5,592,077

Construction in process and equipment deposits

     390,790      110,190
             
     7,149,669      6,393,456

Less accumulated depreciation

     3,916,671      3,537,041
             
   $ 3,232,998    $ 2,856,415
             

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.

8. GOODWILL AND OTHER INTANGIBLE ASSETS:

The change in the net carrying amount of goodwill for the years ended December 31, 2007 and 2006 by segment is as follows :

 

     (in thousands)  
     Steel Mills    Steel Products     All Other    Total  

Balance, December 31, 2005

   $ 2,007    $ 15,013     $ —      $ 17,020  

Acquisitions

     —        126,245       —        126,245  
                              

Balance, December 31, 2006

     2,007      141,258       —        143,265  

Acquisitions

     —        606,637       59,389      666,026  

Purchase price adjustments of previous acquisitions

     —        (15,699 )     —        (15,699 )

Translation

     —        54,295       —        54,295  
                              

Balance, December 31, 2007

   $ 2,007    $ 786,491     $ 59,389    $ 847,887  
                              

Goodwill resulting from the acquisition of Harris Steel and Magnatrax accounts for almost all of the increase in goodwill in 2007 and is presented based upon Nucor’s final purchase price allocations for those acquisitions. The majority of goodwill is not tax deductible.

Intangible assets with estimated lives of five to 22 years are amortized on a straight-line or accelerated basis and are comprised of the following:

 

     (in thousands)
      2007    2006

December 31,

   Gross
Amount
   Accumulated
Amortization
   Gross
Amount
   Accumulated
Amortization

Customer relationships

   $ 414,514    $ 20,042    $ —      $ —  

Trademarks and trade names

     59,431      1,746      

Other

     24,102      6,323      8,742      3,727
                           
   $ 498,047    $ 28,111    $ 8,742    $ 3,727
                           

Intangible asset amortization expense was $24.4 million in 2007 ($1.3 million in 2006 and $1.1 million in 2005). Annual amortization expense is estimated to be $45.3 million in 2008; $42.3 million in 2009; $39.6 million in 2010; $36.3 million in 2011; and $33.0 million in 2012.


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9. CURRENT LIABILITIES:

Drafts payable, included in accounts payable in the balance sheet, was $0.3 million at December 31, 2007 ($74.7 million at December 31, 2006). The decrease in drafts payable is the result of the Company converting to the use of checks in 2007.

Dividends payable, included in accrued expenses and other current liabilities in the balance sheet, was $176.5 million at December 31, 2007 ($181.2 million at December 31, 2006).

10. DEBT AND OTHER FINANCING ARRANGEMENTS:

 

     (in thousands)

December 31,

   2007    2006

Industrial revenue bonds:

     

3.54% to 3.90%, variable, due from 2009 to 2038

   $ 425,300    $ 397,300

Notes, 6%, due 2009

     175,000      175,000

Notes, 4.875%, due 2012

     350,000      350,000

Notes, 5.0%, due 2012

     300,000      —  

Notes, 5.75%, due 2017

     600,000      —  

Notes, 6.40%, due 2037

     400,000      —  
             
     2,250,300      922,300

Less current maturities

     —        —  
             
   $ 2,250,300    $ 922,300
             

Annual aggregate long-term debt maturities are: none in 2008; $180.4 million in 2009; none in 2010 and 2011; $650 million in 2012; and $1.42 billion thereafter.

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

In November 2007, Nucor amended its existing five-year unsecured revolving credit facility to provide for up to $1.0 billion in revolving loans. The amended multi-year revolving credit agreement expires in November 2012. Up to the equivalent of $850.0 million of the credit facility is available for foreign currency loans, and up to $500.0 million is available for the issuance of letters of credit. The credit facility may be increased by up to $300.0 million at Nucor’s election in accordance with the terms set forth in the credit agreement. No borrowings were outstanding under the credit facility as of December 31, 2007. The credit facility provides for grid-based 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 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.

