Table of Contents

Second

Quarter

2014

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

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

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 5, 2014

Commission file number 1-4119

 

 

NUCOR CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   13-1860817

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

1915 Rexford Road, Charlotte, North Carolina   28211
(Address of principal executive offices)   (Zip Code)

(704) 366-7000

(Registrant’s telephone number, including area code)

 

 

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

 

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

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

318,843,007 shares of common stock were outstanding at July 5, 2014.

 

 

 


Table of Contents

Nucor Corporation

Form 10-Q

July 5, 2014

INDEX

 

               Page  

Part I

  

Financial Information

  
  

Item 1

  

Financial Statements (Unaudited)

  
     

Condensed Consolidated Statements of Earnings -
Three Months (13 Weeks) and Six Months (26 Weeks) Ended July 5, 2014 and June 29, 2013

     3   
     

Condensed Consolidated Statements of Comprehensive Income -
Three Months (13 Weeks) and Six Months (26 Weeks) Ended July 5, 2014 and June 29, 2013

     4   
     

Condensed Consolidated Balance Sheets -
July 5, 2014 and December 31, 2013

     5   
     

Condensed Consolidated Statements of Cash Flows -
Six Months (26 Weeks) Ended July  5, 2014 and June 29, 2013

     6   
     

Notes to Condensed Consolidated Financial Statements

     7   
  

Item 2

  

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

     22   
  

Item 3

  

Quantitative and Qualitative Disclosures About Market Risk

     30   
  

Item 4

  

Controls and Procedures

     32   

Part II

  

Other Information

  
  

Item 1

  

Legal Proceedings

     32   
  

Item 1A

  

Risk Factors

     32   
  

Item 6

  

Exhibits

     33   

Signatures

     33   

List of Exhibits to Form 10-Q

     34   

 

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Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Nucor Corporation Condensed Consolidated Statements of Earnings (Unaudited)

(In thousands, except per share amounts)

 

     Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     July 5, 2014     June 29, 2013     July 5, 2014     June 29, 2013  

Net sales

   $ 5,291,075      $ 4,665,588      $ 10,399,519      $ 9,216,360   
  

 

 

   

 

 

   

 

 

   

 

 

 

Costs, expenses and other:

        

Cost of products sold

     4,875,208        4,352,463        9,606,450        8,600,019   

Marketing, administrative and other expenses

     132,813        123,150        266,247        239,375   

Equity in earnings of unconsolidated affiliates

     (3,202     (1,585     (7,676     (413

Interest expense, net

     44,391        39,228        85,132        71,719   
  

 

 

   

 

 

   

 

 

   

 

 

 
     5,049,210        4,513,256        9,950,153        8,910,700   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes and noncontrolling interests

     241,865        152,332        449,366        305,660   

Provision for income taxes

     74,930        46,062        152,735        88,662   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

     166,935        106,270        296,631        216,998   

Earnings attributable to noncontrolling interests

     19,894        21,125        38,559        47,064   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings attributable to Nucor stockholders

   $ 147,041      $ 85,145      $ 258,072      $ 169,934   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings per share:

        

Basic

   $ 0.46      $ 0.27      $ 0.80      $ 0.53   

Diluted

   $ 0.46      $ 0.27      $ 0.80      $ 0.53   

Average shares outstanding:

        

Basic

     319,693        318,903        319,597        318,796   

Diluted

     319,981        319,023        319,872        318,934   

Dividends declared per share

   $ 0.37      $ 0.3675      $ 0.74      $ 0.735   

See notes to condensed consolidated financial statements.

 

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Table of Contents

Nucor Corporation Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

 

     Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     July 5, 2014     June 29, 2013     July 5, 2014     June 29, 2013  

Net earnings

   $ 166,935      $ 106,270      $ 296,631      $ 216,998   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss):

        

Net unrealized income (loss) on hedging derivatives, net of income taxes of $100 and $0 for the second quarter of 2014 and 2013, respectively, and $(1,000) and $0 for the first six months of 2014 and 2013, respectively

     238               (1,633       

Reclassification adjustment for (income) loss on settlement of hedging derivatives included in net income, net of income taxes of $(100) and $0 for the second quarter of 2014 and 2013, respectively, and $100 and $0 for the first six months of 2014 and 2013, respectively

     (238            233          

Foreign currency translation gain (loss), net of income taxes of $0 and ($200) for the second quarter of 2014 and 2013, respectively, and $(400) and ($200) for the first six months of 2014 and 2013, respectively

     31,845        (15,582     (11,632     (66,095
  

 

 

   

 

 

   

 

 

   

 

 

 
     31,845        (15,582     (13,032     (66,095
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     198,780        90,688        283,599        150,903   

Comprehensive income attributable to noncontrolling interests

     (19,894     (21,125     (38,559     (47,064
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to Nucor stockholders

   $ 178,886      $ 69,563      $ 245,040      $ 103,839   
  

 

 

   

 

 

   

 

 

   

 

 

 

See notes to condensed consolidated financial statements.

 

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Table of Contents

Nucor Corporation Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

 

     July 5, 2014     Dec. 31, 2013  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 1,067,561      $ 1,483,252   

Short-term investments

     100,000        28,191   

Accounts receivable, net

     2,071,439        1,810,987   

Inventories, net

     2,738,658        2,605,609   

Other current assets

     517,132        482,007   
  

 

 

   

 

 

 

Total current assets

     6,494,790        6,410,046   

Property, plant and equipment, net

     4,971,813        4,917,024   

Goodwill

     1,971,452        1,973,608   

Other intangible assets, net

     842,445        874,154   

Other assets

     1,030,388        1,028,451   
  

 

 

   

 

 

 

Total assets

   $ 15,310,888      $ 15,203,283   
  

 

 

   

 

 

 

LIABILITIES

    

Current liabilities:

    

Short-term debt

   $ 42,414      $ 29,202   

Long-term debt due within one year

     11,300        3,300   

Accounts payable

     1,124,077        1,117,078   

Salaries, wages and related accruals

     276,660        282,860   

Accrued expenses and other current liabilities

     562,775        527,776   
  

 

 

   

 

 

 

Total current liabilities

     2,017,226        1,960,216   

Long-term debt due after one year

     4,368,900        4,376,900   

Deferred credits and other liabilities

     978,749        955,889   
  

 

 

   

 

 

 

Total liabilities

     7,364,875        7,293,005   
  

 

 

   

 

 

 

EQUITY

    

Nucor stockholders’ equity:

    

Common stock

     151,172        151,010   

Additional paid-in capital

     1,867,948        1,843,353   

Retained earnings

     7,160,952        7,140,440   

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

     (3,952     9,080   

Treasury stock

     (1,495,298     (1,498,114
  

 

 

   

 

 

 

Total Nucor stockholders’ equity

     7,680,822        7,645,769   

Noncontrolling interests

     265,191        264,509   
  

 

 

   

 

 

 

Total equity

     7,946,013        7,910,278   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 15,310,888      $ 15,203,283   
  

 

 

   

 

 

 

See notes to condensed consolidated financial statements.

