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2013

 

 

 

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, 2013

OR

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

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 1-4119

 

 

NUCOR CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   13-1860817

(State or other jurisdiction of

incorporation or organization)

  (I.R.S. Employer Identification No.)
1915 Rexford Road, Charlotte, North Carolina   28211
(Address of principal executive offices)   (Zip Code)

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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 Act).    Yes  ¨    No  x

Aggregate market value of common stock held by non-affiliates was approximately $13.69 billion based upon the closing sales price of the registrant’s common stock on the last business day of our most recently completed second fiscal quarter, June 29, 2013.

318,366,149 shares of common stock were outstanding at February 21, 2014.

Documents incorporated by reference include: Portions of the registrant’s 2013 Annual Report (Parts I, II and IV), and portions of the registrant’s Proxy Statement for its 2014 Annual Meeting of Stockholders (Part III) to be filed within 120 days after the registrant’s fiscal year end.

 

 

 


Table of Contents

Nucor Corporation

Table of Contents

 

PART I      
   Item 1.    Business    1
   Item 1A.    Risk Factors    8
   Item 1B.    Unresolved Staff Comments    13
   Item 2.    Properties    13
   Item 3.    Legal Proceedings    14
   Item 4.    Mine Safety Disclosures    14
   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    16
   Item 6.    Selected Financial Data    16
   Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations    16
   Item 7A.    Quantitative and Qualitative Disclosures About Market Risk    16
   Item 8.    Financial Statements and Supplementary Data    17
   Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure    18
   Item 9A.    Controls and Procedures    18
   Item 9B.    Other Information    18
PART III      
   Item 10.    Directors, Executive Officers and Corporate Governance    19
   Item 11.    Executive Compensation    19
   Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters    19
   Item 13.    Certain Relationships and Related Transactions, and Director Independence    19
   Item 14.    Principal Accountant Fees and Services    19
PART IV      
   Item 15.    Exhibits and Financial Statement Schedules    20
SIGNATURES    24
Index to Financial Statement Schedule    26

 

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PART I

 

Item 1. Business

Overview

Nucor Corporation and its affiliates (“Nucor” or the “Company”) manufacture steel and steel products. The Company also produces direct reduced iron (“DRI”) for use in the Company’s steel mills. Through The David J. Joseph Company and its affiliates (“DJJ”), which the Company acquired in 2008, the Company also processes ferrous and nonferrous metals and brokers ferrous and nonferrous metals, pig iron, hot briquetted iron (“HBI”) and DRI. Most of the Company’s operating facilities and customers are located in North America, but increasingly, Nucor is doing business outside of North America as well. The Company’s operations include several international trading companies that buy and sell steel and steel products manufactured by the Company and others.

Nucor is North America’s largest recycler, using scrap steel as the primary raw material in producing steel and steel products. In 2013, we recycled approximately 19.2 million tons of scrap steel.

General Development of our Business in Recent Years

Nucor has employed a multi-pronged growth strategy in recent years that allows for the ability to capitalize on a variety of growth opportunities as they arise. The five prongs of that growth strategy are: (1) optimizing and continually improving our existing operations, (2) executing on our raw materials strategy, (3) growing through developing greenfield projects that capitalize on new technologies and unique marketplace opportunities, (4) acquiring other companies that will strengthen Nucor’s position as North America’s most diversified producer of steel and steel products and (5) growing internationally with an emphasis on leveraging strategic partnerships and new technologies.

In order to optimize our existing operations, we commit a significant portion of our capital expenditures each year to projects that enhance productivity and improve costs, as well as allow us to produce more value-added and typically higher-margin products at our existing facilities. The heat treat line at our Hertford County, North Carolina mill became operational in 2010, which has allowed Nucor to grow its presence in higher-margin products where greater strength and abrasion resistance is required. The heat treat line allows us to improve the product mix allocation between our two plate mills and four sheet mills to improve margins at those facilities. Also at the Hertford County mill, we commissioned a vacuum tank degasser in 2012, and we began operating a normalizing line in 2013. During 2012, Nucor began work on a $290 million strategic investment to expand our special bar quality (“SBQ”) and wire rod production capabilities at our Tennessee, Nebraska and South Carolina bar mills by approximately one million tons. The following achievements illustrate the significant progress that was made on these projects during 2013: production began on the new wire rod mill located in South Carolina, our Nebraska mill successfully started up its upgraded rolling mill and our Tennessee mill completed the installation and commissioning of a new quality assurance line. The SBQ projects, which we expect to be completed over the course of 2014 and 2015, will allow us to produce engineered bar for the most demanding applications while maintaining our market share in commodity bar products by shifting production to our other bar mills. Other planned value-added projects at existing operations include the vacuum tank degasser that began operating at our Hickman, Arkansas mill in late 2012 and the modernization of casting, hot rolling and downstream operations that will allow us to produce wider and lighter gauge hot-rolled and cold-rolled steel products at our Berkeley, South Carolina mill beginning in early 2014.

As part of the execution of our raw materials strategy, we have a goal of controlling between six and seven million tons of annual capacity in high-quality scrap substitutes. Our 2,500,000 metric tons-per-year DRI facility in St. James Parish, Louisiana began production in December 2013. Between our existing DRI plant in Trinidad, which we expanded in recent years to increase the annual capacity from 1,800,000 to 2,000,000 metric tons, and our new facility in Louisiana, we will be approximately two-thirds of the way towards that goal.

 

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The DRI-making process requires significant volumes of natural gas. To ensure the new DRI plant in Louisiana has a sustained advantage from lower natural gas costs, Nucor entered into two long-term, onshore natural gas working interest drilling programs in U.S.-based proven reserves with Encana Oil & Gas (USA) Inc. (“Encana”) that allow us to better manage our exposure to natural gas pricing volatility and our overall energy demand for our operations. The natural gas produced by these two programs will be sold to offset our exposure to the volatility of the price of natural gas consumed by the Louisiana DRI facility and our other operations. In December 2013, Nucor announced that we and Encana made a joint decision to temporarily suspend drilling new natural gas wells. The joint decision was made due to the current weak natural gas pricing environment. This joint decision demonstrates the flexibility of our partnership with Encana to react to market conditions to the mutual benefit of both parties while still allowing us to better manage our exposure to natural gas pricing volatility at our operating divisions that consume natural gas.

Growth through greenfield projects has included the construction of our SBQ steel mill in Memphis, Tennessee, which we completed in 2009. We also began commercial production in 2009 at a new facility in Blytheville, Arkansas, which uses breakthrough Castrip® technology to strip cast molten steel into near final shape and thickness with minimal hot or cold rolling. This allows for lower investment and operating costs and reduces the environmental impact of producing steel.

Although the pace at which we have been acquiring other companies has slowed in the past few years, the acquisition of Skyline Steel LLC (“Skyline”) in 2012 was a notable exception. The Skyline acquisition is an important strategic investment as it pairs Skyline’s leadership position in the steel piling distribution market with our Nucor-Yamato Steel Company (“Nucor-Yamato”) joint venture’s position as the market leader in steel piling manufacturing. To build upon the synergies in the piling market serviced by Skyline, Nucor announced that Nucor-Yamato will be expanding to broaden its range of hot-rolled piling products. Upon completion in mid-2014, this project will add several new sheet piling sections, increasing the single sheet widths by 22% and providing a lighter, stronger sheet covering more area at a lower installed cost.

In 2010, we entered into an agreement with Mitsui & Co. (U.S.A.) to form NuMit LLC (“NuMit”), in which we own a 50% economic and voting interest. NuMit owns 100% of the equity interest in Steel Technologies LLC (“Steel Technologies”), which operates 24 sheet processing facilities located throughout the United States, Canada and Mexico. Since our investment in NuMit began, Steel Technologies constructed a flat-rolled steel processing operation in Celaya, Mexico, that became operational in late 2012. The 125,000-square-foot facility is equipped with two slitting lines. Additionally, Steel Technologies’ new flat-rolled steel processing facility in the Bajio region of Mexico became fully operational in November 2013. These new investments will allow us to capitalize on the rapid growth in the Mexican automotive industry.

Segments

Nucor reports its results in three segments: steel mills, steel products and raw materials. Net sales to external customers, intercompany sales, depreciation expense, amortization expense, earnings before income taxes and noncontrolling interests, assets and capital expenditures by segment for each of the three fiscal years in the three-year period ended December 31, 2013 are set forth in Note 23 of the Notes to Consolidated Financial Statements included in Nucor’s 2013 Annual Report, which is hereby incorporated by reference. The steel mills are Nucor’s largest segment, representing approximately 70% of the Company’s sales to external customers in the fiscal year ended December 31, 2013.

Principal Products Produced

In the steel mills segment, Nucor produces and distributes sheet steel (hot-rolled, cold-rolled and galvanized), plate steel, structural steel (wide-flange beams, beam blanks, H-piling and sheet piling) and bar steel (blooms, billets, concrete reinforcing bar, merchant bar and SBQ). Nucor manufactures steel principally from scrap steel and scrap steel substitutes using electric arc furnaces, continuous casting and automated rolling mills.

 

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Nucor’s equity method investments in Duferdofin Nucor S.r.l. and NuMit are included in the steel mills segment. Also included in the steel mills segment are our international trading companies that buy and sell steel and steel products that Nucor and other steel producers have manufactured. In the steel products segment, Nucor produces steel joists and joist girders, steel deck, fabricated concrete reinforcing steel, cold finished steel, steel fasteners, metal building systems, steel grating and expanded metal, and wire and wire mesh. In the raw materials segment, the Company produces DRI; brokers ferrous and nonferrous metals, pig iron, HBI and DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap metal. The raw materials segment also includes our natural gas working interest drilling programs with Encana and Nucor’s equity method investment in Hunter Ridge Energy Services LLC.

Markets and Marketing

The steel mills segment sells its products primarily to steel service centers, fabricators and manufacturers located throughout the United States, Canada, Mexico and, increasingly, elsewhere in the world. Nucor produces hot-rolled, cold-rolled and galvanized sheet steel in standard grades and to customers’ specifications while maintaining inventories to fulfill anticipated orders. We estimate that approximately 65% of our sheet steel sales in 2013 were to contract customers. The balance of our sheet steel sales was made in the spot market at prevailing prices at the time of sale. The proportion of tons sold to contract customers at any given time depends on a variety of factors, including our consideration of current and future market conditions, our strategy to appropriately balance spot and contract tons to maximize profitability, our desire to sustain a diversified customer base, and our end-use customers’ perceptions about future market conditions. These sheet sales contracts permit price adjustments to reflect changes in prevailing raw material costs and market conditions. These sheet sales contracts typically have terms ranging from six to twelve months. Steel contract sales outside of our sheet operations are not significant.

Our plate, structural, reinforcing and merchant bar steel come in standard sizes and grades, which allows us to maintain inventory levels of these products to meet our customers’ expected orders. In addition, our bar mill group manufactures hot-rolled SBQ products to exacting specifications primarily servicing the automotive, energy, agricultural, heavy equipment and transportation sectors. Almost all of our plate, structural, and bar steel sales occur in the spot market at prevailing market prices.

In 2013, approximately 86% of the shipments made by our steel mills segment were to external customers. The balance of the steel mill segment’s shipments went to our piling distributor and our downstream joist, deck, rebar fabrication, fastener, metal buildings and cold finish operations.

In the steel products segment, we sell steel joists and joist girders, and steel deck to general contractors and fabricators located throughout the United States and Canada. We make these products to the customers’ specifications and do not maintain inventories of these finished steel products. The majority of these contracts are firm, fixed-price contracts that are in most cases competitively bid against other suppliers. Longer-term supply contracts may permit us to adjust our prices to reflect changes in prevailing raw materials costs. We sell fabricated reinforcing products only on a construction contract bid basis. These products are used by contractors in constructing highways, bridges, reservoirs, utilities, hospitals, schools, airports, stadiums and high-rise buildings. We manufacture cold finished steel, steel fasteners, steel grating, wire and wire mesh in standard sizes and maintain inventories of these products to fulfill anticipated orders. We sell cold finished steel and steel fasteners primarily to distributors and manufacturers located throughout the United States and Canada.

We market products from the steel mills and steel products segments mainly through in-house sales forces. We also utilize our internal trading companies to market our products abroad. The markets for these products are largely tied to capital and durable goods spending and are affected by changes in general economic conditions.

In the raw materials segment, we process ferrous and nonferrous scrap metal for use in our steel mills and for sale to various domestic and international external customers. We also broker ferrous and nonferrous metals and scrap substitutes, supply ferro-alloys, and provide transportation, material handling and other services to

 

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users of scrap metals. Our primary external customers for ferrous scrap are electric arc furnace steel mills and foundries that use ferrous scrap as a raw material in their manufacturing process. External customers purchasing nonferrous scrap metal include aluminum can producers, secondary aluminum smelters, steel mills and other processors and consumers of various nonferrous metals. We market scrap metal products and related services to our external customers through in-house sales forces. In 2013, approximately 13% of the ferrous and nonferrous metals and scrap substitutes tons we processed were sold to external customers. We used the balance in our steel mills.

Also within the raw materials segment are our DRI plants in Trinidad and Louisiana that produce iron inputs exclusively for use in the Nucor mills, as well as our working interest drilling programs. All natural gas produced by the working interest drilling programs is and will be sold to outside parties, and as a result the revenues from these sales are a small but increasing amount of our revenues.

Backlog

In the steel mills segment, Nucor’s backlog of orders was approximately $1.77 billion and $1.46 billion at December 31, 2013 and 2012, respectively. Order backlog for the steel mills segment includes only orders from external customers and excludes orders from our downstream businesses. Nucor’s backlog of orders in the steel products segment was approximately $1.27 billion and $1.17 billion at December 31, 2013 and 2012, respectively. The majority of these orders will be filled within one year. Order backlog within our raw materials segment is not significant because the majority of the raw materials that segment produces are used internally.

Sources and Availability of Raw Materials

The primary raw materials for our steel mills segment are ferrous scrap and scrap substitutes such as pig iron, DRI and HBI. On average, it takes approximately 1.1 tons of scrap and scrap substitutes to produce a ton of steel. As of December 31, 2013, DJJ operated over 70 scrap recycling facilities, and our annual scrap processing capability exceeded five million tons. DJJ acquires ferrous scrap from numerous sources including manufacturers of products made from steel, industrial plants, scrap dealers, peddlers, auto wreckers and demolition firms. We purchase pig iron as needed from a variety of sources and operate DRI plants in Trinidad and Louisiana with respective capacities of 2,000,000 and 2,500,000 metric tons annually. The primary raw material for our DRI facilities is iron ore, which we purchase from various international suppliers. Our newly constructed Louisiana DRI facility is the first phase of a multi-phase plan that is expected to include additional operations in Louisiana.

In 2010, Nucor entered into an agreement with Encana that involves drilling and completing onshore natural gas wells in U.S.-based proven reserves over an approximate seven-year period that began in June 2010. Nucor entered into a second and more extensive drilling agreement with Encana in late 2012 that is projected to span more than 20 years. Natural gas produced by these working interest drilling programs is being sold to offset our exposure to the volatility of the price of gas consumed by our Louisiana DRI facility. In the fourth quarter of 2013, Nucor and Encana announced an agreement to temporarily suspend drilling new natural gas wells given current expectations that the natural gas pricing environment will be weak in 2014. By the middle of 2014, all in-process wells will be completed. At that point, there will be over 300 producing wells providing enough natural gas to cover our Louisiana DRI plant’s expected consumption into 2015. In addition to our natural gas needs at the new DRI facility, Nucor is also a substantial consumer of natural gas at our steel mill operations. Once drilling resumes, the drilling of natural gas wells under the two agreements is expected to be sufficient to cover Nucor’s demand at all of its steel mills in the United States plus the demand of two DRI plants or, alternatively, at three DRI plants.

The primary raw material for our steel products segment is steel produced by Nucor’s steel mills.

DJJ generally purchases ferrous and nonferrous scrap for sale to external customers from the same variety of sources it purchases ferrous scrap for use as a raw material in Nucor’s steel mills. DJJ does not purchase a significant amount of scrap metal from a single source or from a limited number of major sources. The

 

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availability and price of ferrous scrap are affected by changes in the global supply and demand for steel and steel products. Ferrous scrap and scrap substitutes are our single largest cost of products sold. A key part of our business strategy is to control a significant portion of the supply of high quality metallics needed to operate our steel mills.

Energy Consumption and Costs

Our steel mills are large consumers of electricity and natural gas. Our DRI facilities in Trinidad and Louisiana are large consumers of natural gas. Consequently, we use a variety of strategies to manage our exposure to price risk of natural gas, including cash flow hedges and our natural gas working interest drilling programs.

Historically, manufacturers in the United States have benefitted from relatively stable and competitive energy costs that have allowed them to compete on an equal footing in the increasingly global marketplace. The availability and prices of electricity and natural gas are influenced today, however, by many factors including changes in supply and demand, advances in drilling technology and, increasingly, changes in public policy relating to energy production and use. Because energy is such a significant cost of products sold for Nucor, we strive continually to make our operations in all three of our business segments more energy efficient. We also closely monitor developments in public policy relating to energy production and consumption. When appropriate, we work to shape those developments in ways that we believe will allow us to continue to be a competitive producer of steel and steel products in an increasingly competitive global marketplace.

Competition

We compete in a variety of steel and metal markets, including markets for finished steel products, unfinished steel products and raw materials. These markets are highly competitive with many domestic and foreign firms participating, and, as a result of this highly competitive environment, we find that we primarily compete on price and service.

Our electric arc furnace steel mills face many different forms of competition, including integrated steel producers (who use iron ore converted into liquid form in a blast furnace as their basic raw material instead of scrap steel), other electric arc furnace mills, foreign imports and alternative materials. Large integrated steel producers have the ability to manufacture a wide variety of products but face significantly higher energy costs and are often burdened with higher capital and fixed operating costs. Electric arc furnace mill producers such as Nucor are sensitive to increases in scrap prices but tend to have lower capital and fixed operating costs compared with integrated steel producers.

Over the last few years, Nucor has experienced increased competition stemming from significant excess capacity, both domestic and foreign. Although there were no noteworthy additions to domestic capacity in 2013, oversupply is still a significant issue. While steel imports decreased slightly from 2012, the overall level of finished and semi-finished steel imports is still extremely high at 30% of the U.S. steel market. These artificially-priced imports make it very difficult for Nucor to maintain sales prices and profit levels.

Competition from foreign steel and steel product producers presents unique challenges for us. Imported steel and steel products often benefit from government subsidies, either directly or indirectly through government-owned enterprises or government-owned or controlled financial institutions. In particular, competition from steel imported from China, which accounts for more than 45% of the steel produced annually in the world, is a major challenge. We believe that Chinese producers, many of whom are government-owned in whole or in part, benefit from their government’s manipulation of foreign currency exchange rates and from the receipt of government subsidies, which allow them to sell their products below cost. These distorting trade practices are widely recognized as being unfair and have been challenged successfully as violating world trade rules. Examples of successful challenges include the imposition of antidumping duty orders on imports of line pipe, oil country tubular goods, rebar, cut-to-length plate and hot-rolled sheet from China.

 

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China’s aggressive trade practices, left unchallenged, seriously undermine the ability of Nucor and other domestic producers to compete on price. China’s artificially lowered production costs have significantly contributed to the exodus of manufacturing jobs from the United States. When such an exodus occurs, the U.S. economy is weakened and Nucor’s customer base is diminished. Rigorous trade law enforcement is critical to our ability to maintain our competitive position against foreign producers that engage in unlawful trade practices. Nucor has been active in calling on policymakers to enforce global trade agreements and address the jobs crisis in the United States.

We also experience competition from other materials. Depending on our customers’ end use of our products, there are sometimes other materials, such as concrete, aluminum, plastics, composites and wood that compete with our steel products. When the price of steel relative to other raw materials rises, these alternatives become more attractive to our customers.

Competition in our scrap and raw materials business is also vigorous. The scrap metals market consists of many firms and is highly fragmented. Firms typically compete on price and geographic proximity to the sources of scrap metal.

Environmental Laws and Regulations

Our business operations are subject to numerous federal, state and local laws and regulations intended to protect the environment. The principal federal environmental laws include the Clean Air Act (“CAA”) that regulates air emissions; the Clean Water Act (“CWA”) that regulates water discharges; the Resource Conservation and Recovery Act (“RCRA”) that addresses solid and hazardous waste treatment, storage and disposal; and the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) that governs releases of, and remediation of, sites contaminated by hazardous substances. Our operations are also subject to state laws and regulations that are patterned on these and other federal laws.