Harris Steel has credit facilities totaling approximately $52.0 million, with no borrowings outstanding at December 31, 2007.

In addition, the business of Novosteel S.A., of which Harris Steel owns 75%, is financed by trade credit arrangements totaling approximately $199.9 million with a number of Swiss-based banking institutions. These arrangements, principally letters of credit under trade finance facilities, are non-recourse to Nucor and its other subsidiaries. As of December 31, 2007, there were outstanding borrowings of $22.9 million and outstanding letters of credit of $7.8 million under the Swiss trade credit arrangements for commitments to purchase inventories.

11. CAPITAL STOCK:

The par value of Nucor’s common stock is $0.40 per share and there are 800 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.

12. STOCKHOLDER RIGHTS PLAN:

In 2001, the board of directors adopted a Stockholder Rights Plan (“Plan”) in which one right (“Right”) was distributed as a dividend for each Nucor common share outstanding. The Plan was amended in 2006 to adjust the purchase price of the Rights for stock splits effected since adoption of the Plan. 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


50   

 

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 percent (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 percent (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 $150, 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 $0.001 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.

13. DERIVATIVE FINANCIAL INSTRUMENTS:

During 2007, accumulated other comprehensive income decreased by $0.8 million, net of deferred taxes of $0.5 million, due to unrealized losses on cash flow hedges on natural gas forward purchase contracts. The remaining change in accumulated other comprehensive income attributable to cash flow hedges on natural gas forward purchase contracts was due to the reclassification of net losses of approximately $11.7 million, net of deferred taxes of approximately $6.3 million, into earnings due to the settlement of transactions. During 2006, accumulated other comprehensive income decreased by $57.9 million, net of deferred taxes of $31.2 million, due to unrealized losses on cash flow hedges on natural gas forward purchase contracts. The remaining change in accumulated other comprehensive income attributable to cash flow hedges on natural gas forward purchase contracts was due to the reclassification of net losses of approximately $4.4 million, net of deferred taxes of approximately $2.4 million, into earnings due to the settlement of transactions. During 2005, accumulated other comprehensive income increased by $55.8 million, net of 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.

Of the total $6.1 million fair value of cash flow hedges on natural gas forward purchase contracts at December 31, 2007, $4.4 million is included in accrued expenses and other current liabilities and $10.5 million is included in other assets. Of the total $10.6 million fair value of cash flow hedges on natural gas forward purchase contracts at December 31, 2006, $12.6 million is included in accrued expenses and other current liabilities and $2.0 million is included in other assets. At December 31, 2007, $2.9 million of net deferred losses 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, 2007. 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 three years.

Nucor has also entered into various natural gas purchase contracts, which meet the normal purchase normal sale exclusion under SFAS 133. These instruments effectively commit Nucor to the following purchases of natural gas to be used for production: $165.6 million in 2008; $46.6 million in 2009; $27.0 million in 2010; $26.1 million in 2011; $26.7 million in 2012; and $485.3 million between 2013 and 2028. These natural gas purchase contracts will primarily supply our direct reduced iron facility in Trinidad.

In January 2007, the Company entered into forward foreign currency contracts in order to mitigate the risk of currency fluctuation on the fixed purchase price for the acquisition of Harris Steel, which closed in March 2007. These contracts had a notional value of Cdn$600 million and settled in March 2007 resulting in a recognized gain of $5.8 million included in marketing, administrative and other expenses.

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.

14. 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 $19.9 million of accrued environmental costs at December 31, 2007 ($23.0 million at December 31, 2006), $16.6 million was classified in accrued expenses and other current liabilities ($19.7 million at December 31, 2006) and $3.3 million was classified in deferred credits and other liabilities at December 31, 2007 and December 31, 2006. Inherent uncertainties exist in these estimates primarily due to unknown conditions, evolving remediation technology, and changing governmental regulations and legal standards. During 2007, Nucor revised estimates as additional information was obtained and projects were completed, increasing environmental reserves by $1.2 million (increasing reserves by $2.9 million in 2006 and reducing reserves by $9.4 million in 2005). The revisions are included in cost of products sold.