 

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Table of Contents

Nucor Corporation Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

     Six Months (26 Weeks) Ended  
     July 5, 2014     June 29, 2013  

Operating activities:

    

Net earnings

   $ 296,631      $ 216,998   

Adjustments:

    

Depreciation

     326,429        258,390   

Amortization

     36,265        37,575   

Stock-based compensation

     33,752        34,043   

Deferred income taxes

     (5,121     12,304   

Distributions from affiliates

     11,504        7,708   

Equity in earnings of unconsolidated affiliates

     (7,676     (413

Loss on assets

     9,046          

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

    

Accounts receivable

     (249,196     (70,785

Inventories

     (130,463     36,087   

Accounts payable

     90,460        (44,724

Federal income taxes

     14,100        3,709   

Salaries, wages and related accruals

     (1,672     (35,332

Other operating activities

     19,270        29,414   
  

 

 

   

 

 

 

Cash provided by operating activities

     443,329        484,974   
  

 

 

   

 

 

 

Investing activities:

    

Capital expenditures

     (446,798     (621,306

Investment in and advances to affiliates

     (68,491     (43,485

Repayment of advances to affiliates

     15,000        30,500   

Disposition of plant and equipment

     12,858        10,145   

Acquisitions (net of cash acquired)

     (38,466       

Purchases of investments

     (100,000     (19,390

Proceeds from the sale of investments

     27,529        73,428   

Proceeds from the sale of restricted investments

            148,725   

Changes in restricted cash

            55,355   
  

 

 

   

 

 

 

Cash used in investing activities

     (598,368     (366,028
  

 

 

   

 

 

 

Financing activities:

    

Net change in short-term debt

     13,212        1,796   

Repayment of long-term debt

            (250,000

Excess tax benefits from stock-based compensation

     2,700        1,700   

Distributions to noncontrolling interests

     (37,877     (57,266

Cash dividends

     (237,369     (235,280

Other financing activities

     (1,123     109   
  

 

 

   

 

 

 

Cash used in financing activities

     (260,457     (538,941
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     (195     (2,400
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (415,691     (422,395

Cash and cash equivalents - beginning of year

     1,483,252        1,052,862   
  

 

 

   

 

 

 

Cash and cash equivalents - end of six months

   $ 1,067,561      $ 630,467   
  

 

 

   

 

 

 

Non-cash investing activity:

    

Change in accrued plant and equipment purchases

   $ (96,023   $ (20,537
  

 

 

   

 

 

 

See notes to condensed consolidated financial statements.

 

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

 

1. BASIS OF INTERIM PRESENTATION: The information furnished in Item 1 reflects all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented and are of a normal and recurring nature unless otherwise noted. The information furnished has not been audited; however, the December 31, 2013 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited condensed consolidated financial statements in this Item 1 should be read in conjunction with the consolidated financial statements and the notes thereto included in Nucor’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

Recently Adopted Accounting Pronouncements — In the first quarter of 2014, Nucor adopted new accounting guidance, which requires unrecognized tax benefits to be presented as a decrease in net operating loss, similar tax loss or tax credit carryforward if certain criteria are met. Adoption of the guidance did not impact Nucor’s consolidated financial position, results of operations or cash flows.

In March 2013, new accounting guidance was issued on foreign currency matters that clarifies the guidance of a parent company’s accounting for the cumulative translation adjustment upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. Under this new standard, a parent company that ceases to have a controlling financial interest in a foreign subsidiary or group of assets within a foreign entity shall release any related cumulative translation adjustment into net income only if a sale or transfer results in complete or substantially complete liquidation of the foreign entity. This standard is applied prospectively for the Company beginning January 1, 2014. The adoption of this standard did not have a material effect on the consolidated financial statements.

In February 2013, new accounting guidance was issued on joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. Under this new standard, obligations resulting from joint and several liability arrangements are to be measured as the sum of: (a) the amount the reporting entity agreed with its co-obligors that it will pay and (b) any additional amount the reporting entity expects to pay on behalf of its co-obligors. This standard is applied prospectively for the Company beginning January 1, 2014. The adoption of this standard did not have a material effect on the consolidated financial statements.

Recently Issued Accounting Pronouncements — In April 2014, new accounting guidance was issued which changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. The new guidance is effective for annual and interim periods beginning after December 15, 2014. The impact on the Company of adopting the new guidance will depend on the nature, terms and size of business disposals completed after the effective date.

In May 2014, new accounting guidance was issued that will supersede nearly all existing accounting guidance related to revenue recognition. The new guidance provides that an entity recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The amendments are effective for the Company for all annual and interim reporting periods beginning after December 15, 2016. The Company is currently evaluating adoption methods and the impact it will have on the consolidated financial statements.

 

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2. INVENTORIES: Inventories consisted of approximately 37% raw materials and supplies and 63% finished and semi-finished products at July 5, 2014 (40% and 60%, respectively, at December 31, 2013). Nucor’s manufacturing process consists of a continuous, vertically integrated process from which products are sold to customers at various stages throughout the process. Since most steel products can be classified as either finished or semi-finished products, these two categories of inventory are combined.

Inventories valued using the last-in, first-out (LIFO) method of accounting represented approximately 45% of total inventories as of July 5, 2014 and December 31, 2013. If the first-in, first-out (FIFO) method of accounting had been used, inventories would have been $639.2 million higher at July 5, 2014 ($624.7 million higher at December 31, 2013). Use of the lower of cost or market methodology reduced inventories by $1.8 million at July 5, 2014 ($2.1 million at December 31, 2013).

 

3. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is recorded net of accumulated depreciation of $6.93 billion at July 5, 2014 ($6.63 billion at December 31, 2013).

Included within property, plant and equipment, net at July 5, 2014 is $24.1 million of assets, net of accumulated depreciation, under a capital lease agreement (none at December 31, 2013). The gross amount of property, plant and equipment acquired under the capital lease was $25.4 million, which is not included in capital expenditures on the condensed consolidated statement of cash flows. Total obligations associated with this capital lease agreement were $24.2 million at July 5, 2014 (none at December 31, 2013), of which $2.1 million was classified in accrued expenses and other current liabilities and $22.1 million was classified in deferred credits and other liabilities.