We believe that we are in substantial compliance with the provisions of all federal and state environmental laws and regulations applicable to our business operations. However, both federal and state laws and regulations are becoming increasingly stringent, making compliance with them increasingly expensive and burdensome. In many instances the total costs of compliance are not readily quantifiable because compliance is so engrained in our operating philosophy that these costs are simply considered part of our standard operating procedures.

The United States Environmental Protection Agency (“USEPA”) has proposed or promulgated many new national ambient air quality standards and toxic air emissions rules for which it has recently or not yet issued guidance or compliance deadlines. While we begin immediately to plan for compliance with such standards and rules, we cannot fully assess their impact on our operations until the guidance has been fully developed or issued and compliance deadlines have been established. In other cases where environmental regulations are proposed or promulgated that may regulate previously unregulated aspects of our operations, it is impossible for us to fully determine the impact of these regulations until protracted legal challenges have been concluded and USEPA or other regulatory agencies have developed and issued technical guidance. Despite this atmosphere of regulatory uncertainty, at this time we do not believe that compliance with these new environmental regulations will have a material adverse effect on our results of operations, cash flows or financial condition.

The CAA imposes stringent limits on air emissions with a federally mandated operating permit program administered by the states with civil and criminal enforcement sanctions. Each of our steel mills is required to operate in compliance with its permit or potentially incur sanctions for failing to do so. Because of the size of our steelmaking operations, they are subject to new “Greenhouse Gasses” (“GHGs”) regulations and are required to do GHG Best Available Control Technology (“BACT”) evaluations when their permits are modified. There is still uncertainty and very little guidance from USEPA as to what is or may be considered GHG BACT for steelmaking operations. Our operations are currently properly permitted, and we will not need to make these determinations unless and until these permits are modified. Based on current guidance, we do not expect these requirements to have a material adverse effect on our results of operations, cash flows or financial condition.

 

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Nucor uses electric arc furnaces (“EAF”) to recycle scrap metal into new steel products. These EAFs use electricity as their primary source of energy. As the new GHG regulations, air toxics rules and other new environmental regulations are imposed on electric utilities, it is reasonable to expect that the cost of electricity produced by these utilities will increase. See Item 1A “Risk Factors” for more information about the potential impact of GHG regulations on Nucor’s business.

The CWA regulates water discharges and withdrawals. Nucor maintains discharge and withdrawal permits as appropriate at its facilities under the national pollutant discharge elimination system program of the CWA and conducts its operations in compliance with those permits. Nucor also maintains permits from local governments for the discharge of water into publicly owned treatment works where available.

RCRA establishes standards for the management of solid and hazardous wastes. RCRA also addresses the environmental impact of contamination from waste disposal activities and from recycling of and storage of most wastes. While Nucor believes it is in substantial compliance with these regulations, past waste disposal activities that were legal when conducted but now may pose a contamination threat are periodically discovered. These and off-site properties that USEPA has determined are contaminated, for which Nucor may be potentially responsible at some level, are quickly evaluated and corrected. While Nucor has conducted and is in the final stages of completing some cleanups under RCRA, these liabilities either are identified already and being resolved or have been fully resolved.

Because Nucor long ago implemented environmental practices that have resulted in the responsible disposal of waste materials, Nucor is also not presently considered a major contributor to any major cleanups under CERCLA for which Nucor has been named a potentially responsible party. Nucor continually evaluates these types of potential liabilities and, if appropriate, maintains reserves sufficient to remediate the identified liabilities. Under RCRA, private citizens may also bring an action against the operator of a regulated facility for potential damages and payment of cleanup costs. Nucor is confident that its system of internal evaluation and due diligence has sufficiently identified these types of potential liabilities so that compliance with these regulations will not have a material adverse effect on our results of operations, cash flows or financial condition beyond that already reflected in the reserves established for them.

The primary raw material of Nucor’s steelmaking operations is scrap metal. The process of recycling scrap metal brings with it many contaminants such as paint, zinc, chrome and other metals that produce air emissions which are captured in specialized emission control equipment. This filtrant (EAF dust) is classified as a listed hazardous waste under the RCRA. Because these contaminants contain valuable metals, this filtrant is recycled to recover those metals. Nucor sends all but a small fraction of the EAF dust it produces to recycling facilities that recover the zinc, lead, chrome and other valuable metals from this dust. By recycling this material, Nucor is not only acting in a sustainable, responsible manner but is also substantially limiting its potential for future liability under both CERCLA and RCRA.

Nucor operates an aggressive and sustainable environmental program that incorporates the concept of individual employee as well as management responsibility for environmental performance. All of Nucor’s steelmaking operations are ISO 14001 certified. Achieving ISO 14001 certification means that each of Nucor’s steel mills has put an environmental management system in place with measurable targets and objectives, such as reducing the use of oil and grease and minimizing electricity use, and has implemented site-wide recycling programs. These environmental management systems make environmental commitment each Nucor teammate’s responsibility. Nucor’s environmental program maintains a high level of training, commitment, outreach and visibility.

Capital expenditures at our facilities that are associated with environmental regulation compliance for 2014 and 2015 are estimated to be less than $100 million per year.

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. We have fewer than 100 employees in our executive office. The majority of Nucor’s 22,300 employees are not represented by labor unions.

 

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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 any 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.

Recovery from the global recession and credit crisis has and likely will continue to adversely affect our business.

The continuing economic downturn as a result of the deep global recession that began in the United States in December 2007 and officially ended in June 2009 is continuing to have an adverse effect on demand for our products and consequently the results of our operations, financial condition and cash flows. Apprehension about the potential economic consequences of continuing domestic political wrangling over budgetary decisions and debt ceiling limits could negatively impact demand for our products. In addition, uncertainties in Europe regarding the financial sector and debt crises and the potential impact on banks in other regions of the world will continue to weigh on global and domestic growth.

Although domestic credit markets have largely stabilized from the height of the financial crisis in the fourth quarter of 2008 and the first half of 2009, the effects of the financial crisis continue to present additional risks to us, our customers and suppliers. In particular, there is no guarantee that the credit markets or liquidity will not once again be restricted. Additionally, stricter lending standards have made it more difficult and costly for some firms to access the credit markets. Although we believe we have adequate access to several sources of contractually committed borrowings and other available credit facilities, these risks 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. In addition, restricted access to the credit markets is also continuing to make it difficult or, in some cases, impossible for our customers to borrow money to fund their operations. Lack of, or limited access to, capital would adversely affect our customers’ ability to purchase our products or, in some cases, to pay for our products on a timely basis.

Long-term unemployment for those unemployed for more than six months remains high and the housing market and nonresidential construction market remain depressed. High unemployment and a weak housing market have an impact on downstream demand for many of our products. Additionally, nonresidential construction, including publicly financed state and municipal projects, has slowed significantly due to overcapacity of commercial properties and the reluctance of state and local governments to borrow to spend on capital projects when their operating expenses are in many cases growing faster than their revenues from taxes and other sources.

Our industry is cyclical and both recessions and prolonged periods of slow economic growth could have an 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, metals service centers, appliance and automotive industries. As a result, downturns in the United States economy or any of these industries could materially adversely affect our results of operations, financial condition and cash flows. The global economic recession of 2008-2009 and subsequent anemic economic recovery period, coupled with the lingering effects of the global financial and credit market disruptions, have had a historic negative impact on the steel industry and Nucor. These events contributed to an unprecedented decline in pricing for steel and steel

 

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products, weak end-markets and continued depressed demand, resulting in extraordinary volatility in our financial results since the last up-cycle. In 2009, we reported a net loss of $293.6 million, the first in the Company’s history. Although we have since returned to profitability, the economic outlook remains uncertain both in the United States and globally. While we believe that the long-term prospects for the steel industry remain bright, we are unable to predict the duration of the depressed economic conditions that are contributing to reduced demand for our products. Future economic downturns or a prolonged slow-growth or 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 steelmaking capacity exceeds global consumption of steel products. During periods of global economic weakness this overcapacity is amplified because of weaker global demand. This excess capacity often results in manufacturers in certain countries exporting significant amounts of steel and steel products at prices that are at or below their costs of production. In some countries the steel industry is subsidized or owned in whole or in part by the government, giving imported steel from those countries certain cost advantages. 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. Over capacity has also led to greater protectionism as is evident in raw material and finished product border tariffs put in place by China, Brazil and other countries.

In particular, steel production in China, the world’s largest producer and consumer of steel, continues to exceed Chinese demand. This rising overcapacity in China has the potential to result in a further increase in imports of artificially low-priced steel and steel products to the United States that could put our steel products at a competitive disadvantage. 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 recent addition of new capacity and expansion or restarting of existing sheet steel production in the United States has exacerbated this issue domestically as well as globally.

Competition from other producers, imports or alternative materials may adversely affect our business.

We face strong competition from other steel producers and imports that compete with our products on price and service. The steel markets are highly competitive and a number of firms, domestic and foreign, participate in the steel and raw materials markets. Depending on a variety of factors, including raw materials, energy, labor and capital costs, government control of currency exchange rates and government subsidies of foreign steel producers, our business may be materially adversely affected by competitive forces.

In many applications, steel competes with other materials, such as concrete, aluminum, composites, 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.

Since 2011, automobile producers have begun taking steps towards complying with new Corporate Average Fuel Economy mileage requirements for new cars and light trucks that they produce. As automobile producers work to produce vehicles in compliance with these new standards, they may reduce the amount of steel or begin utilizing alternative materials in cars and trucks to improve fuel economy, thereby reducing demand for steel and resulting in further over-supply of steel in North America. Certain automakers have announced that they will use greater amounts of aluminum and smaller proportions of steel in some 2015 models that will be available next year.

The results of our operations are sensitive to volatility in steel prices and 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 we have vertically integrated our

 

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business by constructing our DRI facilities in Trinidad and Louisiana and also acquiring DJJ, we still must purchase most of our primary raw material, steel scrap, from numerous other sources located throughout the United States. Although we believe that the supply of scrap and scrap substitutes is adequate to operate our facilities, prices of these critical raw materials are volatile and are influenced by changes in scrap exports in response to changes in the scrap demands of our 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. Many countries that export steel into our markets restrict the export of scrap, protecting the supply chain of some foreign competitors. This trade practice creates artificial competitive advantage for foreign producers that could limit our ability to compete in the U.S. market.

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. In addition, our DRI facilities are also large consumers of natural gas. We rely upon third parties for our supply of energy resources consumed in the manufacture of our products. The prices for and availability of electricity, natural gas, oil and other energy resources are subject to volatile market conditions. These market conditions often are affected by weather, political and economic factors beyond our control, and we may be unable to raise the price of our products to cover increased energy costs. 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 resulting from regulations that are not equally applicable across the entire global steel market could materially adversely affect our business, results of operations, financial condition and cash flows.

A substantial or extended decline in natural gas prices could have a material adverse effect on our natural gas working interest drilling programs.

The financial performance and condition of our natural gas drilling programs are substantially dependent on the prevailing prices of natural gas and liquids. Fluctuations in natural gas or liquids prices could have an adverse effect on the Company’s natural gas operations and financial condition and the value and recovery of its reserves in the working interest drilling programs. Prices for natural gas and liquids fluctuate in response to changes in the supply and demand for natural gas and oil, market uncertainty and a variety of additional factors beyond the Company’s control. A substantial or extended decline in the price of natural gas could result in further delay or cancellation of existing or future drilling programs or curtailment in production at some properties, all of which could have an adverse effect on the Company’s revenues, profitability and cash flows.

Our steelmaking and DRI processes, and the manufacturing processes of many of our suppliers and customers, are energy intensive and generate carbon dioxide and other GHGs, and regulation of GHGs, through new regulations or legislation 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 increasingly affected both directly and indirectly as GHG regulations are further implemented. Because these

 

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operations are subject to most of these new GHG regulations, we have already begun to feel the impact in the permit modification and reporting processes. Both GHG regulations and recently promulgated National Ambient Air Quality Standards (“NAAQS”), which are more restrictive than previous standards, make it significantly more difficult to obtain new permits and to modify existing permits.

These same regulations have indirectly increased the costs to manufacture our products as they have increased the cost of energy, primarily electricity, which we use extensively in the steelmaking process. The discovery of new natural gas reserves utilizing the practice of horizontal drilling and hydraulic fracturing is dampening some of this indirect impact, as some utilities switch fuels to natural gas from coal thereby reducing their emissions significantly. To the extent that these regulations cause an increase in the cost of energy, they will have an impact on Nucor’s ability to compete.

The USEPA continues to press forward with new regulations that control GHG and other NAAQS pollutants. Most of these and other related regulations are already, or we expect will shortly be, challenged in court. Until all proposed GHG emission regulations are adopted in final form and all legal challenges are resolved, we cannot reliably estimate their full impact on our financial condition, operating performance or ability to compete. Because some foreign steel producers are not subject to these same indirect cost increases, our products could be at a further competitive disadvantage. In addition to increased costs of production, we could also incur costs to defend and resolve legal claims and other litigation related to new air and water quality regulations and the alleged impact of our operations on the environment.

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. If one of our permits is revoked or if we were to experience significant delays in obtaining a permit modification or a new permit, this could result in operational delays at one or more of our facilities, causing a negative impact on our results of operations and cash flows.

Federal and state legislation and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays.

Various legislative efforts, at all levels, are in process that are intended to further regulate the hydraulic fracturing process used by the oil and gas industry. Hydraulic fracturing is an important and commonly used process in the completion of natural gas wells in shale and tight sand formations, including all of those in our working interest natural gas drilling program. This process involves the injection of water, chemicals and, at times, sand under pressure into rock formations to stimulate the production of natural gas, oil and natural gas liquids. Sponsors of these proposals and regulations have asserted that chemicals used in the fracturing process could adversely affect drinking water supplies and/or that hydraulic fracturing could pose a variety of other risks. Any onerous governmental regulations could lead to operational delays, increased operating costs that could make it more difficult to perform hydraulic fracturing and possibly even the cessation of drilling.

We acquire businesses from time to time and we 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.

 

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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.

Our operations are subject to business interruptions and casualty losses.

The steelmaking business is subject to numerous inherent risks, particularly unplanned events such as explosions, fires, other accidents, natural disasters such as floods or earthquakes, unplanned critical equipment failures, acts of terrorism, 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, 2013, our total capital expenditures, excluding acquisitions, were approximately $3.44 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, will be financed by internally generated funds or from borrowings under our $1.5 billion unsecured revolving credit facility, we cannot assure you that this will be the case. Additional acquisitions could require financing from external sources.

Changes in foreign currency may adversely affect our financial results.

Because of our international expansion efforts, we are increasingly exposed to changes in foreign exchange rates. Generally, each of our foreign operations both produces and sells in its local currency, limiting our exposure to foreign currency transactions. We monitor our exposures and, from time to time, may use forward currency contracts to hedge certain forecasted currency transactions. In addition to potential transaction losses, our reported results of operations and financial position could be negatively affected by exchange rates when the activities and balances of our foreign operations are translated into U.S. dollars for financial reporting purposes.

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 test our equity method investments, goodwill and other long-lived assets to determine whether their estimated fair value is less than their value recorded on our balance sheet. The results of this testing for potential impairment may be adversely affected by the continuing uncertain market conditions for the steel industry, as well as changes in interest rates and general economic conditions. If we determine that the fair value of any of these long-lived assets is less than the value recorded on our balance sheet, and in the case of equity method investments the decline is other than temporary, we would likely incur a non-cash impairment loss that would negatively impact our results of operations.

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

The steel industry and our business are sensitive to changes in taxes. As a company based in the U.S., Nucor is more exposed to the effects of changes in U.S. tax laws 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 U.S. tax laws. Potential changes that would adversely affect us include, but are not limited to, current proposals for corporate tax reform which would lower tax rates and eliminate most tax expenditures (repealing LIFO (last-in, first-out treatment of inventory), accelerated depreciation, and the domestic production activity deduction) 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.

 

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We are subject to legal proceedings and legal compliance risks.

We spend substantial resources ensuring that we comply with governmental safety and environmental regulations, contractual obligations and other legal standards. Notwithstanding this, we are subject to a variety of legal proceedings and compliance risks in respect of various issues, including regulatory, environmental, employment, intellectual property, contractual and governmental matters, that arise in the course of our business and in our industry. For information regarding our current significant legal proceedings, see Item 3. Legal Proceedings. A negative outcome in an unusual or significant legal proceeding or compliance investigation could adversely affect our financial condition and results of operations. While we believe that we have adopted appropriate risk management and compliance programs, the nature of our operations means that legal and compliance risks will continue to exist and additional legal proceedings and other contingencies, the outcome of which cannot be predicted with certainty, will arise from time to time.

 

Item 1B. Unresolved Staff Comments

None.

 

Item 2. Properties

We own all of our principal operating facilities. These facilities, by segment, are as follows:

 

Location

   Approximate
square footage
of facilities
    

Principal products

Steel mills:

     

Blytheville, Arkansas

     2,560,000       Steel shapes, flat-rolled steel

Berkeley County, South Carolina

     2,170,000       Flat-rolled steel, steel shapes

Decatur, Alabama

     2,000,000       Flat-rolled steel

Crawfordsville, Indiana

     1,900,000       Flat-rolled steel

Norfolk, Nebraska

     1,460,000       Flat-rolled steel

Hickman, Arkansas

     1,450,000       Steel shapes

Hertford County, North Carolina

     1,220,000       Steel shapes

Plymouth, Utah

     1,200,000       Steel plate

Jewett, Texas

     1,080,000       Steel shapes

Darlington, South Carolina

     970,000       Steel shapes

Seattle, Washington

     640,000       Steel shapes

Memphis, Tennessee

     570,000       Steel shapes

Auburn, New York

     450,000       Steel shapes

Marion, Ohio

     440,000       Steel shapes

Kankakee, Illinois

     430,000       Steel shapes

Jackson, Mississippi

     420,000       Steel shapes

Kingman, Arizona

     380,000       Steel shapes

Tuscaloosa, Alabama

     370,000       Steel plate

Birmingham, Alabama

     280,000       Steel shapes

Wallingford, Connecticut

     260,000       Steel shapes

Steel products:

     

Norfolk, Nebraska

     1,080,000       Joists, deck, cold finished bar

Brigham City, Utah

     730,000       Joists, cold finished 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

 

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The steel mills segment also includes Skyline, our steel foundation distributor with U.S. manufacturing facilities in eight states and one facility in Canada. Additionally, we have a distribution center in Pompano Beach, Florida and in Mexico.

In the steel products segment, we have 77 additional operating facilities in 37 states and 28 operating facilities in Canada. Our affiliate, Harris Steel, also operates multiple sales offices in Canada and certain other foreign locations.

In the raw materials segment, DJJ has 77 operating facilities in 16 states along with multiple brokerage offices in the U.S. and certain other foreign locations. Nucor’s raw materials segment also includes our DRI facilities. Nucor has DRI facilities in Point Lisas, Trinidad and St. James Parish, Louisiana. A significant portion of the DRI production process occurs outdoors. The Trinidad site, including leased land, is approximately 1.84 million square feet. The Louisiana site, which began operations in December 2013, has approximately 174.2 million square feet of owned land with buildings that total approximately 72,000 square feet.

During 2013, the average utilization rates of all operating facilities in the steel mills, steel products and raw materials segments were approximately 74%, 58% and 62% of production capacity, respectively.

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

 

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 majority of these complaints were filed in September and October of 2008, with two additional complaints being filed in July and December of 2010. Two of these complaints have been voluntarily dismissed and are no longer pending. The plaintiffs allege that from April 1, 2005 through December 31, 2007, 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 estimate the range of Nucor’s potential exposure.

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

 

Item 4. Mine Safety Disclosures

Not applicable.

Executive Officers of the Registrant

James R. Darsey (58)—Mr. Darsey has been an Executive Vice President of Nucor since September 2010. He was promoted to Vice President in 1996 and to President of the Vulcraft/Verco Group in 2007. He was General Manager of Nucor Steel, Jewett, Texas from 1999 to 2007; General Manager of Vulcraft, Grapeland, Texas from 1995 to 1999; Engineering Manager of Vulcraft, Grapeland, Texas from 1987 to 1995; and Engineering Manager of Vulcraft, Brigham City, Utah from 1986 to 1987. He began his Nucor career in 1979 as a Design Engineer at Vulcraft, Grapeland, Texas.