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Other contingent liabilities with respect to product warranties, legal proceedings and other matters arise in the normal course of business. Nucor maintains liability insurance for certain risks that arise that are also subject to certain self-insurance limits. In the opinion of management, no such matters exist which, in the event of an unfavorable outcome, would have a material effect on the consolidated financial statements.

15. STOCK-BASED COMPENSATION:

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 price on the date of the grant. Outstanding options are exercisable six months after the grant date and have a term of seven years. Nucor did not grant any options during 2007 or 2006 and does not expect to grant options to its employees, officers or non-employee directors in future periods.

A summary of activity under Nucor’s stock option plans is as follows:

 

                (shares in thousands)
      2007    2006    2005

Year Ended December 31,

   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

   2,461     $ 20.21    4,366     $ 19.93    4,672     $ 14.68

Granted

   —         —      —         —      1,553       29.75

Exercised

   (609 )     19.70    (1,903 )     19.56    (1,833 )     14.77

Canceled

   —         —      (2 )     28.86    (26 )     27.71
                                      

Outstanding at end of year

   1,852     $ 20.37    2,461     $ 20.21    4,366     $ 19.93
                                      

Options exercisable at end of year

   1,852     $ 20.37    2,461     $ 20.21    3,562     $ 17.91
                                      

Shares reserved for future grants

             19,068    
                  

Since Nucor began granting restricted stock units in 2006 in lieu of stock options, the shares reserved for future grants as of December 31, 2007 and 2006 are reflected in the restricted stock units table located at the end of this note. The total intrinsic value of options (the amount by which the stock price exceeded the exercise price of the option on the date of exercise) that were exercised during 2007 was $26.5 million ($56.1 million in 2006 and $28.9 million in 2005).

The following table summarizes information about stock options outstanding at December 31, 2007:

 

     (shares in thousands)
     Options Outstanding and Exercisable

Range of Exercise Prices

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

$ 10.00 – $  15.00

   630    1.8 years    $ 12.28

   15.01 –     20.00

   554    3.5 years      18.29

   20.01 –     25.00

   —      —        —  

   25.01 –     30.73

   668    4.4 years      29.72
                

$ 10.00 – $  30.73

   1,852    3.3 years    $ 20.37
                

The total aggregate intrinsic value of options outstanding and options exercisable as of December 31, 2007 was $71.9 million.


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The weighted-average per share fair value of options granted was $9.08 in 2005 (none granted in 2006 and 2007). 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 (expected volatilities are based on historical experience):

 

Year Ended December 31,

  

2005

Expected dividend yield

   0.98% – 1.04%

Expected stock price volatility

   38.42% – 38.43%

Risk-free interest rate

   3.76% – 3.80%

Expected life of options (in years)

     3.5      

As a result of adopting SFAS 123(R) in the first quarter of 2006, $2.5 million of compensation expense was recorded over the remaining vesting period for the unvested portion of previously issued awards that were outstanding at January 1, 2006. Since Nucor did not grant any options in 2006 or 2007 and since as of March 1, 2006 all outstanding options were vested, no additional compensation expense related to stock options was recorded throughout the remainder of 2006 or in 2007.

RESTRICTED STOCK AWARDS Nucor’s Senior Officers Long-Term Incentive Plan (the “LTIP”) and Annual Incentive Plan (the “AIP”) 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 fifty-five while employed by Nucor. Although participants are entitled to cash dividends and may vote 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 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 award. Common stock units attributable to deferred awards are fully vested. Common stock units credited as a deferral incentive vest upon the participant’s attainment of age fifty-five while employed by Nucor. Vested common stock units are paid to participants in the form of shares of common stock following their termination of employment with Nucor.