As discussed in Note 7 to Nucor’s annual report for the year ended December 31, 2013, in the third quarter of 2013 one of three storage domes collapsed at Nucor Steel Louisiana in St. James Parish. As a result, Nucor recorded a partial write down of assets at the facility, including $21.0 million of property, plant and equipment and $7.0 million of inventory, offset by a $14.0 million insurance receivable that was based on management’s current estimate of probable insurance recoveries. The associated net charge of $14.0 million was included in marketing, administrative and other expenses in the consolidated statement of earnings in 2013. We are continuing to investigate the cause or causes of the 2013 dome collapse at Nucor Steel Louisiana and as a result, Nucor may record additional insurance proceeds and/or incur additional charges.

 

4. RESTRICTED CASH AND INVESTMENTS: There were no restricted cash or investments as of July 5, 2014 or December 31, 2013. In November 2010, Nucor issued $600.0 million in 30-year Gulf Opportunity Zone bonds, the net proceeds of which were accounted for as restricted cash and investments. The restricted cash and investments were held in a trust account and were used to partially fund the capital costs associated with the construction of Nucor’s direct reduced ironmaking facility in St. James Parish, Louisiana. Funds were disbursed as qualified expenditures for the construction of the facility were made, with $204.2 million being disbursed in the first six months of 2013. The remaining funds were disbursed over the remainder of 2013.

 

5. GOODWILL AND OTHER INTANGIBLE ASSETS: The change in the net carrying amount of goodwill for the six months ended July 5, 2014 by segment is as follows (in thousands):

 

     Steel Mills      Steel Products     Raw Materials      Total  

Balance at December 31, 2013

   $  495,897       $ 774,486      $ 703,225       $ 1,973,608   

Translation

             (2,156             (2,156
  

 

 

    

 

 

   

 

 

    

 

 

 

Balance at July 5, 2014

   $  495,897       $ 772,330      $ 703,225       $ 1,971,452   
  

 

 

    

 

 

   

 

 

    

 

 

 

Nucor completed its most recent annual goodwill impairment testing during the fourth quarter of 2013 and concluded that there was no impairment of goodwill for any of its reporting units. There have been no triggering events requiring an interim assessment for impairment since the most recent annual impairment testing date.

 

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Intangible assets with estimated useful lives of 5 to 22 years are amortized on a straight-line or accelerated basis and were comprised of the following (in thousands):

 

     July 5, 2014      December 31, 2013  
     Gross
Amount
     Accumulated
Amortization
     Gross
Amount
     Accumulated
Amortization
 

Customer relationships

   $ 1,151,532       $ 423,011       $ 1,147,786       $ 391,254   

Trademarks and trade names

     151,188         44,219         151,332         40,397   

Other

     22,823         15,868         21,869         15,182   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,325,543       $ 483,098       $ 1,320,987       $ 446,833   
  

 

 

    

 

 

    

 

 

    

 

 

 

Intangible asset amortization expense in the second quarter of 2014 and 2013 was $17.8 million and $18.6 million, respectively, and was $36.3 million and $37.6 million in the first six months of 2014 and 2013, respectively. Annual amortization expense is estimated to be $71.6 million in 2014; $68.6 million in 2015; $66.9 million in 2016; $65.2 million in 2017; and $61.5 million in 2018.

 

6. EQUITY INVESTMENTS: The carrying value of our equity investments in domestic and foreign companies was $937.3 million at July 5, 2014 ($936.0 million at December 31, 2013) and is recorded in other assets in the condensed consolidated balance sheets.

DUFERDOFIN NUCOR

Nucor owns a 50% economic and voting interest in Duferdofin Nucor S.r.l. (Duferdofin Nucor), an Italian steel manufacturer, and accounts for the investment (on a one-month lag basis) under the equity method, as control and risk of loss are shared equally between the members.

Nucor’s investment in Duferdofin Nucor at July 5, 2014 was $456.7 million ($465.4 million at December 31, 2013). Nucor’s 50% share of the total net assets of Duferdofin Nucor was $55.9 million at July 5, 2014, resulting in a basis difference of $400.8 million due to the step-up to fair value of certain assets and liabilities attributable to Duferdofin Nucor as well as the identification of goodwill ($328.4 million) and finite-lived intangible assets. This basis difference, excluding the portion attributable to goodwill, is being amortized based on the remaining estimated useful lives of the various underlying net assets, as appropriate. Amortization expense and other purchase accounting adjustments associated with the fair value step-up were $2.7 million and $2.8 million in the second quarter of 2014 and 2013, respectively, and were $5.4 million and $5.7 million in the first six months of 2014 and 2013, respectively.

As of July 5, 2014, Nucor had outstanding notes receivable of €35.0 million ($47.6 million) from Duferdofin Nucor (€35.0 million, or $48.2 million, at December 31, 2013). The notes receivable bear interest at 1.539% and will reset annually on September 30 to the twelve-month Euro Interbank Offered Rate (Euribor) plus 1% per year. The principal amounts are due on January 31, 2016. Accordingly, the notes receivable were classified in other assets in the condensed consolidated balance sheets as of July 5, 2014.

Nucor has issued guarantees for its ownership percentage (50%) of Duferdofin Nucor’s borrowings under Facility A of a Structured Trade Finance Facilities Agreement as well as the Standby Medium Long Term Loan Credit Facility, which mature on April 26, 2016 and April 22, 2016, respectively. The maximum amount that Duferdofin Nucor can borrow under Facility A is €122.5 million, and as of July 5, 2014, Duferdofin Nucor had €113.5 million ($154.3 million) outstanding under that facility (€112.0 million, or $154.4 million, at December 31, 2013). The guarantee under the Standby Medium Long Term Loan Credit Facility was issued in the second quarter of 2014, and as of July 5, 2014, Duferdofin Nucor had the maximum borrowing amount of €60.0 million ($81.6 million) outstanding under that facility. If Duferdofin Nucor fails to pay when due any amounts for which it is obligated under Facility A or the Standby Medium Long Term Credit Facility, Nucor could be required to pay 50% of such amounts pursuant to and in accordance with the terms of its guarantees. Any indebtedness of Duferdofin Nucor to Nucor is effectively subordinated to the indebtedness of Duferdofin Nucor under both financing agreements. Nucor has not recorded any liability associated with these guarantees.

 

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NUMIT

Nucor has a 50% economic and voting interest in NuMit LLC (NuMit). NuMit owns 100% of the equity interest in Steel Technologies LLC, an operator of 25 sheet processing facilities located throughout the U.S., Canada and Mexico. Nucor accounts for the investment in NuMit (on a one-month lag basis) under the equity method as control and risk of loss are shared equally between the members.

