Table of Contents

 

 

2009

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, 2009   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 mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  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 information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (s232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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 $13.22 billion based upon the closing sales price of the registrant’s common stock on the last day of our most recently completed second fiscal quarter, July 4, 2009.

314,915,594 shares of common stock were outstanding at February 19, 2010.

Documents incorporated by reference include: Portions of 2009 Annual Report (Parts I, II and IV), and Notice of 2010 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    8
Item 1B    Unresolved Staff Comments    11
Item 2    Properties    12
Item 3    Legal Proceedings    13
Item 4    Submission of Matters to a Vote of Security Holders    13
Executive Officers of the Registrant    14
PART II     
Item 5    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
   15
Item 6    Selected Financial Data    15
Item 7    Management's Discussion and Analysis of Financial Condition and Results of
Operations
   15
Item 7A    Quantitative and Qualitative Disclosures about Market Risk    15
Item 8    Financial Statements and Supplementary Data    16
Item 9    Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
   16
Item 9A    Controls and Procedures    16
Item 9B    Other Information    17
PART III     
Item 10    Directors, Executive Officers and Corporate Governance    18
Item 11    Executive Compensation    18
Item 12    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
   18
Item 13    Certain Relationships and Related Transactions, and Director Independence    18
Item 14    Principal Accountant Fees and Services    18
PART IV     
Item 15    Exhibits and Financial Statement Schedules    19
Signatures    23
Index to Financial Statement Schedule    24

 

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PART I

 

Item 1. Business

Overview

Nucor Corporation was incorporated in Delaware in 1958. Nucor and affiliates are manufacturers of steel and steel products, with operating facilities and customers primarily located in North America and, increasingly, internationally. In February 2008, Nucor acquired The David J. Joseph Company (“DJJ”) and its affiliates. Through DJJ, Nucor also brokers ferrous and nonferrous metals, pig iron, hot briquetted iron (“HBI”) and direct reduced iron (“DRI”); supplies ferro-alloys; and processes ferrous and nonferrous scrap. Additionally, the Company’s operations include international trading companies that buy and sell steel and steel products.

Nucor is North America’s largest recycler, using scrap steel as the primary material in producing our products. In 2009, we recycled approximately 13.4 million tons of scrap steel.

Segments

Nucor reports its results in the following segments: steel mills, steel products and raw materials. Net sales to external customers, intercompany sales, depreciation expense, amortization expense, earnings (loss) before income taxes and noncontrolling interests, assets and capital expenditures by segment for each of the three years in the period ended December 31, 2009 are set forth in Note 22 of Notes to Consolidated Financial Statements of the 2009 Annual Report, which 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. The raw materials segment produces DRI from Nucor’s facility in Trinidad; brokers ferrous and nonferrous metals, pig iron, HBI and DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap.

Hot-rolled steel is manufactured principally from scrap and scrap substitutes, 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 2009, approximately 86% 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 and, increasingly, internationally. In 2009, approximately 30% 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

 

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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.

Products from the steel mills and steel products 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.

In the raw materials segment, ferrous and nonferrous scrap metal is processed and sold to domestic and international consumers. Additionally, brokerage of scrap substitutes, supply of ferro-alloy, and transportation, material handling and other services are provided to users of scrap metals. The primary customers for ferrous scrap are steel mills and foundries that use scrap as a raw material in their manufacturing process. Nonferrous customers include aluminum can companies, secondary aluminum smelters, steel mills and other processors and consumers of various nonferrous metals. Scrap products and services are marketed through in-house sales forces. In 2009, approximately 18% of the ferrous and nonferrous scrap tons sold by the raw materials segment were to non-affiliated customers.

Additionally, the Company’s other operations include international trading companies that buy and sell steel and steel products manufactured by Nucor mills as well as other steel manufacturers.

Due to the global economic crisis that began in the second half of 2008 and continued through 2009, there has been a widespread weakening of global economic conditions resulting in decreased capital spending. Because of this deterioration, the related demand for our products has diminished. Looking forward into the first quarter of 2010, we believe that steel market conditions will remain extremely challenging. One indicator of general economic conditions is the unemployment rate. In December 2009, the Bureau of Labor Statistics released the U6 real unemployment rate of 17%. The U6 rate includes total unemployed plus workers who want to work full time but are employed part time for economic reasons. Another indicator of market conditions for our industry is the capacity utilization rate. According to the American Steel Institute, industry capacity utilization rates for 2009 were 51% compared to 81% in 2008 and 87% in 2007. As a result, we believe that any increased demand in the North American steel markets will be part of a long, slow recovery.

We anticipate that global demand in 2010 will bring the steel industry close to production levels experienced prior to the current economic recession, with North America and Europe trailing behind growth in other parts of the world. Any sizeable increase in demand in North America will primarily come from replenishing inventory following the destocking that occurred in late 2008 and early 2009. Additionally, we expect moderate growth in global demand over the next five years, primarily related to the continued building of infrastructure in China, India and other industrializing nations of the world.

In the midst of this economic crisis, Nucor has been active in calling on policymakers to enforce global trade agreements and address the jobs crisis in the United States. The illegal trade practices of some of our trading partners, particularly China, continue to be an important concern for the company. In mid-2008, in response to the global economic crisis, China returned to its practice of pegging its currency to the dollar. Chinese currency manipulation has contributed to huge U.S. trade deficits and the shrinking of our country’s manufacturing base. The Obama Administration has begun to take positive steps toward enforcing trade agreements. The Commerce Secretary and U.S. Trade Representative have both stated that enforcement of trade agreements is essential. The President has also acknowledged the role that the currency policies of our

 

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competitors can play in creating competitive disadvantages. The Administration put this acknowledgement into action when it imposed duties on tires and oil country tubular goods from China during November 2009.

In order to jump-start economic growth, Nucor has urged lawmakers to increase spending on our country’s outdated and deteriorating infrastructure. According to the American Society of Civil Engineers, we need $2.2 trillion in spending over the next five years to repair and update our infrastructure in order to keep the nation globally competitive. The stimulus package passed in early 2009 allocated only $110 billion out of the total $787 billion package for infrastructure, of which less than half of the funds allocated to infrastructure have actually been spent at the date of this filing. We have also encouraged efforts to replace foreign sources of energy with domestically-produced energy as a way to reduce our trade deficit and secure reliable, affordable sources of energy. Traditional and energy-related infrastructure projects would help create the jobs needed to offset the 8.4 million jobs lost during this recession.

Backlog

In the steel mills segment, Nucor’s backlog of orders was approximately $1.55 billion and $1.42 billion at December 31, 2009 and 2008, respectively. Nucor’s backlog of orders in the steel products segment was approximately $954.6 million and $1.38 billion at December 31, 2009 and 2008, respectively. Order backlogs for the steel mills segment include orders attributable to Nucor’s downstream businesses. The majority of these orders will be filled within one year. The decrease in backlog orders in the steel products segments is due to the economic downturn, which was particularly severe in the non-residential construction markets. The construction markets represent a significant percentage of sales for our steel mills and steel products segment. Due to the nature of our raw materials business, order backlog within the raw materials segment is not significant.

Raw Materials

The primary raw material for the steel mills segment is ferrous scrap, which is mostly acquired via DJJ’s brokerage service from numerous sources throughout the country, including our DJJ scrap processing facilities. The primary raw material for the steel products segment is steel, which is almost entirely purchased from the steel mills segment. In the raw materials segment, we purchase ferrous and nonferrous scrap from the following primary sources: (i) manufacturers and industrial plants or other sources that generate or recycle steel scrap, aluminum, copper, stainless steel and other nonferrous metals; and (ii) scrap dealers, peddlers, auto wreckers, demolition firms and others who generate steel that they collect from a variety of sources. We do not purchase a significant amount of scrap metal from a single source or from a limited number of major sources. The primary raw material for our DRI facility in Trinidad is iron ore, which is purchased from various international suppliers.

The average scrap and scrap substitute cost per ton used has decreased by 31% from the historically high levels of $438 in 2008 to $303 in 2009. During both years, Nucor used a raw material surcharge as a component of our product pricing to help offset the impact of volatile scrap prices.

Changes in scrap prices are based on changes in the global supply and demand for scrap, which is tied to the global supply and demand for steel products. From late 2003 until third quarter 2008, demand for scrap and other raw materials rose sharply in response to increased demand, both domestically and internationally, for a wide range of products made from steel without a corresponding increase in the global supply of those raw materials. Although steel demand has weakened recently causing a decrease in scrap pricing, the surcharge mechanism to offset raw materials pricing changes is still in place. Our surcharges are based upon changes in widely-available market indices for prices of scrap and other raw materials. We monitor those changes closely and make adjustments as needed, but generally on a monthly basis, to the surcharges and sometimes directly to the selling prices, for our products. The majority of our steel sales are to spot market customers who place their orders each month based on their business needs and our pricing competitiveness compared with both domestic and global

 

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producers and trading companies. We also include in all of our contracts a method of adjusting prices on a periodic basis to reflect changes in market pricing for scrap. Contract sales typically have a term ranging from six months to two years. There will always be a timing difference between changes in the prices we pay for raw materials and the adjustments we make. We attempt to manage the risk associated with this timing difference via the surcharge mechanism, which our customers understand is a necessary response by us to the market forces of supply and demand for our raw materials.

Nucor’s margins and overall profitability are affected by the global balance of supply and demand for steel. We believe our variable cost structure, combined with our financial strength and liquidity, allowed us to survive the severely depressed steel industry market conditions of 2002-2003 and 2008-2009 as scrap prices fell dramatically and our incentive pay system reduced our hourly and salary payroll costs, helping to offset lower selling prices. We recognize that the steel business is cyclical in nature and expect to see future changes in the balance of supply and demand impact our margins and profitability.

Energy Consumption

The steel mills are also large consumers of electricity and natural gas. Nucor uses cash flow hedges 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. While we support policies promoting expanded drilling for natural gas, our country also needs to pursue the construction of new coal-fired and nuclear power plants. Although our government has prevented access to some of the most promising areas for natural gas exploration, continued advances in drilling technology (particularly shale gas recovery) have resulted in increased proven reserves. As a result, natural gas prices have been volatile, increasing 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 then declining beginning in mid-2008 to prices below $4.00 per mmbtu in the summer of 2009. Forward contract prices for 2010 are currently averaging less than $6.00 per mmbtu due to increased reserves, the weak economy and reduced industrial demand. Any form of greenhouse gas legislation is likely to further increase the share of electricity generated by natural gas, thereby increasing costs for consumers of electricity. Nucor actively supports several organizations that are promoting a more rational energy policy. We believe this is critical not only for our future business success, but also for the future of the U.S. economy. Supplies of raw materials and energy have been, and are expected to be, adequate to operate our facilities.

As a carbon steel producer, Nucor will likely be impacted by legislative and regulatory efforts in the U.S. Nucor is also the largest recycler in the U.S. and, as such, has significantly contributed to the steel industry’s 29% drop in Greenhouse Gas (“GHG”) emissions over the last two decades. Nucor and the rest of the steel industry are continually singled out as already having made the right choices and being models for other industry sectors. The growth of Nucor has in large part been one of the drivers of this reduction.

At present it appears that legislative efforts directed at climate change are correctly being focused on the negative impact that “cap and trade” type legislation would have on manufacturers and the jobs they represent. It is difficult to evaluate the impact of any legislation that at present is only theoretical, but it is possible to make some general statements about the overall concept, particularly as climate change legislation or regulation would apply to Nucor’s cost of operations.

Most versions of climate change “cap and trade” legislation treat the steel industry favorably with respect to allowances for emissions that will facilitate production. However, it is the indirect, increased costs for energy resulting from climate change legislation or regulation that are Nucor’s primary concern. Climate change legislation or regulation will have a negative impact on utilities that will result in an increase in the cost of energy that Nucor consumes at its operations. Higher energy costs would make Nucor and other U.S. based

 

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manufacturers less competitive with other producers in the increasingly global market for steel and steel products. For this reason, Nucor believes it is critical that the U.S. should increase the supply of economical nuclear power and natural gas instead of relying on production of electricity from more expensive alternate sources such as solar and wind.

The severity of the impact on Nucor’s operations of increased energy costs will depend upon the specifics of any climate change legislation or regulation. For this reason, Nucor has for some time been actively involved in efforts, both internally and externally, to improve energy efficiency at all levels of its operations. These efforts include participation in Climate Vision, the World Steel Sector Initiative and the Asia Pacific Partnership. Nucor also tracks energy intensity internally and provides the managers of its various operations with targets for improvement.

The Environmental Protection Agency (“EPA”) has issued an Advanced Notice of Proposed Rulemaking that proposes to regulate GHG’s under the Clean Air Act. Because most of Nucor’s operations are already subject to the EPA’s Prevention of Significant Deterioration (“PSD”) and New Source Review (“NSR”) rules that were also promulgated under the Clean Air Act, complying with any new rules regulating GHG’s should not present significantly new challenges beyond the already cumbersome permitting process. The EPA’s authority to adopt rules regulating GHG’s has already been challenged in court by several states, and the rules themselves when they are adopted will be subject to legal challenges. Therefore, we do not expect the proposed rules regulating GHG’s will be implemented for some time.

Strategic Growth Initiatives

Nucor employs a multi-pronged growth strategy allowing for flexibility and the ability to capitalize on growth opportunities at any point in time. The objective of our strategy is profitable growth that will allow for maximum shareholder returns. The four prongs include:

 

   

Optimization of existing operations

 

   

Greenfield growth that capitalizes on new technologies and unique marketplace opportunities

 

   

Acquisitions

 

   

International growth with an emphasis on leveraging strategic partnerships and new technologies

Inherent in our growth strategy and our business model is our culture. It is a culture based on teamwork, continual improvement and long-term strategic thinking. Over the years, our culture and philosophy have enabled us to operate in a downturn the same way we operate during periods of economic strength. In fact, Nucor has a long history of taking advantage of economic downturns to grow stronger and expand our long-term earnings power. It is worth noting that a healthy portion of the profits realized for several years leading up until 2009 were generated by assets that we built or acquired during the last economic downturn experienced during the 2001 to 2003 time period. These highly successful growth initiatives included our entry into the plate market, and the acquisitions of Auburn Steel, Birmingham Steel and Trico Steel.

While the current economic downturn presents a number of risks to Nucor and the steel industry, we also believe that such an environment will present unusually attractive growth opportunities to a company that is in Nucor’s position of strength. We believe our strong balance sheet and disciplined approach will enable us to capitalize on these opportunities and continue to build Nucor into a better and more profitable company well into the future.

Optimization of existing operations

Nucor emphasizes optimizing existing operations in order to keep them state-of-the-art and globally competitive. Capital expenditures are currently projected to be approximately $400 million in 2010, which is

 

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consistent with capital spending levels in 2009. As discussed in further detail below, several of our greenfield projects were substantially completed in 2009, including our special bar quality mill in Memphis, Tennessee, our Castrip® facility in Blytheville, Arkansas, and our galvanizing facility in Decatur, Alabama. We began work on a new heat treating facility in Hertford County, North Carolina, and on expansion of capacity at our Nu-Iron DRI plant in Trinidad. However, the majority of the projected capital expenditures for 2010 will be used to enhance the productivity and efficiency of our existing facilities.

Greenfield growth

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 has 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. At the start of 2009, we began shipping SBQ from the Memphis mill to our customers.

Another greenfield project is the Castrip facility in Blytheville, Arkansas, which began production in late 2009. Nucor began operations of its other Castrip facility in Crawfordsville, Indiana, in 2002. These facilities use 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 near final shape and thickness with minimal 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. We continue to explore potential new joint ventures utilizing the Castrip technology.

In November 2009, we commissioned the previously idle Kingman, Arizona, rolling mill that we acquired in 2003. Operations will begin in the second quarter of 2010 with initial output of straight-length rebar, coiled rebar and wire rod slated for production of more than 100,000 tons with the ability to increase annual production to 500,000 tons. Also during 2009, we commenced operations at the new galvanizing facility at our sheet mill in Decatur, Alabama. The addition of the Decatur galvanizing line will increase Nucor’s value-added coated flat rolled products annual capacity by one-third to two million tons per year.

Nucor also began construction on a plate heat treating facility at our plate mill in Hertford County, North Carolina. The heat treat line will have an estimated annual capacity of 120,000 tons and will have the ability to produce heat treated plate from 3/16” to 2” thick.

We recently began a project to expand the capacity of our Nu-Iron DRI production facility in Trinidad. This project will increase Nu-Iron’s production capacity of high-quality iron units. The project is expected to be complete in late 2010. 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.

In May 2008, Nucor applied for a permit to build an iron-making facility in St. James Parish, Louisiana. This project has been significantly delayed while we continue working through an extended permitting process and monitor the status of proposed climate change legislation. We remain committed to our goal of controlling one-third of our iron inputs via pig iron, direct reduced iron or other iron-making technologies and have several options under development to complement or replace our Louisiana blast furnace project if the consequences of climate change legislation makes that project unviable.

Acquisitions

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 increased

 

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profitability through 2008 and added market share across multiple product categories. Although our acquisition initiatives were put on hold in late 2008 because of the economic crisis, we did add to our rebar fabrication footprint with the acquisition of Free State Steel in 2009. We continue to meet with potential acquisition targets and joint venture partners as we evaluate opportunities in the economic downturn to grow Nucor’s long-term earnings power for our shareholders.

The annual capacity of Nucor’s downstream value-added products has more than doubled since late 2006 to over 4.5 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. Harris Steel has been a growth platform for Nucor over the past three years, having completed numerous acquisitions in the months following Nucor’s initial acquisition in 2007. With the acquisition of Ambassador Steel, Inc. in 2008, Harris increased our rebar fabrication capacity to over 1.5 million tons.

In February 2008, Nucor announced the acquisition of SHV North America Corporation, which owns 100% of DJJ and certain affiliates. 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 our raw materials strategy. By the end of 2008, Nucor added approximately one million tons of scrap processing and 23 locations via four scrap processing acquisitions executed by DJJ’s management team. Although the economy precluded our team from pursuing acquisitions in 2009, we expect to add additional scrap capacity in 2010. Nucor’s total scrap processing capacity is now approaching five million tons. Additionally, DJJ brokers ferrous scrap, ferro-alloys and non-ferrous metals and internationally sources scrap, pig iron and scrap substitutes. 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 a large 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.

International growth

In 2008, Nucor opened a European office and entered into a joint investment with Duferco S. A. In July 2008, Nucor acquired a 50% equity interest in Duferdofin Nucor S.r.l. for approximately $671.3 million (including $4.3 million paid in 2009 as an adjustment to the purchase price). Duferdofin Nucor operates a one million ton-per-year steel melt shop with a bloom/billet caster in Brescia, Italy. The Company also operates four rolling mills located throughout Italy—two beam mills, one track shoes/cutting edges mill and a new merchant/rebar mill. The rolling mill capacities include 1 million metric tons for beams, 55,000 metric tons for track shoes/cutting edges and 450,000 metric tons for bar. The new merchant/rebar mill was commissioned in late 2009. Duferdofin Nucor’s customers are primarily steel service centers and distributors located in Italy, Southern Europe and North Africa.

Employees

Nucor has a simple, streamlined organizational structure to allow our employees to make quick decisions and be innovative. Our organization is highly decentralized, with most day-to-day operating decisions made by our division general managers and their staff. Only 90 employees are located in our executive office. The majority of Nucor’s 20,400 employees are not represented by labor unions.

Additional Information Incorporated by Reference

Additional information on Nucor’s business is incorporated by reference to Nucor’s 2009 Annual Report, pages 8 through 19.

 

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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.

The current global recession and credit crisis have and are likely to continue to adversely affect our business.

The current deep and potentially prolonged global recession that officially began in the United States in December 2007 has, since the third quarter of 2008, had a material adverse effect on demand for our products and consequently the results of our operations, financial condition and cash flows. A continued recession both globally and in the United States, or the public perception that a recession is continuing, could continue to depress demand for our products and adversely affect our business.