A summary of Nucor’s restricted stock activity under the AIP and LTIP is as follows:

 

     (shares in thousands)
      2007    2006    2005

Year Ended December 31,

   Shares     Grant Date
Fair Value
   Shares     Grant Date
Fair Value
   Shares     Grant Date
Fair Value

Restricted stock awards and units:

              

Unvested at beginning of year

   553     $ 39.14    408     $ 27.33    76     $ 14.03

Granted

   464       64.26    588       47.54    585       28.83

Vested

   (538 )     49.42    (436 )     39.26    (253 )     26.79

Canceled

   —         —      (7 )     47.54    —         —  
                                      

Unvested at end of year

   479     $ 51.93    553     $ 39.14    408     $ 27.33
                                      

Shares reserved for future grants

   2,267        2,731        3,312    
                          


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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 $18.3 million in 2007 ($23.1 million in 2006 and $16.8 million in 2005). The total fair value of shares vested during 2007 was $34.1 million ($20.3 million in 2006 and $7.5 million in 2005). As of December 31, 2007, unrecognized compensation expense related to non-vested restricted stock was $5.3 million, which is expected to be recognized over a weighted-average period of 1.7 years.

RESTRICTED STOCK UNITS In June 2006, Nucor granted restricted stock units (“RSUs”) to key employees, officers and non-employee directors for the first time. The RSUs typically vest and are converted to common stock in three equal installments on each of the first three anniversaries of the grant date. A portion of the RSUs awarded to senior officers vest upon the officer’s retirement. Retirement, for purposes of vesting in these units only, means termination of employment with approval of the Compensation and Executive Development Committee after satisfying age and years of service requirements. RSUs granted to non-employee directors are fully vested on the grant date and are payable to the non-employee director in the form of common stock after the termination of the director’s service on the board of directors.

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

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

The fair value of the RSUs is determined based on the closing stock price of Nucor’s common stock on the day before the grant. A summary of Nucor’s restricted stock unit activity for 2007 and 2006 is as follows:

 

     (shares in thousands)
     2007    2006
     Shares     Grant Date
Fair Value
   Shares     Grant Date
Fair Value

Restricted stock units:

         

Unvested at beginning of year

   597     $ 52.64    —       $ —  

Granted

   637       67.54    769       52.64

Vested

   (310 )     58.93    (159 )     52.64

Canceled

   (6 )     57.38    (13 )     52.64
                         

Unvested at end of year

   918     $ 60.82    597     $ 52.64
                         

Shares reserved for future grants

   17,683        18,314    
                 

Compensation expense for RSUs was $25.7 million in 2007 ($14.5 million in 2006 and none in 2005). The total fair value of shares vested during 2007 was $20.8 million ($8.4 million in 2006 and none in 2005). As of December 31, 2007, unrecognized compensation expense related to non-vested RSUs was $40.7 million, which is expected to be recognized over a weighted-average period of 1.8 years.

16. 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 $229.9 million in 2007 ($272.6 million in 2006 and $206.0 million in 2005). The related liability for these benefits is included in salaries, wages and related accruals. 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 $44.1 million at December 31, 2007 ($51.8 million at December 31, 2006). Expense associated with this plan totaled $3.4 million in 2007 ($4.6 million in 2006 and $2.9 million in 2005). The discount rate used was 6.5% in 2007 (5.75% in 2006 and 5.50% in 2005). The health care cost increase trend rate used was 8% in 2007 and 2006 (9% in 2005). The health care cost increase in the trend rate is projected to decline gradually to 5% by 2013.


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17. INTEREST EXPENSE (INCOME):

Net interest expense (income) consists of the following:

 

     (in thousands)  

Year Ended December 31,

   2007     2006     2005  

Interest expense

   $ 51,106     $ 40,351     $ 36,571  

Interest income

     (45,637 )     (77,716 )     (32,370 )
                        

Interest expense (income), net

   $ 5,469     $ (37,365 )   $ 4,201  
                        

Interest paid was $46.8 million in 2007 ($41.5 million in 2006 and $37.2 million in 2005).