Nucor’s investment in NuMit at July 5, 2014 was $324.8 million ($318.4 million as of December 31, 2013). Nucor has recorded two notes receivable from Steel Technologies LLC. The first note receivable of $40.0 million bears interest at 1.13% as of July 5, 2014, and it resets quarterly to the three-month London Interbank Offered Rate (LIBOR) plus 90 basis points. The second note receivable of $44.0 million was issued on May 2, 2014. It bears interest at 1.43% as of July 5, 2014. The principal amounts of these notes receivable are due on October 21, 2014 and May 1, 2015, respectively. In addition, Nucor has extended a $60.0 million line of credit (of which $15.0 million was outstanding at July 5, 2014) to Steel Technologies LLC. As of July 5, 2014, the amounts outstanding on the line of credit bear interest at 1.36% and mature on April 1, 2015. As of July 5, 2014, both the notes receivable and the amounts outstanding on the line of credit are classified in other current assets in the condensed consolidated balance sheets.

HUNTER RIDGE

Nucor has a 50% economic and voting interest in Hunter Ridge Energy Services LLC (Hunter Ridge). Hunter Ridge provides services for the gathering, separation and compression of energy products including natural gas produced by Nucor’s working interest drilling program. Nucor accounts for the investment (on a one-month lag basis) under the equity method, as control and risk of loss are shared equally between the members. Nucor’s investment in Hunter Ridge at July 5, 2014 was $136.7 million ($134.5 million at December 31, 2013).

ALL EQUITY INVESTMENTS

Nucor reviews its equity investments for impairment if and when circumstances indicate that a decline in value below their carrying amounts may have occurred. In the fourth quarter of 2013, Nucor assessed its equity investment in Duferdofin Nucor for impairment due to the protracted challenging steel market conditions in Europe. After completing its assessment, the Company determined that the estimated fair value exceeded its carrying amount and that there was no need for impairment. The assumptions that most significantly affect the fair value determination include projected revenues and the discount rate. Steel market conditions in Europe have continued to be challenging through the first six months of 2014, and, therefore, it is reasonably possible that material deviation of future performance from the estimates used in our most recent valuation could result in further impairment of our investment in Duferdofin Nucor. Nucor recorded a $30.0 million impairment charge against its investment in Duferdofin Nucor in the second quarter of 2012.

 

7. CURRENT LIABILITIES: Book overdrafts, included in accounts payable in the condensed consolidated balance sheets, were $166.2 million at July 5, 2014 ($81.6 million at December 31, 2013). Dividends payable, included in accrued expenses and other current liabilities in the condensed consolidated balance sheets, were $118.9 million at July 5, 2014 ($118.7 million at December 31, 2013).

 

8. DERIVATIVES: Nucor periodically uses derivative financial instruments primarily to partially manage its exposure to price risk related to natural gas purchases used in the production process as well as to scrap, copper and aluminum purchased for resale to its customers. In addition, Nucor periodically uses derivatives to partially manage its exposure to changes in interest rates on outstanding debt instruments and uses forward foreign exchange contracts to hedge cash flows associated with certain assets and liabilities, firm commitments and anticipated transactions.

 

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Nucor recognizes all derivative instruments in the condensed consolidated balance sheets at fair value. Any resulting changes in fair value are recorded as adjustments to other comprehensive income (loss), net of tax, or recognized in net earnings, as appropriate.

The following tables summarize information regarding Nucor’s derivative instruments (in thousands):

Fair Value of Derivative Instruments

 

          Fair Value at  
    

Balance Sheet Location

   July 5,
2014
    Dec. 31,
2013
 

Liability derivatives designated as hedging instruments:

       

Commodity contracts

   Accrued expenses and other current liabilities    $ (1,400   $   

Commodity contracts

   Deferred credits and other liabilities      (900       

Total liability derivatives designated as hedging instruments

        (2,300       

Liability derivatives not designated as hedging instruments:

       

Commodity contracts

   Accrued expenses and other current liabilities      (757     (553

Foreign exchange contracts

   Accrued expenses and other current liabilities      (132     (2
     

 

 

   

 

 

 

Total liability derivatives not designated as hedging instruments

        (889     (555

Total liability derivatives

      $ (3,189   $ (555
     

 

 

   

 

 

 

The Effect of Derivative Instruments on the Condensed Consolidated Statements of Earnings

Derivatives Designated as Hedging Instruments

 

Derivatives in Cash Flow Hedging
Relationships

  

Statement of
Earnings Location

  Amount of Gain
or (Loss),
net of tax,
Recognized in OCI
on Derivatives

(Effective Portion)
    Amount of Gain
or (Loss),
net of tax,
Reclassified from
Accumulated OCI into
Earnings
(Effective Portion)
    Amount of Gain
or (Loss),
net of tax,
Recognized in
Earnings on
Derivatives
(Ineffective Portion)
 
     Three Months
(13 weeks) Ended
    Three Months
(13 weeks) Ended
    Three Months
(13 weeks) Ended
 
     July 5, 2014     June 29, 2013     July 5, 2014     June 29, 2013     July 5, 2014     June 29, 2013  

Commodity contracts

   Cost of products sold   $ 238      $      $ 238      $      $      $   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Derivatives in Cash Flow Hedging
Relationships

  

Statement of
Earnings Location

  Amount of Gain
or (Loss),
net of tax,
Recognized in OCI
on Derivatives

(Effective Portion)
    Amount of Gain
or (Loss),
net of tax,
Reclassified from
Accumulated OCI  into
Earnings
(Effective Portion)
    Amount of Gain
or (Loss),
net of tax,
Recognized in
Earnings on
Derivatives
(Ineffective Portion)
 
     Six Months
(26 weeks) Ended
    Six Months
(26 weeks) Ended
    Six Months
(26 weeks) Ended
 
     July 5, 2014     June 29, 2013     July 5, 2014     June 29, 2013     July 5, 2014     June 29, 2013  

Commodity contracts

   Cost of products sold   $ (1,633   $      $ (233   $      $      $   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Derivatives Not Designated as Hedging Instruments

 

Derivatives Not Designated as

Hedging Instruments

  

Statement of
Earnings Location

   Amount of Gain or (Loss) Recognized in Earnings on Derivatives  
      Three Months (13 weeks) Ended      Six Months (26 weeks) Ended  
      July 5,
2014
    June 29,
2013
     July 5,
2014
    June 29,
2013
 

Commodity contracts

   Cost of products sold    $ (795   $ 2,473       $ 438      $ 4,982   

Foreign exchange contracts

   Cost of products sold      (201     2         (48     118   
     

 

 

   

 

 

    

 

 

   

 

 

 

Total

      $ (996   $ 2,475       $ 390      $ 5,100   
     

 

 

   

 

 

    

 

 

   

 

 

 

 

9. FAIR VALUE MEASUREMENTS: The following table summarizes information regarding Nucor’s financial assets and financial liabilities that were measured at fair value as of July 5, 2014 and December 31, 2013 (in thousands). Nucor does not currently have any non-financial assets or liabilities that are measured at fair value on a recurring basis.