Since the financial and credit crisis began, the U.S. Government and the Federal Reserve Bank have created a number of programs that have helped to stabilize credit markets and financial institutions and restore liquidity. Despite these efforts, there can be no assurance that these programs, individually or collectively, will continue to have beneficial effects on the markets overall, or will resolve the credit or liquidity issues of companies that participate in the programs. Although we believe we have adequate access to several sources of contractually committed borrowings and other available credit facilities, this current crisis could temporarily restrict our ability to borrow money on acceptable terms in the credit markets and potentially could affect our ability to draw on our credit facility. The recession is also making it difficult or, in many cases, impossible for our customers to borrow money to fund their operations. Their lack of, or limited access to, capital would adversely affect their ability to purchase our products or, in some cases, to pay for our products on a timely basis.

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. As a result, downturns in the United States economy or any of these industries could materially adversely affect our results of operations, financial condition and cash flows. The current global economic recession, coupled with the continued global financial and credit market disruptions, have had a historic negative impact on the steel industry and Nucor. These events have contributed to an unprecedented decline in pricing for steel and steel products, weak end-markets and continued depressed demand, all resulting in historic volatility in our financial results year over year. Nucor reported record high earnings of $1.83 billion in 2008 and recorded the Company’s first net loss of $294 million in 2009. While Nucor believes that the long-term prospects for steel remain bright, the Company is unable to predict the duration or severity of the current global recession. 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, particularly during periods of global recession. This excess capacity often results in manufacturers in certain countries exporting significant

 

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Item 1A. Risk Factors, continued

 

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 increasing steel exports from China.

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 an extent on outside vendors to supply us with raw materials, including both scrap and scrap substitutes, that are critical to the manufacture of our products. Although Nucor has vertically integrated its business through our DRI facility in Trinidad and through the acquisition of DJJ, we are still required to purchase most of our primary raw material, steel scrap, from numerous other 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 are influenced by changes in scrap exports in response to changes in the scrap demands 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. The availability and prices of raw materials may also be negatively affected by new laws and regulations, allocation by suppliers, interruptions in production, accidents or natural disasters, changes in exchange rates, worldwide price fluctuations, and the availability and cost of transportation.

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 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 suppliers and customers, are energy intensive and generate carbon dioxide and other “Greenhouse Gasses”, and pending legislation or regulation of GHG’s, if enacted or adopted in an onerous form, could have a material adverse impact on our results of operations, financial condition and cash flows.

Carbon is an essential raw material in Nucor’s production processes. As a carbon steel producer, Nucor will be affected, both directly and indirectly, if proposed climate change legislation, such as use of a “cap and trade”

 

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Item 1. A. Risk Factors, continued

 

policy, is enacted into law or, alternatively, regulations intended to reduce GHG emissions are adopted by the EPA. The impact of legislation and regulations on Nucor and its suppliers and customers will depend on a number of factors, including whether GHG sources in multiple sectors of the economy are regulated, the overall GHG emissions cap level, the degree to which GHG offsets are allowed, the allocation of emission allowances to specific sources and the indirect impact of carbon regulation on electricity and natural gas prices. If such legislation is enacted or regulations are adopted, we could incur increased energy, environmental and other costs and capital expenditures to comply with the limitations. Unless and until legislation is enacted and its terms are known, we cannot reasonably or reliably estimate its impact on our financial condition, operating performance or ability to compete. We could face increased costs related to defending and resolving legal claims and other litigation related to climate change and the alleged impact of our operations on climate change.

We plan to continue to implement our acquisition strategy 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 operate these businesses and integrate them with our operations and to cooperate with our strategic partners. Our business, results of operations, financial condition and cash flows could be materially 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 have a material adverse effect 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 have a material adverse effect on prices and demand for our steel products.

Congress has 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 help 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, 2009, our total capital expenditures, excluding acquisitions, were approximately $2.60 billion. Our business also requires substantial expenditures for routine maintenance. Although we expect requirements for our business needs, including the funding of capital expenditures, debt service for financings and any contingencies to be financed by internally

 

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Item 1A. Risk Factors, continued

 

generated funds or from borrowings under our $1.3 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 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. A strong U.S. dollar also hampers our international trading and distribution business. Weak local currencies limit the amount of U.S. dollar denominated products that we can import for our international operations and limits our ability to be competitive against local producers selling in local currencies.

The accounting treatment of equity method investments, goodwill and other long-lived assets could result in future asset impairments, which would reduce our earnings.

We periodically calculate the fair value of our equity method investments, goodwill and other long-lived assets to test for impairment. The results of this calculation may be affected by the current adverse market conditions for the steel industry, as well as interest rates and general economic conditions. If impairment is determined to exist, we will incur non-cash impairment losses, which will reduce our earnings.

Tax increases and changes in tax rules could adversely affect our financial results.

The steel industry and specifically Nucor’s business is sensitive to changes in taxes. As a company based in the U.S., Nucor is more exposed to the effects of the various forms of tax increases in the U.S. than some of our major competitors. Our provision for income taxes and cash tax liability in the future could be adversely affected by changes in tax laws and regulations such as certain provisions in the current administration’s budget proposals and various tax changes under discussion in Congress. The proposals with potential adverse effect include, but are not limited to, repealing LIFO (last-in, first-out treatment of inventory) and decreasing the ability of U.S. companies to receive a tax credit for foreign taxes paid or to defer the U.S. deduction of expenses in connection with investments made in other countries.

 

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

   2,550,000    Steel shapes, flat-rolled steel

Crawfordsville, Indiana

   2,120,000    Flat-rolled steel

Berkeley County, South Carolina

   2,030,000    Flat-rolled steel, steel shapes

Decatur, Alabama

   2,000,000    Flat-rolled steel

Hickman, Arkansas

   1,420,000    Flat-rolled steel

Norfolk, Nebraska

   1,400,000    Steel shapes

Plymouth, Utah

   1,190,000    Steel shapes

Jewett, Texas

   1,080,000    Steel shapes

Hertford County, North Carolina

   1,020,000    Steel plate

Darlington, South Carolina

   870,000    Steel shapes

Seattle, Washington

   670,000    Steel shapes

Memphis, Tennessee

   500,000    Steel shapes

Auburn, New York

   450,000    Steel shapes

Marion, Ohio

   440,000    Steel shapes

Kankakee, Illinois

   430,000    Steel shapes

Tuscaloosa, Alabama

   370,000    Steel plate

Jackson, Mississippi

   350,000    Steel shapes

Birmingham, Alabama

   280,000    Steel shapes

Wallingford, Connecticut

   240,000    Steel shapes
Steel products:      

Norfolk, Nebraska

   1,040,000    Joists, deck, cold finish bar

Brigham City, Utah

   750,000    Joists, cold finish bar

Grapeland, Texas

   680,000    Joists, deck

St. Joe, Indiana

   550,000    Joists, deck

Chemung, New York

   550,000    Joists, deck

Florence, South Carolina

   540,000    Joists, deck

Fort Payne, Alabama

   470,000    Joists, deck
Raw materials:      

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 24 additional operating facilities in 17 states. Harris Steel has 55 operating facilities in 33 states and 30 operating facilities in Canada. Harris also operates multiple sales offices in Canada and certain other foreign locations.

In the raw materials segment, DJJ has 67 operating facilities in 14 states along with multiple brokerage offices in the U.S. and certain other foreign locations.

During 2009, the average utilization rates of all operating facilities in the steel mills, steel products and raw materials segments were approximately 54%, 49% and 53% of production capacity, respectively.

We also own our principal executive office in Charlotte, North Carolina.

 

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Item 3. Legal Proceedings

Nucor has been named, along with other major steel producers, as a co-defendant in several related antitrust class-action complaints filed by Standard Iron Works and other steel purchasers in the United States District Court for the Northern District of Illinois. The plaintiffs allege that from January 2005 to the present eight steel manufacturers, including Nucor, engaged in anticompetitive activities with respect to the production and sale of steel. The plaintiffs seek monetary and other relief. Although we believe the plaintiffs’ claims are without merit and will vigorously defend against them, we cannot at this time predict the outcome of this litigation or determine Nucor’s potential exposure.

Nucor is involved in various other 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, 2009.

 

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Executive Officers of the Registrant

Daniel R. DiMicco (59)—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.

James D. Frias (53)—Mr. Frias became Chief Financial Officer, Treasurer and Executive Vice President on January 1, 2010. He was a Vice President of Nucor from 2006 to 2009. Mr. Frias previously served as Corporate Controller from 2001 to 2009; Controller of Nucor Steel, Crawfordsville, Indiana from 1994 to 2001; and Controller of Nucor Building Systems, Waterloo, Indiana from 1991 to 1994.

John J. Ferriola (57)—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.

Keith B. Grass (53)—Mr. Grass is an Executive Vice President of Nucor and serves as President and Chief Executive Officer of DJJ. From January 2000 until Nucor acquired DJJ in February 2008, he served as the President and Chief Executive Officer of DJJ. Before he assumed that position with DJJ, Mr. Grass held the following positions with the same company: President and Chief Operating Officer of the Metal Recycling Division during 1999; President of the International Division from 1996-1998; Vice President of Trading from 1992 to 1996; District Manager of the Chicago trading office from 1988 to 1992; District Manager of the Detroit office from 1986 to 1988; District manager of the Omaha office from 1985 to 1986. Mr. Grass began his career as a brokerage representative in DJJ’s Chicago office in 1978.

Ladd R. Hall (53)—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. (60)—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 (57)—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 (55)—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. Mr. Rutkowski will retire from Nucor on February 28, 2010.

R. Joseph Stratman (53)— 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.

 

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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. Nucor paid a total dividend of $1.40 per share in 2009 compared with $2.17 per share in 2008 ($1.26 base dividend plus $0.91 supplemental dividend). No supplemental dividend was paid in 2009. In December 2009, the board of directors increased the base quarterly cash dividend on Nucor’s common stock by 3% to $0.36 per share from $0.35 per share. In February 2010, the board of directors declared Nucor’s 148th consecutive quarterly cash dividend of $0.36 per share payable on May 12, 2010 to stockholders of record on March 31, 2010.

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 2009 Annual Report, page 70.

 

Item 6. Selected Financial Data

Historical financial information is incorporated by reference to Nucor’s 2009 Annual Report, page 37.

 

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 2009 Annual Report, page 2 (Forward-looking Statements) and pages 20 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, 2009, 14% of Nucor’s long-term debt was in industrial revenue bonds that have variable interest rates that are adjusted weekly or annually. The remaining 86% 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, 2009, 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, other ferrous and nonferrous metals, alloys 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 cost increases of scrap steel and other raw materials. Due to decreased demand for and cost of raw materials, however, the surcharge is impacting our sales prices to a lesser extent than in prior years.

Through the first three quarters of 2009, our earnings were negatively impacted from accelerated consumption of high-cost iron units purchased prior to the abrupt downturn in economic activity late in 2008. Since pig iron has purchase lead times of four to six months from ordering to delivery, dramatically and rapidly reduced sales volumes in the fourth quarter of 2008 and through much of 2009 resulted in the accumulation of increased tons of pig iron inventories, primarily at our steel mills, ordered at peak market prices. As of the end of the third quarter of 2009, we had completed the usage of those high cost iron units. The impact on 2009 net

 

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

 

earnings of the high priced raw material inventory overhang was approximately $420.0 million or $0.85 per share after taxes. As a result, we experienced significant improvement in our raw material costs during the fourth quarter of 2009 and expect to continue to see improved margins in 2010.

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 and to hedge a portion of our aluminum and copper purchases and sales. Gains and losses from derivatives designated as hedges are deferred in accumulated other comprehensive income (loss) on the consolidated balance sheets and recognized into earnings in the same period as the underlying physical transaction. At December 31, 2009, accumulated other comprehensive income (loss) included $74.1 million in unrealized net-of-tax losses for the fair value of these derivative instruments. Changes in the fair values of derivatives not designated as hedges are recognized in earnings each period. The following table presents the negative effect on pre-tax income of a hypothetical change in the fair value of derivative instruments outstanding at December 31, 2009, due to an assumed 10% and 25% change in the market price of each of the indicated commodities (in thousands):

 

Commodity Derivative

   10% Change    25% Change

Natural gas

   $ 23,949    $ 59,871

Aluminum

     2,257      5,642

Copper

     656      1,639

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

Foreign Currency Risk—Nucor is exposed to foreign currency risk through its operations in Canada and Trinidad and its joint ventures in Australia and Italy. We periodically use derivative contracts to mitigate the risk of currency fluctuations. Open foreign currency derivative contracts at December 31, 2009 and 2008 were insignificant.

 

Item 8. Financial Statements and Supplementary Data

Information required by this item is incorporated by reference to Nucor’s 2009 Annual Report, pages 38 through 66.

 

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, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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Item 9A. Controls and Procedures, continued

 

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, 2009 are incorporated by reference to Nucor’s 2009 Annual Report, pages 38 and 39.

 

Item 9B. Other Information

None.

 

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PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this Item about Nucor’s executive officers is contained in Part I, Item 1 of this Form 10-K. The other information required by this Item is contained in the sections of Nucor’s Notice of 2010 Annual Meeting of Stockholders and Proxy Statement (the “Proxy Statement”) captioned Election of Directors, Section 16(a) Beneficial Ownership Reporting Compliance and Corporate Governance and Board of Directors, which sections are 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. 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, Report of the Compensation and Executive Development Committee 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 2009 and 2008 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 2009 Annual Report, pages 38 through 66:

 

   

Management’s Report on Internal Control Over Financial Reporting

 

   

Report of Independent Registered Public Accounting Firm

 

   

Consolidated Statements of Earnings—Years ended December 31, 2009, 2008 and 2007

 

   

Consolidated Statements of Stockholders’ Equity—Years ended December 31, 2009, 2008 and 2007

 

   

Consolidated Balance Sheets—December 31, 2009 and 2008

 

   

Consolidated Statements of Cash Flows—Years ended December 31, 2009, 2008 and 2007

 

   

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

   25

Schedule II—Valuation and Qualifying Accounts—Years ended December 31, 2009, 2008 and 2007

   26

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)

   Fourth Supplemental Indenture, dated as of June 2, 2008, between Nucor Corporation and The Bank of New York, as trustee (incorporated through reference to Form 8-K filed June 3, 2008)

4(v)

   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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Exhibits, continued:

 

4(vi)

   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(vii)

   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(viii)

   Form of 6.40% Notes due 2037 (included in Exhibit 4(iii) above) (incorporated by reference to Form 8-K filed December 4, 2007)

4(ix)

   Form of 5.00% Notes due June 1, 2013 (included in Exhibit 4(iv) above) (incorporated by reference to Form 8-K filed June 3, 2008)

4(x)

   Form of 5.85% Notes due June 1, 2018 (included in Exhibit 4(iv) above) (incorporated by reference to Form 8-K filed June 3, 2008)

4(xi)

   Form of 6.40% Notes due December 1, 2037 (included in Exhibit 4(iv) above) (incorporated by reference to Form 8-K filed June 3, 2008)

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 (incorporated by reference to Form 10-K for year ended December 31, 2007) (1)

10(x)*

   Retirement Separation Waiver and Release Agreement of Terry S. Lisenby (1)

10(xi)*

   Employment Agreement of James D. Frias (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. (incorporated by reference to Form 10-K for year ended December 31, 2007) (1)

10(xiv)

   Employment Agreement of D. Michael Parrish (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (1)

 

20


Table of Contents

Exhibits, continued:

 

10(xv)

   Amendment to Employment Agreement of D. Michael Parrish (incorporated by reference to Form 10-K for year ended December 31, 2007) (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 (incorporated by reference to Form 10-K for year ended December 31, 2007) (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 (incorporated by reference to Form 10-K for year ended December 31, 2007) (1)

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)

   Employment Agreement of Keith B. Grass (incorporated by reference to Form 10-Q for quarter ended March 29, 2008) (1)

10(xxiii)

   Severance Plan for Senior Officers and General Managers as Amended and Restated Effective February 18, 2009 (incorporated by reference to Form 10-Q for quarter ended April 4, 2009) (1)

10(xxiv)

   Senior Officers Annual Incentive Plan As Amended and Restated Effective February 18, 2009 (incorporated by reference to Form 10-Q for quarter ended April 4, 2009) (1)

10(xxv)

   Senior Officers Long-Term Incentive Plan As Amended and Restated Effective February 18, 2009 (incorporated by reference to Form 10-Q for quarter ended April 4, 2009) (1)

10(xxvi)

   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)

10(xxvii)

   Underwriting Agreement dated May 22, 2008 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 May 29, 2008)

10(xxviii)

   Underwriting Agreement dated May 28, 2008 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 June 3, 2008)

12*

   Computation of Ratio of Earnings to Fixed Charges

13*

   2009 Annual Report (portions incorporated by reference)

21*

   Subsidiaries

23*

   Consent of Independent Registered Public Accounting Firm

24

   Power of attorney (included on signature page)

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

 

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Table of Contents

Exhibits, continued:

 

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

101**

   Nucor Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2009, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Earnings, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Statements of Stockholders’ Equity, and (v) the Notes to Consolidated Financial Statements, tagged as blocks of text.

 

* Filed herewith.
** Furnished 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 25, 2010

POWER OF ATTORNEY

KNOW ALL PERSON BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James D. Frias and A. Rae Eagle, or any of them, his or her attorney-in-fact, for such person in any and all capacities, to sign any amendments to this report and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that either of said attorney-in-fact, or substitute or substitutes, may do or cause to be done by virtue hereof.

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 dates indicated.

 

/S/ DANIEL R. DIMICCO    

Daniel R. DiMicco

Chairman, President and

Chief Executive Officer

   

/S/ PETER C. BROWNING

Peter C. Browning

Lead Director

/S/ JAMES D. FRIAS    

James D. Frias

Chief Financial Officer, Treasurer and

Executive Vice President

(Principal Financial and Accounting Officer)

   

/S/ CLAYTON C. DALEY, JR.

Clayton C. Daley, Jr.

Director

   

/S/ HARVEY B. GANTT

Harvey B. Gantt

Director

   

/S/ VICTORIA F. HAYNES

Victoria F. Haynes

Director

   

/S/ JAMES D. HLAVACEK

James D. Hlavacek

Director

   

/S/ BERNARD L. KASRIEL

Bernard L. Kasriel

Director

   

/S/ CHRISTOPHER J. KEARNEY

Christopher J. Kearney

Director

   

/S/ JOHN H. WALKER

John H. Walker

Director

Dated: February 25, 2010    

 

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Table of Contents

NUCOR CORPORATION

Index to Financial Statement Schedule

 

     Page

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

   25

Schedule II—Valuation and Qualifying Accounts—Years ended December 31, 2009, 2008 and 2007

   26

 

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Table of Contents

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

To the Board of Directors and Stockholders of

Nucor Corporation:

Our audits of the consolidated financial statements and of the effectiveness of internal control over financial reporting referred to in our report dated February 25, 2010 appearing in the 2009 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 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.

PricewaterhouseCoopers LLP

Charlotte, North Carolina

February 25, 2010

 

25


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, 2009

          

LIFO Reserve

   $ 923,362    $ —      $ (466,914   $ 456,448

Year ended December 31, 2008

          

LIFO Reserve

   $ 581,528    $ 341,834    $ —        $ 923,362

Year ended December 31, 2007

          

LIFO Reserve

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

 

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Table of Contents

NUCOR CORPORATION

List of Exhibits to Form 10-K—December 31, 2009

 

Exhibit No.

 

Description of Exhibit

10(x)   Retirement Separation Waiver and Release Agreement of Terry S. Lisenby
10(xi)   Employment Agreement of James D. Frias
12   Computation of Ratio of Earnings to Fixed Charges
13   2009 Annual Report (portions incorporated by reference)
21   Subsidiaries
23   Consent of Independent Registered Public Accounting Firm
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
101   Nucor Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2009, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Earnings, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Statements of Stockholders’ Equity, and (v) the Notes to Consolidated Financial Statements, tagged as blocks of text.

 

27

Retirement Separation Waiver and Release Agreement

Exhibit 10(x)

RETIREMENT SEPARATION WAIVER AND RELEASE AGREEMENT

This Retirement Separation Waiver and Release Agreement (“Agreement”) is entered into as of the 17th day of December, 2009, by and between Terry S. Lisenby (“Executive”) and Nucor Corporation.