18. OTHER INCOME:

In 2005, Nucor received $9.2 million in settlement of claims against third parties related to environmental matters.

19. INCOME TAXES:

The provision for income taxes consists of the following:

 

     (in thousands)  

Year Ended December 31,

   2007     2006     2005  

Current:

      

Federal

   $ 762,045     $ 902,110     $ 685,479  

State

     73,435       72,937       49,984  

Foreign

     27,094       —         —    
                        

Total current

     862,574       975,047       735,463  
                        

Deferred:

      

Federal

     (57,845 )     (39,394 )     (24,429 )

State

     (4,500 )     —         (1,200 )

Foreign

     (18,861 )     —         —    
                        

Total deferred

     (81,206 )     (39,394 )     (25,629 )
                        

Total provision for income taxes

   $ 781,368     $ 935,653     $ 709,834  
                        

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

 

Year Ended December 31,

   2007     2006     2005  

Taxes computed at statutory rate

   35.00 %   35.00 %   35.00 %

State income taxes, net of federal income tax benefit

   1.99     1.76     1.57  

Resolution of prior year contingencies

   —       (0.26 )   —    

Federal research credit

   (0.06 )   (0.05 )   (0.07 )

Domestic manufacturing deduction

   (2.02 )   (1.03 )   (1.04 )

Other, net

   (0.23 )   (0.67 )   (0.44 )
                  

Provision for income taxes

   34.68 %   34.75 %   35.02 %
                  


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Deferred tax assets and liabilities resulted from the following:

 

     (in thousands)  

December 31,

   2007     2006  

Deferred tax assets:

    

Accrued liabilities and reserves

   $ 93,266     $ 76,655  

Allowance for doubtful accounts

     15,511       11,617  

Inventory

     124,487       138,642  

Post-retirement benefits

     16,427       19,855  

Natural gas hedges

     —         4,495  

Net operating loss carryforward

     13,887       —    

Tax credit carryforwards

     24,000       —    
                

Total deferred tax assets

     287,578       251,264  
                

Deferred tax liabilities:

    

Cumulative translation adjustment

     (8,000 )     (6,345 )

Natural gas hedges

     (1,597 )     —    

Holdbacks and amounts not due under contracts

     (28,512 )     —    

Intangibles

     (153,087 )     —    

Property, plant and equipment

     (275,680 )     (323,106 )
                

Total deferred tax liabilities

     (466,876 )     (329,451 )
                

Total net deferred tax liabilities

   $ (179,298 )   $ (78,187 )
                

Current deferred tax assets were $161.0 million at December 31, 2007 ($170.8 million at December 31, 2006). Non-current deferred tax liabilities were $340.3 million at December 31, 2007 ($249.0 million at December 31, 2006). Nucor paid $875.6 million in net federal, state and foreign income taxes in 2007 ($971.0 million in 2006 and $806.7 million in 2005).

As a result of the implementation of FIN 48, Nucor recognized a net $31.1 million decrease to reserves for uncertain tax positions and accrued interest and penalties, which was accounted for as an increase in the January 1, 2007 retained earnings. At the adoption date, Nucor had approximately $92.4 million of unrecognized tax benefits, of which $90.2 million would affect Nucor’s effective tax rate, if recognized. At December 31, 2007, Nucor had approximately $102.2 million of unrecognized tax benefits, of which $99.5 million would affect Nucor’s effective tax rate, if recognized.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

 

     (in thousands)  

Balance at January 1, 2007

   $ 92,394  

Additions based on tax positions related to current year

     21,082  

Reductions based on tax positions related to current year

     —    

Additions for tax positions of prior years

     7,504  

Reductions for tax positions of prior years

     (1,173 )

Reductions due to settlements with taxing authorities

     (17,567 )

Reductions due to statute of limitations lapse

     (5,686 )

Additions from current year acquisitions

     5,620  
        

Balance at December 31, 2007

   $ 102,174  
        


56   

 

It is expected that the amount of unrecognized tax benefits will change in the next twelve months. However, we do not expect the change to have a significant impact on our results of operations or financial position.