 

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John J. Ferriola (61)—Mr. Ferriola became Chairman of the Board of Directors of Nucor in January 2014, has served as Chief Executive Officer since January 2013 and has served as President since January 2011. He has also been a director of Nucor since January 2011. Previously, Mr. Ferriola served as President and Chief Operating Officer from January 2011 to December 2012 and, prior to that, as Chief Operating Officer of Steelmaking Operations from 2007 to 2010, Executive Vice President from 2002 to 2007 and 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.

James D. Frias (57)—Mr. Frias has been Chief Financial Officer, Treasurer and Executive Vice President since January 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.

Keith B. Grass (57)—Mr. Grass became an Executive Vice President of Nucor in February 2008 when Nucor acquired DJJ. He has served as Chief Executive Officer of DJJ since 2000 and served as President of DJJ from 2000 until December 2012. Prior to 2000, Mr. Grass held the following positions with DJJ: President and Chief Operating Officer of the Metal Recycling Division during 1999; President of the International Division from 1996 to 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; and 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 (57)—Mr. Hall has been an Executive Vice President of Nucor since September 2007. He 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 in 1993; Sales Manager of Vulcraft, Brigham City, Utah from 1988 to 1993; and Inside Sales at Nucor Steel Plymouth, Utah from 1981 to 1988.

Raymond S. Napolitan, Jr. (56)—Mr. Napolitan became an Executive Vice President of Nucor in June 2013. He was elected Vice President of Nucor in 2007. He served as President of Nucor’s Vulcraft/Verco group from 2010 until 2013; President of American Buildings Company from 2007 until 2010; General Manager of Nucor Buildings Systems, Terrell, Texas from 1999 until 2007. He began his Nucor career in 1996 as Engineering Manager of Nucor Building Systems, Waterloo, Indiana.

R. Joseph Stratman (57)—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 $1.47 per share in 2013 compared with $1.46 per share in 2012. In December 2013, the board of directors increased the base quarterly cash dividend on Nucor’s common stock to $0.37 per share from $0.3675 per share. In February 2014, the board of directors declared Nucor’s 164th consecutive quarterly cash dividend of $0.37 per share payable on May 12, 2014 to stockholders of record on March 31, 2014.

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 2013 Annual Report, page 76. Additional information regarding securities authorized for issuance under stock-based compensation plans is incorporated by reference to Nucor’s 2013 Annual Report, pages 62 through 65.

 

Item 6. Selected Financial Data

Historical financial information is incorporated by reference to Nucor’s 2013 Annual Report, page 43.

 

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 2013 Annual Report, page 3 (Forward-looking Statements) and pages 22 through 39.

 

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, 2013, 24% of Nucor’s long-term debt was in industrial revenue bonds that have variable interest rates that are adjusted weekly or annually. The remaining 76% 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, 2013, 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 recorded as short-term investments.

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 utilizes a raw material surcharge as a component of pricing steel to pass through the cost increases of scrap steel and other raw materials. In periods of stable demand for our products, our surcharge mechanism has worked effectively to reduce the normal time lag in passing through higher raw material costs so that we can maintain our gross margins. When demand for and cost of raw materials is lower, however, the surcharge benefits our sales prices to a lesser extent.

Natural gas produced by Nucor’s working interest drilling program is being sold to third parties to offset our exposure to changes in the price of gas consumed by our Louisiana DRI facility. In addition to its future natural gas needs at the new DRI facility that began operations in the fourth quarter of 2013, Nucor is also a substantial consumer of natural gas at our steel mill operations. We expect that the natural gas produced through the drilling

 

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program will be sufficient to cover Nucor’s demand at all of its steel mills in the United States plus the demand of two DRI plants or, alternatively, at three DRI plants. However, the natural gas production from the working interest drilling program currently does not completely cover the natural gas usage at our operating facilities. For the year ended December 31, 2013, the volume of natural gas sold from our natural gas working interest drilling program was approximately 73% of the volume of natural gas purchased for consumption in our domestic steelmaking and DRI facilities.

Our natural gas working interest drilling program is affected by changes in natural gas prices in an inverse manner to natural gas costs at our DRI and steel mill operations. As natural gas prices increase, our increased energy costs at our DRI and steel mill operations is somewhat mitigated by increased profit from sales of natural gas to third party customers from our natural gas drilling program. Likewise, as natural gas prices decrease, we experience decreased energy costs at our DRI and steel mill operations, but we also experience decreased profit from our natural gas drilling program.

The impact of low natural gas prices associated with our drilling program is limited by the existence of a drilling suspension clause. Nucor is contractually obligated to drill a minimum number of wells per year under the terms of our original agreements with Encana; however, we have the right to suspend drilling of new wells at any time after January 1, 2015, if market pricing falls below a pre-established threshold. In the fourth quarter of 2013, Nucor and Encana agreed to temporarily suspend drilling new natural gas wells. This joint decision was made due to the current weak natural gas pricing environment. This pause demonstrates the flexibility of our partnership with Encana to react to market conditions to the mutual benefit of both parties while still allowing us to better manage our exposure to natural gas pricing volatility at our operating divisions that consume natural gas.

Nucor also uses derivative financial instruments from time to time primarily to partially manage our exposure to price risk related to natural gas purchases used in the production process as well as scrap, 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, 2013, there were no amounts in accumulated other comprehensive income (loss) related to derivative instruments as all of our previously held positions have settled. 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 earnings of a hypothetical change in the fair value of derivative instruments outstanding at December 31, 2013, 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

   $ 838       $ 2,095   

Aluminum

     1,011         2,527   

Copper

     1,337         3,342   

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 primarily through its operations in Canada, Europe, Trinidad and Colombia. We periodically use derivative contracts to mitigate the risk of currency fluctuations. Open foreign currency derivative contracts at December 31, 2013 and 2012 were insignificant.

 

Item 8. Financial Statements and Supplementary Data

Information required by this item is incorporated by reference to Nucor’s 2013 Annual Report, pages 44 through 72.

 

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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, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Report on Internal Control Over Financial Reporting—Management’s report on internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002 and the attestation report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, on the effectiveness of Nucor’s internal control over financial reporting as of December 31, 2013 are incorporated by reference to Nucor’s 2013 Annual Report, pages 44 through 45.

 

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 of this Form 10-K. The other information required by this Item is contained in the sections of Nucor’s Proxy Statement for the 2014 Annual Meeting of Stockholders (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 by reference.

 

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

The 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 2013 and 2012 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 2013 Annual Report, pages 44 through 72:

 

   

Management’s Report on Internal Control Over Financial Reporting

 

   

Report of Independent Registered Public Accounting Firm

 

   

Consolidated Balance Sheets—December 31, 2013 and 2012

 

   

Consolidated Statements of Earnings—Years ended December 31, 2013, 2012 and 2011

 

   

Consolidated Statements of Comprehensive Income—Years ended December 31, 2013, 2012, and 2011

 

   

Consolidated Statements of Stockholders’ Equity—Years ended December 31, 2013, 2012 and 2011

 

   

Consolidated Statements of Cash Flows—Years ended December 31, 2013, 2012 and 2011

 

   

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

     27   

Schedule II—Valuation and Qualifying Accounts—Years ended December 31, 2013, 2012 and 2011

     28   

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 8-K filed September 14, 2010)

3(i)

   Bylaws as amended and restated September 11, 2012 (incorporated by reference to Form 8-K filed September 13, 2012)

4

   Indenture, dated as of January 12, 1999, between Nucor Corporation and The Bank of New York Mellon (formerly known as The Bank of New York), as trustee (incorporated by reference to Form S-4 filed December 13, 2002)

4(i)

   Second Supplemental Indenture, dated October 1, 2002, between Nucor Corporation and The Bank of New York Mellon (formerly known as The Bank of New York), as trustee (incorporated by reference to Form S-4 filed December 13, 2002)

4(ii)

   Third Supplemental Indenture, dated December 3, 2007, between Nucor Corporation and The Bank of New York Mellon (formerly known as The Bank of New York), as trustee (incorporated by reference to Form 8-K filed December 4, 2007)

4(iii)

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

 

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4(iv)

   Fifth Supplemental Indenture, dated September 21, 2010, between Nucor Corporation and The Bank of New York Mellon (formerly known as The Bank of New York), as trustee (incorporated by reference to Form 8-K filed September 21, 2010)

4(v)

   Sixth Supplemental Indenture, dated July 29, 2013, between Nucor Corporation and The Bank of New York Mellon, as trustee (incorporated by reference to Form 8-K filed July 29, 2013)

4(vi)

   Form of 5.75% Notes due December 2017 (included in Exhibit 4(ii) above) (incorporated by reference to Form 8-K filed December 4, 2007)

4(vii)

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

4(viii)

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

4(ix)

   Form of 4.125% Notes due September 2022 (included in Exhibit 4(iv) above) (incorporated by reference to Form 8-K filed September 21, 2010)

4(x)

   Form of 4.000% Notes due August 2023 (included in Exhibit 4(v) above) (incorporated by reference to Form 8-K filed September July 29, 2013)

4(xi)

   Form of 5.200% Notes due August 2043 (included in Exhibit 4(v) above) (incorporated by reference to Form 8-K filed July 29, 2013)

10

   2005 Stock Option and Award Plan (incorporated by reference to Form 8-K filed May 17, 2005) (#)

10(i)

   2005 Stock Option and Award Plan, Amendment No. 1 (incorporated by reference to Form 10-Q for quarter ended September 29, 2007) (#)

10(ii)

   2010 Stock Option and Award Plan (incorporated by reference to Form 10-Q for quarter ended July 3, 2010) (#)

10(iii)

   Form of Restricted Stock Unit Award Agreement—time-vested awards (incorporated by reference to Form 10-K for year ended December 31, 2005) (#)

10(iv)

   Form of Restricted Stock Unit Award Agreement—retirement-vested awards (incorporated by reference to Form 10-K for year ended December 31, 2005) (#)

10(v)

   Form of Restricted Stock Unit Award Agreement for Non-Employee Directors (incorporated by reference to Form 10-Q for quarter ended April 1, 2006) (#)

10(vi)

   Form of Award Agreement for Annual Stock Option Grants (incorporated by reference to Form 10-Q for quarter ended June 30, 2012) (#)

10(vii)*

   Retirement, Separation, Waiver and Release Agreement of Daniel R. DiMicco (#)

10(viii)

   Employment Agreement of James D. Frias (incorporated by reference to Form 10-K for year ended December 31, 2009) (#)

10(ix)

   Employment Agreement of Hamilton Lott, Jr. (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (#)

10(x)

   Amendment to Employment Agreement of Hamilton Lott, Jr. (incorporated by reference to Form 10-K for year ended December 31, 2007) (#)

10(xi)*

   Retirement, Separation, Waiver and Release Agreement of Hamilton Lott, Jr. (#)

10(xii)

   Employment Agreement of John J. Ferriola (incorporated by reference to Form 10-K for year ended December 31, 2001) (#)

 

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10(xiii)

   Amendment to Employment Agreement of John J. Ferriola (incorporated by reference to Form 10-K for year ended December 31, 2007) (#)

10(xiv)

   Employment Agreement of Ladd R. Hall (incorporated by reference to Form 10-Q for quarter ended September 29, 2007) (#)

10(xv)

   Employment Agreement of R. Joseph Stratman (incorporated by reference to Form 10-Q for quarter ended September 29, 2007) (#)

10(xvi)

   Employment Agreement of Keith B. Grass (incorporated by reference to Form 10-K for the year ended December 31, 2011) (#)

10(xvii)

   Employment Agreement of James R. Darsey (incorporated by reference to Form 10-K for year ended December 31, 2010) (#)

10(xviii)

   Employment Agreement of Raymond S. Napolitan, Jr. (incorporated by reference to Form 10-Q for quarter ended June 29, 2013) (#)

10(xix)

   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) (#)

10(xx)

   Senior Officers Annual Incentive Plan, As Amended and Restated Effective January 1, 2013 (incorporated by reference to Appendix A of our Definitive Proxy Statement on Schedule 14A filed on March 27, 2013) (#)

10(xxi)

   Senior Officers Long-Term Incentive Plan, As Amended and Restated Effective January 1, 2013 (incorporated by reference to Appendix B of our Definitive Proxy Statement on Schedule 14A filed on March 27, 2013) (#)

10(xxii)

   Underwriting Agreement dated September 16, 2010 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 September 21, 2010)

10(xxiii)

   Underwriting Agreement, dated July 24, 2013, among Nucor Corporation, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated (incorporated by reference to Form 8-K filed July 29, 2013)

10(xxiv)

   BJU Carry and Earning Agreement dated October 31, 2012, among Nucor Corporation, Nucor Energy Holdings, Inc. and Encana Oil & Gas (USA) Inc. (incorporated by reference to Form 10-K for year ended December 31, 2012) †

10(xxv)

   Consulting Services Agreement with The Corporate Development Institute, Inc. and James D. Hlavacek (incorporated by reference to Form 10-Q for quarter ended June 29, 2013)

12*

   Computation of Ratio of Earnings to Fixed Charges

13*

   2013 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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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, 2013, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Earnings, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Stockholders’ Equity, and (vi) the Notes to Consolidated Financial Statements.

 

* Filed herewith.
** Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of the SEC’s Regulation S-K.
Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with Securities and Exchange Commission.
(#) Indicates a management contract or compensatory plan or arrangement.

 

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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/ JOHN J. FERRIOLA

  John J. Ferriola
 

Chairman, President and

Chief Executive Officer

Dated: February 28, 2014

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 either 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/ JOHN J. FERRIOLA

   

/S/ PETER C. BROWNING

John J. Ferriola

Chairman, President and
Chief Executive Officer

(Principal Executive Officer)

   

Peter C. Browning

Director

/S/ JAMES D. FRIAS

   

/S/ HARVEY B. GANTT

James D. Frias

Chief Financial Officer, Treasurer and
Executive Vice President

(Principal Financial Officer)

   

Harvey B. Gantt

Director

/S/ MICHAEL D. KELLER

   

/S/ GREGORY J. HAYES

Michael D. Keller

Vice President and Corporate Controller

(Principal Accounting Officer)

   

Gregory J. Hayes

Director

   

/S/ VICTORIA F. HAYNES

   

Victoria F. Haynes

Director

   

/S/ BERNARD L. KASRIEL

   

Bernard L. Kasriel

Director

   

/S/ CHRISTOPHER J. KEARNEY

   

Christopher J. Kearney

Director

 

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/S/ RAYMOND J. MILCHOVICH

   

Raymond J. Milchovich

Lead Director

   

/S/ JOHN H. WALKER

   

John H. Walker

Director

Dated: February 28, 2014

 

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NUCOR CORPORATION

Index to Financial Statement Schedule

 

      Page  

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

     27   

Schedule II—Valuation and Qualifying Accounts—Years ended December 31, 2013, 2012 and 2011

     28   

 

26


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Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

To the Board of Directors and Stockholders of

Nucor Corporation:

Our audits of the consolidated financial statements and of the effectiveness of internal control over financial reporting referred to in our report dated February 28, 2014 appearing in the 2013 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.

/s/ PricewaterhouseCoopers LLP

Charlotte, North Carolina

February 28, 2014

 

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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, 2013
LIFO Reserve

   $ 607,240       $ 17,445       $ —        $ 624,685   

Year ended December 31, 2012
LIFO Reserve

   $ 763,176       $ —         $ (155,936   $ 607,240   

Year ended December 31, 2011
LIFO Reserve

   $ 620,414       $ 142,762       $ —        $ 763,176   

 

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NUCOR CORPORATION

List of Exhibits to Form 10-K—December 31, 2013

 

Exhibit
No.

  

Description of Exhibit

10(vii)

   Retirement, Separation, Waiver and Release Agreement of Daniel R. DiMicco

10(xi)

   Retirement, Separation, Waiver and Release Agreement of Hamilton Lott, Jr.

12

   Computation of Ratio of Earnings to Fixed Charges

13

   2013 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, 2013, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Earnings, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Stockholders’ Equity, and (vi) the Notes to Consolidated Financial Statements.

 

29

EX-10.VII

EXHIBIT 10(vii)

RETIREMENT, SEPARATION, WAIVER AND RELEASE AGREEMENT

This Retirement, Separation, Waiver and Release Agreement (“Agreement”) is entered into as of the 13th day of December, 2013, by and between Daniel R. DiMicco (“Executive”), a citizen and resident of North Carolina, and Nucor Corporation, a Delaware corporation with its principal place of business in Charlotte, North Carolina.

WHEREAS, Executive has spent thirty-one years as a Nucor (as hereinafter defined) employee, and has most recently been employed as Executive Chairman of Nucor Corporation, where he was significantly involved with and responsible for the management and direction of Nucor’s business operations;

WHEREAS, Executive has decided to retire from Nucor effective December 31, 2013 (the “Effective Date”);

WHEREAS, based upon the Severance Plan (as hereinafter defined), Executive shall be eligible to receive certain severance benefits contingent upon his execution of this Agreement and his strict compliance with the Restrictive Covenants (as hereinafter defined);

WHEREAS, pursuant to that certain Executive Employment Agreement by and between Executive and Nucor Corporation dated as of April 10, 2001, as amended by an Amendment Agreement dated as of November 5, 2007 (as amended, the “Executive 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 Executive 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-retirement benefits and to protect Nucor’s competitive advantages, confidential trade secrets and goodwill.

NOW, THEREFORE, in consideration of the reasons recited above, the post-retirement 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; Nucor Defined. The above recitals are true and correct and are incorporated herein by reference as if fully set forth herein. For purposes of this Agreement the term “Nucor” means Nucor Corporation and its direct and indirect subsidiaries and affiliates in existence or planned as of the Effective Date.

2. 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 Restrictive Covenants (as hereinafter defined). Based on Executive’s (i) November 15, 1982 date of hire, (ii) effective retirement date of December 31, 2013 and (iii) current annual base salary of $925,000, Executive


would be eligible to receive Severance Benefits under the Severance Plan totaling Two Million Three Hundred Ninety Nine Thousand Three Hundred Forty Four Dollars and Six Cents ($2,399,344.06) payable in twenty-four (24) monthly installments of Ninety Nine Thousand Nine Hundred Seventy Two Dollars and Sixty Seven Cents ($99,972.67) (the “Monthly Severance Plan Payments”). Subject to the provisions of Paragraph 2(c) of this Agreement, the payments of the Monthly Severance Plan Payments shall be made each month following the Effective Date. In the event Executive dies during the first twenty-four (24) months following the Effective Date, and provided that Executive was not in breach of his obligations under this Agreement or the Restrictive Covenants 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 Restrictive Covenants, Nucor will pay Executive Two Hundred Fifty Nine Thousand Dollars ($259,000.00) 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 2(c) of this Agreement, the payments of the Monthly Non-Compete Payments 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 (12) 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 2(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 2(a) and 2(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.

3. Executive Agreement Covenants. Executive and Nucor Corporation acknowledge and agree that except for Sections 1, 3, 4 and 5 of the Executive Agreement, which paragraphs shall be deemed void and of no further force or effect as of the Effective Date, all of the other provisions of the Executive Agreement (collectively, the “Surviving Provisions”), including without limitation Sections 10, 11 and 13 thereof (collectively, the “Restrictive Covenants”), shall survive and continue in full force and effect after the Effective Date in accordance with their respective terms.

4. Release; Covenant Not to Sue.

(a) Executive agrees that, in consideration for the Monthly Separation Payments, 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, against any and all Nucor Releasees that are attributable to or arose during all periods of time occurring on or prior to the Effective Date, including, but not limited to, any claims arising under or pursuant to any employment agreements, including the Employment Agreement (as hereinafter defined); claims for bonuses, severance pay, employee or fringe benefits; 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.; (vi) any claim under the Fair Labor Standard Act of 1939 as amended, 29 U.S.C.§ 201 et seq.; or (vii) any claim under the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 701 et seq.; and any other claims related to or arising out of his employment relationship with Nucor or the termination thereof whether based on contract, quasi-contract, quantum merit implied contract, tort, wrongful or constructive discharge or any other employment related claim (collectively, the “Released Claims”). Notwithstanding the foregoing, the Released Claims do not include any claims that 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.

(b) Except to the extent contemplated by Paragraph 4(d) of this Agreement, Executive covenants not to sue or bring a claim against any of the Nucor Releasees with respect to any Released Claim in any forum for any reason. If Executive sues any Nucor Releasee in violation of the foregoing covenant not to sue, Executive agrees that Executive shall pay all reasonable fees, costs and expenses incurred by the Nucor Releasees in defending against any such suit or claim, including reasonable attorneys’ fees.