WHEREAS, Executive has spent twenty four (24) years as a Nucor (as defined below) employee, and has most recently been employed as Nucor Corporation’s Chief Financial Officer, Treasurer and Executive Vice President;

WHEREAS, Executive has decided to retire from Nucor effective December 31, 2009 (the “Effective Date”);

WHEREAS, based upon the Severance Plan (as defined below), Executive shall be eligible to receive certain severance benefits contingent upon his agreement to the covenants set forth in this Agreement and his strict compliance with such covenants;

WHEREAS, pursuant to that certain Executive Employment Agreement by and between Executive and Nucor dated as of April 10, 2001, as amended by an Amendment Agreement dated as of November 7, 2007 (as amended, the “Employment Agreement”), Executive is entitled to certain post-separation benefits in addition to those granted under the Severance Plan provided that Executive adheres to the post-separation restrictive covenants set forth in the Employment Agreement;

WHEREAS, Nucor and Executive desire for this Agreement to, amongst other things, supersede (as of the Effective Date) the terms of the Employment Agreement;

WHEREAS, Executive’s years of experience as an Executive Officer of Nucor give him unique expertise and insight into Nucor’s operations and management; and

WHEREAS, the parties wish to enter into this Agreement during the course of Executive’s employment to set forth Executive’s post-separation benefit opportunities and to protect Nucor’s competitive advantages, confidential trade secrets and goodwill.

NOW, THEREFORE, in consideration of the reasons recited above, the severance and other post-separation benefits to be paid by Nucor to Executive upon termination of his full-time employment with Nucor, the mutual covenants and obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and which consideration Executive was not otherwise entitled to receive, Executive and Nucor hereby agree effective as of the Effective Date as follows:

1. Recitals. The above recitals are true and correct and are incorporated herein by reference as if fully set forth herein.

2. Definitions. For purposes of this Agreement the following definitions shall apply:

(a) The term “Business” means the research, manufacture, marketing, sale and/or distribution of steel or steel products (including but not limited to flat-rolled steel, steel shapes, structural steel, light gauge steel framing, steel plate, steel joists and girders, steel deck, steel fasteners, metal building systems, wire rod, welded-wire reinforcement rolls and sheets, cold finished steel bars and wire, guard rail, fabricated concrete reinforcement bars, and structural welded-wire reinforcement) or steel or steel product inputs (including but not limited to scrap metal and direct reduced iron).


(b) The term “Code” means the Internal Revenue Code of 1986, as amended.

(c) The term “Competing Business” means any business activity (i) that is the same as, or is in direct competition with, any portion of the Business and (ii) in which Executive engaged in during the course of his employment with Nucor.

(d) The term “Confidential Information” shall include all confidential and proprietary information of Nucor, including, without limitation, any of the following information to the extent not generally known to third persons: financial and budgetary information and strategies; plant design, specifications, and layouts; equipment design, specifications, and layouts; product design and specifications; manufacturing processes, procedures, and specifications; data processing or other computer programs; research and development projects; marketing information and strategies; customer lists; vendor lists; information about customer preferences and buying patterns; information about prospective customers, vendors, or business opportunities; information about Nucor’s costs and the pricing structure used in sales to customers; information about Nucor’s overall corporate business strategy; and technological innovations used in Nucor’s business, to the extent that such information does not fall within the definition of Secret Information.

(e) The term “Customer” means the following alternatives:

(i) any and all customers of Nucor with whom Nucor is doing business at the time of Executive’s termination of employment with Nucor, but if such definition is deemed overbroad by a court of law, then;

(ii) any customer of Nucor with whom Executive or Executive’s direct reports had significant contact or with whom Executive or Executive’s direct reports directly dealt on behalf of Nucor at the time of Executive’s last date of full time employment with Nucor, but if such definition is deemed overbroad by a court of law, then;

(iii) any customer of Nucor with whom Executive had significant contact or with whom Executive directly dealt on behalf of Nucor at the time of Executive’s last date of full time employment with Nucor.

Provided, however, that the term “Customer” shall not include any business or entity that no longer does business with Nucor without any direct or indirect interference by Executive or violation of this Agreement by Executive, and that ceased doing business with Nucor prior to any direct or indirect communication or contact by Executive.

(f) The term “Prospective Customer” means any person or entity who does not currently or has not yet purchased the products or services of Nucor, but who, at the time of Executive’s last date of full-time employment with Nucor has been targeted by Nucor as a potential user of the products or services of Nucor, and whom Executive or his direct reports participated in the solicitation of or on behalf of Nucor.

(g) The term “Nucor” means Nucor Corporation and its direct and indirect subsidiaries and affiliates in existence or planned as of the Effective Date.

 

2


(h) The term “Restricted Territory” means Executive’s geographic area of responsibility at Nucor which Executive acknowledges extends to the full scope of Nucor operations throughout North America. “Restricted Territory” therefore consists of the following alternatives reasonably necessary to protect Nucor’s legitimate business interests:

(i) the United States, Canada, and Mexico, where Executive acknowledges Nucor engages in the Business, but if such territory is deemed overbroad by a court of law, then;

(ii) the United States, where Executive acknowledges Nucor engages in the Business, but if such territory is deemed overbroad by a court of law, then;

(iii) any state in the United States located within a three hundred (300) mile radius of a Nucor plant or facility, but if such territory is deemed overbroad by a court of law, then;

(iv) any state in the United States where a Customer or Prospective Customer is located.

(i) The term “Secret Information” means Nucor’s proprietary and confidential information (i) that is not generally known in the Business, which would be difficult for others to acquire or duplicate without improper means, (ii) that Nucor strives to keep secret, and (iii) from which Nucor derives substantial commercial benefit because of the fact that it is not generally known. As used in this Agreement, Nucor’s Secret Information includes, without limitation: (w) Nucor’s process of developing and producing raw material, and designing and manufacturing steel and iron products; (x) Nucor’s process for treating, processing or fabricating steel and iron products; (y) Nucor’s customer lists, non-public financial data, strategic business plans, competitor analysis, sales and marketing data, and proprietary margin, pricing, and cost data; and (z) any other information or data which meets the definition of Trade Secrets.

(j) The term “Severance Period” means the period of time commencing on the date of Executive’s separation of employment from Nucor and terminating twenty four (24) months thereafter.

(k) The term “Trade Secrets” has the meaning assigned to such term by the North Carolina Trade Secrets Protection Act.

3. Post-Retirement Benefits.

(a) Severance Plan. Executive recognizes and agrees that pursuant to the Nucor Corporation Severance Plan for Senior Officers and General Managers (the “Severance Plan”), Executive shall receive certain Severance Benefits (as defined in the Severance Plan) contingent upon his execution of this Agreement and strict compliance with the covenants contained herein. Based on Executive’s (a) September 16, 1985 date of hire, (b) effective retirement date of December 31, 2009 and (c) current annual base salary of Four Hundred Thirty-Four Thousand Nine Hundred Dollars ($434,900), Executive would be eligible to receive Severance Benefits under the Severance Plan totaling Eight Hundred Eighty Thousand Nine Hundred Twenty Dollars and Seventy-Three Cents ($880,920.73) payable in twenty-four (24) monthly installments of Thirty-Six Thousand Seven Hundred and Five Dollars and Three Cents ($36,705.03) (the “Monthly Severance Plan Payments”). Subject to the provisions of Paragraph 3(c) of this Agreement, the payments of the Monthly Severance Plan Payments shall be made each month

 

3


following the Effective Date. In the event Executive dies during the Severance Period and provided that Executive was not in breach of his obligations under this Agreement at the time of his death, the remaining Monthly Severance Plan Payments that would have been paid to Executive pursuant to the Severance Plan shall be paid to Executive’s estate in a single sum payment as soon as practicable (but in any event within ninety (90) days) following Executive’s death. All Monthly Severance Plan Payments shall be subject to regular and customary withholding.

(b) Non-Competition Payment.

(i) Contingent upon his execution of this Agreement and strict compliance with the covenants contained herein, Nucor will pay Executive One Hundred Twenty One Thousand Seven Hundred Seventy-Two Dollars ($121,772) each month (the “Monthly Non-Compete Payments”, and together with the Monthly Severance Plan Payments, collectively, the “Monthly Separation Payments”) for twenty-four (24) months following the Effective Date. Subject to the provisions of Paragraph 3(c) of this Agreement, the payments of the Monthly Non-Compete Payment shall be made each month following the Effective Date. All Monthly Non-Compete Payments shall be subject to regular and customary withholding.

(ii) If Executive dies prior to the Effective Date, Nucor’s obligations to make any payments of the Monthly Non-Compete Payments under this Agreement will automatically terminate and Executive’s estate and executors will have no rights to any payments of the Monthly Non-Compete Payments under this Agreement. If Executive dies during the first twelve months following the Effective Date, then Nucor will pay Executive’s estate the payments of the Monthly Non-Compete Payments through the end of the twelfth (12th) month following the Effective Date. If Executive dies twelve (12) or more months following the Effective Date, then Nucor’s obligations to make any payments of the Monthly Non-Compete Payments will automatically terminate without the necessity of Nucor providing notice (written or otherwise).

(iii) Executive acknowledges and agrees that the payments described in this Paragraph 3(b) (A) are the same payments that Executive would have been entitled to pursuant to Section 4 of the Employment Agreement and (B) are provided in lieu of, and not in addition to, the payments Executive would have been entitled to pursuant to Section 4 of the Employment Agreement.

(c) Compliance with 409A. Because Executive (i) is and will be as of the Effective Date a “specified employee” under Section 409A(a)(2)(B)(i) of the Code and (ii) the Monthly Separation Payments would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code, in order to comply with Section 409A of the Code, the Monthly Separation Payments that would otherwise be payable pursuant to Paragraphs 3(a) and 3(b) of this Agreement during the six (6) month period immediately following the Effective Date shall be accumulated and the Executive’s right to receive payment of such accumulated amount (which such amount shall not accrue interest) will be delayed until the seventh month following the Effective Date.

4. Acknowledgment of Nucor Protectable Interests. Executive acknowledges and agrees that Nucor competes in North America and throughout the world in the Business. Executive further acknowledges and agrees that Nucor has Secret Information and Confidential Information to which he has had access and has used in the course of his employment with Nucor. Executive acknowledges that

 

4


Nucor’s Secret Information and Confidential Information are valuable to Nucor and provide it with a competitive advantage in the Business. Executive also acknowledges and agrees that during his employment with Nucor he has had substantial contact and developed goodwill with Nucor’s personnel (including, without limitation, executive officers and senior management of Nucor), customers, vendors and/or suppliers, and that such goodwill is an important and valuable asset of Nucor.

5. Non-Competition Covenant. Executive hereby agrees that for the duration of the Severance Period, Executive shall not, directly or indirectly, within the Restricted Territory:

(a) engage in a Competing Business, whether as an employee, consultant, or in any other capacity;

(b) commence, establish or own (in whole or in part) any Competing Business, whether (i) by establishing a sole proprietorship, (ii) as a partner of a partnership, (iii) as a member of a limited liability company, (iv) as a shareholder of a corporation (except to the extent Executive is the holder of not more than five percent (5%) of any class of the outstanding stock of any company listed on a national securities exchange so long as Executive does not actively participate in the management or business of any such entity) or (v) as the owner of any similar equity interest in any such entity;

(c) provide any public endorsement of, or otherwise lend Executive’s name for use by, any person or entity engaged in a Competing Business; or

(d) engage in work that would inherently call on him in the fulfillment of his duties and responsibilities to reveal, rely upon, or otherwise use Nucor’s Confidential Information or Secret Information.

6. Nonsolicitation. Executive hereby agrees for the duration of the Severance Period, Executive will not, directly or indirectly, within the Restricted Territory, do any of the following:

(a) solicit, contact, or attempt to influence any Customer to limit, curtail, cancel, or terminate any business it transacts with, or products it receives from Nucor;

(b) solicit, contact, or attempt to influence any Prospective Customer to terminate any business negotiations it is having with Nucor, or to otherwise not do business with Nucor;

(c) solicit, contact, or attempt to influence any Customer to purchase products or services from an entity other than Nucor, which are the same or substantially similar to, or otherwise in competition with, those offered to the Customer by Nucor; or

(d) solicit, contact, or attempt to influence any Prospective Customer to purchase products or services from an entity other than Nucor, which are the same or substantially similar to, or otherwise in competition with, those offered to the Prospective Customer by Nucor.

7. Anti-Piracy.

(a) Executive agrees for the duration of the Severance Period, Executive will not, directly or indirectly, encourage, contact, or attempt to induce any employees of Nucor (i) with whom Executive had regular contact with as of the Effective Date, and (ii) who are employed by Nucor at the time of the encouragement, contact or attempted inducement, to end their employment relationship with Nucor.

 

5


(b) Executive further agrees for the duration of the Severance Period not to hire for any reason any employees described in Paragraph 7(a) of this Agreement.

8. Confidentiality. Except and only as required by law, Executive shall not, at any time or in any manner, either directly or indirectly, disclose, divulge, reveal, or use any Confidential Information, Secret Information or Trade Secrets of Nucor that Executive learned of or otherwise acquired during his employment with Nucor. The provisions of this Paragraph 8 shall survive indefinitely. Executive further agrees that he shall maintain and keep the terms and conditions of this Agreement confidential for an indefinite term except that Executive may disclose such terms to his spouse, attorney, tax advisor and/or financial planner.

9. Return of Property. Executive agrees that he shall return any and all Nucor property and information, regardless of medium or format, to Nucor no later than three (3) days following his last day of employment, and Executive shall not retain any copies of any Nucor information. Notwithstanding the foregoing, Executive may retain such Nucor property and information as is specifically agreed to by Nucor’s Chief Executive Officer, provided, however, that any information so retained by Executive shall be deemed Confidential Information and shall be subject to the restrictions set forth in Paragraph 8 of this Agreement.

10. Release. Executive agrees that, in consideration for the payments referenced in Paragraph 3, he, for himself, his heirs, executors, administrators, and assigns, hereby releases, waives, and forever discharges Nucor, its predecessors, successors and assigns, and its officers, directors, employees, agents, representatives and trustees (“Nucor Releasees”), from any and all claims or liabilities of whatever kind or nature which he ever had or which he now has, known or unknown, including, but not limited to, any claims arising under or pursuant to the Employment Agreement or any other contract claims; claims for bonuses, severance pay, employee or fringe benefits; and claims based on any state or federal wage, employment, or common laws, statutes, or amendments thereto, including, but not limited to: (i) any claim under the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq., or COBRA; (ii) any race, color, religion, sex, or national origin discrimination claims under Title VII of the 1964 Civil Rights Act, 42 U.S.C. § 2000(e) et seq.; (iii) any claim of disability discrimination under the Americans with Disabilities Act (“ADA”), 42 U.S.C. § 12102 et seq.; (iv) any claim of retaliation or wrongful discharge, (v) any age discrimination claims under the Age Discrimination in Employment Act, as amended (“ADEA”), 29 U.S.C. § 621 et seq.; (v) any claim under the Fair Labor Standard Act of 1939 as amended, 29 U.S.C.§ 201 et seq.; or (vi) any claim under the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 701 et seq.; or any other claims related to or arising out of his employment relationship with Nucor or the termination thereof whether based on contract (including, without limitation, the Employment Agreement), quasi-contract, quantum merit implied contract, tort, wrongful or constructive discharge or any employment related claim. This release and waiver does not apply to claims that (x) Executive may have for incentive compensation earned under or pursuant to the Nucor Corporation Senior Officers Annual Incentive Plan or the Nucor Corporation Senior Officers Long-Term Incentive Plan for his employment with Nucor through the Effective Date, or (y) may arise after the date this Agreement is executed.

Nothing in this Paragraph 10 or elsewhere in this Agreement prevents or prohibits Executive from filing a claim with a government agency such as the United States Equal Employment Opportunity Commission that is responsible for enforcing a law on behalf of the government. However, Executive understands that because he is waiving and releasing all claims for monetary damages and any other forms of personal relief, he may only seek and receive non-financial forms of relief through any such claim.

 

6


11. Remedies. Executive agrees that in the event of a breach or threatened breach by Executive of any provision of this Agreement, monetary remedies may not be adequate and Executive agrees that Nucor is entitled to injunctive relief, without need to post bond or similar security, in lieu of or in addition to, such monetary remedies. In the event that Executive engages in or attempts to engage in any of the conduct prohibited in Paragraphs 5, 6, 7 or 8 of this Agreement or fails to comply with the provisions of Paragraph 9, Nucor shall be entitled, in Nucor’s sole discretion, to (a) cease all Monthly Separation Payments, and Executive shall immediately refund to Nucor any Monthly Separation Payments already paid to him, and/or (b) in addition to any other remedies available at law or in equity, to enforce the provisions of Paragraphs 5, 6, 7, 8 and 9 by temporary, preliminary and permanent injunction to restrain any violation or threatened violation by Executive of any provisions of Paragraphs 5, 6, 7, 8 and 9. Executive further agrees to reimburse Nucor its costs (including, without limitation, attorney’s fees) incurred for to enforce Paragraphs 5, 6, 7, 8 or 9.

12. Cooperation With Legal Matters: Executive agrees that after his date of separation of employment from Nucor, he will cooperate with and assist Nucor, upon request and with reasonable notice, by providing information relevant to matters he gained knowledge of or was involved with while employed by meeting with Nucor’s attorneys or other representatives on such matters, and by appearing voluntarily for hearings, depositions, trials, or any regulatory or legal proceedings related to such matters. Executive understands that Nucor will reimburse him for any reasonable expense he incurs related to this cooperation and assistance, but will not be obligated to pay him any additional amounts.

13. Assignability. Neither this Agreement, nor any right or interest hereunder, shall be assignable by Executive, Executive’s beneficiaries, or legal representatives. Nucor, however, retains the right to assign this Agreement. This Agreement shall be binding upon Executive, Executive’s heirs, administrators, and representatives, and shall inure for the benefit of the Nucor Releasees and each of their respective heirs, administrators, representatives, executors, successors, and assigns.

14. Choice of Law and Venue. This Agreement’s validity, interpretation, performance and enforcement shall be construed and governed in accordance with, and by the laws of, the State of North Carolina, the location of Nucor Corporation’s corporate headquarters and Executive’s place of employment prior to the Effective Date. Executive, for himself and his successors and assigns, hereby expressly and irrevocably (a) consents to the exclusive jurisdiction of the state courts of Mecklenburg County, North Carolina for any action arising out of or related to this Agreement; and (b) waives any and all objection to any such action based on venue or forum non conveniens. Executive agrees that Nucor shall have the right to file and enforce any award, order, judgment, or injunction in any appropriate jurisdiction, and Executive waives service of process in connection with the filing and enforcement of the award, order, judgment, or injunction in any foreign jurisdiction and venue in which Nucor seeks to enforce the award, order, judgment, or injunction.

15. Severability. If any part of this Agreement is determined by a court of competent jurisdiction to be invalid in any respect, the parties agree that the court may modify by redaction any provision or part thereof to the extent reasonably necessary to protect Nucor’s legitimate business interests. The remaining provisions shall retain full force and effect.

16. Entire Agreement. This Agreement contains the entire agreement of the parties and supersedes all prior agreements and understandings, oral or written, between the parties hereto with respect to the subject matter hereof, including, without limitation, the Employment Agreement. This Agreement may be modified or amended only by an instrument in writing signed by Executive and Nucor and approved by Nucor’s Board of Directors. The language of this Agreement and all parts shall be construed as a whole and according to its reasonable and fair meaning, and not strictly for or against either party. The parties agree they have jointly drafted this Agreement and agree that any rules requiring construction of this Agreement against its drafter shall not be applied to this Agreement.