During 2007, Nucor recognized $1.8 million in interest and penalties. As of December 31, 2007, Nucor had approximately $30.0 million of accrued interest and penalties related to uncertain tax positions.

The Internal Revenue Service (“IRS”) is currently examining Nucor’s 2005 federal income tax returns. Management believes that the Company has adequately provided for any adjustments that may arise from this audit. Nucor has substantially concluded U.S. federal income tax matters for years through 2004. The 2006 and 2007 tax years are open to examination by the IRS. The tax years 2003 through 2007 remain open to examination by other major taxing jurisdictions to which Nucor is subject.

20. 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,

   2007    2006    2005

Basic earnings per share:

        

Basic net earnings

   $ 1,471,947    $ 1,756,782    $ 1,317,249
                    

Average shares outstanding

     295,779      306,621      314,256
                    

Basic net earnings per share

   $ 4.98    $ 5.73    $ 4.19
                    

Diluted earnings per share:

        

Diluted net earnings

   $ 1,471,947    $ 1,756,782    $ 1,317,249
                    

Diluted average shares outstanding:

        

Basic shares outstanding

     295,779      306,621      314,256

Dilutive effect of stock options and other

     2,099      2,760      2,874
                    
     297,878      309,381      317,130
                    

Diluted net earnings per share

   $ 4.94    $ 5.68    $ 4.15
                    


  57

 

21. SEGMENTS:

Nucor reports its results in the following 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, fabricated concrete reinforcing steel, cold finish steel, steel fasteners, metal buildings, light gauge steel framing, steel grating and expanded metal, and wire and wire mesh. The “All other” category includes Novosteel S.A., a steel trading business of which Nucor owns 75%, Nu-Iron Unlimited, a facility that produces direct reduced iron used by the steel mills, and certain equity method investments. 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. Corporate assets primarily include cash and cash equivalents, short-term investments, deferred income tax assets and investments in affiliates.

Nucor’s segment results are as follows:

 

     (in thousands)  

Year Ended December 31,

   2007     2006     2005  

Net sales to external customers:

      

Steel mills

   $ 13,311,212     $ 13,025,123     $ 11,063,681  

Steel products

     3,051,648       1,726,147       1,637,318  

All other (1)

     230,116       —         —    
                        
   $ 16,592,976     $ 14,751,270     $ 12,700,999  
                        

Intercompany sales:

      

Steel mills

   $ 1,313,337     $ 990,382     $ 896,432  

Steel products

     36,101       21,560       36,246  

All other (1)

     340,687       —         —    

Corporate/eliminations

     (1,690,125 )     (1,011,942 )     (932,678 )
                        
   $ —       $ —       $ —    
                        

Depreciation expense:

      

Steel mills

   $ 351,565     $ 345,165     $ 355,887  

Steel products

     31,089       18,438       19,167  

All other (1)

     19,692       —         —    

Corporate

     826       333       —    
                        
   $ 403,172     $ 363,936     $ 375,054  
                        

Earnings before income taxes:

      

Steel mills

   $ 2,854,152     $ 3,193,277     $ 2,218,336  

Steel products

     302,162       191,514       180,756  

All other (1)

     (3,926 )     (17,780 )     (9,399 )

Corporate/eliminations

     (899,073 )     (674,576 )     (362,610 )
                        
   $ 2,253,315     $ 2,692,435     $ 2,027,083  
                        

Segment assets:

      

Steel mills

   $ 5,134,277     $ 4,717,734     $ 4,633,520  

Steel products

     2,938,964       751,858       519,562  

All other (1)