 

           Fair Value Measurements at Reporting Date Using  

Description

   Carrying
Amount in
Condensed
Consolidated
Balance Sheets
    Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
    Significant
Unobservable
Inputs
(Level 3)
 

As of July 5, 2014

         

Assets:

         

Cash equivalents

   $ 919,447      $ 919,447       $      $   

Short-term investments

     100,000        100,000                  
  

 

 

   

 

 

    

 

 

   

 

 

 

Total assets

   $ 1,019,447      $ 1,019,447       $      $   
  

 

 

   

 

 

    

 

 

   

 

 

 

Liabilities:

         

Foreign exchange and commodity contracts

   $ (3,189   $       $ (3,189   $   
  

 

 

   

 

 

    

 

 

   

 

 

 

As of December 31, 2013

         

Assets:

         

Cash equivalents

   $ 1,269,465      $ 1,269,465       $      $   

Short-term investments

     28,191        28,191                  
  

 

 

   

 

 

    

 

 

   

 

 

 

Total assets

   $ 1,297,656      $ 1,297,656       $      $   
  

 

 

   

 

 

    

 

 

   

 

 

 

Liabilities:

         

Foreign exchange and commodity contracts

   $ (555   $       $ (555   $   
  

 

 

   

 

 

    

 

 

   

 

 

 

Fair value measurements for Nucor’s cash equivalents and short-term investments are classified under Level 1 because such measurements are based on quoted market prices in active markets for identical assets. Our short-term investments are held in similar short-term investment instruments as described in Note 4 to Nucor’s annual report for the year ended December 31, 2013. Fair value measurements for Nucor’s derivatives are classified under Level 2 because such measurements are based on published market prices for similar assets or are estimated based on observable inputs such as interest rates, yield curves, credit risks, spot and future commodity prices, and spot and future exchange rates.

The fair value of short-term and long-term debt, including current maturities, was approximately $4.76 billion at July 5, 2014 ($4.61 billion at December 31, 2013). The debt fair value estimates are classified under Level 2 because such estimates are based on readily available market prices of our debt at July 5, 2014 and December 31, 2013, or similar debt with the same maturities, rating and interest rates.

 

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10. CONTINGENCIES: Nucor is subject to environmental laws and regulations established by federal, state and local authorities and, accordingly, makes provision for the estimated costs of compliance. Of the undiscounted total of $20.7 million of accrued environmental costs at July 5, 2014 ($22.9 million at December 31, 2013), $4.5 million was classified in accrued expenses and other current liabilities ($6.9 million at December 31, 2013) and $16.2 million was classified in deferred credits and other liabilities ($16.0 million at December 31, 2013). Inherent uncertainties exist in these estimates primarily due to unknown conditions, evolving remediation technology, and changing governmental regulations and legal standards.

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. Five of the eight defendants have entered into settlement agreements with the plaintiffs, which agreements are in the process of court approval. Although we believe the plaintiffs’ claims are without merit, we will continue to vigorously defend against them, but we cannot at this time predict the outcome of this litigation or estimate the range of Nucor’s potential exposure.

On March 25, 2014, a jury in the U.S. District Court for the Southern District of Texas returned a verdict against Nucor and five other co-defendants in an antitrust lawsuit brought by plaintiff MM Steel, LP, a steel plate service center located in Houston. The jury returned a verdict of $52.0 million in damages against all defendants jointly and severally. On June 1, 2014, pursuant to antitrust laws providing for treble damages, the court awarded a judgment to MM Steel jointly and severally against the defendants in an amount totaling $160.8 million after including costs and attorneys’ fees. The Company has appealed the judgment to the U.S. Court of Appeals for the Fifth Circuit, and believes that it has valid grounds to have the judgment vacated or reversed. The Company believes that the evidence against Nucor was insufficient to support any finding that Nucor was involved in a horizontal conspiracy. The Company believes that the trial court wrongly excluded relevant testimony of Nucor’s expert witness. The Company believes that the trial court erred in admitting hearsay evidence. Finally, the Company believes that the trial court did not sufficiently instruct the jury on applicable legal principles. As a result, the Company believes that the likelihood that the judgment will be affirmed is not probable, and, accordingly, it has not recorded any reserves or contingencies related to this legal matter. Although we are defending this lawsuit vigorously, its ultimate resolution is uncertain.

We are from time to time a party to various other lawsuits, claims and 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.

 

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

 

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A summary of activity under Nucor’s stock option plans for the first six months of 2014 is as follows (in thousands, except year and per share amounts):

 

     Shares      Weighted -
Average
Exercise
Price
     Weighted -
Average
Remaining
Contractual Life
     Aggregate
Intrinsic
Value
 

Number of shares under option:

           

Outstanding at beginning of year

     2,089       $ 40.47         

Granted

     469       $ 50.63         

Exercised

                     

Canceled

                     
  

 

 

          

Outstanding at July 5, 2014

     2,558       $ 42.33         8.1 years       $ 21,023   
  

 

 

          

Options exercisable at July 5, 2014

     1,272       $ 40.28         7.2 years       $ 13,037   
  

 

 

          

For the 2014 stock option grant, the grant date fair value of $17.48 per share was calculated using the Black-Scholes option-pricing model with the following assumptions:

 

Exercise price

   $ 50.63   

Expected dividend yield

     2.92

Expected stock price volatility

     45.00

Risk-free interest rate

     2.03

Expected life (years)

     6.5   

Stock options granted to employees who are eligible for retirement on the date of grant are expensed immediately since these awards vest upon retirement from the Company. Retirement, for purposes of vesting in these stock options, means termination of employment after satisfying age and years of service requirements. Similarly, stock options granted to employees who will become retirement-eligible prior to the end of the vesting term are expensed over the period through which the employee will become retirement-eligible. Compensation expense for stock options granted to employees who are not retirement-eligible is recognized on a straight-line basis over the vesting period. Compensation expense for stock options was $7.6 million and $8.4 million in the second quarter of 2014 and 2013, respectively, and $7.6 million and $8.6 million in the first six months of 2014 and 2013, respectively. As of July 5, 2014, unrecognized compensation expense related to options was $0.6 million, which is expected to be recognized over 3 years.

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

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

 

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

The fair value of the RSUs is determined based on the closing stock price of Nucor’s common stock on the day before the grant. A summary of Nucor’s RSU activity for the first six months of 2014 is as follows (shares in thousands):

 

     Shares     Grant Date
Fair Value
 

Restricted stock units:

    

Unvested at beginning of year

     1,122      $ 42.51   

Granted

     655      $ 50.63   

Vested

     (704   $ 44.51   

Canceled

     (8   $ 40.42   
  

 

 

   

Unvested at July 5, 2014

     1,065      $ 46.19   
  

 

 

   

Shares reserved for future grants (stock options and RSUs)

     11,868     
  

 

 

   

Compensation expense for RSUs was $17.6 million and $18.1 million in the second quarter of 2014 and 2013, respectively, and $22.5 million and $22.2 million in the first six months of 2014 and 2013, respectively. As of July 5, 2014, unrecognized compensation expense related to unvested RSUs was $39.2 million, which is expected to be recognized over a weighted-average period of 2.8 years.