 

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17. No Violation of Public Policy; Executive’s Right of Rescission. Executive has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon Nucor under Paragraphs 5, 6, 7, 8, 9 and 11 of this Agreement and acknowledges and agrees that they are reasonable in scope, time, and territory; are designed to eliminate competition which would otherwise be unfair; do not interfere with Executive’s exercise of his inherent skill and experience; are reasonably required to protect the legitimate interests of Nucor; and do not confer a benefit upon Nucor disproportionate to the detriment to Executive. Before executing this Agreement, Executive is advised to consult with an attorney of his choice, at his expense. Executive has seven (7) days after execution hereof in which to revoke the Agreement, and this Agreement shall not become effective and enforceable until the expiration of seven (7) days following its execution by Executive. To revoke this Agreement, Executive should notify the Chief Executive Officer of Nucor, by fax confirmed by certified mail within such seven (7) day period. No attempted revocation after the expiration of such seven (7) day period shall have any effect on the terms of this Agreement.

18. Compliance with Older Workers Benefit Protection Act: In addition to the items noted, acknowledged or discussed in Paragraph 17 above, by signing this Agreement, Executive specifically acknowledges and represents that:

(a) Executive has been given a period of twenty-one days to consider the terms of this Agreement.

(b) The terms of this Agreement are clear and understandable to Executive; and

(c) The benefits Nucor will provide to Executive under this Agreement exceed the benefits that Executive was otherwise entitled to receive as an employee of Nucor.

 

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IN WITNESS WHEREOF, Executive and Nucor have executed this Agreement as of the date first set forth above.

 

Executive:  

/s/ Terry S. Lisenby

  Terry S. Lisenby
Nucor Corporation:  

/s/ A. Rae Eagle

  By:   A. Rae Eagle
  Its:   Secretary
Employment Agreement of James D. Frias

Exhibit 10(xi)

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into between NUCOR CORPORATION, a Delaware corporation, on behalf of itself and each of its affiliates and subsidiaries (all such entities, collectively, “Nucor”), and JAMES D. FRIAS (“Executive”).

WHEREAS, Executive has heretofore been employed as an at-will employee of Nucor in the position of Vice President and Corporate Controller of Nucor Corporation (the “Prior Position”); and

WHEREAS, Nucor has offered Executive a promotion to the position of Chief Financial Officer, Treasurer, and Executive Vice President effective January 1, 2010 contingent upon Executive’s execution of this Agreement, and Executive has accepted the promotion; and

WHEREAS, Nucor Corporation’s Board of Directors (the “Board”) has approved Executives’ promotion to the position of Chief Financial Officer, Treasurer, and Executive Vice President contingent upon Executive’s execution of this Agreement; and

WHEREAS, prior to the effective date of the promotion, Executive and Nucor discussed the requirements of the restrictive covenants contained in this Agreement as a condition to Executive’s promotion; and

WHEREAS, Nucor’s promotion of Executive entitles Executive to receive increased compensation and benefits that Executive did not have prior to his promotion; and

WHEREAS, Executive agrees and acknowledges that in his new position of Chief Financial Officer, Treasurer, and Executive Vice President he will acquire greater access to and knowledge of Nucor’s trade secrets and confidential information which Executive did not have prior to his promotion; and

WHEREAS, the parties wish to formalize their employment relationship in writing and for Nucor to employ Executive under the terms and conditions set forth below; and

NOW, THEREFORE, in consideration for the promises and mutual agreements contained herein, the parties agree, effective as of January 1, 2010, as follows:

1. Employment. Nucor agrees to employ Executive in the position of Chief Financial Officer, Treasurer, and Executive Vice President, and Executive agrees to accept employment in this position, subject to the terms and conditions set forth in this Agreement, including the confidentiality, non-competition and non-solicitation provisions which Executive acknowledges were discussed in detail prior to and made an express condition of his promotion to Chief Financial Officer, Treasurer, and Executive Vice President. Executive acknowledges that the Board’s approval of Executive’s promotion to Chief Financial Officer, Treasurer, and Executive Vice President is conditioned upon Executive’s execution of this Agreement.

2. Compensation and Benefits During Employment. Nucor will provide the following compensation and benefits to Executive:

(a) Nucor will pay Executive a base salary of Three Hundred Twenty Five Thousand Dollars ($325,000) per year, paid not less frequently than monthly in accordance with Nucor’s normal payroll practices, subject to withholding by Nucor and other deductions as required by law. The parties acknowledge and agree that this amount exceeds the base salary Executive was entitled to receive in the Prior Position. Executive’s base salary is subject to adjustment up or down by the Board at its sole discretion and without notice to Executive.


(b) Executive will be a participant in, and eligible to receive awards of incentive compensation under and in accordance with the applicable terms and conditions of, Nucor’s senior officer annual and long term incentive compensation plans, as modified from time to time by, and in the sole discretion of, the Board.

(c) Executive shall be a participant in, and eligible to receive awards of equity-based compensation under and in accordance with the applicable terms and conditions of, Nucor’s senior officer equity incentive compensation plans, as modified from time to time by, and in the sole discretion of, the Board.

(d) Executive will be eligible for those employee benefits that are generally made available by Nucor to its executive officers.

3. Compensation Following Termination.

(a) From the date of Executive’s termination of employment with Nucor, whether by Executive or Nucor for any or no reason, Nucor will pay Executive the Monthly Amount (as defined below) for twenty-four (24) months following Executive’s termination. The “Monthly Amount” shall be an amount equal to (i) the product of (A) the amount of Executive’s highest base salary level during the twelve (12) month period immediately prior to his date of termination, multiplied by (B) 3.36, (ii) divided by twelve (12). Subject to the provisions of Section 24 of this Agreement, the payments of the Monthly Amount shall be made at the end of each month following Executive’s termination of employment with Nucor on Nucor’s regular monthly payroll date.

(b) In exchange for Nucor’s agreement to pay the Monthly Amount as set forth in this Section 3, and other good and valuable consideration, including without limitation the compensation and benefits set forth in Section 2 of this Agreement, Executive agrees to strictly abide by the terms of Sections 8 through 12 of this Agreement.

(c) If Executive is employed by Nucor at the time of Executive’s death, Nucor’s obligations to make any payments of the Monthly Amount under this Agreement will automatically terminate and Executive’s estate and executors will have no rights to any payments of the Monthly Amount under this Agreement. If Executive dies during the first twelve months following Executive’s termination from employment with Nucor, then Nucor will pay Executive’s estate the payments of the Monthly Amount due pursuant to Section 3(a) of this Agreement through the end of the twelfth (12 th) month following Executive’s termination from employment with Nucor. If Executive dies twelve (12) or more months after termination of Executive’s employment with Nucor, then Nucor’s obligations to make any payments of the Monthly Amount under Section 3(a) of this Agreement will automatically terminate without the necessity of Nucor providing written notice.

(d) The amounts payable pursuant to this Section 3 of this Agreement shall be in addition to and not in lieu of any amounts payable to Executive pursuant to the Nucor Corporation Severance Plan for Senior Officers and General Managers (the “Severance Plan”), which such payments, if any, shall be governed by the terms and conditions of the Severance Plan.

 

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4. Duties and Responsibilities; Best Efforts. While employed by Nucor, Executive shall perform such duties for and on behalf of Nucor as may be determined and assigned to Executive from time to time by the Board. Executive shall devote his full time and best efforts to the business and affairs of Nucor. During the term of Executive’s employment with Nucor, Executive will not undertake other paid employment or engage in any other business activity without the prior written consent of the Board.

5. Employment at Will. The parties acknowledge and agree that this Agreement does not create employment for a definite term and that Executive’s employment with Nucor is at will and terminable by Nucor or Executive at any time, with or without cause and with or without notice, unless otherwise expressly set forth in a separate written agreement executed by Executive and Nucor after the date of this Agreement.

6. Change in Executive’s Position. In the event that Nucor transfers, demotes, promotes, or otherwise changes Executive’s compensation or position with Nucor, the restrictions and post-termination obligations set forth in Sections 8 through 12 of this Agreement shall remain in full force and effect.

7. Recognition of Nucor’s Legitimate Interests. Executive understands and acknowledges that Nucor competes in North America and throughout the world in the research, manufacture, marketing, sale and/or distribution of steel or steel products (including but not limited to flat-rolled steel, steel shapes, structural steel, light gauge steel framing, steel plate, steel joists and girders, steel deck, steel fasteners, metal building systems, wire rod, welded-wire reinforcement rolls and sheets, cold finished steel bars and wire, guard rail, fabricated concrete reinforcement bars, and structural welded-wire reinforcement) or steel or steel product inputs (including but not limited to scrap metal and direct reduced iron ) (all such activities, collectively, the “Business”). As part of Executive’s employment with Nucor, Executive acknowledges he will continue to have access to and gain knowledge of significant secret, confidential and proprietary information of the full range of operations of Nucor. In addition, Executive will continue to have access to training opportunities, contact with vendors, customers and prospective vendors and customers of Nucor, in which capacity he is expected to develop good relationships with such vendors, customers and prospective vendors and customers, and will gain intimate knowledge regarding the products and services of Nucor. Executive recognizes and agrees that Nucor has spent and will continue to spend substantial effort, time and money in developing relationships with its vendors and customers, that many such vendors and customers have long term relationships with Nucor, and that all vendors, customers and accounts that Executive may deal with during his employment with Nucor, are the vendors, customers and accounts of Nucor. Executive acknowledges that Nucor’s competitors would obtain an unfair advantage if Executive disclosed Nucor’s Secret Information or Confidential Information as defined in Sections 8 and 9 to a competitor, used it on a competitor’s behalf, or if he were able to exploit the relationships he develops as an employee of Nucor to solicit business on behalf of a competitor.

8. Covenant Regarding Nucor’s Secret Information. Executive recognizes and agrees that he will have continued access to certain sensitive and confidential information of Nucor (a) that is not generally known in the steel business, which would be difficult for others to acquire or duplicate without improper means, (b) that Nucor strives to keep secret, and (c) from which Nucor derives substantial commercial benefit because of the fact that it is not generally known (the “Secret Information”), including without limitation: (i) Nucor’s process of developing and producing raw material, and designing and manufacturing steel and iron products; (ii) Nucor’s process for treating, processing or fabricating steel and iron products; (iii) Nucor’s non-public financial data, strategic business plans, competitor analysis, sales and marketing data, and proprietary margin, pricing, and cost data; and (iv) any other information or data which meets the definition of “trade secrets” under applicable law. Executive agrees that unless he is expressly authorized by Nucor in writing, Executive will not use or disclose or allow to be used or disclosed Nucor’s Secret Information. This covenant shall survive until the Secret Information is

 

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generally known in the industry through no act or omission of the Executive or until Nucor knowingly authorizes the disclosure of or discloses the Secret Information, without any limitations on use or confidentiality. Executive acknowledges that he did not have knowledge of Nucor’s Secret Information prior to his employment with Nucor and that the Secret Information does not include Executive’s general skills and know-how.

9. Agreement to Maintain Confidentiality.

(a) As used in this Agreement, “Confidential Information” shall include all confidential and proprietary information of Nucor, including, without limitation, any of the following information to the extent not generally known to third persons: financial and budgetary information and strategies; plant design, specifications, and layouts; equipment design, specifications, and layouts; product design and specifications; manufacturing processes, procedures, and specifications; data processing or other computer programs; research and development projects; marketing information and strategies; customer lists; vendor lists; information about customer preferences and buying patterns; information about prospective customers, vendors and prospective vendors, or business opportunities; information about Nucor’s costs and the pricing structure used in sales to customers; information about Nucor’s overall corporate business strategy; and technological innovations used in Nucor’s business, to the extent that such information does not fall within the definition of Secret Information.

(b) Except as otherwise provided in this Agreement, during Executive’s employment with Nucor and at all times after the termination of Executive’s employment, Executive covenants and agrees to treat as confidential and not to negligently or intentionally disclose, and to use only for the advancement of the interests of Nucor, all Confidential Information submitted to Executive or received, compiled, developed, designed, produced, accessed, or otherwise discovered by the Executive from time to time while employed by Nucor. Executive will not disclose or divulge the Confidential Information to any person, entity, firm or company whatsoever or use the Confidential Information for Executive’s own benefit or for the benefit of any person, entity, firm or company other than Nucor. This restriction will apply throughout the world; provided, however, that if the restrictions of this Section 9(b) when applied to any specific piece of Confidential Information would prevent the Executive from using his general knowledge or skills in competition with Nucor or would otherwise substantially restrict the Executive’s ability to fairly compete with Nucor, then as to that piece of Confidential Information only, the scope of this restriction will apply only for the Restrictive Period (as defined below) and only within the Restricted Territory (as defined below).

(c) Executive specifically acknowledges that the Confidential Information, whether reduced to writing or maintained in the mind or memory of Executive, and whether compiled or created by Executive, Nucor, or any of its vendors or customers, derives independent economic value from not being readily known to or ascertainable by proper means by others who could obtain economic value from the disclosure or use of the Confidential Information. Executive also acknowledges that reasonable efforts have been put forth by Nucor to maintain the secrecy of the Confidential Information, that the Confidential Information is and will remain the sole property of Nucor or any of its vendors or customers, as the case may be, and that any retention and/or use of Confidential Information during or after the termination of Executive’s employment with Nucor (except in the regular course of performing his duties hereunder) will constitute a misappropriation of the Confidential Information belonging to Nucor. Executive acknowledges and agrees that if he (i) accesses Confidential Information on any Nucor computer system within thirty (30) days prior the effective date of his voluntary resignation of employment with Nucor and (ii) transmits, copies or reproduces such Confidential Information in any manner or deletes any such Confidential Information, he is exceeding his authorized access to such computer system.

 

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10. Noncompetition.

(a) Executive hereby agrees that for the duration of Executive’s employment with Nucor, and for a period of twenty-four (24) months thereafter (the “Restrictive Period”), Executive will NOT, within the Restricted Territory, do any of the following:

(i) engage in, whether as an employee, consultant, or in any other capacity, any business activity (A) that is the same as, or is in direct competition with, any portion of the Business, and (B) in which Executive engaged in during the course of his employment with Nucor (any such activities described in this Section 10(a)(i), “Competing Activities”);

(ii) commence, establish or own (in whole or in part) any business that engages in any Competing Activities, whether (i) by establishing a sole proprietorship, (ii) as a partner of a partnership, (iii) as a member of a limited liability company, (iv) as a shareholder of a corporation (except to the extent Executive is the holder of not more than five percent (5%) of any class of the outstanding stock of any company listed on a national securities exchange so long as Executive does not actively participate in the management or business of any such entity) or (v) as the owner of any similar equity interest in any such entity;

(iii) provide any public endorsement of, or otherwise lend Executive’s name for use by, any person or entity engaged in any Competing Activities; or

(iv) engage in work that would inherently call on him in the fulfillment of his duties and responsibilities to reveal, rely upon, or otherwise use any Confidential Information or Secret Information.

(b) For purposes of this Agreement:

(i) The term “Restricted Territory” means Executive’s geographic area of responsibility at Nucor which Executive acknowledges extends to the full scope of Nucor operations throughout the world. “Restricted Territory” therefore consists of the following alternatives reasonably necessary to protect Nucor’s legitimate business interests:

(A) Asia, Australia, Western Europe, Eastern Europe (including Russia), the Middle East, South America and North America, where Executive acknowledges Nucor engages in the Business, but if such territory is deemed overbroad by a court of law, then

(B) The United States, Canada, and Mexico, where Executive acknowledges Nucor engages in the Business, but if such territory is deemed overbroad by a court of law, then;

(C) The contiguous United States, where Executive acknowledges Nucor engages in the Business, but if such territory is deemed overbroad by a court of law, then;

 

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(D) Any state in the United States located within a three hundred (300) mile radius of a Nucor plant or facility that engages in the Business, but if such territory is deemed overbroad by a court of law, then;

(E) Any state in the United States where a Customer or Prospective Customer is located.

(ii) The term “Customer” means the following alternatives:

(A) any and all customers of Nucor with whom Nucor is doing business at the time of Executive’s termination of employment with Nucor, but if such definition is deemed overbroad by a court of law, then;

(B) any customer of Nucor with whom Executive or Executive’s direct reports had significant contact or with whom Executive or Executive’s direct reports directly dealt on behalf of Nucor at the time of Executive’s last date of full time employment with Nucor, but if such definition is deemed overbroad by a court of law, then;

(C) any customer of Nucor with whom Executive had significant contact or with whom Executive directly dealt on behalf of Nucor at the time of Executive’s last date of full time employment with Nucor but if such definition is deemed overbroad by a court of law, then;

(D) any customer of Nucor about whom Executive had obtained Secret Information or Confidential Information by virtue of his employment with Nucor and with whom Executive had significant contact or with whom Executive directly dealt on behalf of Nucor at the time of Executive’s last date of full time employment;

Provided, however, that the term “Customer” shall not include any business or entity that no longer does business with Nucor without any direct or indirect interference by Executive or violation of this Agreement by Executive, and that ceased doing business with Nucor prior to any direct or indirect communication or contact by Executive.

(iii) The term “Prospective Customer” means any person or entity who does not currently or has not yet purchased the products or services of Nucor, but who, at the time of Executive’s last date of full-time employment with Nucor has been targeted by Nucor as a potential user of the products or services of Nucor, and whom Executive or his direct reports participated in the solicitation of or on behalf of Nucor.

(iv) The term “solicit” means to initiate contact for the purpose of promoting, marketing, or selling products or services similar to those Nucor offered during the tenure of Executive’s employment with Nucor or to accept business from Customers or Prospective Customers.

(c) Executive specifically agrees that the post-termination restrictions in this Section 10 and in Sections 8, 9, 11 and 12 will apply to Executive regardless of whether termination of employment is initiated by Nucor or Executive and regardless of the reason for termination of Executive’s employment. Further, Executive acknowledges and agrees that Nucor’s payment of

 

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the compensation described in Section 3 is intended to compensate Executive for the limitations on Executive’s competitive activities described in this Section 10 and Sections 11 and 12 for the Restrictive Period regardless of the reason for termination. Thus, for example, in the event that Nucor terminates Executive’s employment without cause, Executive expressly agrees that the restrictions in this Section 10 and Sections 8, 9, 11 and 12 will apply to Executive notwithstanding the reasons or motivations of Nucor in terminating Executive’s employment.

11. Nonsolicitation. Executive hereby agrees that for the duration of Executive’s employment with Nucor, and for the Restrictive Period, Executive will NOT, within the Restricted Territory, do any of the following:

(a) solicit, contact, or attempt to influence any Customer to limit, curtail, cancel, or terminate any business it transacts with, or products it receives from Nucor;

(b) solicit, contact, or attempt to influence any Prospective Customer to terminate any business negotiations it is having with Nucor, or to otherwise not do business with Nucor;

(c) solicit, contact, or attempt to influence any Customer to purchase products or services from an entity other than Nucor, which are the same or substantially similar to, or otherwise in competition with, those offered to the Customer by Nucor; or

(d) solicit, contact, or attempt to influence any Prospective Customer to purchase products or services from an entity other than Nucor, which are the same or substantially similar to, or otherwise in competition with, those offered to the Prospective Customer by Nucor.

12. Antipiracy.

(a) Executive agrees for the duration of the Restrictive Period, Executive will not, directly or indirectly, encourage, contact, or attempt to induce any employees of Nucor (i) with whom Executive had regular contact with at the time of Executive’s last date of full time employment with Nucor, and (ii) who are employed by Nucor at the time of the encouragement, contact or attempted inducement, to end their employment relationship with Nucor.

(b) Executive further agrees for the duration of the Restrictive Period not to hire for any reason any employees described in Section 12(a) of this Agreement.

13. Assignment of Intellectual Property Rights.

(a) Executive hereby assigns to Nucor Executive’s entire right, title and interest, including copyrights and patents, in any idea, invention, design of a useful article (whether the design is ornamental or otherwise), and any other work of authorship (collectively the “Developments”), made or conceived solely or jointly by Executive at any time during Executive’s employment by Nucor (whether prior or subsequent to the execution of this Agreement), or created wholly or in part by Executive, whether or not such Developments are patentable, copyrightable or susceptible to other forms of protection, where the Developments: (i) were developed, invented, or conceived within the scope of Executive’s employment with Nucor; (ii) relate to Nucor’s actual or demonstrably anticipated research or development; or (iii) result from any work performed by Executive on Nucor’s behalf.