(c) Executive understands that Executive may later discover claims or facts that may be different than, or in addition to, those that Executive now knows or believes to exist regarding the subject matter of the Released Claims, and which, if known at the time of signing this Agreement, may have materially affected this Agreement and the Executive’s decision to enter into this Agreement and grant the release and covenant not to sue contained herein. Nevertheless, Executive, for himself, his heirs, executors, administrators, and assigns, intends to fully, finally


and forever settle and release all Released Claims that now exist, may exist or previously existed, as set forth herein, whether known or unknown, foreseen or unforeseen, matured or unmatured, suspected or unsuspected, existing or claimed to exist, fixed or contingent, both at law and in equity, and the release given herein is and will remain in effect as a complete release, notwithstanding the discovery or existence of such additional or different facts.

(d) Nothing in this Paragraph 4 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.

5. Remedies. Executive agrees that in the event of a breach or threatened breach by Executive of any provision of this Agreement or any of the Restrictive Covenants, 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 by any of the Restrictive Covenants or fails to comply with the provisions of Paragraph 4(b), 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 any of the Restrictive Covenants hereof by temporary, preliminary and permanent injunction to restrain any violation or threatened violation by Executive of any provisions of the Restrictive Covenants. Executive further agrees to reimburse Nucor its costs (including, without limitation, attorney’s fees) incurred to enforce any of the Restrictive Covenants.

6. Cooperation With Legal Matters: Executive agrees that after the Effective Date, 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.

7. 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.

8. Choice of Law and Venue. This Agreement is made in, and its validity, interpretation, performance and enforcement shall be construed and governed in accordance with, the laws of, the State of North Carolina, the location of Nucor Corporation’s corporate headquarters where Executive was employed 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 or the federal district court for the Western District of North Carolina, Charlotte Division, 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.

9. 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 (or any other method available to and endorsed by such court) 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.

10. Entire Agreement. This Agreement, together with the Surviving Provisions of the Executive Agreement, collectively contain the entire agreement of the parties and supersede all prior agreements and understandings, oral or written, between the parties hereto with respect to the subject matter hereof. This Agreement may be modified or amended only by an instrument in writing signed by Executive and Nucor Corporation. 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. This Agreement may be executed in counterparts and by facsimile or .pdf signature, all of which together shall be considered one and the same original document.

11. No Violation of Public Policy. Executive has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon Nucor under the Restrictive Covenants and Paragraph 5 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.

12. Compliance with Older Workers Benefit Protection Act: Before executing this Agreement, Executive is advised to consult with an attorney of his choice, at his expense. By signing this Agreement, Executive specifically acknowledges and represents that:

(a) Executive has been given a period of twenty-one (21) 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 would otherwise be entitled to receive as an employee of Nucor.

The parties acknowledge and agree that 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 Financial Officer of Nucor, by fax or email 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.


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

 

Executive:     LOGO
    Daniel R. DiMicco
Nucor Corporation:     LOGO
    By:   A. Rae Eagle
    Its:   Secretary


EXHIBIT A

See Attached Executive Agreement


EXECUTIVE EMPLOYMENT AGREEMENT

THIS AGREEMENT is made and entered into between Nucor Corporation, a Delaware corporation, on behalf of itself and its affiliates (collectively “Nucor”), and Daniel R. DiMicco, a resident of Waxhaw, North Carolina (the “Employee”).

WHEREAS, Employee has been employed as an “at-will” employee of Nucor, and the parties wish to formalize their employment relationship in writing and for Nucor to continue Employee’s employment under the terms and conditions set forth below;

WHEREAS, Employee and Nucor previously entered into an “Agreement Not to Compete” dated as of September 19, 1999;

WHEREAS, Employee and Nucor now wish to substitute this Employment Agreement for the previous “Agreement Not to Compete”;

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

1. Employment. Nucor agrees to continue to employ Employee in the position of President and Chief Executive Officer, and Employee agrees to accept continued employment in this position, subject to the terms and conditions set forth in this Agreement.

2. Signing Payment. Nucor will pay Employee a one-time $10,000 amount for executing this Agreement. This $10,000 will become due and payable to Employee upon Employee’s execution of this Agreement.

3. Compensation and Benefits During Employment. Nucor will provide the following compensation and benefits to Employee:

(a.) Nucor will pay Employee a base salary of $412,500 per year, paid on a monthly basis, subject to withholding by Nucor and other deductions as required by law. This amount is subject to adjustment up or down by Nucor’s Board of Directors at its sole discretion and without notice to Employee.

(b.) Employee will be eligible for bonuses based on the Senior Officer Incentive Compensation Plans, as modified from time to time by, and in the sole discretion of, the Board of Directors of Nucor.

(c.) Employee will be eligible for those employee benefits that are generally made available by Nucor to its employees.

(d.) Employee shall be eligible to participate in the Key Employees Incentive Stock Option Plan (the “Option Plan”) in accordance with the applicable terms and conditions of the Option Plan and a Key Employee Stock Option Certificate issued to Employee.

 

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4. Compensation Following Termination.

(a.) From the date of Employee’s termination, whether by Employee or Nucor for any or no reason, Nucor will pay Employee a monthly amount for twenty-four (24) months following Employee’s termination. The monthly amount will be computed using the following formula: the amount of Employee’s highest base salary level during the prior twelve months multiplied by 3.36 and the product divided by twelve. The payments shall be made at the end of each month following Employee’s termination on Nucor’s regular monthly payroll date.

(b.) In exchange for Nucor’s promises in this Section 4 and other good and valuable consideration, Employee agrees to strictly abide by the terms of Sections 10, 11, and 13 of this Agreement. If Employee fails to strictly abide by the terms of Sections 10, 11, and 13 of this Agreement, Nucor may, at its option, do any or all of the following: (i) pursue any legal remedies available to it (including but not limited to injunctive relief, damages, and specific performance), and (ii) declare the monthly payment forfeited with respect to any month during which Employee is in breach of this Agreement. Nucor may declare the monthly payment forfeited if Employee is in breach of this Agreement for any portion of the month at issue, and Employee will not be entitled to a payment for that month.

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

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

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

7. Change in Employee’s Position. In the event that Nucor transfers, demotes, promotes, or otherwise changes Employee’s compensation or position with Nucor, the restrictions and post-termination obligations of this Agreement shall remain in full force and effect on both parties.

 

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8. Recognition of Nucor’s Legitimate Interests. Employee understands and acknowledges that Nucor and its affiliates compete in North America in the research, manufacture, marketing, sale and distribution of steel and steel products, including but not limited to flat-rolled steel, steel shapes, structural steel, steel plate, steel joists and girders, steel deck, steel fasteners, and metal building systems. As part of Employee’s employment with Nucor, Employee will be provided significant Confidential Information by Nucor (as defined below). In addition, Employee will have direct contact with Nucor’s customers, in which capacity he is expected to develop good relationships with such customers. Employee acknowledges that Nucor’s competitors would obtain an unfair advantage if Employee disclosed the Confidential Information to a competitor, used it in a competitor’s behalf, or if he were able to exploit the relationships he developed as an employee of Nucor to solicit business on behalf of a competitor.

9. Definition of Confidential Information. As used in this Agreement, Confidential Information shall include, without limitation, 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 the business.

10. Agreement to Maintain Confidentiality.

(a.) Except as otherwise provided in this Agreement, during Employee’s employment with Nucor and at all times after the termination of Employee’s employment, Employee 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 the Employee or received, compiled, developed, designed, produced, accessed, or otherwise discovered by the Employee from time to time while employed by Nucor. Employee will not disclose or divulge the Confidential Information to any person, entity, firm or company whatsoever or use the Confidential Information for Employee’s own benefit or for the benefit of any person, entity, firm or company other than Nucor.

(b.) Employee specifically acknowledges that the Confidential Information, whether reduced to writing or maintained in the mind or memory of Employee, and whether compiled or created by Employee, Nucor, or any of its affiliates 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. Employee 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 affiliates or customers, as the case may be, and that any retention and/or use of Confidential Information during or after the termination of Employee’s

 

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employment with Nucor (except in the regular course of performing his duties hereunder) will constitute a misappropriation of the Confidential Information belonging to Nucor.

(c.) Employee’s obligations under this Section 10 will survive termination of his employment and will continue indefinitely. For purposes of this Section, information shall not be deemed to be “Confidential Information” to the extent that the information (i) is in the public domain, or hereafter becomes generally known or available through no action or omission on the part of Employee; (ii) is furnished to any person by Nucor without restriction on disclosure; (iii) becomes known to the Employee from a source other than Nucor, without a breach of any agreement with Nucor and without any restriction on disclosure; (iv) is required to be disclosed by judicial action, provided, however, that prompt notice of said judicial action shall have been given to Nucor and that efforts to avoid disclosure shall have been exhausted; or (v) is disclosed after written approval for the disclosure has been given by Nucor.

11. Noncompetition.

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

(1) Engage directly or indirectly (either as an owner, employee, consultant, or in any similar capacity) in the research, development, manufacture, marketing, sale, or distribution of steel or steel products which are the same as or similar to those in development, manufactured, and/or sold by Nucor on the date of Employee’s termination.

(2) Solicit or encourage any customers of Nucor (a) with whom Employee had direct contact during the last twelve (12) months of Employee’s employment with Nucor, and (b) who remain Nucor customers at the time of solicitation, to purchase steel or steel products from any entity other than Nucor.

(3) Encourage, induce, or attempt to induce any employees of Nucor (a) with whom Employee had direct contact during the last twelve (12) months of Employee’s employment with Nucor, and (b) who remain employed by Nucor at the time of the attempted inducement, to end their employment relationship with Nucor.

(b.) As used in this provision, “Restricted Territory” shall mean the following:

(1) The United States, Canada, and Mexico.

(2) If the definition in subparagraph (b)(1) is found to be unreasonable with respect to subparagraph (a)(1), (a)(2), or (a)(3) of this Section 11, then with regard to such subparagraph, the term “Restricted Territory” shall mean the United States.

(3) If the definitions in subparagraphs (b)(1) and (b)(2) are found to be unreasonable with respect to subparagraph (a)(1), (a)(2), or (a)(3) of this Section 11, then with regard to such subparagraph, the term “Restricted Territory” shall mean each state in

 

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the United States in which Nucor has a manufacturing facility or plant on the date of the termination of Employee’s employment with Nucor (at the time of entry into this Agreement, these states include North Carolina, South Carolina, Texas, Alabama, Arkansas, Nebraska, Utah, Indiana, and New York).

(c.) Employee specifically agrees that the post-termination restrictions in this Section 11 will apply to Employee regardless of whether termination of employment is initiated by Nucor or Employee and regardless of the reason for termination of Employee’s employment. Further, Employee acknowledges and agrees that Nucor’s payment of the compensation described in Section 4 is intended to compensate Employee for the limitations on Employee’s competitive activities described in this Section 11 for the two-year period following Employee’s employment with Nucor regardless of the reason for termination. Thus, for example, in the event that Nucor terminates Employee’s employment without cause, Employee expressly agrees that the restrictions in this Section 11 will apply to Employee notwithstanding the reasons or motivations of Nucor in terminating Employee’s employment.

12. Severability. It is the intention of the parties to restrict the activities of Employee 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.

13. Assignment of Intellectual Property Rights.

(a.) Employee hereby assigns to Nucor Employee’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 during Employee’s employment by Nucor solely or jointly by Employee, or created wholly or in part by Employee, whether or not such Developments are patentable, copyrightable or susceptible to other forms of protection, where the Developments: (i) relate to Nucor’s actual or anticipated business or research or development, or (ii) are suggested by or result from any work performed by Employee on Nucor’s behalf.

(b.) In connection with any of the Developments assigned in subparagraph (a) above: (i) Employee will promptly disclose them to Nucor’s management; and (ii) Employee 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.

14. Enforcement. In addition to any other remedies available to Nucor, the provisions of this Agreement may be enforced by injunction to (a) restrain any violation by Employee, Employee’s partners, agents, servants, employers, and employees, and all persons acting for or with Employee, and (b) to compel specific performance of the terms and conditions of this

 

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Agreement. Employee represents and acknowledges that in the event of the termination of Employee’s employment for any reason, Employee’s experience and capabilities are such that Employee can obtain employment and that enforcement of this Agreement by way of injunction will not prevent Employee from earning a livelihood.

15. Reasonableness of Restrictions. Employee has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon Nucor under Sections 4, 10, 11, 13, and 14 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 Employee’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 the Employee. Employee 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.

16. 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. Further, Nucor and Employee agree that in any dispute between them jurisdiction and venue are appropriate in Mecklenburg County, North Carolina.

17. Employee to Return Property. Employee agrees that upon (a) the termination of Employee’s employment with Nucor, whether by Employee or Nucor for any reason (with or without cause), or (b) the written request of Nucor, Employee (or in the event of the death or disability of Employee, Employee’s heirs, successors, assigns and legal representatives) shall return to Nucor any and all property of Nucor, including but not limited to all Confidential Information, notes, data, tapes, computers, lists, reference items, phones, documents, sketches, drawings, software, product samples, rolodex cards, forms, manuals, and equipment, without retaining any copies or summaries of such property.

18. Entire Agreement: Amendments. This Agreement discharges and cancels all previous agreements 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.

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

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

21. 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

 

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partial exercise of a right preclude any further or later enforcement of the right within the period of the applicable statute of limitations.

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

 

DANIEL R. DIMICCO
LOGO
Daniel R. DiMicco
Date:  

APR 10 2001

NUCOR CORPORATION
By:   LOGO
Its:  

EXECUTIVE VICE PRESIDENT

Date:  

APR 10 2001

 

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AMENDMENT AGREEMENT

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

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

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

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

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

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

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

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

 

LOGO
Date:  

11-8-07

NUCOR CORPORATION
By:   LOGO
Its:  

Chief Financial Officer, Treasurer and EVP

Date:  

11/21/07

EX-10.XI

EXHIBIT 10(xi)

RETIREMENT, SEPARATION, WAIVER AND RELEASE AGREEMENT

This Retirement, Separation, Waiver and Release Agreement (“Agreement”) is entered into as of the 14th day of May, 2013, by and between Hamilton Lott, Jr. (“Executive”) and Nucor Corporation.

WHEREAS, Executive has spent thirty seven (37) years as a Nucor (as defined below) employee, and has most recently been employed as Nucor Corporation’s Executive Vice President of Fabricated Construction Products;

WHEREAS, Executive has decided to retire from Nucor effective June 3, 2013 (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, 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, fabrication, placement and/or distribution of steel or steel products (including but not limited to flat-rolled steel, special quality and merchant quality steel bar and shapes, concrete reinforcement bars, structural steel, light gauge steel framing, steel plate, steel joists and girders, steel deck, steel fasteners, steel trusses, metal building systems, wire rod, welded-wire reinforcement rolls and sheets, cold finished steel bars and wire, steel grating, 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 as of the Effective Date, 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 or immediately prior to 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 or immediately prior to 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 or immediately prior to 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.

(h) The term “Restricted Territory” means Executive’s geographic area of responsibility at Nucor which Executive acknowledges extends to the full scope of Nucor

 

2


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 located within a three hundred (300) mile radius of a Nucor plant or facility that engages in the business of the (A) production, manufacture, fabrication, distribution or sale of steel joists, girders or decking, metal building systems, steel trusses or (B) the fabrication of rebar or the distribution or sale of fabricated rebar or related products, but if such territory is deemed overbroad by a court of law, then;

(v) 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 Effective Date 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 (i) December 1, 1975 date of hire, (ii) effective retirement date of June 3, 2013 and (iii) current annual base salary of Four Hundred Forty Eight Thousand Three Hundred and Fifty Dollars ($448,350.00), Executive would be eligible to receive Severance Benefits under the Severance Plan totaling One Million Four Hundred One Thousand Three Hundred and Eleven Dollars and Twelve Cents ($1,401,311.12) payable in twenty-four (24) monthly installments of

 

3


Fifty Eight Thousand Three Hundred and Eighty Seven Dollars and Ninety Six Cents ($58,387.96) (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 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 Five Thousand Five Hundred and Thirty Eight Dollars ($125,538.00) 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


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 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, joint venture and strategic partners, and potential acquisition targets, 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 will 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 business that engages in a 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 that for the duration of the Severance Period, Executive will not, directly or indirectly, within the Restricted Territory:

(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.

 

5


For avoidance of doubt, Nucor and Executive agree that Executive’s contemplated association with the University of South Carolina as an adjunct professor does not violate any of the provisions of this Section 5.

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 or immediately prior to 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.

(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 or Secret Information of Nucor that Executive learned of or otherwise acquired during his employment with Nucor. The provisions of this Paragraph 8 shall survive indefinitely.

9. Return of Property. Executive agrees that he shall return to Nucor any and all property of Nucor, including all Confidential Information or Secret Information of Nucor, regardless of medium or format, no later than three (3) days following his last day of employment, and Executive shall not retain any copies or summaries of any such information. Notwithstanding the foregoing, Executive may retain such property of Nucor as is specifically agreed to in writing by Nucor’s Chief Executive Officer.

10. Release. Executive agrees that, in consideration for the opportunity to receive Monthly Separation Payments hereunder, 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, against any and all Nucor Releasees, 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.

 

6


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.

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 or 9. Executive further agrees to reimburse Nucor its costs (including, without limitation reasonable attorneys’ fees) incurred by Nucor to enforce Paragraphs 5, 6, 7, 8 or 9.

12. Cooperation With Legal Matters: Executive agrees that after the Effective Date, 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 with Nucor 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 or the federal district court for the Western District of North Carolina, Charlotte Division, 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 such 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 (or any other method available to and endorsed by such court) 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.

 

7


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 and as of the Effective Date, 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.

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.

 

8


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

 

Executive:    

/s/ Hamilton Lott, Jr.