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

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

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

 

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A summary of Nucor’s restricted stock activity under the AIP and LTIP for the first six months of 2014 is as follows (shares in thousands):

 

     Shares     Grant Date
Fair Value
 

Restricted stock awards and units:

    

Unvested at beginning of year

     73      $ 45.49   

Granted

     127      $ 50.35   

Vested

     (133   $ 48.91   

Canceled

              
  

 

 

   

Unvested at July 5, 2014

     67      $ 47.93   
  

 

 

   

Shares reserved for future grants

     1,111     
  

 

 

   

Compensation expense for common stock and common stock units awarded under the AIP and LTIP is recorded over the performance measurement and vesting periods based on the anticipated number and market value of shares of common stock and common stock units to be awarded. Compensation expense for anticipated awards based upon Nucor’s financial performance, exclusive of amounts payable in cash, was $1.9 million and $1.5 million in the second quarter of 2014 and 2013, respectively, and $3.1 million and $3.3 million in the first six months of 2014 and 2013 respectively. At July 5, 2014, unrecognized compensation expense related to unvested restricted stock awards was $1.1 million, which is expected to be recognized over a weighted-average period of 2.0 years.

 

12. EMPLOYEE BENEFIT PLAN: Nucor makes contributions to a Profit Sharing and Retirement Savings Plan for qualified employees based on the profitability of the Company. Nucor’s expense for these benefits was $22.0 million and $13.1 million in the second quarter of 2014 and 2013, respectively, and was $40.2 million and $26.7 million in the first six months of 2014 and 2013, respectively. The related liability for these benefits is included in salaries, wages and related accruals.

 

13. INTEREST EXPENSE (INCOME): The components of net interest expense are as follows (in thousands):

 

     Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     July 5, 2014     June 29, 2013     July 5, 2014     June 29, 2013  

Interest expense

   $  45,878      $ 40,676      $ 87,771      $ 74,356   

Interest income

     (1,487     (1,448     (2,639     (2,637
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense, net

   $ 44,391      $ 39,228      $ 85,132      $ 71,719   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

14. INCOME TAXES: The effective tax rate for the second quarter of 2014 was 31.0% compared with 30.2% for the second quarter of 2013. The increase in the effective tax rate for the second quarter of 2014 as compared to the second quarter of 2013 is primarily due to the change in relative proportions of net earnings attributable to noncontrolling interests to total pre-tax earnings between the periods. The Internal Revenue Service (IRS) is currently examining Nucor’s 2012 federal income tax return. Management believes that the Company has adequately provided for any adjustments that may arise from this audit. Nucor has concluded U.S. federal income tax matters for years through 2009. The 2010, 2011, and 2013 tax years also are open to examination by the IRS. The tax years 2009 through 2013 remain open to examination by other major taxing jurisdictions to which Nucor is subject (primarily Canada and state and local jurisdictions).

 

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Current deferred tax assets included in other current assets were $259.4 million at July 5, 2014 ($255.5 million at December 31, 2013). Current deferred tax liabilities included in accrued expenses and other current liabilities were $13.5 million at July 5, 2014 ($14.6 million at December 31, 2013). Non-current deferred tax liabilities included in deferred credits and other liabilities were $675.3 million at July 5, 2014 ($676.2 million at December 31, 2013).

 

15. STOCKHOLDERS’ EQUITY: The following tables reflect the changes in stockholders’ equity attributable to both Nucor and the noncontrolling interests of Nucor’s joint ventures, primarily Nucor-Yamato Steel Company, of which Nucor owns 51% (in thousands):

 

     Attributable to
Nucor Corporation
    Attributable to
Noncontrolling Interests
    Total  

Stockholders’ equity at December 31, 2013

   $ 7,645,769      $ 264,509      $ 7,910,278   

Total comprehensive income

     245,040        38,559        283,599   

Stock options

     7,617               7,617   

Issuance of stock under award plans, net of forfeitures

     19,556               19,556   

Amortization of unearned compensation

     400               400   

Dividends declared

     (237,560            (237,560

Distributions to noncontrolling interests

            (37,877     (37,877
  

 

 

   

 

 

   

 

 

 

Stockholders’ equity at July 5, 2014

   $ 7,680,822      $ 265,191      $ 7,946,013   
  

 

 

   

 

 

   

 

 

 
     Attributable to
Nucor Corporation
    Attributable to
Noncontrolling Interests
    Total  

Stockholders’ equity at December 31, 2012

   $ 7,641,571      $ 243,803      $ 7,885,374   

Total comprehensive income

     103,839        47,064        150,903   

Stock options

     8,575               8,575   

Issuance of stock under award plans, net of forfeitures

     18,789               18,789   

Amortization of unearned compensation

     400               400   

Dividends declared

     (235,545            (235,545

Distributions to noncontrolling interests

            (57,266     (57,266
  

 

 

   

 

 

   

 

 

 

Stockholders’ equity at June 29, 2013

   $ 7,537,629      $ 233,601      $ 7,771,230   
  

 

 

   

 

 

   

 

 

 

 

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16. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME: The following tables reflect the changes in accumulated other comprehensive (loss) income by component (in thousands):

 

     Three Month (13 week) Period Ended
July 5, 2014
 
    

Gains and Losses on

Hedging Derivatives

    Foreign Currency
Gain (Loss)
    Adjustment to Early
Retiree Medical Plan
     Total  

April 5, 2014

   $ (1,400   $ (50,915   $ 16,518       $ (35,797

Other comprehensive income (loss) before reclassifications

     238        31,845                32,083   

Amounts reclassified from accumulated other comprehensive (loss) income into earnings

     (238                    (238
  

 

 

   

 

 

   

 

 

    

 

 

 

Net current-period other comprehensive income (loss)

            31,845                31,845   

July 5, 2014

   $ (1,400   $ (19,070   $ 16,518       $ (3,952

 

     Six Month (26 week) Period Ended
July 5, 2014
 
    

Gains and Losses on

Hedging Derivatives

    Foreign Currency
Gain (Loss)
    Adjustment to Early
Retiree Medical Plan
     Total  

December 31, 2013

   $      $ (7,438   $ 16,518       $ 9,080   

Other comprehensive income (loss) before reclassifications

     (1,633     (11,632             (13,265

Amounts reclassified from accumulated other comprehensive (loss) income into earnings

     233                       233   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net current-period other comprehensive income (loss)

     (1,400     (11,632             (13,032

July 5, 2014

   $ (1,400   $ (19,070   $ 16,518       $ (3,952

 

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Table of Contents
     Three Month (13 week) Period Ended
June 29, 2013
 