     647,945       370,486       220,265  

Corporate/eliminations

     1,104,936       2,052,940       1,775,498  
                        
   $ 9,826,122     $ 7,893,018     $ 7,148,845  
                        

Capital expenditures:

      

Steel mills

   $ 409,986     $ 195,548     $ 216,047  

Steel products

     90,344       18,039       18,378  

All other (1)

     9,107       105,961       89,740  

Corporate

     10,916       18,856       7,301  
                        
   $ 520,353     $ 338,404     $ 331,466  
                        

 

(1)

In 2007, “All other” includes the results of our raw material-related businesses as follows: no sales to external customers, intercompany sales of $322.0 million, depreciation expense of $19.6 million, earnings before income taxes of $(6.5) million, assets of $465.1 million and capital expenditures of $9.0 million. In 2006 and 2005, the amounts in “All other” consist exclusively of the results from our raw material-related businesses.


58   

 

Geographic information is as follows:

 

     (in thousands)

December 31,

   2007    2006

Property, plant, equipment, net

     

United States

   $ 2,887,760    $ 2,624,231

Other

     345,238      232,184
             
   $ 3,232,998    $ 2,856,415
             

Net sales by product were as follows. Further product group breakdown is impracticable.

 

          (in thousands)

Year Ended December 31,

   2007    2006    2005

Net sales to external customers:

        

Sheet

   $ 5,051,067    $ 5,362,178    $ 4,805,391

Bar

     3,885,094      3,702,609      3,061,326

Structural

     2,564,531      2,205,303      1,702,720

Plate

     1,810,520      1,755,033      1,494,244

Steel products

     3,051,648      1,726,147      1,637,318

All other

     230,116      —        —  
                    
   $ 16,592,976    $ 14,751,270    $ 12,700,999
                    

22. SUBSEQUENT EVENT:

In February 2008, Nucor signed a purchase agreement to acquire the stock of SHV North America Corporation, which owns 100% of The David J. Joseph Company (“DJJ”), its related affiliates and real estate, for approximately $1.44 billion. The acquisition is expected to close in the first quarter after satisfactory resolution of regulatory approvals. DJJ, which will operate as a subsidiary of Nucor, trades and processes scrap, provides transportation services using a railcar fleet, and provides other complementary services.

23. QUARTERLY INFORMATION (UNAUDITED):

 

     (in thousands, except per share data)

Year Ended December 31,

   First Quarter    Second Quarter    Third Quarter    Fourth Quarter

2007

           

Net sales

   $ 3,768,885    $ 4,168,110    $ 4,259,221    $ 4,396,760

Gross margin(1)

     777,287      764,205      809,961      778,596

Net earnings

     381,029      344,850      381,222      364,846

Net earnings per share:

           

Basic

     1.27      1.14      1.30      1.27

Diluted

     1.26      1.14      1.29      1.26

2006

           

Net sales

   $ 3,545,097    $ 3,806,350    $ 3,931,233    $ 3,468,590

Gross margin(2)

     766,926      876,555      1,010,451      812,732

Net earnings

     380,031      450,011      521,636      405,104

Net earnings per share:

           

Basic

     1.22      1.45      1.71      1.35

Diluted

     1.21      1.44      1.70      1.34

 

(1)

Nucor incurred LIFO charges of $24.5 million, $66.5 million, $11.0 million and $92.3 million in the first, second, third and fourth quarters of 2007, respectively.

(2)

Nucor incurred LIFO charges of $9.0 million, $15.5 million and $20.5 million in the first, second and third quarters of 2006, respectively; and incurred a LIFO credit of $39.6 million in the fourth quarter of 2006.


62    CORPORATE AND STOCK DATA

 

CORPORATE OFFICE

1915 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

The 2008 annual meeting of stockholders will be held at 10:00 a.m. on Friday, May 9, 2008, at the Charlotte Marriott SouthPark, 2200 Rexford Road, Charlotte, NC.