    Hamilton Lott, Jr.
Nucor Corporation:    

/s/ A. Rae Eagle

    By:   A. Rae Eagle
    Its:   Secretary
EX-12

Exhibit 12

Nucor Corporation

2013 Form 10-K

Computation of Ratio of Earnings to Fixed Charges

 

     Year-ended December 31,  
     2009     2010     2011     2012     2013  
     (In thousands, except ratios)  

Earnings

          

Earnings/(loss) before income taxes and noncontrolling interests

   $ (413,978   $ 267,115      $ 1,251,812      $ 852,940      $ 791,123   

Plus: (earnings)/losses from equity investments

     82,341        32,082        10,043        13,323        (9,297

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

     168,317        163,626        183,541        179,169        164,128   

Plus: amortization of capitalized interest

     962        2,332        2,724        2,550        3,064   

Plus: distributed income of equity investees

     7,373        4,923        3,883        9,946        8,708   

Less: interest capitalized

     (16,390     (940     (3,509     (4,715     (10,913

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

     (57,865     (73,110     (83,591     (88,507     (97,504
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total earnings/(loss) before fixed charges

   $ (229,240   $ 396,028      $ 1,364,903      $ 964,706      $ 849,309   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed charges

          

Interest cost and amortization of bond issuance and settled swaps

   $ 166,313      $ 162,213      $ 182,321      $ 178,218      $ 162,899   

Estimated interest on rent expense

     2,004        1,413        1,220        951        1,229   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed charges

   $ 168,317      $ 163,626      $ 183,541      $ 179,169      $ 164,128   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratio of earnings to fixed charges

     *        2.42        7.44        5.38        5.17   

 

* Earnings for the year ended December 31, 2009 were inadequate to cover fixed charges. The coverage deficiency was $397,557.
EX-13

Exhibit 13

 

  

 

    FINANCIAL HIGHLIGHTS      

 

    

 

       3       

 

 

FINANCIAL HIGHLIGHTS     

 

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

 

     

 

2013

 

    

 

2012

 

    

 

% CHANGE

 

   

  FOR THE YEAR

          

 

  Net sales

     $19,052,046         $19,429,273       -2%  

 

  Earnings:

          

 

  Earnings before income taxes and noncontrolling interests

     791,123         852,940       -7%  

 

  Provision for income taxes

            205,594                259,814       -21%  

 

  Net earnings

     585,529         593,126       -1%  

 

  Earnings attributable to noncontrolling interests

              97,504                  88,507       10%  

 

  Net earnings attributable to Nucor stockholders

     488,025         504,619       -3%  

 

  Per share:

          

 

  Basic

     1.52         1.58       -4%  

 

  Diluted

     1.52         1.58       -4%  

 

  Dividends declared per share

     1.4725         1.4625       1%  

 

  Percentage of net earnings to net sales

     2.6%         2.6%      

 

  Return on average stockholders’ equity

     6.4%         6.7%      

 

  Capital expenditures

     1,230,418         1,019,334       21%  

 

  Depreciation

     535,852         534,010       —  

 

  Acquisitions (net of cash acquired)

             760,833       not meaningful  

 

  Sales per employee

 

    

 

859

 

  

 

    

 

906

 

  

 

  

-5%  

 

  AT YEAR END

          

 

  Working capital

     $  4,449,830         $  3,631,796       23%  

 

  Property, plant and equipment, net

     4,917,024         4,283,056       15%  

 

  Long-term debt (including current maturities)

     4,380,200         3,630,200       21%  

 

  Total Nucor stockholders’ equity

     7,645,769         7,641,571       —  

 

  Per share

     24.02         24.06       —  

 

  Shares outstanding

     318,328         317,663       —  

 

  Employees

 

    

 

22,300

 

  

 

    

 

22,200

 

  

 

  

—  

 

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,” “could” and similar expressions are intended to identify those forward-looking statements. These forward-looking statements reflect the Company’s best judgment based on current information, and although we base these statements on circumstances that we believe to be reasonable when made, there can be no assurance that future events will not affect the accuracy of such forward-looking information. As such, the forward-looking statements are not guarantees of future performance, and actual results may vary materially from the projected results and expectations discussed in this report. Factors that might cause the Company’s actual results to differ materially from those anticipated in forward-looking statements include, but are not limited to: (1) the sensitivity of the results of our operations to prevailing steel prices and changes in the supply and cost of raw materials, including pig iron, iron ore and scrap steel; (2) availability and cost of electricity and natural gas which could negatively affect our cost of steel production or could result in a delay or cancelation of existing or future drilling within our natural gas working interest drilling programs; (3) critical equipment failures and business interruptions; (4) market demand for steel products, which, in the case of many of our products, is driven by the level of nonresidential construction activity in the U.S.; (5) competitive pressure on sales and pricing, including pressure from imports and substitute materials; (6) impairment in the recorded value of inventory, equity investments, fixed assets, goodwill or other long-lived assets; (7) uncertainties surrounding the global economy, including the severe economic downturn in construction markets and excess world capacity for steel production; (8) fluctuations in currency conversion rates; (9) U.S. and foreign trade policies affecting steel imports or exports; (10) significant changes in laws or government regulations affecting environmental compliance, including legislation and regulations that result in greater regulation of greenhouse gas emissions that could increase our energy costs and our capital expenditures and operating costs or cause one or more of our permits to be revoked or make it more difficult to obtain permit modifications; (11) the cyclical nature of the steel industry; (12) capital investments and their impact on our performance; and (13) our safety performance.


 

      22      

 

     

 

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

    OPERATIONS

 

     
     

 

 

OVERVIEW

MACROECONOMIC CONDITIONS

After five years of recession, the worst the United States has experienced in decades, we still do not see any real and sustained signs of a full recovery. Our nation’s unemployment rate remains high due to the loss of millions of jobs during the recession, the slow pace of the recovery and the uncertainty surrounding domestic fiscal policies. In the face of these economic headwinds, the pace and degree of recovery has been weak and uneven at best, and it has been experienced in fits and starts. While there has been some recent traction gained in single-family housing starts, nonresidential construction (the sector to which we are most closely tied) has continued to languish. Even though there has been some recent improvement in the U.S. Labor Department’s U-6 unemployment figures, which include not only unemployed workers but also discouraged workers and those who are working part-time but would like to work full-time, those rates remain historically high and employment is not expected to regain the peak reached during the most recent economic cycle for several more years. Until a stronger job recovery takes hold, consumer confidence and spending will be inconsistent, indirectly diminishing demand for our products. Macro-level uncertainties in world markets will almost certainly continue to weigh on global and domestic growth in 2014. We believe our net sales and financial results will be stronger in 2014 than in 2013, but they will continue to be adversely affected by these general economic factors as well as by the conditions specific to the steel industry that are described below.

CONDITIONS IN THE STEEL INDUSTRY

The steel industry has always been cyclical in nature, but North American producers of steel and steel products have been facing and are continuing to face some of the most challenging market conditions they have experienced in decades. The average capacity utilization rate of U.S. steel mills was at a historically unprecedented low of 52% in 2009. Since then, the average capacity utilization rate increased to approximately 76% in 2013 and 75% in 2012. These rates, though improved, still compare unfavorably to capacity utilization rates of 81% and 87% in 2008 and 2007, respectively. As domestic demand for steel and steel products is expected to improve only slightly in 2014, it is unlikely that average capacity utilization rates will increase significantly. The average utilization rates of all operating facilities in our steel mills, steel products and raw materials segments were approximately 74%, 58% and 62%, respectively, in 2013, compared with 74%, 60% and 63% respectively, in 2012.

The steel industry has also historically been characterized by global overcapacity and intense competition for sales among producers. This aspect of the industry remains true today despite the bankruptcies of numerous domestic steel companies and ongoing global steel industry consolidation. The recent addition of new production capacity in the United States, as well as the very rapid and extraordinary increase in China’s total production of steel in the last decade, has exacerbated this overcapacity issue domestically as well as globally.

Foreign imports of steel continued to significantly affect our domestic markets. Imported steel and steel products continue to present unique challenges for us because foreign producers often benefit from government subsidies, either directly through government-owned enterprises or indirectly through government-owned or controlled financial institutions. Foreign imports of finished and semi-finished steel accounted for approximately 30% of the U.S. steel market in 2013 despite significant unused domestic capacity. Rebar and hot-rolled bar were impacted especially hard by imports in 2013 as imports of these products increased by 23% and 15%, respectively, over 2012 levels. Increased imports of bar have translated into even lower domestic utilization rates for that product – utilization in the mid-60% range – and significant decreases in domestic bar pricing in 2013. Competition from China, the world’s largest producer and exporter of steel, which produces more than 45% of the steel produced globally, is a major challenge in particular. We believe that Chinese producers, many of which are government-owned in whole or in part, benefit from their government’s manipulation of foreign currency exchange rates and from the receipt of government subsidies, which allow them to sell steel into our markets at artificially low prices.

China is not only selling steel at artificially low prices into our domestic market but also across the globe. When they do so, steel products which would otherwise have been consumed by the local steel customers in other countries are displaced into global markets, which compounds the issue. In a more indirect manner, but still significant, is the import of fabricated steel products, such as oil country tubular goods, wind towers and other construction components that were produced in China.

OUR CHALLENGES AND RISKS

Sales of many of our products are dependent upon capital spending in the nonresidential construction markets in the United States, including in the industrial and commercial sectors, as well as capital spending on infrastructure that is publicly funded such as bridges, schools, prisons and hospitals. Unlike recoveries from past recessions, the recovery from the recession of 2008-2009 has not included a strong recovery in the severely depressed nonresidential construction market. In fact, while capital spending on nonresidential construction projects is slowly improving, it continues to lack sustained momentum, which is posing a significant challenge to our business. We do not expect to see strong growth in our net sales until we see a sustained increase in capital spending on these types of construction projects.


 

    23    

 

 

Artificially cheap exports by some of our major foreign competitors to the United States and elsewhere reduce our net sales and adversely impact our financial results. Aggressive enforcement of trade rules by the World Trade Organization to limit unfairly traded imports remains uncertain, although it is critical to our ability to remain competitive. We have been encouraged by recent actions the United States International Trade Commission has taken on existing antidumping and countervailing duty orders on hot-rolled sheet steel as well as on imports of rebar that threaten domestic rebar producers. We continue to believe that assertive enforcement of world trade rules must be one of the highest priorities of the United States government.

A major uncertainty we continue to face in our business is the price of our principal raw material, ferrous scrap, which is volatile and often increases rapidly in response to changes in domestic demand, unanticipated events that decrease the flow of scrap into scrap yards and increased foreign demand for scrap. In periods of rapidly increasing raw material prices in the industry, which is often also associated with periods of strong or rapidly improving steel market conditions, being able to increase our prices for the products we sell quickly enough to offset increases in the prices we pay for ferrous scrap is challenging but critical to maintaining our profitability. We attempt to manage this risk via a raw material surcharge mechanism, which our customers understand is a necessary response by us to the market forces of supply and demand for our raw materials. The surcharge mechanism functions to offset changes in prices of our raw materials and is based upon widely available market indices for prices of scrap and other raw materials. We monitor changes in those indices closely and make adjustments as needed, generally on a monthly basis, to our surcharges and sometimes directly to the selling prices for our products. The surcharges are determined from a base scrap price and can differ by product. To further help mitigate the scrap price risk, we also aim to manage scrap inventory levels at the steel mills to match the anticipated demand over a period of the next several weeks for various steel products. Certain scrap substitutes, including pig iron, have longer lead times for delivery than scrap.

During periods of stronger or improving steel market conditions, the surcharge is generally an effective mechanism that facilitates Nucor’s ability to pass through, relatively quickly, the increased costs of ferrous scrap and scrap substitutes and to protect our gross margins from significant erosion. During weaker or rapidly deteriorating steel market conditions, including the steel market environment of the past several years, weak steel demand, low industry utilization rates and the impact of imports create an even more intensified competitive environment. All of those factors, to some degree, impact base pricing, which increases the likelihood that Nucor will experience lower gross margins. During these periods, the surcharge mechanism is less effective at protecting our gross margins; however, there are typically less frequent and smaller raw material cost increases.

Although 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 to both domestic and global producers and trading companies, we also sell contract tons, primarily in our sheet operations. Approximately 65% of our sheet sales was to contract customers in 2013 (65% in 2012), with the balance in the spot market at the prevailing prices at the time of sale. Steel contract sales outside of our sheet operations are not significant. The amount of tons sold to contract customers depends on the overall market conditions at the time, how the end-use customers see the market moving forward and the strategy that Nucor management believes is appropriate to the upcoming period. Nucor management considerations include maintaining an appropriate balance of spot and contract tons based on market projections and appropriately supporting our diversified customer base. The percentage of tons that is placed under contract also depends on the overall market dynamics and customer negotiations. In years of strengthening demand, we typically see an increase in the percentage of sheet sales sold under contract as our customers have an expectation that transaction prices will rapidly rise and available capacity will quickly be sold out. To mitigate this risk, customers prefer to enter into contracts in order to obtain committed volumes of supply from the mills. Our contracts include a method of adjusting prices on a periodic basis to reflect changes in the market pricing for steel and/ or scrap. Market indices for steel generally trend with scrap pricing changes but during periods of steel market weakness, including the market conditions of the past several years, the more intensified competitive steel market environment can cause the sales price indices to result in reduced gross margins and profitability. Furthermore, since the selling price adjustments are not immediate, there will always be a timing difference between changes in the prices we pay for raw materials and the adjustments we make to our contract selling prices. Generally, in periods of increasing scrap prices, we experience a short-term margin contraction on contract tons. Conversely, in periods of decreasing scrap prices, we typically experience a short-term margin expansion. Contract sales typically have terms ranging from six to twelve months.

Another significant uncertainty we face is the cost of energy. The availability and prices of electricity and natural gas are influenced today by many factors including changes in supply and demand, advances in drilling technology and, increasingly, by changes in public policy relating to energy production and use. Proposed regulation of greenhouse gas emissions from new and refurbished power plants could increase our cost of electricity in future years, particularly if they are adopted in a form that requires deep reductions in greenhouse gas emissions. Adopting these regulations in an onerous form could lead to foreign producers that are not affected by them gaining a competitive advantage over us. We are monitoring these regulatory developments closely and will seek to educate public policy makers during the adoption process about their potential impact on our business.


 

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Finally, due to our natural gas working interest drilling programs with Encana, a substantial or extended decline in natural gas prices could have a material adverse effect on these programs and, by extension, us. In order to mitigate this risk, we announced a joint decision with Encana in the fourth quarter of 2013 to temporarily suspend drilling new wells until there is a sustained improvement in natural gas pricing. A substantial or extended decline in the price of natural gas could result in further delays or cancellation of existing or future drilling programs or curtailment in production at some properties, all of which could have an adverse effect on our revenues, profitability and cash flows. In addition, natural gas drilling and production are subject to intense federal and state regulation as well as to public interest in environmental protection. Such regulation and interest, when coupled, could result in these drilling programs being forced to comply with certain future regulations, resulting in unknown impacts on the programs’ ability to achieve the cost and hedge benefits we expect from the programs.

OUR STRENGTHS AND OPPORTUNITIES

We are North America’s most diversified steel producer. As a result, our short-term performance is not tied to any one market. The pie chart below shows the diversity of our product mix by total tons sold to outside customers in 2013.

 

LOGO

Our highly variable cost structure, combined with our financial strength and liquidity, has allowed us to succeed during cyclical severely depressed steel industry market conditions in the past. In such times, our incentive-based pay system reduces our payroll costs, both hourly and salary, which helps to offset lower selling prices. Our pay-for-performance system, which is closely tied to our levels of production, also allows us to keep our work force intact and to continue operating our facilities when some of our competitors with greater fixed costs are forced to shut down some of their facilities. Because we use electric arc furnaces to produce our steel, we can easily vary our production levels to match short-term changes in demand, unlike our integrated competitors. We believe these strengths also give us opportunities to gain market share during such times.

EVALUATING OUR OPERATING PERFORMANCE

We report our results of operations in three segments: steel mills, steel products and raw materials. Most of the steel we produce in our mills is sold to outside customers, but a significant percentage is used internally by many of the facilities in our steel products segment.

We begin measuring our performance by comparing our net sales, both in total and by individual segment, during a reporting period with our net sales in the corresponding period in the prior year. In doing so, we focus on changes in and the reasons for such changes in the two key variables that have the greatest influence on our net sales: average sales price per ton during the period and total tons shipped to outside customers.

We also focus on both dollar and percentage changes in gross margins, which are key drivers of our profitability, and the reasons for such changes. There are many factors from period to period that can affect our gross margins. One consistent area of focus for us is changes in “metal margins,” which is the difference between the selling price of steel and the cost of scrap and scrap substitutes. Increases in the cost of scrap and scrap substitutes that are not offset by increases in the selling price of steel can quickly compress our margins and reduce our profitability.

Another factor affecting our gross margins in any given period is the application of the last-in, first-out (LIFO) method of accounting to a substantial portion of our inventory (45% of total inventories as of December 31, 2013). LIFO charges or credits for interim periods are based on management’s interim period-end estimates, after considering current and anticipated market conditions, of both inventory costs and quantities at fiscal year end. The actual year end amounts may differ significantly from these estimated interim amounts. Annual LIFO charges or credits are largely based on the relative changes in cost and quantities year over year, primarily with raw material inventory in the steel mills segment.


 

    25    

 

 

Because we are such a large user of energy, material changes in energy costs per ton can significantly affect our gross margins as well. Lower energy costs per ton increase our gross margins. Generally, our energy costs per ton are lower when the average utilization rates of all operating facilities in our steel mills segment are higher.

Changes in marketing, administrative and other expenses, particularly profit sharing costs, can have a material effect on our results of operations for a reporting period as well. Profit sharing costs vary significantly from period to period as they are based upon changes in our pre-tax earnings and are a reflection of our pay-for-performance system that is closely tied to our levels of production.

EVALUATING OUR FINANCIAL CONDITION

We evaluate our financial condition each reporting period by focusing primarily on the amounts of and reasons for changes in cash provided by operating activities, our current ratio, the turnover rate of our accounts receivable and inventories, the amount and reasons for changes in cash used in investing activities, the amounts and reasons for changes in cash provided by or used in financing activities and our cash and cash equivalents and short-term investments position at period end. Our conservative financial practices have served us well in the past and are serving us well today. As a result, our financial position remains strong despite the negative effects on our business of the continued weakness in the domestic and global economies.

 

 

COMPARISON OF 2013 TO 2012

RESULTS OF OPERATIONS

NET SALES

Net sales to external customers by segment for 2013 and 2012 were as follows:

 

                         (in thousands)
  Year Ended December 31,      2013        2012        % Change  
   

  Steel mills

     $ 13,311,948         $ 13,781,797         -3%  

  Steel products

       3,607,333           3,738,381         -4%  

  Raw materials

       2,132,765           1,909,095         12%  
    

 

 

      

 

 

      

  Total net sales to external customers

     $ 19,052,046         $ 19,429,273         -2%  
                              

Net sales for 2013 decreased 2% from the prior year. The average sales price per ton decreased 5% from $841 in 2012 to $803 in 2013, while total tons shipped to outside customers increased 3% in 2013 as compared to 2012.

Net sales in the fourth quarter of 2013 increased 10% compared with the fourth quarter of 2012 due to a 10% increase in tons shipped to outside customers. The average sales price per ton was $813 in the fourth quarters of 2013 and 2012.

 

LOGO


 

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

 

                                 (in thousands)
  Year Ended December 31,      2013        2012        % Change  

 

  Steel production

         19,900             19,865         —  

 

  Outside steel shipments

         17,733             17,473         1%  

  Inside steel shipments

           2,917               2,769         5%  

  Total steel shipments

         20,650             20,242         2%  
                                      

Net sales to external customers in the steel mills segment decreased 3% due to a 5% decrease in the average sales price per ton from $792 in 2012 to $751 in 2013, partially offset by a 1% increase in tons sold to outside customers.

The average selling prices for our sheet, bar and plate products decreased in 2013 as compared to 2012 due to pressure from imports and excess domestic capacity. Though average selling prices for our sheet products were lower in 2013 than 2012, average selling prices for sheet products increased during the last half of 2013 due to pricing increases that began late in the second quarter that were supported by competitor supply disruptions and slightly improved demand. Average selling prices for our structural products group increased in 2013 as compared to 2012 because Skyline’s distribution business is included for the entire year in 2013. Skyline was only included in 2012 after its June 20, 2012 acquisition date. Skyline has higher average sales prices for its products because of the value-added functions it provides to its customers. Demand in nonresidential construction markets is slowly improving but continues to lack sustained momentum. The strongest end markets in 2013 continue to be in manufactured goods, including energy and automotive, much like they were in 2012.

Tonnage data for the steel products segment is as follows:

 

                         (in thousands)
  Year Ended December 31,      2013        2012        % Change  

 

  Joist production

       342           291         18%  

  Deck sales

       334           308         8%  

  Cold finished sales

       474           492         -4%  

  Fabricated concrete reinforcing steel sales

 

      

 

1,065

 

  

 

      

 

1,180

 

  

 

    

-10%  

 

Net sales to external customers in the steel products segment decreased 4% from 2012 due to a 3% decrease in tons sold to outside customers and a 1% decrease in the average sales price per ton from $1,393 to $1,375. The 10% decrease in volume of our rebar fabricated products in 2013 as compared to 2012 was partially offset by a 3% increase in the average sales price per ton. Selling prices of our joist and deck products decreased in 2013 as compared to 2012, but these decreases were more than offset by increased sales volumes due to moderately improved demand in nonresidential construction. Pricing and volumes of cold finished bar products decreased from the prior year. Steel products segment shipments to external customers decreased 6% in the fourth quarter of 2013 from the third quarter of 2013 because of typical seasonality in the nonresidential construction market. Tons shipped to external customers in the fourth quarter of 2013 increased 3% over the fourth quarter of 2012. Though we have seen slow improvement in demand related to nonresidential construction, that improvement has lacked sustained momentum, causing net sales in the steel products segment to remain depressed.

Sales for the raw materials segment increased 12% from 2012 primarily due to increased volumes in DJJ’s brokerage and processing operations and increased volumes at our natural gas drilling working interests, partially offset by decreased pricing experienced by DJJ. Raw materials segment sales increased 25% in the fourth quarter of 2013 as compared to the fourth quarter of 2012, due mainly to increases in volumes at DJJ’s brokerage operations and at our natural gas drilling working interests. Approximately 83% of outside sales in the raw materials segment in 2013 were from brokerage operations of DJJ and approximately 12% of the outside sales were from the scrap processing facilities (85% and 13%, respectively, in 2012).