(b) The assignment requirement in subsection (a) of this Section 13 shall not apply to an invention that Executive developed entirely on his own time without using Nucor’s

 

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equipment, supplies, facilities or Secret Information or Confidential Information except for those inventions that (i) relate to Nucor’s business or actual or demonstrably anticipated research or development, or (ii) result from any work performed by Executive for Nucor.

(c) In connection with any of the Developments assigned in subsection (a) above: (i) Executive will promptly disclose them to Nucor’s management; and (ii) Executive will, on Nucor’s request, promptly execute a specific assignment of title to Nucor or its designee, and do anything else reasonably necessary to enable Nucor or its designee to secure a patent, copyright, or other form of protection therefore in the United States and in any other applicable country.

(d) Nothing in this Section 13 is intended to waive, or shall be construed as waiving, any assignment of any Developments to Nucor implied by law.

14. Severability. It is the intention of the parties to restrict the activities of Executive only to the extent reasonably necessary for the protection of Nucor’s legitimate interests. The parties specifically covenant and agree that should any of the provisions in this Agreement be deemed by a court of competent jurisdiction too broad for the protection of Nucor’s legitimate interests, the parties authorize the court to narrow, limit or modify the restrictions herein to the extent reasonably necessary to accomplish such purpose. In the event such limiting construction is impossible, such invalid or unenforceable provision shall be deemed severed from this Agreement and every other provision of this Agreement shall remain in full force and effect.

15. Enforcement. Executive understands and agrees that any breach or threatened breach by Executive of any of the provisions of Sections 8 through 12 of this Agreement shall be considered a material breach of this Agreement, and in the event of such a breach or threatened breach of this Agreement, Nucor shall be entitled to pursue any and all of its remedies under law or in equity arising out of such breach. If Nucor pursues either a temporary restraining order or temporary injunctive relief, then Executive agrees to expedited discovery with respect thereto and waives any requirement that Nucor post a bond. Executive further agrees that in the event of his breach of any of the provisions of Sections 8 through 12 of this Agreement, unless otherwise prohibited by law:

(a) Nucor shall be (i) entitled to cancel any unexercised stock options granted under any senior officer equity incentive compensation plan from and after the date of this Agreement (the “Post-Agreement Date Option Grants”), and (ii) entitled to seek other appropriate relief, including, without limitation, repayment by Executive of any (A) Monthly Amounts already paid and (B) benefits already paid under any severance or similar benefit plans; and

(b) Executive shall (i) forfeit any (A) unexercised Post-Agreement Date Option Grants and (B) any shares of restricted stock or restricted stock units granted under any senior officer equity incentive compensation plan that vested during the six (6) month period immediately preceding Executive’s termination of employment (the “Vested Stock”) and (ii) forfeit and immediately return upon demand by Nucor any profit realized by Executive from the exercise of any Post-Agreement Date Option Grants or sale or exchange of any Vested Stock during the six (6) month period preceding Executive’s breach of any of the provisions of Sections 8 through 12 of this Agreement.

Executive agrees that any breach or threatened breach of any of the provisions of Sections 8 through 12 will cause Nucor irreparable harm which cannot be remedied through monetary damages and the alternative relief set forth in Sections 15(a) and (b) shall not be considered an adequate remedy for the harm Nucor would incur. Executive further agrees that such remedies in Sections 15(a) and (b) will not preclude injunctive relief.

 

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If Executive breaches or threatens to breach any of the provisions of Sections 10, 11 or 12 of this Agreement and Nucor obtains an injunction, preliminary or otherwise, ordering Executive to adhere to the restrictive period required by the applicable paragraph, then the applicable restrictive period will be extended by the number of days that have elapsed from the date of Executive’s termination until the time the injunction is granted.

Executive further agrees, unless otherwise prohibited by law, to pay Nucor’s attorneys’ fees and costs incurred in successfully enforcing its rights pursuant to this Section 15, or in defending against any action brought by Executive or on Executive’s behalf in violation of or under this Section 15 in which Nucor prevails. Executive agrees that Nucor’s actions pursuant to this Section 15, including, without limitation, filing a legal action, are permissible and are not and will not be considered by Executive to be retaliatory. Executive further represents and acknowledges that in the event of the termination of Executive’s employment for any reason, Executive’s experience and capabilities are such that Executive can obtain employment and that enforcement of this Agreement by way of injunction will not prevent Executive from earning a livelihood.

16. Reasonableness of Restrictions. Executive has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon Nucor under Sections 8, 9, 10, 11, 12 and 15 and hereby acknowledges and agrees that the same are reasonable in time and territory, are designed to eliminate competition which would otherwise be unfair to Nucor, do not interfere with Executive’s exercise of his inherent skill and experience, are reasonably required to protect the legitimate interests of Nucor, and do not confer a benefit upon Nucor disproportionate to the detriment to Executive. Executive certifies that he has had the opportunity to discuss this Agreement with such legal advisors as he chooses and that he understands its provisions and has entered into this Agreement freely and voluntarily.

17. Applicable Law. This Agreement shall be interpreted, construed and governed according to the laws of the State of North Carolina, regardless of choice of law principles to the contrary. Each party, for themselves and their successors and assigns, hereby irrevocably (a) consents to the exclusive jurisdictions of the State and Federal courts located in the State of North Carolina; and (b) waives any objection to any such action based on venue or forum non conveniens. Further, Executive hereby irrevocably consents to the jurisdiction of any court or similar body within the Restricted Territory for enforcement of any judgment entered in a court or similar body pursuant to this Agreement. This Agreement is intended, among other things, to supplement the provisions of the North Carolina Trade Secrets Protection Act, as amended from time to time, and the duties Executive owes to Nucor under the common law, including, but not limited to, the duty of loyalty.

18. Executive to Return Property. Executive agrees that upon (a) the termination of Executive’s employment with Nucor and within three (3) business days thereof, whether by Executive or Nucor for any reason (with or without cause), or (b) the written request of Nucor, Executive (or in the event of the death or disability of Executive, Executive’s heirs, successors, assigns and legal representatives) shall return to Nucor any and all property of Nucor regardless of the medium in which such property is stored or kept, including but not limited to all Secret Information, Confidential Information, notes, data, tapes, computers, lists, customer lists, names of customers, reference items, phones, documents, sketches, drawings, software, product samples, rolodex cards, forms, manuals, keys, pass or access cards and equipment, without retaining any copies or summaries of such property. Executive further agrees that to the extent Secret Information or Confidential Information are in electronic format and in Executive’s possession, custody or control, Executive will provide all such copies to Nucor and will not keep copies in such format but, upon Nucor’s request, will confirm the permanent deletion thereof.

 

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19. Entire Agreement; Amendments. This Agreement discharges and cancels all previous agreements regarding Executive’s employment with Nucor, including without limitation that certain Executive Agreement by and between Nucor Corporation and Executive dated as of February 26, 2006, and constitutes the entire agreement between the parties with regard to the subject matter hereof. No agreements, representations, or statements of any party not contained herein shall be binding on either party. Further, no amendment or variation of the terms or conditions of this Agreement shall be valid unless in writing and signed by both parties.

20. Assignability. This Agreement and the rights and duties created hereunder shall not be assignable or delegable by Executive. Nucor may, at its option and without consent of Executive, assign its rights and duties hereunder to any successor entity or transferee of Nucor Corporation’s assets.

21. Binding Effect. This Agreement shall be binding upon and inure to the benefit of Nucor and Executive and their respective successors, assigns, heirs and legal representatives.

22. No Waiver. No failure or delay by any party to this Agreement to enforce any right specified in this Agreement will operate as a waiver of such right, nor will any single or partial exercise of a right preclude any further or later enforcement of the right within the period of the applicable statute of limitations.

23. Cooperation. Executive agrees that both during and after his employment, he shall, at Nucor’s request, render all assistance and perform all lawful acts that Nucor considers necessary or advisable in connection with any litigation involving Nucor or any of its directors, officers, employees, shareholders, agents, representatives, consultants, clients, or vendors. Executive understands and agrees that Nucor will reimburse him for any reasonable documented expense he incurs related to this cooperation and assistance, but will not be obligated to pay him any additional amounts.

24. Compliance with Code Section 409A. Notwithstanding anything in this Agreement to the contrary, if (a) Executive is a specified employee as of the date of his separation from service and (b) any amount or benefit that Nucor determines would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Internal Revenue Code of 1986 (the “Code”) would otherwise be payable or distributable under this Agreement by reason of Executive’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, Executive’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of Executive’s death or the seventh month following Executive’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 (6) month period immediately following Executive’s separation from service will be accumulated, and Executive’s right to receive payment or distribution of such accumulated amount or benefit will be delayed until the earlier of Executive’s death or the seventh month following Executive’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.

For purposes of this Agreement, the term “separation from service” shall be defined as provided in Code Section 409A and applicable regulations, and Executive shall be a “specified employee” during the twelve (12) month period beginning April 1 each year if Executive met the requirements of Section 416(i)(l)(A)(i), (ii) or (iii) of the Code (applied in accordance with the regulations thereunder and disregarding Section 416(i)(5) of the Code) at any time during the twelve (12) month period ending on the December 31 immediately preceding his separation from service.

 

10


IN WITNESS WHEREOF, Executive and Nucor Corporation have executed this Agreement on the dates specified below.

 

EXECUTIVE

LOGO

James D. Frias
Date:  

Oct 19, 2009

NUCOR CORPORATION
By:  

LOGO

Its:  

Chairman, President and CEO

Date:  

October 19, 2009

 

11

Computation of Ratio of Earnings to Fixed Charges

Exhibit 12

Computation of Ratio of Earnings to Fixed Charges

 

     Year-ended December 31,  
     2005     2006     2007     2008     2009  
     (In thousands, except ratios)  

Earnings

          

Earnings/(loss) before income taxes and noncontrolling interests

   $ 2,137,733      $ 2,911,556      $ 2,546,816      $ 3,104,391      $ (413,978

Plus/(Less): losses/(earnings) from equity investments

     (476     17,690        24,618        36,920        82,341   

Plus: fixed charges (includes interest expense and amortization of bond issuance costs and settled swaps and estimated interest on rent expense)

     36,571        40,351        55,381        146,360        168,317   

Plus: amortization of capitalized interest

     216        216        216        300        962   

Plus: distributed income of equity investees

     —          3,172        8,072        20,117        7,373   

Less: interest capitalized

     —          —          (3,700     (10,020     (16,390

Less: pre-tax earnings in noncontrolling interests in subsidiaries that have not incurred fixed charges

     (110,650     (219,121     (293,604     (314,277     (57,865
                                        

Total earnings/(loss) before fixed charges

   $ 2,063,394      $ 2,753,864      $ 2,337,799      $ 2,983,791      $ (229,240
                                        

Fixed charges

          

Interest cost and amortization of bond issuance and settled swaps

     36,571        40,351        55,052        144,845        166,313   

Estimated interest on rent expense

     —          —          329        1,515        2,004   
                                        

Total Fixed Charges

     36,571        40,351        55,381        146,360        168,317   
                                        

Ratio of earnings to fixed charges

     56.42        68.25        42.21        20.39        *   

 

* Earnings for the year ended December 31, 2009 were inadequate to cover fixed charges. The coverage deficiency was $397,557.
2009 Annual Report

Exhibit 13

 

    2       

    FINANCIAL HIGHLIGHTS

 

 

FINANCIAL HIGHLIGHTS      (dollar and share amounts in thousands, except per share data)   
       2009        2008      % CHANGE   

 

FOR THE YEAR

      

 

Net sales

   $ 11,190,296      $ 23,663,324      -53

 

Earnings:

      

 

Earnings (loss) before income taxes and noncontrolling interests

     (413,978     3,104,391      -113

 

Provision for (benefit from) income taxes

     (176,800     959,480      -118
                  

 

Net earnings (loss)

     (237,178     2,144,911      -111

 

Earnings attributable to noncontrolling interests

     56,435        313,921      -82
                  

 

Net earnings (loss) attributable to Nucor stockholders

     (293,613     1,830,990      -116

 

Per share:

      

 

Basic

     (0.94     5.99      -116

 

Diluted

     (0.94     5.98      -116

 

Dividends declared per share

     1.41        1.91      -26

 

Percentage of net earnings (loss) to net sales

     -2.6     7.7   -134

 

Return on average stockholders’ equity

     -3.8     28.1   -114

 

Capital expenditures

     390,500        1,018,980      -62

 

Depreciation

     494,035        479,484      3

 

Acquisitions (net of cash acquired)

     32,720        1,826,030      -98

 

Sales per employee

     539        1,155      -53

 

AT YEAR END

                      

 

Working capital

   $ 3,955,191      $ 4,543,294      -13

 

Property, plant and equipment, net

     4,013,836        4,131,861      -3

 

Long-term debt

     3,086,200        3,266,600      -6

 

Total Nucor stockholders’ equity

     7,390,526        7,929,204      -7

 

Per share

     23.47        25.25      -7

 

Shares outstanding

     314,856        313,977        

 

Employees

 

    

 

20,400

 

  

 

   

 

21,700

 

  

 

  -6

 

 

FORWARD-LOOKING STATEMENTS Certain statements made in this annual report are forward-looking statements that involve risks and uncertainties. The words “believe,” “expect,” “project,” “will,” “should” and similar expressions are intended to identify those forward-looking statements. These forward-looking statements reflect the Company’s best judgment based on current information, and although we base these statements on circumstances that we believe to be reasonable when made, there can be no assurance that future events will not affect the accuracy of such forward-looking information. As such, the forward-looking statements are not guarantees of future performance, and actual results may vary materially from the projected results and expectations discussed in this report. Factors that might cause the Company’s actual results to differ materially from those anticipated in forward-looking statements include, but are not limited to: (1) the sensitivity of the results of our operations to prevailing steel prices and changes in the supply and cost of raw materials, including pig iron and 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) impairment in the recorded value of inventory, fixed assets, goodwill or other long-lived assets; (6) uncertainties surrounding the global economy, including the severe economic downturn in construction markets and excess world capacity for steel production; (7) fluctuations in currency conversion rates; (8) U.S. and foreign trade policy affecting steel imports or exports; (9) significant changes in laws or government regulations affecting environmental compliance, including legislation and regulations that result in greater regulation of greenhouse gas emissions, which could increase our energy costs and our capital expenditures and operating costs; (10) the cyclical nature of the steel industry; (11) capital investments and their impact on our performance; and (12) our safety performance.


    8       

    OPERATIONS REVIEW

 

STEEL MILLS SEGMENT

 

 

BAR MILLS, SHEET MILLS, STRUCTURAL MILLS AND PLATE MILLS

Nucor operates scrap-based steel mills in 23 facilities and is North America’s largest recycler.

 

 

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    9  

 

BAR MILLS

Nucor has thirteen bar mills located across the U.S. that produce concrete reinforcing bars, hot-rolled bars, rods, light shapes, structural angles, channels 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 modernized and globally competitive. Nucor acquired the remaining bar mills since 2000. The construction of the state-of-the-art special bar quality (SBQ) mill in Memphis was substantially completed in 2008, and the Nucor Steel – Memphis team began shipping prime rolled bars to customers in early 2009. This mill will complement the product offerings of Nucor’s Nebraska and South Carolina SBQ mills, growing Nucor’s business in energy, automotive, heavy equipment and service center markets. In 2009, the total capacity of our bar mills was approximately 8,910,000 tons per year.

In November 2009, we commissioned our Kingman, Arizona, wire rod and bar mill that we acquired in 2003 and that had previously been idle. Production will begin in the second quarter of 2010 with initial annual output of straight-length rebar, coiled rebar and wire rod of more than 100,000 tons with the ability to increase annual production to 500,000 tons. This facility will allow us to better serve wire rod and rebar customers in the southwestern U.S. market.

SHEET MILLS

Nucor’s four sheet mills utilize thin slab casters to produce flat-rolled steel for the automotive, appliance, pipe and tube, construction and other industries. Nucor constructed three of the sheet mills between 1989 and 1996, and Nucor’s wholly owned subsidiary, Nucor Steel Decatur, LLC, purchased substantially all of the assets of Trico Steel Company, LLC in 2002. In 2009, Nucor began operations at the galvanizing facility at the Decatur sheet mill. This line enables Nucor to expand the products offered to the galvanized market and increases the sheet mills’ total coated capacity by one-third. All four of our sheet mills are now 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.

Nucor began operations of its Castrip facility in Crawfordsville, Indiana, in May 2002. This facility uses the breakthrough technology of strip casting, to which Nucor holds exclusive rights in the United States and Brazil. Strip casting involves the direct casting of molten steel into final shape and thickness without further hot or cold rolling. This process allows lower investment and operating costs, reduced energy consumption and smaller scale plants than can be economically built with current technology. This process also reduces the overall environmental impact of producing steel by generating significantly lower emissions. In 2009, Nucor commissioned the second Castrip production facility in Blytheville, Arkansas. Our Castrip - Arkansas team, supported by the Castrip - Indiana team, experienced a successful start-up and began making product available to customers in late 2009, just four months after beginning equipment commissioning.

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 Co. LTD., 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. 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. Our mills produce plate for manufacturers of heavy equipment, rail cars, wind towers, bridges, ships, barges, refinery tanks and others. Our products are also 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.

Construction is underway to install a new heat treating facility at the plate mill in North Carolina. Heat treated plate is used in applications where higher strength, abrasion resistance and toughness are required. This value-added product will allow Nucor’s plate mills to expand business with both current and new customers.


  10       

    OPERATIONS REVIEW

 

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 decreased 32% from 20,446,000 tons in 2008 to 13,998,000 tons in 2009. 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 steel mills are highly automated, resulting in employment costs of approximately 8% of the sales dollar in 2009. 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 natural gas. Total energy costs per ton increased 2% from 2008 to 2009. Because of the efficiency of Nucor steel mills, these energy costs were less than 8% 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 decreased 31% from $438 per ton in 2008 to $303 per ton in 2009. 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 86% of the steel mills’ production in 2009 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 34% from 18,185,000 tons in 2008 to 12,075,000 tons in 2009.

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 2010 with approximately 35% of our sheet mill volume committed to contract customers. Contract terms are typically six to twelve months in length with various renewal structures. These contracts are non-cancelable agreements with a pricing formula that varies based on raw material costs.

INTEREST IN DUFERDOFIN NUCOR

In July 2008, Nucor acquired 50% of the stock of Duferdofin Nucor S.r.l., an unconsolidated affiliate, for approximately $671.3 million (including $4.3 million paid in 2009 as an adjustment to the purchase price). Duferdofin Nucor operates a 1,000,000 ton-per-year steel melt shop with a bloom/billet caster in Brescia, Italy. The company also operates four rolling mills located throughout Italy — two beam mills, one track shoes/cutting edges mill and a new merchant/rebar mill. The rolling mill capacities are as follows: 1,000,000 metric tons for beams, 55,000 metric tons for track shoes/cutting edges and 450,000 metric tons for bar. The new merchant/rebar mill was commissioned in late 2009.

Duferdofin Nucor’s customers are primarily steel service centers and distributors located in Italy, other countries in Southern Europe and North Africa. We expect our strong customer relationships and reputation in the beam market to assist us in the bar market in those countries.


   

  11  

 

LOGO


  12       

    OPERATIONS REVIEW

 

STEEL PRODUCTS SEGMENT

 

 

LOGO

 

 


   

  13  

 

 

 

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). After three successful years working together, 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 the U.S. and Canada.

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 for Nucor in the rebar fabrication business. In August 2008, Harris Steel acquired all of the issued and outstanding common shares of Ambassador Steel Corporation for a cash purchase price of approximately $185.1 million. At closing, Harris Steel also repaid Ambassador’s bank debt of approximately $135.6 million. The purchase price was adjusted in 2009, resulting in the payment of an additional $25.7 million. Based in Auburn, Indiana, Ambassador Steel is a fabricator and distributor of concrete reinforcing steel and related products. Although our acquisition initiatives were put on hold in late 2008 because of the economic collapse and financial crisis, Harris Steel acquired Free State Steel late in 2009, adding locations in Maryland and Virginia. With the addition of Ambassador Steel to the other acquisitions that Harris Steel has completed, our rebar fabrication capacity has more than doubled to 1,588,000 tons since Nucor acquired Harris Steel in 2007. In 2009, fabricated rebar sales were 954,000 tons compared to 955,000 tons in 2008.