     Gains and Losses on
Hedging Derivatives
     Foreign Currency
Gain (Loss)
    Adjustment to Early
Retiree Medical Plan
     Total  

March 30, 2013

   $       $ (4,332   $ 10,580       $ 6,248   

Other comprehensive income (loss) before reclassifications

             (15,582             (15,582

Amounts reclassified from accumulated other comprehensive (loss) income into earnings

                              
  

 

 

    

 

 

   

 

 

    

 

 

 

Net current-period other comprehensive income (loss)

             (15,582             (15,582

June 29, 2013

   $       $ (19,914   $ 10,580       $ (9,334

 

    

Six Month (26 week) Period Ended

June 29, 2013

 
     Gains and Losses on
Hedging Derivatives
     Foreign Currency
Gain (Loss)
    Adjustment to Early
Retiree Medical Plan
     Total  

December 31, 2012

   $       $ 46,181      $ 10,580       $ 56,761   

Other comprehensive income (loss) before reclassifications

             (66,095             (66,095

Amounts reclassified from accumulated other comprehensive (loss) income into earnings

                              
  

 

 

    

 

 

   

 

 

    

 

 

 

Net current-period other comprehensive income (loss)

             (66,095             (66,095

June 29, 2013

   $       $ (19,914   $ 10,580       $ (9,334

 

17. SEGMENTS: Nucor reports its results in the following segments: steel mills, steel products and raw materials. The steel mills segment includes carbon and alloy steel in sheet, bars, structural and plate; steel foundation distributors; steel trading businesses; rebar distribution businesses; and Nucor’s equity method investments in Duferdofin Nucor and NuMit. The steel products segment includes 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. The raw materials segment includes DJJ, a scrap broker and processor; Nu-Iron Unlimited and Nucor Steel Louisiana, two facilities that produce DRI used by the steel mills; our natural gas working interests; and Nucor’s equity method investment in Hunter Ridge. 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.

Net interest expense, other income, profit sharing expense, stock-based compensation and changes in the LIFO reserve are shown under Corporate/eliminations. Corporate assets primarily include cash and cash equivalents, short-term investments, allowances to eliminate intercompany profit in inventory, fair value of natural gas hedges, deferred income tax assets, federal and state income taxes receivable, the LIFO reserve and investments in and advances to affiliates.

 

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

 

     Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     July 5, 2014     June 29, 2013     July 5, 2014     June 29, 2013  

Net sales to external customers:

        

Steel mills

   $ 3,674,140      $ 3,197,433      $ 7,281,904      $ 6,465,587   

Steel products

     1,035,923        937,104        1,910,092        1,726,451   

Raw materials

     581,012        531,051        1,207,523        1,024,322   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 5,291,075      $ 4,665,588      $ 10,399,519      $ 9,216,360   
  

 

 

   

 

 

   

 

 

   

 

 

 

Intercompany sales:

        

Steel mills

   $ 742,200      $ 639,425      $ 1,451,066      $ 1,272,145   

Steel products

     26,542        30,855        48,042        50,127   

Raw materials

     2,443,492        2,183,495        4,971,498        4,346,983   

Corporate/eliminations

     (3,212,234     (2,853,775     (6,470,606     (5,669,255
  

 

 

   

 

 

   

 

 

   

 

 

 
   $      $      $      $   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes and noncontrolling interests:

        

Steel mills

   $ 368,138      $ 237,102      $ 685,935      $ 509,360   

Steel products

     42,612        32,073        44,332        20,149   

Raw materials

     (9,635     12,218        (1,276     13,754   

Corporate/eliminations

     (159,250     (129,061     (279,625     (237,603
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 241,865      $ 152,332      $ 449,366      $ 305,660   
  

 

 

   

 

 

   

 

 

   

 

 

 
     July 5, 2014     Dec. 31, 2013              

Segment assets:

        

Steel mills

   $ 8,572,357      $ 8,365,023       

Steel products

     2,999,733        2,861,403       

Raw materials

     3,952,359        3,956,913       

Corporate/eliminations

     (213,561     19,944       
  

 

 

   

 

 

     
   $ 15,310,888      $ 15,203,283       
  

 

 

   

 

 

     

 

18. EARNINGS PER SHARE: The computations of basic and diluted net earnings per share are as follows (in thousands, except per share amounts):

 

     Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     July 5, 2014     June 29, 2013     July 5, 2014     June 29, 2013  

Basic net earnings per share:

        

Basic net earnings

   $ 147,041      $ 85,145      $ 258,072      $ 169,934   

Earnings allocated to participating securities

     (487     (419     (878     (805
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings available to common stockholders

   $ 146,554      $ 84,726      $ 257,194      $ 169,129   
  

 

 

   

 

 

   

 

 

   

 

 

 

Average shares outstanding

     319,693        318,903        319,597        318,796   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic net earnings per share

   $ 0.46      $ 0.27      $ 0.80      $ 0.53   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net earnings per share:

        

Diluted net earnings

   $ 147,041      $ 85,145      $ 258,072      $ 169,934   

Earnings allocated to participating securities

     (487     (419     (878     (805
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings available to common stockholders

   $ 146,554      $ 84,726      $ 257,194      $ 169,129   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted average shares outstanding:

        

Basic shares outstanding

     319,693        318,903        319,597        318,796   

Dilutive effect of stock options and other

     288        120        275        138   
  

 

 

   

 

 

   

 

 

   

 

 

 
     319,981        319,023        319,872        318,934   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net earnings per share

   $ 0.46      $ 0.27      $ 0.80      $ 0.53   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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The following stock options were excluded from the computation of diluted net earnings per share because their effect would have been anti-dilutive (in thousands, except per share amounts):

 

     Three Months (13 Weeks) Ended      Six Months (26 Weeks) Ended  
     July 5, 2014      June 29, 2013      July 5, 2014      June 29, 2013  

Anti-dilutive stock options:

           

Weighted average shares

             546                 276   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average exercise price

   $       $ 44.51       $       $ 44.51   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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

Certain statements made in this quarterly report 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 cancellation 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 policy 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.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements included elsewhere in this report, as well as the audited consolidated financial statements, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Nucor’s Annual Report on Form 10-K for the year ended December 31, 2013.

Overview

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

Nucor reports its results in three segments: steel mills, steel products and raw materials. In the steel mills segment, Nucor produces sheet steel (hot and cold-rolled), 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 special bar quality). Nucor manufactures steel principally from scrap steel and scrap steel substitutes using electric arc furnaces, continuous casting and automated rolling mills. The steel mills segment also includes Nucor’s equity method investments in Duferdofin Nucor and NuMit, as well as Nucor’s steel trading businesses and rebar distribution businesses. 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, Nucor 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 certain equity method investments including our natural gas drilling working interests.