 

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GROSS MARGIN

In 2013, Nucor recorded gross margins of $1.41 billion (7%) compared to $1.51 billion (8%) in 2012. The year-over-year dollar and gross margin percentage decreases were primarily the result of the 5% decrease in the average sales price per ton, partially offset by the 3% increase in tons shipped to outside customers. Additionally, gross margins were impacted by the following factors:

 

• 

  In the steel mills segment, the average scrap and scrap substitute cost per ton used decreased 8% from $407 in 2012 to $376 in 2013; however, metal margins also decreased for our sheet, bar and plate products from 2012 due to the previously mentioned decreases in selling prices in those categories. Metal margin dollars for all of our steel mill products increased in the fourth quarter of 2013 as compared to the fourth quarter of 2012. Metal margins increased in the fourth quarter of 2013 as compared to the third quarter of 2013 due to increased metal margins from our sheet, structural and plate products.       
    
  Scrap prices are driven by global supply and demand for scrap and other iron-based raw materials used to make steel. We experienced less quarterly volatility in scrap costs during 2013 than in 2012. We expect that early 2014 conditions in the domestic scrap market will be very dependent on the region of the country where they are located. Some regions are experiencing less export demand while weather conditions in other regions are negatively impacting the flow of scrap into scrap yards. We anticipate low volatility in scrap costs going forward until we see stronger market demand either domestically or globally.      LOGO     

 

• 

 

 

Nucor’s gross margins are significantly impacted by the application of the LIFO method of accounting. LIFO charges or credits are largely based on the relative changes in cost and quantities year over year, primarily within raw material inventory in the steel mills segment. The average scrap and scrap substitute cost per ton in ending inventory within our steel mills segment at December 31, 2013 increased 3% as compared to December 31, 2012. Ending inventory quantities also increased as compared to December 31, 2012. As a result of these factors, Nucor recorded a LIFO charge of $17.4 million in 2013 (a LIFO credit of $155.9 million in 2012). The increases in cost per ton were driven by market conditions at the end of 2013, which experienced stronger demand for steel and raw materials than market conditions at the end of 2012.

  
 

 

In the fourth quarter of 2013, Nucor recorded a LIFO charge of $17.4 million compared with a LIFO credit of $71.9 million in the fourth quarter of 2012.

   

• 

  Nucor’s 2012 gross margins were negatively impacted by $48.8 million in inventory-related purchase accounting adjustments associated with our acquisition of Skyline (none in 2013). Purchase accounting adjustments related to Skyline were $12.0 million in the fourth quarter of 2012 with none being recorded in the fourth quarter of 2013.     

• 

  Gross margins at our rebar fabrication businesses increased significantly in 2013 as compared to 2012 due to higher average sales prices and the effects of management initiatives that have resulted in lower costs, better selling strategies and improved supplier relationships. With the exception of the fourth quarter, in which margins were down slightly from the prior year fourth quarter, the rebar fabrication businesses had higher gross margins in each quarter of 2013 than in the comparable quarter of 2012.      

• 

 

Total energy costs decreased approximately $1 per ton from 2012 to 2013, primarily due to the negative impact of natural gas hedge settlements on our overall natural gas costs in 2012. Due to the efficiency of Nucor’s steel mills, energy costs remained less than 6% of the sales dollar in 2013 and 2012.

 

    

  In the fourth quarter of 2013, total energy costs decreased approximately $2 per ton from the third quarter of 2013 due primarily to lower electricity unit costs, and decreased approximately $3 per ton from the fourth quarter of 2012 primarily due to natural gas hedge settlement costs in the fourth quarter of last year.     

• 

  Gross margins related to DJJ’s scrap processing operations decreased significantly during 2013 compared to 2012 due to excess shredding capacity increasing DJJ’s cost of scrap purchases and weather-related effects in the first quarter of 2013 that reduced the flow of scrap into our scrap processing operations.     


 

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MARKETING, ADMINISTRATIVE AND OTHER EXPENSES

A major component of marketing, administrative and other expenses is profit sharing and other incentive compensation costs. These costs, which are based upon and fluctuate with Nucor’s financial performance, decreased from 2012 to 2013. In 2013, profit sharing costs consisted of $71.7 million of contributions, including the Company’s matching contribution, made to the Company’s Profit Sharing and Retirement Savings Plan for qualified employees ($77.7 million in 2012). Other bonus 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 other companies. Stock-based compensation included in marketing, administrative and other expenses decreased by 8% to $22.9 million in 2013 compared with $25.0 million in 2012 and includes costs associated with vesting of stock awards granted in prior years.

Of the $27.0 million increase in marketing, administrative and other expenses in 2013 as compared to 2012, $15.3 million was due to the inclusion of Skyline’s results for the entire 2013 year as compared to only being included after its June 2012 acquisition date during 2012. Additionally, in the third quarter of 2013, a storage dome collapsed at Nucor Steel Louisiana in St. James Parish. As a result, Nucor recorded a partial write-down of assets at the facility, including $7.0 million of inventory and $21.0 million of property, plant and equipment, offset by a $14.0 million insurance receivable that was based on management’s estimate of probable insurance recoveries. Included in marketing, administrative and other expenses in 2012 was a $17.6 million loss on the sale of the assets of Nucor Wire Products Pennsylvania, Inc.

EQUITY IN (EARNINGS) LOSSES OF UNCONSOLIDATED AFFILIATES

Nucor recorded equity method investment earnings of $9.3 million in 2013 compared with losses of $13.3 million in 2012. The equity method investment results included amortization expense and other purchase accounting adjustments. The improvement in the equity method investment results in 2013 from 2012 is primarily due to greater equity method earnings at NuMit, a decrease in losses at Duferdofin Nucor and earnings at Hunter Ridge (acquired in November 2012). Equity in earnings of unconsolidated affiliates was $6.6 million in the fourth quarter of 2013 compared to losses of $4.2 million in the fourth quarter of 2012 and earnings of $2.3 million in the third quarter of 2013. The improvement in equity method earnings in the fourth quarter of 2013 from the fourth quarter of last year is mainly due to an increase in equity method earnings at NuMit as well as a decrease in losses at Duferdofin Nucor. The improvement in equity method earnings in the fourth quarter of 2013 from the previous quarter is primarily due to a decrease in losses at Duferdofin Nucor.

IMPAIRMENT OF NON-CURRENT ASSETS

In 2013, Nucor incurred no charges for impairment of non-current assets compared to $30.0 million in 2012. In the second quarter of 2012, Nucor recorded a $30.0 million impairment charge related to its equity method investment in Duferdofin Nucor (see Note 10 to the Consolidated Financial Statements).

INTEREST EXPENSE (INCOME)

Net interest expense is detailed below:

 

                  (in thousands)
  Year Ended December 31,      2013        2012  

 

  Interest expense

     $ 151,986         $ 173,503   

  Interest income

       (5,091        (11,128
    

 

 

      

 

 

 

  Interest expense, net

     $ 146,895         $ 162,375   
                       

The 12% decrease in gross interest expense from 2012 is primarily attributable to a 6% decrease in average debt outstanding and a 2% decrease in the average interest rate. In 2013, Nucor issued $1.0 billion of new notes at a lower weighted average interest rate than the $900.0 million of debt that matured between the fourth quarter of 2012 and the second quarter of 2013. Gross interest income decreased 54% due to a 50% decrease in average investments and a 45% decrease in the average interest rate on investments.


 

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EARNINGS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS

Earnings before income taxes and noncontrolling interests by segment for 2013 and 2012 are as follows:

 

                      (in thousands)
  Year Ended December 31,         2013           2012  

 

  Steel mills

     $ 1,156,715         $ 1,162,270   

  Steel products

       82,129           (17,140

  Raw materials

       13,686           55,264   

  Corporate/eliminations

       (461,407        (347,454
    

 

 

      

 

 

 

  Earnings before income taxes and noncontrolling interests

     $    791,123         $    852,940   
                           

Earnings before income taxes and noncontrolling interests in the steel mills segment in 2013 decreased slightly from 2012. Gross margin was negatively affected in 2013 by lower metal margin dollars resulting from factors discussed above. The profitability of the steel mills segment in 2013 benefited from improved results from the NuMit and Duferdofin Nucor equity method investments as compared to 2012. Other factors impacting the profitability of the steel mills segment in 2012 that did not occur in 2013 were the $30.0 million impairment charge related to Duferdofin Nucor and the $48.8 million of inventory-related purchase accounting adjustments related to Skyline. Earnings before income taxes and noncontrolling interests in the steel mills segment increased significantly in the fourth quarter of 2013 as compared to the fourth quarter of 2012 due to more favorable market conditions in our sheet mills resulting from competitor supply disruptions that began late in the second quarter and slightly improved demand. Although conditions are slowly improving from historically low levels, the nonresidential construction market continues to lack sustained momentum. The strongest end markets continue to be in manufactured goods, including energy and automotive.

The steel products segment had earnings before income taxes and noncontrolling interests in 2013 as compared to a loss in 2012. Although the average sales price and volume for the segment were lower in 2013 than 2012, profitability in our joist, cold finish and rebar fabrication businesses improved from 2012. The largest increase in profitability was in our rebar fabrication businesses, which experienced higher average sales prices and the effects of management initiatives that have resulted in lower costs, better selling strategies and improved supplier relationships. The steel products segment’s 2012 results were impacted by the $17.6 million loss on the sale of assets of Nucor Wire Products Pennsylvania, Inc. in the third quarter of 2012. In 2013, the steel products segment experienced its first profitable year since 2008. Though the profitability of the steel products segment has improved, conditions in the nonresidential construction markets continue to negatively impact the results of the segment.

The profitability of our raw materials segment decreased from 2012. Difficult conditions in the scrap processing industry have had a negative impact on the profitability of the scrap processing operations of DJJ since the first quarter of 2012. During this time, excess shredding capacity has increased competition and therefore the cost of raw materials while the selling price of scrap has decreased in 2013 as compared to 2012. Also negatively affecting profitability in the raw materials segment were the third quarter 2013 charges related to the net $14.0 million write-down of inventory and property, plant and equipment as a result of the dome collapse at Nucor Steel Louisiana. Nucor Steel Louisiana also had increased startup costs in 2013 as it began production in late December. An unplanned 18-day outage at our Trinidad DRI facility in early 2013 also contributed to lower profitability for the raw materials segment in 2013 as compared to 2012.

The decrease in results in Corporate/eliminations in 2013 was primarily due to a LIFO charge of $17.4 million in 2013 as compared to a $155.9 million LIFO credit in 2012.

NONCONTROLLING INTERESTS

Noncontrolling interests represent the income attributable to the minority interest partners of Nucor’s joint ventures, primarily Nucor-Yamato Steel Company (NYS) of which Nucor owns 51%. The 10% increase in earnings attributable to noncontrolling interests in 2013 over the previous year was primarily due to increased margins as a result of a shift in product mix at NYS. 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.

PROVISION FOR INCOME TAXES

The effective tax rate in 2013 was 26.0% compared with 30.5% in 2012. The change in the rate between 2012 and 2013 was primarily due to a $21.3 million out-of-period adjustment to the deferred tax balances recorded in 2013. The out-of-period item did not have a material impact in the current or any previously reported period. Nucor has concluded U.S. federal income tax matters for years through 2009. The 2010 through 2013 tax years are open to examination by the Internal Revenue Service. The Canada Revenue Agency has completed an audit examination for the periods 2006 to 2008 for Harris Steel Group Inc. and subsidiaries with immaterial adjustments to the income tax returns. The tax years 2009 through 2013 remain open to examination by other major taxing jurisdictions to which Nucor is subject (primarily Canada and other state and local jurisdictions).


 

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NET EARNINGS AND RETURN ON EQUITY

Nucor reported net earnings of $488.0 million, or $1.52 per diluted share, in 2013 compared to net earnings of $504.6 million, or $1.58 per diluted share, in 2012. Net earnings attributable to Nucor stockholders as a percentage of net sales were 3% in both 2013 and 2012. Return on average stockholders’ equity was 6% and 7% in 2013 and 2012, respectively.

 

LOGO

 

 

COMPARISON OF 2012 TO 2011

RESULTS OF OPERATIONS

NET SALES

Net sales to external customers by segment for 2012 and 2011 were as follows:

 

               (in thousands)
  Year Ended December 31,    2012      2011      % Change  

 

  Steel mills

   $ 13,781,797       $ 14,463,683         -5%   

  Steel products

     3,738,381         3,431,490         9%   

  Raw materials

     1,909,095         2,128,391         -10%   
  

 

 

    

 

 

    

  Total net sales to external customers

   $ 19,429,273       $ 20,023,564         -3%   
                            

Net sales for 2012 decreased 3% from the prior year. The average sales price per ton decreased 3% from $869 in 2011 to $841 in 2012, while total tons shipped to outside customers only slightly increased.

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

 

               (in thousands)
  Year Ended December 31,            2012              2011      % Change  

 

  Steel production

     19,865         19,561         2%   

 

  Outside steel shipments

     17,473         16,796         4%   

  Inside steel shipments

       2,769           3,329         -17%   

  Total steel shipments

     20,242         20,125         1%   
                            


 

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Net sales to external customers in the steel mills segment decreased 5% in 2012 from 2011 due to a decrease in the average sales price per ton, partially offset by an increase in tons sold to outside customers.

Tonnage data for the steel products segment is as follows:

 

               (in thousands)
  Year Ended December 31,            2012              2011      % Change  

 

  Joist production

  

 

 

 

291

 

  

  

 

 

 

288

 

  

  

 

 

 

1%

 

  

  Deck sales

     308         312         -1%   

  Cold finished sales

     492         494           

  Fabricated concrete reinforcing steel sales

 

    

 

1,180

 

  

 

    

 

1,074

 

  

 

    

 

10%

 

  

 

                            

Net sales to external customers in the steel products segment increased 9% over 2011 due to a 4% increase in tons sold to outside customers and a 4% increase in the average sales price per ton from $1,335 to $1,393. Pricing of joists, deck, metal buildings and components and rebar fabricated products improved over the prior year as nonresidential construction activity showed modest improvement; however, sales in the steel products segment were depressed as demand in the nonresidential construction market remained well below historical averages. Pricing and volumes of cold finished bar products decreased slightly from 2011. Sales of rebar fabricated products contributed most significantly to the year-over-year increases in volumes and prices in the steel products segment due to the modest improvement in nonresidential construction activity.

Sales for the raw materials segment decreased 10% from 2011 primarily due to decreased pricing and decreased volumes in DJJ’s brokerage operations. Approximately 85% of outside sales in the raw materials segment in 2012 were from brokerage operations of DJJ and approximately 13% of the outside sales were from the scrap processing facilities (86% and 13%, respectively, in 2011).

GROSS MARGIN

In 2012, Nucor recorded gross margins of $1.51 billion (8%) compared to $1.88 billion (9%) in 2011. The year-over-year dollar and gross margin percentage decreases were primarily the result of the 3% decrease in the average sales price per ton. Additionally, gross margins were impacted by the following factors:

 

  In the steel mills segment, the average scrap and scrap substitute cost per ton used decreased 7% from $439 in 2011 to $407 in 2012; however, metal margins also decreased from 2011.

The average scrap and scrap substitute cost per ton used decreased each quarter during 2012. However, the average sales price per ton also decreased each quarter of 2012 for all of the products within our steel mills segment except for structural. The decrease in sales prices and the resulting decrease in metal margins is primarily the result of new domestic suppliers and very high import levels in 2012 that increased from 2011 levels.

 

  The average scrap and scrap substitute cost per ton in ending inventory within our steel mills segment at December 31, 2012 decreased 13% as compared to December 31, 2011, which was partially offset by increased quantities included in ending inventory. As a result of these factors, Nucor recorded a LIFO credit of $155.9 million (a LIFO charge of $142.8 million in 2011).

 

  Nucor’s 2012 gross margins were negatively impacted by $48.8 million in inventory-related purchase accounting adjustments associated with our acquisition of Skyline.

 

  Total energy costs decreased $2 per ton from 2011 to 2012 due primarily to lower natural gas unit costs. Due to the efficiency of Nucor’s steel mills, energy costs remained less than 6% of the sales dollar in 2012 and 2011.

 

  Gross margins related to DJJ’s scrap processing operations were significantly lower in 2012 compared to 2011. The decrease was due to conditions in the scrap processing industry, in which excess shredding capacity increased competition for raw materials. As scrap selling prices decreased throughout 2012, DJJ experienced severe downward pressure on margins.

 

  Gross margins were impacted in the fourth quarter of 2011 by a non-cash gain of $29.0 million as a result of the correction of an actuarial calculation related to the medical plan covering certain eligible early retirees.

 

  Gross margins in 2012 were positively affected by the improved performance of our steel products segment, which experienced gross margin improvement between the third and fourth quarters of 2012.


 

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MARKETING, ADMINISTRATIVE AND OTHER EXPENSES

Profit sharing costs decreased from 2011 to 2012. In 2012, profit sharing costs consisted of $77.7 million of contributions, including the Company’s matching contribution, made to the Company’s Profit Sharing and Retirement Savings Plan for qualified employees ($117.7 million in 2011). Stock-based compensation included in marketing, administrative and other expenses increased 1% to $25.0 million in 2012 compared with $24.7 million in 2011 and includes costs associated with vesting of stock awards granted in prior years.

In 2012, marketing, administrative and other expenses included a charge of $17.6 million for the loss on the sale of the assets of Nucor Wire Products Pennsylvania, Inc. Also contributing to the increase in marketing, administrative and other expenses in 2012 was the inclusion of Skyline’s results since the acquisition date and a general increase in the steel products segment related to increased shipments to outside customers.

EQUITY IN LOSSES OF UNCONSOLIDATED AFFILIATES

Nucor incurred equity method investment losses of $13.3 million and $10.0 million in 2012 and 2011, respectively. The increase in the equity method investment losses is primarily attributable to an increase in losses generated by Duferdofin Nucor S.r.l.

IMPAIRMENT OF NON-CURRENT ASSETS

In 2012, Nucor recorded $30.0 million in charges for impairment of non-current assets compared with $13.9 million in 2011. In the second quarter of 2012, Nucor incurred a $30.0 million charge related to its equity method investment in Duferdofin Nucor. The entire impairment charge recorded in 2011 relates to the impairment of Nucor’s investment in a dust recycling joint venture that has since been terminated (see Note 10 to the Consolidated Financial Statements).

INTEREST EXPENSE (INCOME)

Net interest expense is detailed below:

 

          (in thousands)
  Year Ended December 31,    2012     2011  

 

  Interest expense

  

 

 

 

    $173,503

 

  

 

 

 

 

    $178,812

 

  

  Interest income

        (11,128        (12,718

  Interest expense, net

     $162,375        $166,094   
                  

The 3% decrease in gross interest expense from 2011 is primarily attributable to a 3% decrease in average debt outstanding and a slight decrease in the average interest rate. Gross interest income decreased 13% due primarily to a decrease in average investments.

EARNINGS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS

Earnings before income taxes and noncontrolling interests by segment for 2012 and 2011 are as follows:

 

          (in thousands)
  Year Ended December 31,    2012     2011  

 

  Steel mills

  

 

 

 

$1,162,270

 

  

 

 

 

 

$1,813,155

 

  

  Steel products

     (17,140     (60,282

  Raw materials

     55,264        156,180   

  Corporate/eliminations

         (347,454        (657,241

  Earnings before income taxes and noncontrolling interests

     $   852,940        $1,251,812   
                  

Earnings before income taxes and noncontrolling interests in the steel mills segment for 2012 decreased 36% from 2011. A major factor behind the decrease is that metal margin dollars decreased from 2011 resulting from the factors described above. Other factors impacting the profitability of the steel mills segment in 2012 were the $30.0 million impairment charge related to Duferdofin Nucor and the $48.8 million of inventory-related purchase accounting adjustments related to Skyline. The market conditions that impacted the steel mills segment include an import surge across most products that began late in 2011 and continued through 2012. In addition, U.S. sheet steel markets were negatively impacted by new domestic supply that began ramping up production in 2011. The strongest end markets were manufactured goods, including automotive, energy and heavy equipment.


 

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Losses before income taxes and noncontrolling interests in the steel products segment in 2012 decreased from 2011. The 2012 loss was impacted by the $17.6 million loss on the sale of assets of Nucor Wire Products Pennsylvania, Inc. At our rebar fabrication businesses, 2012 shipments to outside customers increased 10% over 2011, which led to improved profitability within the segment. Although the segment experienced market share gains, improved pricing and effective management of costs, the profitability of this segment was weak due to the continued challenging conditions in the nonresidential construction market.

The profitability of our raw materials segment, particularly DJJ, decreased significantly from 2011 primarily due to margin compression at the scrap processing operations resulting from falling scrap selling prices and excess shredding capacity.