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 manufactures wire products, grating and industrial bolts.

 

 

STEEL MESH

Nucor produces steel mesh at Nucor Steel Connecticut, Inc. and Nucor Wire Products of Pennsylvania, Inc. In addition to these facilities in the U.S., Nucor produces steel mesh in Canada at Harris Steel’s operations at Laurel and Laurel-LEC. The combined annual production capacity of the steel mesh facilities is approximately 233,000 tons.

GRATING

With the acquisition of Harris Steel, Nucor expanded 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 103,000 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.


  14       

    OPERATIONS REVIEW

 

 

 

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 across the United States. Current annual production capacity is approximately 715,000 tons. In 2009, Vulcraft produced 264,000 tons of steel joists and joist girders, a decrease of 46% from the 485,000 tons produced in 2008. Material costs, primarily steel, were approximately 63% of the joist sales dollar in 2009 (62% in 2008). Vulcraft obtained 99% of its steel requirements for joists and joist girders from the Nucor bar mills in both 2009 and 2008. 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 throughout the country. 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). This acquisition included three deck plants located in Arizona and California, positioning Nucor to better supply the large western construction market. Current annual deck production capacity is now approximately 530,000 tons. In 2009 steel deck sales decreased by 38% to 310,000 tons, compared to the record 498,000 tons in 2008. Material costs, primarily coiled sheet steel, were approximately 73% of the steel deck sales dollar in 2009 (72% in 2008). In 2009, Nucor obtained 83% of its steel requirements for steel deck production from the Nucor sheet mills (73% in 2008). In 2009 and 2008, freight costs for deck were less than 10% of the sales dollar.

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

MARKETS AND MARKETING

The majority of 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.

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 2009, Vulcraft supplied more than 40% of total domestic sales of steel joists. Steel deck sales are also obtained by competitive bidding. The majority of steel deck is used to support roofs and is also used as concrete floor support in high-rise buildings. In 2009, 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.


   

  15  

 

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  16       

    OPERATIONS REVIEW

 

 

 

BUILDINGS GROUP AND LIGHT GAUGE STEEL FRAMING

Nucor manufactures custom-engineered and standard metal buildings and components as well as 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 located in Indiana, South Carolina and Texas. During the first quarter of 2008, Nucor’s Brigham City, Utah, facility began its operations, adding 30,000 tons to annual capacity. These four plants have an annual capacity of 175,000 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 Corporation was a leading provider of custom-engineered metal buildings and components for the 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.

In total, Nucor’s Buildings Group currently has eleven metal buildings plants with an annual capacity of approximately 465,000 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 decreased 44% from a record 292,000 tons in 2008 to 163,000 tons in 2009. The primary markets served 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.

 

Nucon has introduced two 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.

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  17  

 

 

 

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. With approximately 100,000 tons of annual capacity, LMP is a producer of cold finished bar and operates related businesses 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. In 2009, sales of cold finished steel products were 330,000 tons, a decrease of 32% from the record 485,000 tons sold in 2008.

These facilities produce cold-drawn, turned, ground and polished steel bars that are used extensively for shafting and other precision machined applications. 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, fluid power, construction equipment, 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, hydraulic cylinders and shafting for air conditioner compressors, ceiling fan motors, garage door openers, electric motors and lawn mowers.

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.

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  18       

    OPERATIONS REVIEW

 

RAW MATERIALS SEGMENT

 

 

SCRAP AND SCRAP SUBSTITUTES are Nucor’s single largest cost. Over the past several years, Nucor has executed a raw materials strategy to control the supply of high quality metallics for consumption at the steel mills.

 

 

 

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*Hong Kong office not shown


   

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OPERATIONS

In February 2008, Nucor completed the acquisition of The David J. Joseph Company (DJJ) and related affiliates for a cash purchase price of approximately $1.44 billion, the largest acquisition in our history. DJJ immediately became a Nucor growth platform for strategic acquisitions. By the end of 2008, we added approximately one million tons of scrap processing and 23 locations. Although the economy precluded our team from pursuing acquisitions in 2009, we expect to add additional scrap yards in 2010. Our total annual scrap processing capacity is now approaching five million tons. In addition to processing scrap, DJJ brokers ferrous scrap; internationally sources scrap, pig iron and other scrap substitutes; and brokers ferro-alloys and nonferrous 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.

Nucor’s direct reduced iron (“DRI”) plant, Nu-Iron Unlimited, is located in Trinidad and has capacity of 1,800,000 metric tons. We are currently working on a plan to expand the capacity of this facility. 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.

INTERNATIONAL JOINT VENTURE

Nucor has a 25% interest in a joint venture that owns 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. This plant has an initial annual capacity of 800,000 metric tons and is expandable to over 1,500,000 metric tons. In December 2008, production at the HIsmelt plant was temporarily suspended due to market conditions. As a result, Nucor recorded an impairment charge of $84.8 million in 2008. The joint venture hopes to resume operations when conditions in the pig iron market improve.

GREENFIELD PROJECT

In 2008 Nucor applied for a permit to build a state-of-the-art iron-making facility in St. James Parish, Louisiana. This project has been delayed while we continue working through an extended permitting process and await the outcome of climate change legislation that is currently pending in Congress. Sites outside of the United States are still being considered, and the site selection and capital investment are subject to approval by Nucor’s board of directors. We remain committed to our goal of controlling one-third of our iron inputs via pig iron, direct reduced iron or using other iron making technologies and have several options under development to complement or replace the Louisiana blast furnace project if the threat of climate change legislation or other circumstances make that project unviable.


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

    OPERATIONS

 

 

 

OVERVIEW

Nucor and affiliates are manufacturers of steel and steel products, with operating facilities primarily located in North America. Nucor’s customers are principally located in North America and, increasingly, internationally. Nucor is also a scrap processor and broker and is North America’s largest recycler. Additionally, the Company’s operations include international trading companies that buy and sell steel and steel products. Nucor reports its results in three segments: steel mills, steel products and raw materials.

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. The raw materials segment produces direct reduced iron (DRI) used by the steel mills; brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap.

Hot-rolled steel is manufactured principally from scrap, utilizing electric arc furnaces, continuous casting and automated rolling mills. In 2009, approximately 82% of the tons sold by the raw materials segment were consumed internally by the steel mills segment; the remaining tons were sold to non-affiliated customers. Cold-rolled steel, cold finished steel, steel joists and joist girders, fabricated concrete reinforcing steel, steel fasteners grating and expanded metal, wire and wire mesh are manufactured by further processing of hot-rolled steel. Steel deck, light gauge framing and wire mesh are manufactured from cold-rolled and cold drawn steel. In 2009, approximately 86% of the steel mills segment production was sold to non-affiliated customers; the remainder was used internally by the steel products segment.

The recession experienced by the global economy and its effects on steel markets throughout 2009 were unprecedented. This year was the first since 2001 in which Nucor has experienced a decrease in sales when compared to the prior year. The significant reduction in demand for our products, particularly in the first half of the year, resulted in the first annual net loss in the history of our company. Our results improved each quarter, however, and we ended the year with a profitable fourth quarter.

The strength of our balance sheet and our culture enable us to use downturns as opportunities to grow Nucor’s long-term earnings power. 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.

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COMPARISON OF 2009 TO 2008

RESULTS OF OPERATIONS

NET SALES

Net sales to external customers by segment for 2009 and 2008 were as follows:

 

             (in thousands)

Year Ended December 31,

   2009      2008      % Change  
     

Steel mills

   $  7,159,512      $16,477,900      -57%  

Steel products

   2,691,322      4,339,524      -38%  

Raw materials

   1,076,964      2,403,075      -55%  

All other

   262,498      442,825      -41%  
            

Total net sales to external customers

   $11,190,296      $23,663,324      -53%  
            
                

Net sales for 2009 decreased 53% from the prior year due to the most challenging market conditions in Nucor’s history. The average sales price per ton decreased 32% from $940 in 2008 to $637 in 2009, while total tons shipped to outside customers decreased 30%.

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In the steel mills segment, production and sales tons were as follows:

 

             (in thousands)

Year Ended December 31,

   2009      2008      % Change  
     

Steel production

   13,998      20,446      -32%  
            

Outside steel shipments

   12,075      18,185      -34%  

Inside steel shipments

   1,961      2,747      -29%  
            

Total steel shipments

   14,036      20,932      -33%  
            
                

Net sales to external customers in the steel mills segment decreased 57% due to a 34% decrease in tons sold to outside customers and a 35% decrease in the average sales price per ton from $907 in 2008 to $593 in 2009. Total production levels at the steel mills decreased 32% due to significant decreases in outside shipments as well as in tons supplied to Nucor’s downstream businesses.


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Tonnage data for the steel products segment is as follows:

 

             (in thousands)

Year Ended December 31,

   2009      2008      % Change  
     

Joist production

   264      485      -46%  

Deck sales

   310      498      -38%  

Cold finished sales

   330      485      -32%  

Fabricated concrete
reinforcing steel sales

   954      955      —    
                

Net sales to external customers in the steel products segment decreased 38% from 2008 due to a 26% decrease in tons sold to outside customers and a 16% decrease in the average sales price per ton from $1,500 to $1,263.

Sales for the raw materials segment decreased 55% from 2008 due to declines in both volume and price. Only ten months of DJJ’s sales were included in Nucor’s consolidated results in 2008. Prior to the acquisition of DJJ, Nucor had no outside sales of raw materials. Approximately 80% of outside sales in the raw materials segment in 2009 were from brokerage operations of DJJ and approximately 19% of the outside sales were from the scrap processing facilities (77% and 22%, respectively, in 2008).

The “All other” category includes Nucor’s steel trading businesses. The year-over-year decreases in sales are primarily due to decreased sales prices per ton.

GROSS MARGIN

In 2009, Nucor recorded gross margins of $154.4 million (1%) compared to $4.05 billion (17%) in 2008. The year-over-year dollar and gross margin decreases were the result of the 30% decrease in total shipments to outside customers and decreased average selling price per ton for all products. Additionally, the decreases were due to the following factors:

 

   In the steel mills segment, the average scrap and scrap substitute cost per ton used in our steel mills segment decreased 31% from $438 in 2008 to $303 in 2009; however, metal margins (the difference between selling price of steel and the cost of scrap and scrap substitutes) also decreased. The results of the first nine months of 2009 included a substantially greater burden than the prior year from the accelerated consumption of high-cost pig iron inventories, primarily at our sheet mills. These inventories were purchased prior to the collapse of both the economy and scrap/pig iron pricing in last year’s fourth quarter. The consumption of the high-cost pig iron inventories had a negative impact of approximately $420 million and was completed by the close of the third quarter.

 

   Pre-operating and start-up costs of new facilities increased to $160.0 million in 2009, compared with $128.6 million in 2008. In 2009, these costs primarily related to the start-up of the SBQ mill in Memphis, Tennessee, the construction and start-up of the galvanizing line at our Decatur, Alabama mill, the proposed iron-making facility and the Castrip project in Blytheville, Arkansas. In 2008, these costs related to the HIsmelt project in Australia, the construction of the SBQ mill, the start-up of the Castrip facility, the construction of the galvanizing line and the start-up of our building systems plant in Brigham City, Utah. Nucor defines pre-operating and start-up costs, all of which are expensed, as the losses attributable to facilities or major projects that are either under construction or in the early stages of operation. Once these facilities or projects have attained a utilization rate that is consistent with our similar operating facilities, they are no longer considered by Nucor to be in start-up.

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Total energy costs increased $1 per ton from 2008 to 2009 due primarily to decreased utilization rates across all product lines; however, due to the efficiency of Nucor’s steel mills, energy costs remained less than 8% of the sales dollar in 2009 and 2008.

The decrease in gross margin was partially offset by a LIFO credit of $466.9 million in 2009, compared with a charge of $341.8 million in 2008.


   

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MARKETING, ADMINISTRATIVE AND OTHER EXPENSES

Two major components of marketing, administrative and other expenses are freight and profit sharing costs. Unit freight costs decreased 3% from 2008 to 2009 primarily due to lower fuel costs. Profit sharing costs, which are based upon and fluctuate with pre-tax earnings, decreased approximately 96% from 2008 to 2009 mainly due to our net loss for 2009. In 2009, profit sharing costs primarily consisted of $9.6 million of matching contributions made to the 401(k) portion of the Company’s Profit Sharing and Retirement Savings Plan for qualified employees. In 2008, profit sharing costs included $281.3 million for contributions to the Profit Sharing and Retirement Savings Plan (including the Company’s matching contribution) and an additional $36.2 million in extraordinary bonuses paid to employees for the achievement of record earnings during the year. 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 increased 8% to $19.5 million in 2009 compared with $18.1 million in 2008, and includes costs associated with vesting of stock awards granted in prior years.

EQUITY IN LOSSES OF UNCONSOLIDATED AFFILIATES

Nucor incurred equity method investment losses of $82.3 million and $36.9 million in 2009 and 2008, respectively. The increase in the equity method investment losses is primarily due to losses at Duferdofin Nucor S.r.l., including a pre-tax charge to write-down inventories to the lower of cost or market of $46.8 million in 2009. Nucor acquired a 50% economic and voting interest in Duferdofin Nucor in July 2008.

IMPAIRMENT OF NON-CURRENT ASSETS

In 2009, Nucor recorded $2.8 million in charges for impairment of non-current assets compared with $105.2 million in charges in 2008. Approximately $84.8 million of the impairment charge in 2008 was for the impairment of our investment in the HIsmelt joint venture in Australia. The HIsmelt process is a blast furnace replacement technology that has the potential to be a hot metal source for electric arc furnaces. In December 2008, production at the HIsmelt plant was suspended due to market conditions. Given the uncertain outlook for the pig iron market and the fact that the technology is not yet fully commercialized, management decided it was appropriate to recognize an impairment of this investment. Restart of this facility has not yet commenced.

INTEREST EXPENSE (INCOME)

Net interest expense is detailed below:

 

        (in thousands)

Year Ended December 31,

   2009       2008       
   

Interest expense

   $149,922       $134,554       

Interest income

   (15,170)      (44,071)      
         

Interest expense, net

   $134,752       $  90,483       
         
           

Gross interest expense increased 11% over 2008 primarily due to increased average debt outstanding of approximately 4% and increased interest related to uncertain tax positions. Gross interest income decreased approximately 66% primarily due to a significant decrease in the average interest rate earned on investments. The decrease in rates was offset by a 29% increase in average investments attributable to cash received from the issuance of debt and equity during the second quarter of 2008 and decreased acquisition activity and capital expenditures in 2009 as compared to 2008.

NONCONTROLLING INTERESTS

Noncontrolling interests represent the income attributable to the minority interest partners of Nucor’s joint ventures, primarily Nucor-Yamato Steel Company (NYS), Nucor Trading S.A., and Barker Steel Company, Inc., of which Nucor owns 51%, 75% and 90%, respectively. The 82% decrease in noncontrolling interests was primarily attributable to the decreased earnings of NYS, which were due to the significant weakening of the structural steel market. 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 2009, the amount of cash distributed to noncontrolling interest holders exceeded the earnings attributable to noncontrolling interests based on mutual agreement of the general partners; however, the cumulative amount of cash distributed to partners was less than the cumulative net earnings of the partnership.

PROVISION FOR INCOME TAXES

The effective tax rate in 2009 was 42.7% compared with 30.9% in 2008. Our effective tax rate for each of the periods presented has been impacted by the recast of earnings attributable to noncontrolling interests to a position after earnings before income taxes and noncontrolling interests in accordance with the amended guidance on accounting and reporting for noncontrolling interests, which we adopted on January 1, 2009. The change in the rate between 2008 and 2009 is primarily due to the changes in relative proportions


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of net income attributable to noncontrolling interests to total pre-tax income and to the pre-tax loss position in 2009 and the related reduction in domestic manufacturing deduction benefits. In 2008, Nucor recorded refundable state income tax credits of $6.1 million (none in 2009). The IRS is currently examining Nucor’s 2005 and 2006 federal income tax returns. Management believes that the company has adequately provided for any adjustments that may arise from this audit.

NET EARNINGS AND RETURN ON EQUITY

Nucor reported a net loss of $293.6 million or $0.94 per diluted share in 2009 compared to record net earnings and earnings per share of $1.83 billion and $5.98 per diluted share in 2008. Net earnings (loss) attributable to Nucor stockholders as a percentage of net sales were (2.6%) in 2009 and 7.7% in 2008. Return on average stockholders’ equity was (4%) and 28% in 2009 and 2008, respectively.

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COMPARISON OF 2008 TO 2007

RESULTS OF OPERATIONS

NET SALES

Net sales to external customers by segment for 2008 and 2007 were as follows:

 

             (in thousands)

Year Ended December 31,

   2008      2007      % Change  
     

Steel mills

   $16,477,900      $13,311,212      24%  

Steel products

   4,339,524      3,051,648      42%  

Raw materials

   2,403,075      —      —  

All other

   442,825      230,116      92%  
            

Total net sales to external customers

   $23,663,324      $16,592,976      43%  
            
                

Net sales for 2008 increased 43% over the prior year due to the strength of the first nine months of the year. The average sales price per ton increased 30% from $723 in 2007 to $940 in 2008, while total shipments to outside customers increased 10%. The fourth quarter average sales price per ton decreased 13% from the third quarter, accompanied by a 36% decrease in tons shipped to outside customers.

In the steel mills segment, production and sales tons were as follows:

 

             (in thousands)

Year Ended December 31,

   2008      2007      % Change  
     

Steel production

   20,446      22,089      -7%  
            

Outside steel shipments

   18,185      20,235      -10%  

Inside steel shipments

   2,747      2,112      30%  
            

Total steel shipments

   20,932      22,347      -6%  
            
                


   

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Net sales to external customers increased 24% due to a 38% increase in the average sales price per ton from $659 in 2007 to $907 in 2008, partially offset by a 10% decrease in steel sales to outside customers. Although outside steel shipments decreased 10%, total production levels at the steel mills only decreased 7% due to an increase in the tons supplied to Nucor’s downstream businesses. Steel consumed internally by the steel products segment increased due to the acquisitions made in 2007 and 2008.

Net sales to external customers in the steel products segment increased 42% over 2007. Approximately 60% of the increase was due to increased volume, primarily attributable to the acquisitions of Harris Steel in March 2007, Magnatrax Corporation in August 2007 and Ambassador Steel Corporation in August 2008. The increased sales for the segment were also due to a 16% increase in the average selling price per ton.

Approximately 77% of outside sales in the raw materials segment in 2008 were from brokerage operations of DJJ and approximately 22% of the outside sales were from the scrap processing facilities. Prior to the acquisition of DJJ in February 2008, there were no outside sales of raw materials.

In 2008 and 2007, the “All other” category included the steel trading businesses that Nucor owns through Harris Steel. The year-over-year increases in sales were due to Nucor owning Harris Steel for all of 2008 versus only a portion of 2007 (since March), combined with increased sales prices per ton.

GROSS MARGIN

In 2008, Nucor recorded gross margins of $4.05 billion (17%) compared to $3.13 billion (19%) in 2007. The year-over-year dollar increase was due to increased average selling price per ton for all products and the significant acquisitions made by Nucor in 2007 and 2008. The decrease in our gross margin percentage was due to the following factors:

 

The cost of raw materials, including scrap and energy, continued to escalate. In the steel mills segment, the average price of raw materials used increased approximately 54% in 2008, primarily due to the increased cost of scrap and scrap substitutes, our main raw materials. The average scrap and scrap substitute cost per ton used in our steel mills segment increased 58% from $278 in 2007 to $438 in 2008. Total energy costs per ton increased $6 from 2007 to 2008 as natural gas prices increased 21% and electricity prices increased 14%. In the steel products segment, the average price of raw materials used increased 21% over the prior year.

 

As a result of these increased raw material and energy costs, Nucor incurred a LIFO charge of $341.8 million in 2008, compared with a charge of $194.3 million in 2007. Nucor also recorded $48.9 million in charges to write down inventories to the lower of cost or market in 2008 (none in 2007).