STOCK LISTING

Nucor’s common stock is traded on the New York Stock Exchange under the symbol NUE. As of January 31, 2008, there were approximately 19,000 stockholders of record.

FORM 10-K

A copy of Nucor’s 2007 annual report filed with the Securities and Exchange Commission (“SEC”) on Form 10-K is available to stockholders upon 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 Sarbanes-Oxley Act of 2002 are included as exhibits to Nucor’s annual report on Form 10-K. In addition, in 2007, 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.

STOCK PRICE AND DIVIDENDS PAID

 

      First
Quarter
   Second
Quarter
   Third
Quarter
   Fourth
Quarter

2007

           

Stock price:

           

High

   $ 66.99    $ 69.93    $ 64.75    $ 64.97

Low

     53.20      56.07      41.62      50.11

Dividends paid

     0.60      0.61      0.61      0.61

2006

           

Stock price:

           

High

   $ 54.90    $ 60.30    $ 55.94    $ 67.55

Low

     33.64      44.80      45.12      47.50

Dividends paid

     0.325      0.35      0.60      0.60

STOCK PERFORMANCE

This graphic comparison assumes the investment of $100 in Nucor Corporation common stock, $100 in the S&P 500 Index and $100 in the S&P Steel Group Index, all at year-end 2002. The resulting cumulative total return assumes that cash dividends were reinvested. Nucor common stock comprised 42% of the S&P Steel Group Index at year-end 2007 (51% at year-end 2002).

LOGO

THIS ANNUAL REPORT HAS BEEN PRINTED ON RECYCLED PAPER.

Subsidiaries

Exhibit 21

Nucor Corporation

2007 Form 10-K

Subsidiaries

 

                    Subsidiary

 

State/Jurisdiction

                    of Incorporation                    

Nucor Overseas Holding, LLC

  Delaware

Nucor Steel Auburn, Inc.

  Delaware

Nucor Steel Birmingham, Inc.

  Delaware

Nucor Steel Decatur, LLC.

  Delaware

Nucor Steel Jackson, Inc.

  Delaware

Nucor Steel Kankakee, Inc.

  Delaware

Nucor Steel Marion, Inc.

  Delaware

Nucor Steel Memphis, Inc.

  Delaware

Nucor Steel Seattle, Inc.

  Delaware

Nucor Steel Tuscaloosa, Inc

  Delaware

Nucor-Yamato Steel Company

  Delaware

Nu-Iron Holding (Barbados) SRL

  Barbados

Nustrip Arkansas LLC

  Delaware

Harris Steel Inc.

  Delaware

Harris U.S. Holdings Inc

  Delaware

Harris Steel Group, ULC

  Alberta, Canada

 

Consent of Independent Registered Public Accounting Firm

Exhibit 23

Nucor Corporation

2007 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-3ASR (Number 333-147657) of Nucor Corporation of our report dated February 27, 2008 relating to the financial statements 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 February 27, 2008 relating to the financial statement schedule, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Charlotte, North Carolina

February 27, 2008

Powers of Attorney

Exhibit 24

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 2007 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 20th day of February, 2008.

 

  /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 20th day of February, 2008, 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 20th day of February, 2008.

 

  /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 2007 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 20th day of February, 2008.

 

  /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 20th day of February, 2008, 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 20th day of February, 2008.

 

  /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 2007 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 20th day of February, 2008.

 

  /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 20th day of February, 2008, 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 20th day of February, 2008.

 

  /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 2007 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 20th day of February, 2008.

 

  /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 20th day of February, 2008, 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 20th day of February, 2008.

 

  /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 2007 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 20th day of February, 2008.

 

  /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 20th day of February, 2008, 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 20th day of February, 2008.

 

  /S/ KELLY J. WILMOTH
  Notary Public
  My commission expires on August 23, 2008