The improvements in results in Corporate/eliminations in 2012 were primarily due to the change in LIFO from a charge to a credit and lower profit sharing and incentive compensation costs.

NONCONTROLLING INTERESTS

The 7% increase in noncontrolling interests from 2011 to 2012 was primarily attributable to the increased earnings of NYS, which were primarily due to increases in volumes and changes in product mix.

PROVISION FOR INCOME TAXES

The effective tax rate in 2012 was 30.5% compared with 31.2% in 2011. The change in the rate between 2011 and 2012 was primarily due to the change in relative proportions of net earnings attributable to noncontrolling interests to total pre-tax earnings, a greater benefit in 2012 from the domestic manufacturing deduction and the recognition of a deferred tax asset related to state tax credit carryforwards and the adjustment of tax expense to previously filed returns.

NET EARNINGS AND RETURN ON EQUITY

Nucor reported net earnings of $504.6 million, or $1.58 per diluted share, in 2012 compared to net earnings of $778.2 million, or $2.45 per diluted share, in 2011. Net earnings attributable to Nucor stockholders as a percentage of net sales were 3% in 2012 and 4% in 2011. Return on average stockholders’ equity was 7% and 11% in 2012 and 2011, 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.

In 2013, Nucor’s $1.5 billion revolving credit facility was amended and restated to extend the maturity date to August 2018. The revolving credit facility was undrawn and Nucor had no commercial paper outstanding at December 31, 2013. We believe our financial strength is a key strategic advantage among domestic steel producers, particularly during recessionary business cycles. We currently carry the highest credit ratings of any metals and mining company in North America with an A rating from Standard & Poor’s and a Baa1 rating from Moody’s. Based upon these factors, we expect to continue to have adequate access to the capital markets at a reasonable cost of funds for liquidity purposes when needed. Our credit ratings are dependent, however, upon a number of factors, both qualitative and quantitative, and are subject to change at any time. The disclosure of our credit ratings is made in order to enhance investors’ understanding of our sources of liquidity and the impact of our credit ratings on our cost of funds.

Nucor’s cash and cash equivalents and short-term investments position remains robust at $1.51 billion as of December 31, 2013. Approximately $173.2 million and $186.2 million of the cash and cash equivalents position at December 31, 2013 and December 31, 2012, respectively, was held by our majority-owned joint ventures.

 

  Selected Measures of Liquidity   
     (dollars in thousands)
  December 31,    2013      2012  

 

  Cash and cash equivalents

  

 

$

 

1,483,252

 

  

  

 

$

 

1,052,862

 

  

  Short-term investments

     28,191         104,167   

  Restricted cash and investments

             275,163   

  Working capital

     4,449,830         3,631,796   

  Current ratio

 

    

 

3.3

 

  

 

    

 

2.8

 

  

 


 

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The current ratio was 3.3 at year end 2013 compared with 2.8 at year end 2012. The current ratio was positively impacted by a 31% increase from 2012 in cash and cash equivalents and short-term investments. The increase in cash and cash equivalents and short-term investments was primarily due to proceeds from the issuance of debt and cash generated by operations, partially offset by cash paid for capital expenditures and dividend payments. In addition, inventories increased by 12% due primarily to increases at the new DRI plant in Louisiana, as well as an 8% increase in inventory tons on hand and a 3% increase in scrap costs in inventory over the prior year. The current ratio was also positively impacted by an 88% decrease from 2012 in long-term debt due within one year and short-term debt, due primarily to the repayment of $250 million of debt in the second quarter of 2013. The next significant debt maturity is not until 2017.

Accounts receivable increased by 6% over 2012 due primarily to the 10% increase in net sales in the fourth quarter of 2013 compared with the prior year fourth quarter. This increase is the result of a 10% increase in outside shipments in the fourth quarter of 2013 as compared with the fourth quarter of 2012. In 2013, total accounts receivable turned approximately every five weeks and inventories turned approximately every seven weeks. This compares to turns of every five weeks for accounts receivable and every six weeks for inventory in 2012. Inventory turnover has slowed slightly from historical rates due mainly to the acquisition of Skyline which, as a distributor, must keep a larger supply of inventory on hand.

Funds provided by 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 that we believe could have a material impact on our financial condition or liquidity.

 

OPERATING ACTIVITIES

Cash provided by operating activities was $1.08 billion in 2013 compared with $1.20 billion in 2012, a decrease of 10%. The change in operating assets and liabilities of ($235.2) million in 2013 compared with ($86.1) million in 2012 was partially offset by the increase in deferred income taxes over the prior year. The funding of working capital increased over the prior year due mainly to increases in accounts receivable and inventory, somewhat offset by a decrease in cash provided by the change in accounts payable. Accounts receivable increased due to increased outside shipments in the fourth quarter over the prior year fourth quarter. Inventory increased due to an increase in inventory on hand and an increase in scrap prices in inventory from year end 2012. The increase in scrap prices also drove the increase in the accounts payable balance.

 

INVESTING ACTIVITIES

Our business is capital intensive; therefore, cash used in investing activities primarily represents capital expenditures for new facilities, the expansion and upgrading of existing facilities and the acquisition of other companies. Nucor invested $1.20 billion in new facilities

    

 

LOGO  

 

  

 

or upgrading of existing facilities in 2013 compared with $947.6 million in 2012, an increase of 26%. This increase in capital expenditures was in large part due to the construction of our DRI facility in Louisiana and the funding of our natural gas working interest drilling program. Offsetting the increase in capital expenditures was the decrease in acquisitions. In 2012, Nucor invested $760.8 million in the acquisition of other companies (primarily Skyline); however, there were no acquisitions in 2013. Another factor contributing to the increase in cash used in investing activities was the net decrease of $1.22 billion in proceeds from the sale of investments and restricted investments (net of purchases) and changes in restricted cash from 2012.

FINANCING ACTIVITIES

Cash provided by financing activities was $196.0 million in 2013 compared with cash used in financing activities of $1.15 billion in 2012. The increase in cash provided by financing activities is primarily attributable to the issuance of debt in 2013 and a decrease in required debt repayments in 2013 than 2012. In the third quarter of 2013, Nucor issued $500.0 million of 4.0% notes due in 2023 and $500.0 million of 5.2% notes due in 2043. The bond offering effectively refinanced $900.0 million of debt that matured between the fourth quarter of 2012 ($650.0 million) and the second quarter of 2013 ($250.0 million). The weighted average interest rate of the new debt is 35 basis points lower than the retired debt, and the new debt also lengthens our debt maturity profile with its weighted average term to maturity of 20 years. Additionally, over 99% of our long-term debt matures in 2017 and beyond.

In 2013, Nucor increased its quarterly base dividend resulting in dividends paid of $471.0 million ($466.4 million in 2012).

Although there were no repurchases in 2013 or 2012, approximately 27.2 million shares remain authorized for repurchase under the Company’s stock repurchase program.


 

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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 36% and 32% at year-end 2013 and 2012, 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 utilization rates for the steel mills and steel products facilities for the fourth quarter of 2013 were 75% and 58%, respectively. A significant portion of our steel and steel products segments sales are into the commercial, industrial and municipal construction markets, which continue to be depressed. Our largest single customer in 2013 represented approximately 5% of sales and consistently pays within terms. In the raw materials segment, we are exposed to price fluctuations related to the purchase of scrap steel and iron ore. Our exposure to market risk is mitigated by the fact that our steel mills use a significant portion of the products of this segment.

The majority of Nucor’s tax-exempt industrial revenue bonds (IDRBs), including the Gulf Opportunity Zone bonds, have variable interest rates that are adjusted weekly, with the rate of one IDRB adjusted annually. These IDRBs represent 24% of Nucor’s long-term debt outstanding at December 31, 2013. The remaining 76% 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, 2013, there were no such interest rate swap 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 recorded as short-term investments.

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 scrap, 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 or sold 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 material 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 Colombia. We periodically use derivative contracts to mitigate the risk of currency fluctuations.

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

The following table sets forth our contractual obligations and other commercial commitments as of December 31, 2013 for the periods presented:

 

                         (in thousands)
      

 

Payments Due By Period

 

 
  Contractual Obligations      Total        2014        2015 - 2016        2017 - 2018      2019 and thereafter  

 

  Long-term debt

    

 

 

 

$  4,380,200

 

  

    

 

 

 

$       3,300

 

  

    

 

 

 

$     16,300

 

  

    

 

 

 

$1,100,000

 

  

  

 

 

 

$3,260,600

 

  

  Estimated interest on long-term debt(1)

       2,519,614           179,775           359,436           304,911         1,675,492   

  Capital leases

       34,200           3,420           6,840           6,840         17,100   

  Operating leases

       92,171           26,781           32,955           17,984         14,451   

  Raw material purchase commitments(2)

       4,595,800           1,246,713           2,021,166           1,072,757         255,164   

  Utility purchase commitments(2)

       1,093,797           325,193           235,216           113,923         419,465   

  Natural gas drilling commitments

       4,709,322           42,920           584,916           927,168         3,154,318   

  Other unconditional purchase obligations(3)

       166,106           147,563           3,441           3,356         11,746   

  Other long-term obligations(4)

             355,173               188,333                 60,690                 26,757              79,393   

  Total contractual obligations

       $17,946,383           $2,163,998           $3,320,960           $3,573,696         $8,887,729   
                                                      

 

    (1) Interest is estimated using applicable rates at December 31, 2013 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, 2013, 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, management compensation and guarantees.
Note: In addition to the amounts shown in the table above, $66.0 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 $37.2 million at December 31, 2013.


 

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DIVIDENDS

Nucor has increased its base cash dividend every year since it began paying dividends in 1973. Nucor paid dividends of $1.47 per share in 2013 compared with $1.46 per share in 2012. In December 2013, the board of directors increased the base quarterly dividend to $0.37 per share. The base quarterly dividend has more than tripled since the end of 2007. In February 2014, the board of directors declared Nucor’s 164th consecutive quarterly cash dividend of $0.37 per share payable on May 12, 2014 to stockholders of record on March 31, 2014.

OUTLOOK

In 2014, we will continue to take advantage of our position of strength to grow Nucor’s long-term earnings power and shareholder value despite a U.S. economy burdened by a challenging regulatory and overall business environment. We have invested significant capital into our business since the last cyclical peak in 2008. We have done so over a broad range of strategic investments that will further enhance our key competitive strengths: low-cost production, diversified product mix and market leadership positions. With many of these capital projects completed and ready to yield results, we will focus on execution in order to generate strong returns on these investments.

Although macro-level uncertainties in world markets will almost certainly affect both global and domestic growth, we anticipate that our sales and profitability will strengthen somewhat in 2014. Utilization rates, which were flat when compared to 2012, have continued at a similar pace in early 2014 and we expect this trend to continue as we progress through the first quarter. We are encouraged by improvements in backlogs at our steel mills and steel products segments of approximately 21% and 9%, respectively, over year end 2012, and we believe several end-use markets such as automotive, energy and general manufacturing will experience some real demand improvement in 2014. However, the effect this improvement in demand will have on our operating rates will be challenged by excess global steel capacity and the threat of continued increases in imported steel. Nucor is most closely tied to the nonresidential construction sector, which is showing signs of improvement but still lacks sustained momentum. Our ability to achieve significant earnings and sales growth will be diminished until there is sustained improvement in nonresidential construction. Although we expect that we will continue to experience fluctuations in raw material costs in 2014, we have made great strides to manage our raw material costs more effectively with the completion and startup of our second DRI facility located in Louisiana.

We are committed to executing on the opportunities we see ahead to reward Nucor stockholders with very attractive long-term returns on their valuable capital invested in our company. Nucor is the only steel producer in North America with the extremely important competitive advantage of an investment grade credit rating. Our industry-leading financial strength allows us to support investments in our facilities that will prepare us for increased profitability as we enter into more favorable market conditions. In 2014, as we have in our past, we will allocate capital to investments that build our long-term earnings power. Capital expenditures are currently projected to be approximately $600 million in 2014, which is significantly lower than in 2013 mainly due to the joint agreement with Encana to temporarily suspend drilling new natural gas wells given current gas price expectations for 2014. Included in this $600 million total are residual expenditures for our Louisiana DRI facility and our natural gas related investments, capacity expansions in SBQ steel and in sheet piling production as well as other investments in our core operations to expand our product offerings and keep our facilities
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.


 

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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 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 circumstances indicate that the carrying amounts of those productive assets could exceed their projected undiscounted cash flows. In developing estimated values for assets that we currently use in our operations, we 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.

Certain long-lived asset groupings were tested for impairment during the fourth quarter of 2013. 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. Our undiscounted cash flow analysis indicated that those long-lived asset groupings were recoverable as of December 31, 2013; 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 20% decrease in the projected cash flows of each of our asset groupings would not result in an impairment, with the exception of one asset grouping included in the steel products segment that has $34.9 million of property, plant and equipment and $34.1 million of finite-lived intangible assets at December 31, 2013.

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.

When appropriate, Nucor performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. For certain reporting units it is necessary to perform a quantitative analysis. In these instances, a discounted cash flow model is used to determine the current estimated fair value of these reporting units. Key assumptions used to determine the 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.

Our fourth quarter 2013 annual goodwill impairment analysis did not result in an impairment charge. And, management does not currently believe that future impairment of these reporting units is probable. However, the performance of certain businesses that comprise our reporting units requires continued improvement. An increase of approximately 50 basis points in the discount rate, a critical assumption in which a minor change can have a significant impact on the estimated fair value, would not result in an impairment charge.


 

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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 2014. 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 our 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 an other-than-temporary decline in value below its carrying amount may have occurred. Examples of such circumstances include, but are not limited to, a significant deterioration in the earnings performance or business prospects of the investee; a significant adverse change in the regulatory, economic or technological environment of the investee; a significant adverse change in the general market condition of either the geographic area or the industry in which the investee operates; and recurring negative cash flows from operations. If management considers the decline to be other than temporary, the Company would write down the investment to its estimated fair market value. An other-than-temporary decline in carrying value is determined to have occurred when, in management’s judgment, a decline in fair value below carrying value is of such length of time and/or severity that it is considered permanent.

In the event that an impairment review is necessary, we calculate the estimated fair value of our equity method investments using a probability-weighted multiple scenario income approach. Management’s analysis includes three discounted cash flow scenarios (best case, base case and recessionary case), which contain forecasted near-term cash flows under each scenario. Generally, (i) the best case scenario contains estimates of future results ranging from slightly higher than recent operating performance to levels that are consistent with historical operating and financial performance (i.e., results experienced prior to the onset of the current recessionary period that began in 2008); (ii) the base case scenario has estimates of future results ranging from generally in line with recent operating performance to levels that are more conservative than historical operating and financial performance; and (iii) the worst case scenario has estimates of future results ranging from results relatively consistent with the operating and financial performance that we are experiencing in the current unprecedented recessionary state of the global steel industry to limited growth resulting only from slight improvements each year in utilization rates as an acknowledgement of where the industry is at the bottom of the economic cycle. Management determines the probability that each cash flow scenario will come to fruition based on the specific facts and circumstances of each of the preceding scenarios, with the base case typically receiving the majority of the weighting.

Key assumptions used to determine the fair value of our equity method investments 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. While the assumptions that most significantly affect the fair value determination include projected revenues and discount rate, the assumptions are often interdependent and no single factor predominates in determining the estimated fair value. 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 investments are estimated. Those estimates and judgments may or may not ultimately prove appropriate.

In the second quarter of 2012, Nucor concluded that a triggering event occurred requiring assessment for impairment of its equity investment in Duferdofin Nucor due to the continued declines in the global demand for steel, the escalated economic and political turmoil in Europe and continued operating performance well below budgeted levels through the first half of 2012. Duferdofin Nucor’s updated unfavorable forecast of future operating performance was also a contributing factor. After completing its assessment, Nucor determined that the carrying amount exceeded its estimated fair value and recorded a $30.0 million impairment charge against the Company’s investment in Duferdofin Nucor in the second quarter of 2012. This charge is included in impairment of non-current assets in the consolidated statements of earnings.

Although the operating results of Duferdofin Nucor have improved since 2012 and there have been no significant deteriorations in
near-term financial projections or other key assumptions since the last impairment test performed in the fourth quarter of 2012, Nucor concluded that it was appropriate to reassess its equity investment in Duferdofin Nucor for impairment during the fourth quarter of 2013 due to the protracted challenging steel market conditions in Europe. The updated analysis included expected future cash flow assumptions that were developed by local management at Duferdofin Nucor and were reviewed in detail by Nucor senior management using the methodology outlined above. The base case scenario received the majority of the probability weighting, with equal weighting given to the other two scenarios. After completing its assessment, the Company determined that the estimated fair value exceeded its carrying amount by a sufficient amount and that there was no need for additional impairment charges.


 

    39    

 

 

It is reasonably possible that based on actual future performance the estimates used in our fourth quarter valuation could change and result in further impairment of our investment. 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.

ENVIRONMENTAL REMEDIATION

We are subject to environmental laws and regulations established by federal, state and local authorities, and we make provisions 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. 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 interest expense.

 

 

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 to our consolidated financial statements for a discussion of new accounting pronouncements adopted by Nucor during 2013 and the expected financial impact of accounting pronouncements recently issued or proposed but not yet required to be adopted.

 

 

RECLASSIFICATIONS

In the first quarter of 2013, we began reporting the results of Nucor’s steel trading businesses and rebar distribution businesses in the steel mills segment. Previously these businesses were reported in an “All other” category. These businesses were reclassified to the steel mills segment as part of a realignment of Nucor’s reportable segments to better reflect the way in which they are managed. The segment data for the comparable periods has also been reclassified into the steel mills segment in order to conform to the current year presentation. The steel mills, steel products and raw materials segments are consistent with the way Nucor manages its business, which is primarily based upon the similarity of the types of products produced and sold by each segment. Additionally, the composition of assets by segment at December 31, 2012 and December 31, 2011 was reclassified to conform with the current presentation. This reclassification between segments did not have any impact on the consolidated asset balances.

In 2012, we began classifying internal fleet and some common carrier costs in cost of products sold in the consolidated statements of earnings. We made this change so that all freight costs will be recorded within the same financial statement line item to allow users of our financial statements to better understand our expense structure. This change resulted in the reclassification of $67.2 million of these costs from marketing, administrative and other expenses to cost of products sold for the year ended December 31, 2011 in order to conform to the current presentation.