 

DJJ’s business of collecting and processing ferrous and nonferrous materials for resale typically operates at lower margins than Nucor has historically experienced as a manufacturer of steel and steel products.

 

Amortization expense increased from $24.4 million in 2007 to $69.4 million in 2008. The increase was due to the acquisitions that occurred in 2008, which resulted in approximately $593.7 million of additional amortizable intangible assets, and the recording of a full year of amortization expense on the intangible assets acquired in 2007.

 

Pre-operating and start-up costs of new facilities increased to $128.6 million in 2008, compared with $56.1 million in 2007. In 2008, these costs related to the HIsmelt project, the construction of our SBQ mill, the start-up of our Castrip facility in Arkansas, the construction of a galvanizing line at our sheet mill in Alabama and the start-up of our building systems plant in Utah. In 2007, these costs primarily related to the HIsmelt project, the construction of the SBQ mill and the start-up of the Utah building systems plant.

MARKETING, ADMINISTRATIVE AND OTHER EXPENSES

Unit freight costs increased 14% from 2007 to 2008 primarily due to higher fuel costs. Profit sharing costs increased approximately 26% from 2007 to 2008. In 2008, profit sharing costs included $281.3 million for contributions to a Profit Sharing and Retirement Savings Plan for qualified employees, compared with $229.9 million in 2007. Profit sharing costs in 2008 included an additional $36.2 million in extraordinary bonuses paid to employees for the achievement of record earnings during the year. Stock-based compensation included in marketing, administrative and other expenses increased 5% to $18.1 million in 2008 compared with $17.3 million in 2007. Since stock-based compensation is impacted by changes in Nucor’s stock price and net earnings, the 24% increase in Nucor’s net earnings was offset by the 22% decrease in the stock price.


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EQUITY IN LOSSES OF UNCONSOLIDATED AFFILIATES

Nucor incurred equity method investment losses of $36.9 million and $24.6 million in 2008 and 2007, respectively. The increase in the equity method investment losses is primarily due to losses at the HIsmelt joint venture in Australia.

IMPAIRMENT OF NON-CURRENT ASSETS

In 2008, Nucor recorded $105.2 million in charges for impairment of non-current assets. Approximately $84.8 million of the impairment charge is for the impairment of our investment in the HIsmelt joint venture in Australia.

INTEREST EXPENSE (INCOME)

Net interest expense is detailed below:

 

        (in thousands)

Year Ended December 31,

   2008       2007     

Interest expense

   $134,554      $51,106     

Interest income

   (44,071)      (45,637)    
         

Interest expense, net

   $  90,483       $  5,469     
         
           

Gross interest expense more than doubled from 2007 to 2008 primarily due to increased average debt outstanding, accompanied by increased average interest rates. Nucor issued $2.3 billion in notes from the beginning of the fourth quarter of 2007 through the end of 2008 at rates slightly higher than the majority of our pre-existing debt. Gross interest income decreased approximately 3%, primarily due to a significant decrease in the average interest rate earned on investments. The decrease in rates was offset by a 41% increase in average investments attributable to cash received from the issuance of debt and equity during the second quarter of 2008 and decreased stock repurchase activity as compared to 2007.

NONCONTROLLING INTERESTS

The 7% increase in noncontrolling interests was primarily attributable to the increased earnings of NYS in the first half of the year, which were due to the strength of the structural steel market.

PROVISION FOR INCOME TAXES

Nucor had an effective tax rate of 30.9% in 2008 compared with 30.7% in 2007. In 2008, Nucor recorded refundable state income tax credits of $6.1 million ($10.7 million in 2007).

NET EARNINGS AND RETURN ON EQUITY

Net earnings and earnings per share for 2008 increased 24% and 21%, respectively, to a record $1.83 billion and $5.98 per diluted share, compared with $1.47 billion and $4.94 per diluted share in 2007. Net earnings as a percentage of net sales were 7.7% in 2008 compared with 8.9% in 2007. The 21% increase in earnings per share also reflects the effect of the public offering of approximately 27.7 million common shares in the second quarter of 2008. Return on average stockholders’ equity was 28.1% and 29.5% in 2008 and 2007, 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.

Nucor had no commercial paper outstanding at December 31, 2009, and our $1.3 billion revolving credit facility that does not expire until November 2012 was undrawn. We believe our financial strength is a key strategic advantage among domestic steel producers, particularly during recessionary business cycles. We carry the highest credit ratings of any metals and mining company in North America, with an A credit rating from Standard and Poor’s and Moody’s. The credit markets have largely remained open and receptive to companies with an investment grade credit rating throughout the economic crisis, and Nucor’s present ratings place us several notches above the investment grade minimum of BBB-. Accordingly, we expect to continue to have access to the capital markets if needed.

Nucor’s cash and cash equivalents and short term investments position remains robust at $2.24 billion as of December 31, 2009. Approximately $158.7 million and $202.1 million of the cash and cash equivalents position at December 31, 2009 and December 31, 2008, respectively, was held by our majority-owned joint ventures.


   

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Selected Measures of Liquidity and Capital Resources:

 

            (in thousands

December 31,

     2009        2008     

Cash and cash equivalents

   $ 2,016,981      $ 2,355,130     

Short-term investments

     225,000        —     

Working capital

     3,955,191        4,543,294     

Current ratio

     4.2        3.5     
                 

The current ratio increased from 3.5 at December 31, 2008 to 4.2 at December 31, 2009. Accounts receivable and inventories decreased 9% and 45%, respectively, since 2008, while net sales in the fourth quarter decreased 29% from the fourth quarter of 2008. Historically, total accounts receivable has turned approximately monthly, with accounts receivable for the steel products segment turning about every five weeks. In 2009, the sales for the steel products segment were a higher percentage of total sales, resulting in accounts receivable turnover of approximately five weeks. Inventories have historically turned every five to six weeks. With decreased utilization and the accumulation of higher-cost scrap and scrap substitutes ordered at the peak market prices in 2008, inventory turnover was approximately every nine weeks in 2009. The current ratio was also impacted by the payment of approximately $305 million in early 2009 for profit sharing and extraordinary bonuses related to our 2008 record performance.

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

We have a simple capital structure with no off-balance sheet arrangements or relationships with unconsolidated special purpose entities.

OPERATING ACTIVITIES

Nucor generated cash provided by operating activities of $1.18 billion in 2009 compared with a record $2.5 billion in 2008, a decrease of 53%. This decrease was primarily the result of the 116% decrease in net earnings. Changes in operating assets and liabilities (exclusive of acquisitions) provided cash of $624.7 million in 2009 compared with $93.6 million cash used in 2008. The decrease in inventories was primarily due to the significant decrease in raw material costs and to decreased tons in inventory resulting from the decline in sales. Inventory levels were unusually high at December 31, 2008 due to the accumulation of increased tons of inventory ordered at peak market prices in the second half of 2008 prior to the rapid fall-off in sales in the fourth quarter.

 

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 $700.4 million in 2009 compared with $3.32 billion in 2008. Nucor invested $390.5 million in new facilities (exclusive of acquisitions) and expansion or upgrading of existing facilities in 2009 compared with $1.02 billion in 2008, a decrease of 62%. Nucor’s capital investment and maintenance practices give us the flexibility to reduce our current spending on our facilities to very low levels during severely depressed market conditions such as we experienced in 2009.

 

Nucor made significant acquisitions in 2008, using cash of $1.83 billion. The acquisition of DJJ in 2008 was the largest in the Company’s history. Also in 2008, Nucor acquired 50% of the stock of Duferdofin Nucor for $667.0 million. Activity related to acquisitions and investments in affiliates was minimal in 2009 due to the current economic environment.

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FINANCING ACTIVITIES

Cash used in financing activities was $820.0 million in 2009 compared with cash provided by financing activities of $1.78 billion in 2008. In June 2008, Nucor issued $1 billion in debt in three tranches: $250 million in 5% notes due in 2013, $500 million of 5.85% notes due in 2018 and $250 million in 6.4% notes due in 2037. Nucor repaid $180.4 million in notes that matured in 2009, and we have no other significant debt maturities until 2012.

In May 2008, Nucor completed a public offering of approximately 27.7 million common shares at an offering price of $74.00 per share. Net proceeds of the common stock offering were approximately $1.99 billion, after deducting underwriting discounts and commissions and offering expenses. Nucor used a portion of the net proceeds from the common stock offering and the issuance of notes to fund the acquisition of Ambassador and other companies as well as the investment in Duferdofin Nucor. Nucor plans to use the remainder of the net proceeds for general corporate purposes including acquisitions, capital expenditures, working capital requirements and repayment of debt.

In 2009, Nucor increased its quarterly base dividend resulting in dividends paid of $443.1 million. In 2008, in addition to the quarterly base dividends, Nucor paid supplemental dividends resulting in total dividend payments of $658.1 million. The supplemental dividends were suspended in the first quarter of 2009.

During 2008, Nucor repurchased approximately 2.8 million shares of Nucor’s common stock at a cost of approximately $124.0 million (no repurchases in 2009). Approximately 27.2 million shares remain authorized for repurchase under the Company’s stock repurchase program.

In June 2008, Nucor received increased commitments under its existing five-year unsecured revolving credit facility to provide up to $1.3 billion in revolving loans. This multi-year credit agreement matures in November 2012 and was further amended in June 2008 to allow up to $200 million in additional commitments at Nucor’s election in accordance with the terms set forth in the credit agreement. Up to the equivalent of $850 million of the credit facility will be available for foreign currency loans, and up to $500 million is available for the issuance of letters of credit.

Our credit facility includes only one financial covenant, which is a limit of 60% on the ratio of funded debt to total capitalization. In addition, the credit facility contains customary non-financial covenants, including a limit on Nucor’s ability to pledge the Company’s assets and a limit on consolidations, mergers and sales of assets. Our funded debt to total capital ratio was 29% and 28% at year-end 2009 and 2008, respectively, and we were in compliance with all other covenants under our credit facility.

MARKET RISK

Nucor’s largest exposure to market risk is in our steel mills and steel products segments. Our steel mills utilization rate was 58% for the fourth quarter of 2009, and our steel products facilities operated at 48% of capacity in the fourth quarter. A significant portion of our steel and steel products segments sales are into the commercial, industrial and municipal construction markets. We expect the non-residential construction market to remain at depressed levels, resulting in decreased sales prices and volumes compared to years prior to 2009. Our largest single customer in 2009 represented approximately 5% of sales and consistently pays within terms. We have only a small exposure to the U.S. automotive industry. Our exposure to market risk in our raw materials segment is mitigated by the fact that our steel mills use a significant portion of the products of that segment.

The majority of Nucor’s industrial revenue bonds (IDRBs) have variable interest rates that are adjusted weekly, with the rate of one IDRB adjusted annually. These IDRBs represent 14% of Nucor’s long-term debt outstanding at December 31, 2009. The remaining 86% 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, 2009, there were no such contracts outstanding. Nucor’s investment practice is to invest in securities that are highly liquid with short maturities. As a result, we do not expect changes in interest rates to have a significant impact on the value of our investment securities.

Nucor also uses derivative financial instruments from time to time to partially manage its exposure to price risk related to natural gas purchases used in the production process as well as copper and aluminum purchased for resale to its customers. In addition, Nucor uses forward foreign exchange contracts from time to time to hedge cash flows associated with certain assets and liabilities, firm commitments and anticipated transactions. 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 and foreign currency transactions. Nucor recognizes all derivative instruments in the consolidated balance sheets at fair value.

The Company is exposed to foreign currency risk through its operations in Canada, Europe, Trinidad and Australia. We periodically use derivative contracts to mitigate the risk of currency fluctuations.


   

  29  

 

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

The following table sets forth our contractual obligations and other commercial commitments as of December 31, 2009 for the periods presented:

 

                         (in thousands)
    

 

Payments Due By Period

Contractual Obligations    Total    2010    2011 - 2012    2013 - 2014    2015 and thereafter

Long-term debt

   $ 3,086,200    $ 6,000    $ 650,000    $ 253,300    $ 2,176,900

Estimated interest on long-term debt(1)

     1,848,618      151,583      297,650      219,224      1,180,161

Operating leases

     121,618      34,533      42,363      18,410      26,312

Raw material purchase commitments(2)

     2,462,470      702,116      847,061      687,646      225,647

Utility purchase commitments(2)

     1,064,669      232,449      212,342      88,428      531,450

Other unconditional purchase obligations(3)

     113,654      82,883      10,485      3,416      16,870

Other long-term obligations(4)

     178,405      60,260      16,788      6,568      94,789
                                  

Total contractual obligations

   $ 8,875,634    $ 1,269,824    $ 2,076,689    $ 1,276,992    $ 4,252,129
                                  
                                    

 

(1)

   Interest is estimated using applicable rates at December 31, 2009 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, 2009, 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, $108.6 million of unrecognized tax benefits have been recorded as liabilities, 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 $35.1 million at December 31, 2009.

DIVIDENDS

Nucor has increased its base cash dividend every year since it began paying dividends in 1973. Nucor paid dividends of $1.40 per share in 2009 compared with $2.17 per share in 2008. In December 2009, the board of directors increased the base quarterly dividend by 3% to $0.36 per share. In 2008 the board of directors approved a supplemental dividend based on Nucor’s strong performance. The supplemental dividend was suspended in December 2008. The base quarterly dividend has more than tripled since the end of 2007. In February 2010, the board of directors declared Nucor’s 148th consecutive quarterly cash dividend of $0.36 per share payable on May 12, 2010 to stockholders of record on March 31, 2010.

OUTLOOK

As we anticipated, 2009 was one of the most tumultuous and difficult periods in Nucor’s history. As a result, we reported net losses for the first three quarters of 2009 and a net loss for the year. These were the first losing quarters in the Company’s history and broke a record of continuous quarterly and annual profitability since 1966.

Entering the first quarter of 2010, general economic and steel market conditions have remained extremely challenging. At this point, Nucor has not seen any measurable benefit from the government’s stimulus plan. While we expect to see improvements in steel mill shipments in the first quarter, we also expect significant increases in both sales prices and scrap costs, which would result in a LIFO charge. In addition to weakened end-use demand, many steel industry customers continue to maintain reduced levels of steel inventories due to liquidity and future pricing concerns. The economic downturn is most severe in the non-residential construction markets, which represent a significant percentage of sales for our steel mills and steel products segments. Our steel mills have worked through their higher cost scrap and scrap substitute inventories that existed through much of 2009, but their results going forward could be negatively impacted by the potential of lower operating volumes and rising raw material costs.

We continue to believe that the current downturn is likely to present attractive growth opportunities to a company that is in Nucor’s unrivaled position in the industry. We are maintaining or growing our market share, while many competitors who do not have our financial strength or highly variable and low-cost structure are forced to shut down facilities. Our manufacturing processes are highly flexible and able to increase production quickly in response to any improvement in demand. This is especially true because our pay-for-performance culture has allowed us to avoid layoffs as our payroll expense has decreased dramatically due to lower production and other performance bonuses. The strength of our balance sheet, our highly flexible production capabilities and our highly variable cost structure put us in a unique position to meet our customers’ needs and gain additional market share.


  30  

 

    

Recent legislative and regulatory proposals related to climate change and new interpretations of existing laws through climate change-related litigation create further financial risk. Nucor’s operations may be affected by climate change laws and regulation in the next few years, most notably through increased energy costs. Cost of compliance, capital investment or the operating and maintenance costs incurred to comply with the climate change legislation, directly or indirectly, could have a material adverse effect on our results of operations, cash flows and financial condition.

In 2010, we will continue to execute on our successful and disciplined, multi-pronged growth strategy. Even though acquisition spending decreased significantly in 2009, we are excited about the significant growth platforms that we now have in place upstream, downstream and in our core steelmaking business. Capital expenditures are currently projected to be approximately $400 million in 2010, consistent with 2009. Nucor continues to invest capital in our core operations to keep them state-of-the-art and globally competitive.

 

 

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 non-current assets; 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.

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. All inventories held by the parent company and Nucor-Yamato Steel Company are valued using the last-in, first-out (LIFO) method of accounting except for supplies that are consumed indirectly in the production process, which are valued using the first-in, first-out (FIFO) method of accounting. All inventories held by the parent company’s other subsidiaries are valued using the FIFO method of accounting. The Company records any amount required to reduce the carrying value of inventory to net realizable value as a charge to cost of products sold.

If steel selling prices were to decline in future quarters, write-downs of inventory could result. Specifically, the valuation of raw material inventories purchased during periods of peak market pricing held by subsidiaries valued using the FIFO method of accounting would most likely be impacted. Low utilization rates at our steel mills could hinder our ability to work through high-priced scrap and scrap substitutes (particularly pig iron), leading to period-end exposure when comparing carrying value to net realizable value.

LONG-LIVED ASSET IMPAIRMENTS

We evaluate our property, plant and equipment and finite-lived intangible assets for potential impairment on an individual asset basis or at the lowest level asset grouping for which cash flows can be separately identified. Asset impairments are assessed whenever changes in circumstances indicate that the carrying amounts of those productive assets could exceed their projected undiscounted cash flows. Some of the estimated values for assets that we currently use in our operations utilize judgments and assumptions of future undiscounted cash flows that the assets will produce. When it is determined that an impairment exists, the related assets are written down to estimated fair market value.


   

  31  

 

Certain long-lived asset groupings were tested for impairment during the fourth quarter of 2009. Undiscounted cash flows for each asset grouping were estimated using management’s long-range estimates of market conditions associated with each asset grouping over the estimated useful life of the principal asset within the group. With one minor exception, our undiscounted cash flow analysis indicated that those long-lived asset groupings were recoverable as of December 31, 2009; however, if our projected cash flows are not realized, either because of an extended recessionary period or other unforeseen events, impairment charges may be required in future periods. A 10% decrease in the projected cash flows of each of our asset groupings would not result in an impairment.

GOODWILL

Goodwill is tested annually for impairment and whenever events or circumstances change that would make it more likely than not that an impairment may have occurred. We perform our annual impairment analysis as of the first day of the fourth quarter each year. The evaluation of impairment involves comparing the current estimated fair value of each reporting unit to the recorded value, including goodwill.

Nucor uses a discounted cash flow model to determine the current estimated fair value of its reporting units. Key assumptions used to determine the estimated fair value of each reporting unit as part of our annual testing (and any required interim testing) include: (a) expected cash flow for the five-year period following the testing date (including market share, sales volumes and prices, costs to produce and estimated capital needs); (b) an estimated terminal value using a terminal year growth rate determined based on the growth prospects of the reporting unit; (c) a discount rate based on management’s best estimate of the after-tax weighted average cost of capital; and (d) a probability-weighted scenario approach by which varying cash flows are assigned to certain scenarios based on the likelihood of occurrence. Management considers historical and anticipated future results, general economic and market conditions, the impact of planned business and operational strategies and all available information at the time the fair values of its reporting units are estimated.

While our fourth quarter 2009 annual goodwill impairment analysis did not result in an impairment charge, the excess of estimated fair value over carrying value for the majority of our reporting units has declined substantially. Despite these declines, management does not believe that future impairment of all reporting units is probable. However, the performance of certain businesses that comprise our reporting units requires continued improvement. In particular, the severity and duration of losses sustained within the Buildings Group and Steel Trading reporting units have resulted in continued declines in estimated fair value over the past year. Management of working capital at these businesses has resulted in related declines in the carrying values of the assets of these reporting units over this same time period. As of the testing date, the estimated fair values of the Buildings Group and Steel Trading reporting units exceeded carrying values by 13% and 12%, respectively. As a result, these reporting units would be most likely to be affected by changes in our assumptions and estimates. The calculation of fair value could increase or decrease depending on changes in the inputs and assumptions used, such as changes in the reporting unit’s future growth rates, discount rates, etc. In order to evaluate the sensitivity of the fair value calculations on the goodwill impairment test, we applied a hypothetical 5% decrease to the fair values of each reporting unit. This hypothetical 5% decrease would result in excess fair value over carrying value for our Buildings Group reporting unit of $25.4 million and our Steel Trading reporting unit of $9.3 million at December 31, 2009.