  

 

FIVE-YEAR FINANCIAL REVIEW    

 

    

 

     43      

 

       
       

 

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

 

2013

 

   

 

2012

 

    

 

2011

 

    

 

2010

 

    

 

2009

 

 

 

  FOR THE YEAR

             

 

  Net sales

   $ 19,052,046      $ 19,429,273       $ 20,023,564       $ 15,844,627       $ 11,190,296   

 

  Costs, expenses and other:

             

 

Cost of products sold

     17,641,421        17,915,735         18,142,144         15,060,882         11,090,230   

 

Marketing, administrative and other expenses

  

 

 

 

481,904

 

  

 

 

 

 

454,900

 

  

  

 

 

 

439,528

 

  

  

 

 

 

331,455

 

  

  

 

 

 

296,951

 

  

 

Equity in (earnings) losses of unconsolidated affiliates

  

 

 

 

(9,297

 

 

 

 

 

13,323

 

  

  

 

 

 

10,043

 

  

  

 

 

 

32,082

 

  

  

 

 

 

82,341

 

  

 

Impairment of non-current assets

  

 

 

 

 

  

 

 

 

 

30,000

 

  

  

 

 

 

13,943

 

  

  

 

 

 

 

  

  

 

 

 

 

  

 

Interest expense, net

  

 

 

 

146,895

 

  

 

 

 

 

162,375

 

  

  

 

 

 

166,094

 

  

  

 

 

 

153,093

 

  

  

 

 

 

134,752

 

  

  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
  

 

 

 

18,260,923

 

  

 

 

 

 

18,576,333

 

  

  

 

 

 

18,771,752

 

  

  

 

 

 

15,577,512

 

  

  

 

 

 

11,604,274

 

  

 

  Earnings (loss) before income taxes and noncontrolling interests

  

 

 

 

791,123

 

  

 

 

 

 

852,940

 

  

  

 

 

 

1,251,812

 

  

  

 

 

 

267,115

 

  

  

 

 

 

(413,978

 

 

  Provision for (benefit from) income taxes

  

 

 

 

205,594

 

  

 

 

 

 

259,814

 

  

  

 

 

 

390,828

 

  

  

 

 

 

60,792

 

  

  

 

 

 

(176,800

 

  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

  Net earnings (loss)

  

 

 

 

585,529

 

  

 

 

 

 

593,126

 

  

  

 

 

 

860,984

 

  

  

 

 

 

206,323

 

  

  

 

 

 

(237,178

 

 

  Earnings attributable to noncontrolling interests

  

 

 

 

97,504

 

  

 

 

 

 

88,507

 

  

  

 

 

 

82,796

 

  

  

 

 

 

72,231

 

  

  

 

 

 

56,435

 

  

  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

  Net earnings (loss) attributable to Nucor stockholders

  

 

 

 

488,025

 

  

 

 

 

 

504,619

 

  

  

 

 

 

778,188

 

  

  

 

 

 

134,092

 

  

  

 

 

 

(293,613

 

 

  Net earnings (loss) per share:

             

 

Basic

     1.52        1.58         2.45         0.42         (0.94

 

Diluted

     1.52        1.58         2.45         0.42         (0.94

 

  Dividends declared per share

     1.4725        1.4625         1.4525         1.4425         1.41   

 

  Percentage of net earnings (loss) to net sales

     2.6%        2.6%         3.9%         0.8%         -2.6%   

 

  Return on average stockholders’ equity

     6.4%        6.7%         10.7%         1.8%         -3.8%   

 

  Capital expenditures

     1,230,418        1,019,334         450,627         345,294         390,500   

 

  Acquisitions (net of cash acquired)

            760,833         3,959         64,788         32,720   

 

  Depreciation

     535,852        534,010         522,571         512,147         494,035   

 

  Sales per employee

 

     859        906         974         777         539   

 

  AT YEAR END

             

 

  Current assets

   $ 6,410,046      $ 5,661,364       $ 6,708,081       $ 5,861,175       $ 5,182,248   

 

  Current liabilities

  

 

 

 

1,960,216

 

  

 

 

 

 

2,029,568

 

  

  

 

 

 

2,396,059

 

  

  

 

 

 

1,504,438

 

  

  

 

 

 

1,227,057

 

  

  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

  Working capital

  

 

 

 

4,449,830

 

  

 

 

 

 

3,631,796

 

  

  

 

 

 

4,312,022

 

  

  

 

 

 

4,356,737

 

  

  

 

 

 

3,955,191

 

  

 

  Cash provided by operating activities

  

 

 

 

1,077,949

 

  

 

 

 

 

1,200,385

 

  

  

 

 

 

1,031,053

 

  

  

 

 

 

866,794

 

  

  

 

 

 

1,173,194

 

  

 

  Current ratio

  

 

 

 

3.3

 

  

 

 

 

 

2.8

 

  

  

 

 

 

2.8

 

  

  

 

 

 

3.9

 

  

  

 

 

 

4.2

 

  

 

  Property, plant and equipment, net

  

 

 

 

4,917,024

 

  

 

 

 

 

4,283,056

 

  

  

 

 

 

3,755,604

 

  

  

 

 

 

3,852,118

 

  

  

 

 

 

4,013,836

 

  

 

  Total assets

  

 

 

 

15,203,283

 

  

 

 

 

 

14,152,059

 

  

  

 

 

 

14,570,350

 

  

  

 

 

 

13,921,910

 

  

  

 

 

 

12,571,904

 

  

 

  Long-term debt (including current maturities)

  

 

 

 

4,380,200

 

  

 

 

 

 

3,630,200

 

  

  

 

 

 

4,280,200

 

  

  

 

 

 

4,280,200

 

  

  

 

 

 

3,086,200

 

  

 

  Percentage of debt to capital(1)

  

 

 

 

35.6%

 

  

 

 

 

 

31.5%

 

  

  

 

 

 

35.7%

 

  

  

 

 

 

36.9%

 

  

  

 

 

 

28.9%

 

  

 

  Total Nucor stockholders’ equity

  

 

 

 

7,645,769

 

  

 

 

 

 

7,641,571

 

  

  

 

 

 

7,474,885

 

  

  

 

 

 

7,120,070

 

  

  

 

 

 

7,390,526

 

  

 

Per share

  

 

 

 

24.02

 

  

 

 

 

 

24.06

 

  

  

 

 

 

23.60

 

  

  

 

 

 

22.55

 

  

  

 

 

 

23.47

 

  

 

  Shares outstanding

  

 

 

 

318,328

 

  

 

 

 

 

317,663

 

  

  

 

 

 

316,749

 

  

  

 

 

 

315,791

 

  

  

 

 

 

314,856

 

  

 

  Employees

 

  

 

 

 

 

22,300

 

 

  

 

 

 

 

 

 

22,200

 

 

  

 

  

 

 

 

 

20,800

 

 

  

 

  

 

 

 

 

20,500

 

 

  

 

  

 

 

 

 

20,400

 

 

  

 

 

(1) Long-term debt divided by total equity plus long-term debt.


 

      44      

 

     

 

    MANAGEMENT’S REPORT

 

  
        
        

 

 

MANAGEMENTS  REPORT  on internal control over financial reporting

 

Nucor’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) under the Securities 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, 2013. 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 (1992).

Based on its assessment, management concluded that Nucor’s internal control over financial reporting was effective as of December 31, 2013. PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of Nucor’s internal control over financial reporting as of December 31, 2013 as stated in their report which is included herein.


  

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     

 

    

 

     45      

 

       
       

 

 

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, comprehensive income, stockholders’ equity and cash flows present fairly, in all material respects, the financial position of Nucor Corporation and its subsidiaries at December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 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, 2013, based on criteria established in Internal Control – Integrated Framework (1992) 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 the accompanying 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.

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, NC

February 28, 2014


46         
          CONSOLIDATED BALANCE SHEETS   
        

 

  CONSOLIDATED BALANCE SHEETS

 

         (in thousands)  

 

  December 31,

 

   2013     2012  

 

  ASSETS

    

 

  CURRENT ASSETS:

    

 

  Cash and cash equivalents (Note 15)

   $ 1,483,252      $ 1,052,862   

 

  Short-term investments (Notes 4 and 15)

     28,191        104,167   

 

  Accounts receivable, net (Note 5)

     1,810,987        1,707,317   

 

  Inventories, net (Note 6)

     2,605,609        2,323,641   

 

  Other current assets (Notes 10 and 20)

     482,007        473,377   
  

 

 

   

 

 

 

 

  Total current assets

     6,410,046        5,661,364   

 

  PROPERTY, PLANT AND EQUIPMENT, NET (Note 7)

     4,917,024        4,283,056   

 

  RESTRICTED CASH AND INVESTMENTS (Notes 8 and 15)

            275,163   

 

  GOODWILL (Note 9)

     1,973,608        2,004,538   

 

  OTHER INTANGIBLE ASSETS, NET (Note 9)

     874,154        959,240   

 

  OTHER ASSETS (Note 10)

     1,028,451        968,698   
  

 

 

   

 

 

 

 

  TOTAL ASSETS

   $ 15,203,283      $ 14,152,059   
  

 

 

   

 

 

 
                  

 

  LIABILITIES AND EQUITY

    

 

  CURRENT LIABILITIES:

    

 

  Short-term debt (Notes 12 and 15)

   $ 29,202      $ 29,912   

 

  Long-term debt due within one year (Notes 12 and 15)

     3,300        250,000   

 

  Accounts payable (Note 11)

     1,117,078        1,046,713   

 

  Salaries, wages and related accruals (Note 18)

     282,860        279,898   

 

  Accrued expenses and other current liabilities (Notes 11, 14, 16 and 20)

     527,776        423,045   
  

 

 

   

 

 

 

 

  Total current liabilities

     1,960,216        2,029,568   

 

  LONG-TERM DEBT DUE AFTER ONE YEAR (Notes 12 and 15)

     4,376,900        3,380,200   

 

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

     955,889        856,917   
  

 

 

   

 

 

 

 

  TOTAL LIABILITIES

     7,293,005        6,266,685   
  

 

 

   

 

 

 

 

  COMMITMENTS AND CONTINGENCIES (Note 16)

    

 

  EQUITY

    

 

  NUCOR STOCKHOLDERS’ EQUITY (Notes 13 and 17):

    

 

  Common stock (800,000 shares authorized; 377,525 and 377,013 shares issued, respectively)

     151,010        150,805   

 

  Additional paid-in capital

     1,843,353        1,811,459   

 

  Retained earnings

     7,140,440        7,124,523   

 

  Accumulated other comprehensive income, net of income taxes (Notes 2, 14 and 21)

     9,080        56,761   

 

  Treasury stock (59,197 and 59,350 shares, respectively)

     (1,498,114     (1,501,977
  

 

 

   

 

 

 

 

  Total Nucor stockholders’ equity

     7,645,769        7,641,571   

 

  NONCONTROLLING INTERESTS

     264,509        243,803   
  

 

 

   

 

 

 

 

  TOTAL EQUITY

     7,910,278        7,885,374   
  

 

 

   

 

 

 

 

  TOTAL LIABILITIES AND EQUITY

   $ 15,203,283      $ 14,152,059   
  

 

 

   

 

 

 
                  

  See notes to consolidated financial statements.


            47    
   CONSOLIDATED STATEMENTS OF EARNINGS           
       

 

 

 

  CONSOLIDATED STATEMENTS OF EARNINGS

 

    

(in thousands, except per share data)

 

 

 

  Year Ended December 31,

 

     2013      2012        2011  

 

  NET SALES

     $ 19,052,046       $ 19,429,273         $ 20,023,564   
    

 

 

    

 

 

      

 

 

 

 

  COSTS, EXPENSES AND OTHER:

              

 

  Cost of products sold (Notes 1, 6, 14 and 18)

       17,641,421         17,915,735           18,142,144   

 

  Marketing, administrative and other expenses (Notes 1, 3 and 7)

       481,904         454,900           439,528   

 

  Equity in (earnings) losses of unconsolidated affiliates (Note 10)

       (9,297      13,323           10,043   

 

  Impairment of non-current assets (Note 10)

               30,000           13,943   

 

  Interest expense, net (Notes 19 and 20)

       146,895         162,375           166,094   
    

 

 

    

 

 

      

 

 

 
    

 

 

 

18,260,923

 

  

  

 

 

 

18,576,333

 

  

    

 

 

 

18,771,752

 

  

    

 

 

    

 

 

      

 

 

 

 

  EARNINGS BEFORE INCOME TAXES AND

              

 

      NONCONTROLLING INTERESTS

       791,123         852,940           1,251,812   

 

  PROVISION FOR INCOME TAXES (Note 20)

       205,594         259,814           390,828   
    

 

 

    

 

 

      

 

 

 

 

  NET EARNINGS

       585,529         593,126           860,984   

 

  EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTERESTS

       97,504         88,507           82,796   
    

 

 

    

 

 

      

 

 

 

 

  NET EARNINGS ATTRIBUTABLE TO NUCOR STOCKHOLDERS

     $ 488,025       $ 504,619         $ 778,188   
    

 

 

    

 

 

      

 

 

 

 

  NET EARNINGS PER SHARE (Note 22):

              

 

   Basic

       $1.52       $ 1.58           $2.45   

 

   Diluted

     $ 1.52       $ 1.58           $2.45   

  See notes to consolidated financial statements.

 


    48             
      CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME   
        

 

  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

              

(in thousands)

 

 

 

  Year Ended December 31,

 

     2013        2012        2011  

 

  NET EARNINGS

     $ 585,529         $ 593,126         $ 860,984   
    

 

 

      

 

 

      

 

 

 

 

  OTHER COMPREHENSIVE INCOME (LOSS):

              

 

  Net unrealized loss on hedging derivatives, net of

    income taxes of $0, ($1,100) and ($4,700)

      for 2013, 2012 and 2011, respectively

                 (2,264        (8,454

 

  Reclassification adjustment for loss on settlement of

    hedging derivatives included in net earnings, net of

      income taxes of $0, $25,000 and $21,800

        for 2013, 2012 and 2011, respectively

                 42,515           37,093   

 

  Foreign currency translation gain (loss), net of

    income taxes of ($600), $0 and $100

      for 2013, 2012 and 2011, respectively

       (53,619        58,626           (40,210

 

  Adjustment to early retiree medical plan, net of

    income taxes of $2,547, ($1,528) and $952

      for 2013, 2012 and 2011, respectively

       5,938           (3,646        1,165   
    

 

 

      

 

 

      

 

 

 
    

 

 

 

(47,681

 

    

 

 

 

95,231

 

  

    

 

 

 

(10,406

 

    

 

 

      

 

 

      

 

 

 
     

  COMPREHENSIVE INCOME

       537,848           688,357           850,578   

 

  COMPREHENSIVE INCOME ATTRIBUTABLE TO

  NONCONTROLLING INTERESTS

       (97,504        (88,512        (82,791
    

 

 

      

 

 

      

 

 

 

 

  COMPREHENSIVE INCOME ATTRIBUTABLE TO

  NUCOR STOCKHOLDERS

     $ 440,344         $ 599,845         $ 767,787   
    

 

 

      

 

 

      

 

 

 
              
                                  

  See notes to consolidated financial statements.

 


              49      
   CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY         
       

 

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

 

            COMMON STOCK     ADDITIONAL
PAID-IN
    RETAINED    

ACCUMULATED

OTHER

COMPREHENSIVE

   

TREASURY STOCK

(AT COST)

   

TOTAL

NUCOR

STOCKHOLDERS’

   

NON-

CONTROLLING

 
     TOTAL     SHARES     AMOUNT     CAPITAL     EARNINGS     INCOME (LOSS)     SHARES     AMOUNT     EQUITY     INTERESTS  

 

BALANCES, December 31, 2010

 

    $7,330,694        375,451        $150,181        $1,711,518        $6,795,988        ($27,776)        59,660        ($1,509,841     $7,120,070        $210,624   

 

Net earnings in 2011

    860,984                    778,188                    778,188        82,796   

 

Other comprehensive income

    (10,406                     (10,401)                (10,401     (5

 

Stock options exercised

    8,097        387        155        7,942                        8,097     

 

Stock option expense

    9,850                9,850                        9,850     

 

Issuance of stock under award plans, net of forfeitures

    30,091        401        160        25,624                (170     4,307        30,091     

 

Amortization of unearned compensation

    1,600                1,600                        1,600     

 

Cash dividends ($1.4525 per share)

    (462,610                 (462,610                 (462,610  

 

Distributions to noncontrolling interests

    (61,720                                                                     (61,720

 

BALANCES, December 31, 2011

 

    7,706,580        376,239        150,496        1,756,534        7,111,566        (38,177)        59,490        (1,505,534     7,474,885        231,695   

 

Net earnings in 2012

    593,126                    504,619                    504,619        88,507   

 

Other comprehensive income

    95,231                        95,226                 95,226        5   

 

Stock options exercised

    10,515        354        142        10,373                        10,515     

 

Stock option expense

    9,850                9,850                        9,850     

 

Issuance of stock under award plans, net of forfeitures

    36,119        420        167        32,395                (140     3,557        36,119     

 

Amortization of unearned compensation

    800                800                        800     

 

Cash dividends ($1.4625 per share)

    (467,662                 (467,662                 (467,662  

 

Distributions to noncontrolling interests

    (74,848                                     (74,848

 

Other

    (24,337                     1,507        (24,000     (288)                        (22,781     (1,556

 

BALANCES, December 31, 2012

 

    7,885,374        377,013        150,805        1,811,459        7,124,523        56,761        59,350        (1,501,977     7,641,571        243,803   

 

Net earnings in 2013

    585,529                    488,025                    488,025        97,504   

 

Other comprehensive income

    (47,681                     (47,681)                (47,681  

 

Stock option expense

    8,576                8,576                        8,576     

 

Issuance of stock under award plans, net of forfeitures

    26,565        512        205        22,497                (153     3,863        26,565     

 

Amortization of unearned compensation

    821                821                        821     

 

Cash dividends ($1.4725 per share)

    (472,108                 (472,108                 (472,108  

 

Distributions to noncontrolling interests

    (76,798                                                                     (76,798

 

BALANCES, December 31, 2013

 

    $7,910,278        377,525        $151,010        $ 1,843,353        $ 7,140,440        $    9,080        59,197        ($1,498,114     $7,645,769        $264,509   

See notes to consolidated financial statements.


 

       50       

 

        
          CONSOLIDATED STATEMENTS OF CASH FLOWS   
        

 

 

  CONSOLIDATED STATEMENTS OF CASH FLOWS

 

              

(in thousands)

 

 

 

  Year Ended December 31,

 

     2013        2012        2011  

 

OPERATING ACTIVITIES:

              

 

Net earnings

     $ 585,529         $ 593,126         $ 860,984   

 

Adjustments:

              

 

Depreciation

       535,852           534,010           522,571   

 

Amortization

       74,356           73,011           67,829   

 

Stock-based compensation

       47,450           50,733           49,003   

 

Deferred income taxes

       56,564           (25,274        58,051   

 

Distributions from affiliates

       8,708                       

 

Equity in (earnings) losses of unconsolidated affiliates

       (9,297        13,323           10,043   

 

Impairment of non-current assets

                 30,000           13,943   

 

Loss on assets

       14,000           17,563             

 

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

              

 

Accounts receivable

       (103,649        148,113           (274,920

 

Inventories

       (298,074        (65,655        (433,696

 

Accounts payable

       39,489           (111,496        62,012   

 

Federal income taxes

       77,950           (28,022        930   

 

Salaries, wages and related accruals

       7,155           (60,363        129,340   

 

Other operating activities

       41,916           31,316           (35,037
    

 

 

      

 

 

      

 

 

 
     

Cash provided by operating activities

    

 

 

 

1,077,949

 

  

    

 

 

 

1,200,385

 

  

    

 

 

 

1,031,053

 

  

 

INVESTING ACTIVITIES:

              

 

Capital expenditures

       (1,196,952        (947,608        (438,943

 

Investment in and advances to affiliates

       (85,053        (180,472        (95,950

 

Repayment of advances to affiliates

       54,500           65,446           50,000   

 

Disposition of plant and equipment

       34,097           51,063           25,333   

 

Acquisitions (net of cash acquired)

                 (760,833        (3,959

 

Purchases of investments

       (19,349        (409,403        (1,494,782

 

Proceeds from the sale of investments

       92,761           1,667,142           1,285,763   

 

Purchases of restricted investments

                           (564,994

 

Proceeds from the sale of restricted investments

       148,725           359,295           47,479   

 

Changes in restricted cash

       126,438           (48,625        530,165   

 

Other investing activities

       4,863                       
    

 

 

      

 

 

      

 

 

 

 

Cash used in investing activities

    

 

 

 

(839,970

 

    

 

 

 

(203,995

 

    

 

 

 

(659,888

 

 

FINANCING ACTIVITIES:

              

 

Net change in short-term debt

       (671        27,945           (11,450

 

Repayment of long-term debt

       (250,000        (650,000          

 

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

       999,100                       

 

Bond issuance costs

       (7,625                    

 

Issuance of common stock

                 10,515           8,097   

 

Excess tax benefits from stock-based compensation

       2,955           4,700           1,000   

 

Distributions to noncontrolling interests

       (76,798        (74,848        (61,720

 

Cash dividends

       (471,028        (466,361        (461,518

 

Other financing activities

       111           1,172           30,569   
    

 

 

      

 

 

      

 

 

 

Cash provided by (used in) financing activities

    

 

 

 

196,044

 

  

    

 

 

 

(1,146,877

 

    

 

 

 

(495,022

 

 

Effect of exchange rate changes on cash

       (3,633        2,704           (904
    

 

 

      

 

 

      

 

 

 

 

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

       430,390           (147,783        (124,761

 

CASH AND CASH EQUIVALENTS — BEGINNING OF YEAR

       1,052,862           1,200,645           1,325,406   
    

 

 

      

 

 

      

 

 

 

 

CASH AND CASH EQUIVALENTS — END OF YEAR

     $ 1,483,252         $ 1,052,862         $ 1,200,645   
    

 

 

      

 

 

      

 

 

 
                                  

 

NON-CASH INVESTING ACTIVITY:

              

 

Change in accrued plant and equipment purchases

     $ 33,467         $ 71,726         $ 1,559   
    

 

 

      

 

 

      

 

 

 
                                  

See notes to consolidated financial statements.


            51    
   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
       

 

YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

 

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 broker and 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 noncontrolling 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 r