Nucor concluded during the second quarter of 2009 that an interim triggering event had occurred for purposes of testing goodwill recorded within the Cold Finish reporting unit. As a result, an evaluation of impairment was performed during the second quarter of 2009 resulting in no goodwill impairment. The fourth quarter 2009 annual goodwill impairment analysis for the Cold Finish reporting unit also resulted in no goodwill impairment due mainly to the improved operating results in the near term as compared to those budgeted cash flows included in the second quarter 2009 impairment testing. Based on these revised forecasts and the improving outlook for the Cold Finish reporting unit, management believes that the likelihood of a goodwill impairment charge within the upcoming year is diminished.

Nucor will continue to monitor operating results within all reporting units throughout the upcoming year in an effort to determine if events and circumstances warrant further interim impairment testing. Otherwise, all reporting units will again be subject to the required annual impairment test during our fourth quarter of 2010. Changes in the judgments and estimates underlying our analysis of goodwill for possible impairment, including expected future operating cash flows and discount rate, could decrease the estimated fair value of these and other reporting units in the future and could result in an impairment of goodwill.

EQUITY METHOD INVESTMENTS

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. Each of the Company’s equity method investments is subject to a review for impairment if, and when, circumstances indicate that the estimated fair value of our investment could be less than carrying value. If the results of the review indicate a decline in the carrying value of our investment and that decline is other than temporary, the Company would write down the investment to its estimated fair value, which would become its new carrying amount.


  32  

 

    

As a result of the significant decline in the global demand for steel and the losses incurred at the investment during 2009, we evaluated our investment in Duferdofin Nucor during the fourth quarter of 2009. Nucor determined the estimated fair value of our investment in Duferdofin Nucor using a discounted cash flow model based on a weighted-average of multiple discounted cash flow scenarios. The discounted cash flow scenarios require the use of unobservable inputs, including assumptions of projected revenues (including product volume, product mix and average selling prices), raw material costs and other production expenses, capital spending and other costs, as well as a discount rate. Estimates of projected revenues, expenses, capital spending and other costs are developed by Duferdofin Nucor and Nucor using historical data and available market data. Based on our fair value determination, the estimated fair value of our investment in Duferdofin Nucor approximated carrying value as of December 31, 2009. As a result, we did not have an other-than-temporary impairment of our investment in Duferdofin Nucor in 2009.

Changes in management estimates to the unobservable inputs would change the valuation of the investment. The estimates for the projected revenue and discount rate are the assumptions that most significantly affect the fair value determination. For example, a 50 basis point increase in the discount rate would result in a decline in the estimated fair value of our investment in Duferdofin Nucor of approximately $45.2 million.

ENVIRONMENTAL REMEDIATION

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

INCOME TAXES

We utilize the liability method of accounting for income taxes. 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. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Potential accrued interest and penalties related to unrecognized tax benefits within operations are recognized as a component of earnings before taxes and noncontrolling interests.

 

 

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 to our consolidated financial statements for a discussion of new accounting pronouncements adopted by Nucor during 2009 and the expected financial impact of accounting pronouncements recently issued or proposed but not yet required to be adopted.


FIVE-YEAR FINANCIAL REVIEW    

 

       37  

 

    

 

(dollar and share amounts in thousands, except per share data)

 

  

 

    

 

 

 

2009

 

  

    2008        2007        2006        2005   

 

FOR THE YEAR

          

 

Net sales

   $ 11,190,296      $ 23,663,324      $ 16,592,976      $ 14,751,270      $ 12,700,999   

 

Costs, expenses and other:

          

 

Cost of products sold

     11,035,903        19,612,283        13,462,927        11,284,606        10,108,805   

 

Marketing, administrative and other expenses

     348,478        714,064        553,146        574,783        459,936   

 

Equity in (earnings) losses of unconsolidated affiliates

     82,341        36,920        24,618        17,690        (476

 

Impairment of non-current assets

     2,800        105,183                        

 

Interest expense (income), net

     134,752        90,483        5,469        (37,365     4,201   

 

Other income

                                 (9,200
                                        
     11,604,274        20,558,933        14,046,160        11,839,714        10,563,266   

 

Earnings (loss) before income taxes and noncontrolling interests

     (413,978     3,104,391        2,546,816        2,911,556        2,137,733   

 

Provision for (benefit from) income taxes

     (176,800     959,480        781,368        935,653        709,834   
                                        

 

Net earnings (loss)

     (237,178     2,144,911        1,765,448        1,975,903        1,427,899   

 

Earnings attributable to noncontrolling interests

     56,435        313,921        293,501        219,121        110,650   
                                        

 

Net earnings (loss) attributable to Nucor stockholders

     (293,613     1,830,990        1,471,947        1,756,782        1,317,249   

 

Net earnings (loss) per share:

          

 

Basic

     (0.94     5.99        4.96        5.73        4.19   

 

Diluted

     (0.94     5.98        4.94        5.68        4.15   

 

Dividends declared per share

     1.41        1.91        2.44        2.15        0.93   

 

Percentage of net earnings (loss) to net sales

     -2.6     7.7     8.9     11.9     10.4

 

Return on average stockholders’ equity

     -3.8     28.1     29.5     38.3     33.8

 

Capital expenditures

     390,500        1,018,980        520,353        338,404        331,466   

 

Acquisitions (net of cash acquired)

     32,720        1,826,030        1,542,666        223,920        154,864   

 

Depreciation

     494,035        479,484        403,172        363,936        375,054   

 

Sales per employee

 

     539        1,155        1,085        1,273        1,159   

AT YEAR END

          

 

Current assets

   $ 5,182,248      $ 6,397,486      $ 5,073,249      $ 4,683,065      $ 4,081,611   

 

Current liabilities

     1,227,057        1,854,192        1,582,036        1,421,917        1,228,618   
                                        

 

Working capital

     3,955,191        4,543,294        3,491,213        3,261,148        2,852,993   

 

Cash provided by operating activities

     1,182,297        2,498,728        1,935,306        2,251,233        2,136,615   

 

Current ratio

     4.2        3.5        3.2        3.3        3.3   

 

Property, plant and equipment, net

     4,013,836        4,131,861        3,232,998        2,856,415        2,855,717   

 

Total assets

     12,571,904        13,874,443        9,826,122        7,893,018        7,148,845   

 

Long-term debt

     3,086,200        3,266,600        2,250,300        922,300        923,550   

 

Percentage of debt to capital

     28.9     28.3     29.4     15.3     17.0

 

Total Nucor stockholders’ equity

     7,390,526        7,929,204        5,112,917        4,857,351        4,312,049   

 

Per share

     23.47        25.25        17.75        16.14        13.90   

 

Shares outstanding

     314,856        313,977        287,993        300,949        310,220   

 

Employees

 

     20,400        21,700        18,000        11,900        11,300   


  38       

    MANAGEMENT’S REPORT

 

 

 

Management’s 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 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, 2009. 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, 2009. PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of Nucor’s internal control over financial reporting as of December 31, 2009 as stated in their report which is included herein.


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM    

 

       39  

 

 

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, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 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, 2009, 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 Note 2 to the consolidated financial statements, Nucor Corporation changed the way it accounts and reports a noncontrolling interest in a subsidiary in fiscal 2009.

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 25, 2010


  40       

    CONSOLIDATED BALANCE SHEETS

 

 

CONSOLIDATED BALANCE SHEETS

 

    

 

(in thousands)

 

  

 

December 31,

 

     2009        2008   

 

ASSETS

      

 

CURRENT ASSETS:

      

 

Cash and cash equivalents (Note 15)

   $ 2,016,981      $ 2,355,130   

 

Short-term investments (Notes 4 and 15)

     225,000          

 

Accounts receivable, net (Note 5)

     1,116,035        1,228,807   

 

Inventories, net (Note 6)

     1,312,903        2,408,157   

 

Other current assets (Notes 14, 15 and 20)

     511,329        405,392   
                

 

Total current assets

     5,182,248        6,397,486   

 

PROPERTY, PLANT AND EQUIPMENT, NET (Note 7)

     4,013,836        4,131,861   

 

GOODWILL (Note 8)

     1,803,021        1,732,045   

 

OTHER INTANGIBLE ASSETS, NET (Note 8)

     902,922        946,545   

 

OTHER ASSETS (Notes 9 and 11)

     669,877        666,506   
                

TOTAL ASSETS

   $ 12,571,904      $ 13,874,443   
                

 

LIABILITIES AND EQUITY

                

 

CURRENT LIABILITIES:

      

 

Short-term debt (Notes 11 and 15)

   $ 1,748      $ 8,622   

 

Long-term debt due within one year (Notes 11 and 15)

     6,000        180,400   

 

Accounts payable (Note 10)

     707,038        534,161   

 

Federal income taxes payable

     —          199,044   

 

Salaries, wages and related accruals (Notes 17 and 18)

     154,997        580,090   

 

Accrued expenses and other current liabilities (Notes 10, 14, 15 and 16)

     357,274        351,875   
                

Total current liabilities

     1,227,057        1,854,192   

 

LONG-TERM DEBT DUE AFTER ONE YEAR (Notes 11 and 15)

     3,080,200        3,086,200   

 

DEFERRED CREDITS AND OTHER LIABILITIES (Notes 14, 15, 16, 17, 18 and 20)

     680,358        677,370   
                

 

TOTAL LIABILITIES

     4,987,615        5,617,762   
                

 

COMMITMENTS AND CONTINGENCIES (Notes 6 and 16)

      

 

EQUITY

      

 

NUCOR STOCKHOLDERS’ EQUITY (Notes 12, 13 and 17):

      

 

Common stock (800,000 shares authorized; 374,692 and 374,069 shares issued, respectively)

     149,877        149,628   

 

Additional paid-in capital

     1,675,777        1,629,981   

 

Retained earnings

     7,120,218        7,860,629   

 

Accumulated other comprehensive loss, net of income taxes (Notes 2 and 14)

     (41,056     (190,262

 

Treasury stock (59,836 and 60,092, respectively)

     (1,514,290     (1,520,772
                

 

Total Nucor stockholders’ equity

     7,390,526        7,929,204   

 

 

NONCONTROLLING INTERESTS

     193,763        327,477   
                

 

TOTAL EQUITY

     7,584,289        8,256,681   
                

 

TOTAL LIABILITIES AND EQUITY

   $ 12,571,904      $ 13,874,443   
                
                  

See notes to consolidated financial statements.


CONSOLIDATED STATEMENTS OF EARNINGS    

 

      41  

 

CONSOLIDATED STATEMENTS OF EARNINGS

 

    

 

(in thousands, except per share data)

 

  

 

 

Year Ended December 31,

 

     2009        2008        2007   

 

NET SALES

   $ 11,190,296      $ 23,663,324      $ 16,592,976   
                        

 

COSTS, EXPENSES AND OTHER:

          

 

Cost of products sold

     11,035,903        19,612,283        13,462,927   

 

Marketing, administrative and other expenses

     348,478        714,064        553,146   

 

Equity in losses of unconsolidated affiliates (Note 9)

     82,341        36,920        24,618   

 

Impairment of non-current assets (Note 9)

     2,800        105,183          

 

Interest expense, net (Note 19)

     134,752        90,483        5,469   
                        
     11,604,274        20,558,933        14,046,160   
                        

 

EARNINGS (LOSS) BEFORE INCOME TAXES
  AND NONCONTROLLING INTERESTS

     (413,978     3,104,391        2,546,816   

 

PROVISION FOR (BENEFIT FROM) INCOME TAXES (Note 20)

     (176,800     959,480        781,368   
                        

 

NET EARNINGS (LOSS)

     (237,178     2,144,911        1,765,448   
          

 

EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTERESTS

     56,435        313,921        293,501   
                        

 

NET EARNINGS (LOSS) ATTRIBUTABLE TO NUCOR STOCKHOLDERS

   $ (293,613   $ 1,830,990      $ 1,471,947   
                        

 

NET EARNINGS (LOSS) PER SHARE (Note 21):

          

 

Basic

     ($0.94     $5.99        $4.96   

 

Diluted

     ($0.94     $5.98        $4.94   

See notes to consolidated financial statements.


  42       

    CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 

(in thousands, except per share data)

      TOTAL     COMMON STOCK     ADDITIONAL
PAID-IN
CAPITAL
   RETAINED
EARNINGS
    ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
   

TREASURY STOCK

(AT COST)

   

TOTAL

NUCOR
STOCKHOLDERS’
EQUITY

    NON-
CONTROLLING
INTERESTS
 
        SHARES     AMOUNT            SHARES     AMOUNT      

BALANCES, December 31, 2006

   $ 5,100,717      372,516      $ 149,006      $ 195,543    $ 5,840,067      $ 4,470      71,567      $ (1,331,735   $ 4,857,351      $ 243,366   

Comprehensive income:

                     

Net earnings in 2007

     1,765,448               1,471,947              1,471,947        293,501   

Net unrealized loss on hedging derivatives, net of income taxes

     (819              (819         (819  

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

     11,719                 11,719            11,719     

Foreign currency translation gain, net of income taxes

     143,228                 142,971            142,971        257   

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

     10,313                 10,313            10,313     

Other

     (5,292              (5,292         (5,292  
                                       

Total comprehensive income

     1,924,597                       1,630,839        293,758   

Adjustment to initially apply FIN 48

     31,135               31,135              31,135     

Stock options exercised

     12,003      609        244        11,759              12,003     

Issuance of stock under award plans, net of forfeitures

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

Amortization of unearned compensation

     5,550            5,550              5,550     

Treasury stock acquired

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

Cash dividends ($2.44 per share)

     (721,503            (721,503           (721,503  

Distributions to noncontrolling interests

     (263,086                      (263,086

Other

     13,408                                                                   13,408   

BALANCES, December 31, 2007

     5,400,363      373,255        149,302        256,406      6,621,646        163,362      85,262        (2,077,799     5,112,917        287,446   

Comprehensive income:

                     

Net earnings in 2008

     2,144,911               1,830,990              1,830,990        313,921   

Net unrealized loss on hedging derivatives, net of income taxes

     (60,137              (60,137         (60,137  

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

     (9,863              (9,863         (9,863  

Foreign currency translation loss, net of income taxes

     (284,534              (284,199         (284,199     (335

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

     575                 575            575     
                                       

Total comprehensive income

     1,790,952                       1,477,366        313,586   

Stock options exercised

     10,711      553        221        10,490              10,711     

Issuance of stock under award plans, net of forfeitures

     53,173      261        105        46,340        (276     6,728        53,173     

Amortization of unearned compensation

     5,025            5,025              5,025     

Issuance of stock under public equity offering

     1,985,979            1,311,720        (27,668     674,259        1,985,979     

Treasury stock acquired

     (123,960              2,774        (123,960     (123,960  

Cash dividends ($1.91 per share)

     (592,007            (592,007           (592,007  

Distributions to noncontrolling interests

     (275,075                      (275,075

Other

     1,520                                                                   1,520   

BALANCES, December 31, 2008

     8,256,681      374,069        149,628        1,629,981      7,860,629        (190,262   60,092        (1,520,772     7,929,204        327,477   

Comprehensive income:

                     

Net earnings (loss) in 2009

     (237,178            (293,613           (293,613     56,435   

Net unrealized loss on hedging derivatives, net of income taxes

     (48,616              (48,616         (48,616  

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

     40,543                 40,543            40,543     

Foreign currency translation gain, net of income taxes

     155,285                 155,201            155,201        84   

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

     2,078                 2,078            2,078     
                                       

Total comprehensive income (loss)

     (87,888                    (144,407     56,519   

Stock options exercised

     3,740      239        95        3,645              3,740     

Issuance of stock under award plans, net of forfeitures

     44,883      384        154        38,247        (256     6,482        44,883     

Amortization of unearned compensation

     3,904            3,904              3,904     

Cash dividends ($1.41 per share)

     (446,798            (446,798           (446,798  

Distributions to noncontrolling interests

     (190,233                                                                (190,233

BALANCES, December 31, 2009

   $ 7,584,289      374,692      $ 149,877      $ 1,675,777    $ 7,120,218      $ (41,056   59,836      $ (1,514,290   $ 7,390,526      $ 193,763   

See notes to consolidated financial statements.


CONSOLIDATED STATEMENTS OF CASH FLOWS    

 

       43  

 

CONSOLIDATED STATEMENTS OF CASH FLOWS      (in thousands)   

 

Year Ended December 31,

     2009        2008        2007   

 

OPERATING ACTIVITIES:

      

 

Net earnings (loss)

   $ (237,178   $ 2,144,911      $ 1,765,448   

 

Adjustments:

      

 

Depreciation

     494,035        479,484        403,172   

 

Amortization

     72,388        69,423        24,384   

 

Stock-based compensation

     54,665        49,873        44,001   

 

Deferred income taxes

     88,546        (293,476     (81,206

 

Equity in losses of unconsolidated affiliates

     82,341        36,920        24,618   

 

Impairment of non-current assets

     2,800        105,183          

 

Changes in assets and liabilities (exclusive of acquisitions):

      

 

Accounts receivable

     141,104        855,572        (174,326

 

Inventories

     1,117,600        (364,280     (102,490

 

Accounts payable

     170,229        (861,334     57,259   

 

Federal income taxes

     (422,116     278,663        13,332   

 

Salaries, wages and related accruals

     (419,800     129,927        (42,931

 

Other

     37,683        (132,138     4,045   
                        

 

Cash provided by operating activities

     1,182,297        2,498,728        1,935,306   

 

INVESTING ACTIVITIES:

                        

 

Capital expenditures

     (390,500     (1,018,980     (520,353

 

Sale of interest in affiliate

                   29,500   

 

Investment in and advances to affiliates

     (63,563     (720,713     (31,435

 

Disposition of plant and equipment

     11,371        17,180        2,787   

 

Acquisitions (net of cash acquired)

     (32,720     (1,826,030     (1,542,666

 

Purchases of investments

     (261,389     (289,423     (487,395

 

Proceeds from the sale of investments

     36,389        499,709        1,687,578   

 

Proceeds from currency derivative contracts

            1,441,862        517,241   

 

Settlement of currency derivative contracts

            (1,424,291     (511,394
                        

Cash used in investing activities

     (700,412     (3,320,686     (856,137

 

FINANCING ACTIVITIES:

                        

 

Net change in short-term debt (exclusive of aquisitions)

     (6,908     (149,837     (65,871

 

Repayment of long-term debt

     (180,400              

 

Proceeds from issuance of long-term debt, net of discount

            989,715        1,322,445   

 

Debt issuance costs

            (6,937     (9,200

 

Issuance of common stock

     3,716        1,996,690        12,003   

 

Excess tax benefits from stock-based compensation

     (3,100     10,600        13,000   

 

Distributions to noncontrolling interests

     (190,233     (275,075     (263,086

 

Cash dividends

     (443,109     (658,051     (726,139

 

Acquisition of treasury stock

            (123,960     (754,029
                        

Cash provided by (used in) financing activities

     (820,034     1,783,145        (470,877

 

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

     (338,149     961,187        608,292   

 

CASH AND CASH EQUIVALENTS — BEGINNING OF YEAR

     2,355,130        1,393,943        785,651   
                        

 

CASH AND CASH EQUIVALENTS — END OF YEAR

   $ 2,016,981      $ 2,355,130      $ 1,393,943   
                        
                          

See notes to consolidated financial statements.


  44       

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007

 

 

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Nature of Operations Nucor is principally a manufacturer of steel and steel products, as well as a scrap processor, 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%. 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.

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 2009 presentation.

Subsequent Events The Company has evaluated subsequent events through February 25, 2010, the date these financial statements were issued.

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 (loss). Management determines the appropriate classification of its investments at the time of purchase and re-evaluates such determination at each balance sheet date.

Inventories Valuation Inventories are stated at the lower of cost or market. Inventories valued using the last-in, first-out (LIFO) method of accounting represent approximately 48% of total inventories as of December 31, 2009 (65% as of December 31, 2008). All inventories held by the parent company and Nucor-Yamato Steel Company are valued using the LIFO method of accounting except for supplies that are consumed indirectly in the production process, which are valued using the first-in, first-out (FIFO) meth