 

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We continue to be pleased with the progress of our new direct reduced iron plant in St. James Parish, Louisiana. The Louisiana DRI plant underwent a three week outage in the second quarter to implement adjustments that will improve yield and conversion costs. The Louisiana DRI plant has continued to exceed our volume expectations while producing excellent quality DRI units.

In March, a jury in the U.S. District Court for the Southern District of Texas returned a verdict of $52.0 million in damages against Nucor and five other co-defendants, jointly and severally, in an antitrust lawsuit brought by plaintiff MM Steel, LP, a steel plate service center located in Houston. The amount was trebled to $160.8 million (inclusive of costs and attorneys’ fees) under the federal antitrust laws in a judgment awarded by the court on June 1, 2014. Nucor has appealed the judgment to the U.S. Court of Appeals for the Fifth Circuit and believes that MM Steel, LP’s claims against Nucor are meritless and that Nucor acted entirely within its legal rights. Nucor believes that the likelihood that the judgment will be affirmed is not probable, and, accordingly, we have not recorded any reserves or contingencies related to this legal matter.

The average utilization rates of all operating facilities in the steel mills, steel products and raw materials segments were approximately 77%, 61% and 64%, respectively, in the first six months of 2014 compared with 73%, 56% and 61%, respectively, in the first six months of 2013.

Results of Operations

Net Sales Net sales to external customers by segment for the second quarter and first six months of 2014 and 2013 were as follows (in thousands):

 

     Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     July 5, 2014      June 29, 2013      % Change     July 5, 2014      June 29, 2013      % Change  

Steel mills

   $ 3,674,140       $ 3,197,433         15   $ 7,281,904       $ 6,465,587         13

Steel products

     1,035,923         937,104         11     1,910,092         1,726,451         11

Raw materials

     581,012         531,051         9     1,207,523         1,024,322         18
  

 

 

    

 

 

      

 

 

    

 

 

    

Net sales

   $ 5,291,075       $ 4,665,588         13   $ 10,399,519       $ 9,216,360         13
  

 

 

    

 

 

      

 

 

    

 

 

    

Net sales for the second quarter of 2014 increased 13% over the second quarter of 2013. Average sales price per ton increased 4% from $799 in the second quarter of 2013 to $831 in the second quarter of 2014, while total tons shipped to outside customers increased 9% over the same period last year.

Net sales for the first six months of 2014 increased 13% over the first six months of 2013. Average sales price per ton increased 4% from $798 in the first half of 2013 to $828 in the first half of 2014, while total tons shipped to outside customers increased 9% over last year.

In the steel mills segment, production and sales tons were as follows (in thousands):

 

     Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     July 5, 2014      June 29, 2013      % Change     July 5, 2014      June 29, 2013      % Change  

Steel production

     5,324         4,892         9     10,518         9,710         8
  

 

 

    

 

 

      

 

 

    

 

 

    

Outside steel shipments

     4,646         4,274         9     9,246         8,608         7

Inside steel shipments

     831         751         11     1,663         1,492         11
  

 

 

    

 

 

      

 

 

    

 

 

    

Total steel shipments

     5,477         5,025         9     10,909         10,100         8
  

 

 

    

 

 

      

 

 

    

 

 

    

Net sales for the steel mills segment increased 15% over the second quarter of 2013 due to a 6% increase in the average sales price per ton from $746 to $789, and a 9% increase in tons shipped to outside customers. Our sheet, bar, structural and plate products all experienced higher average sales

 

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prices in the second quarter of 2014 compared with the second quarter of 2013 due to stronger demand and new product offerings. Volumes for sheet products also increased during the second quarter in part due to supply disruptions at some of our domestic competitors. Steel mill sales were negatively impacted by a planned three week outage at Nucor-Yamato Steel related to a capital project that will expand its sheet piling production capabilities. The outage resulted in lower shipments for structural steel in the second quarter of 2014 as compared with the first quarter of 2014. Though average sales prices increased for the steel mills segment in the second quarter of 2014 compared to the second quarter of 2013, imports continued to apply downward pressure on pricing during the second quarter of 2014, preventing a larger increase in average sales prices from occurring. In its most recent monthly report, the Steel Import Monitoring and Analysis System reported a 31.8% increase in year-to-date 2014 U.S. imports of steel mill products from the same period in 2013.

The 13% increase in sales from the first half of 2014 to the first half of 2013 in the steel mills segment was attributable to the 7% increase in tons sold to outside customers and the 5% increase in average sales price per ton from $751 in the first half of 2013 to $786 in the first half of 2014.

Tonnage data for the steel products segment is as follows (in thousands):

 

     Three Months (13 weeks) Ended     Six Months (26 weeks) Ended  
     July 5, 2014      June 29, 2013      % Change     July 5, 2014      June 29, 2013      % Change  

Joist sales

     97         91         7     189         162         17

Deck sales

     101         83         22     188         152         24

Cold finish sales

     133         124         7     271         246         10

Fabricated concrete reinforcing steel sales

     321         280         15     560         508         10

The 11% increase in the steel products segment’s sales for the second quarter of 2014 over the second quarter of 2013 was due to an 11% increase in volume that was partially offset by a slight decrease in average sales price per ton from $1,374 to $1,367. The 11% increase in the steel products segment’s sales for the first half of the year was due to a 12% increase in volume partially offset by a 1% decrease in average sales price per ton from $1,377 to $1,358. The improvement in sales for the steel products segment in the second quarter and first half of 2014 compared with the same periods in the prior year is due to improving conditions in the nonresidential construction markets. Though conditions in the nonresidential constructions markets have improved, the improvements are from historically low levels. Sales for the steel products segment in the second quarter of 2014 increased from the first quarter of 2014 due to higher volumes resulting from improved weather conditions from the harsh conditions experienced in the first quarter of 2014.

The sales for the raw materials segment increased 9% from the second quarter of 2013 and 18% from the first half of 2013 primarily due to increased volumes at our natural gas drilling working interests and DJJ’s recycling and brokerage businesses. In the second quarter of 2014, approximately 79% of outside sales in the raw materials segment were from the brokerage operations of DJJ and approximately 12% of the outside sales were from the scrap processing facilities (83% and 14%, respectively, in the second quarter of 2013). In the first half of 2014, approximately 78% of outside sales for the raw materials segment were from the brokerage operations and approximately 14% of outside sales were from the scrap processing facilities of DJJ (84% and 13%, respectively, in the first half of 2013).

 

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Gross Margins For the second quarter of 2014 , Nucor recorded gross margins of $415.9 million (8%), compared with $313.1 million (7%) in the second quarter of 2013. The gross margin was impacted by a 4% increase in average sales price per ton and a 9% increase in tons shipped to outside customers, along with the following factors:

 

   

In the steel mills segment, the average scrap and scrap substitute cost per ton used increased 2% from $377 in the second quarter of 2013 to $384 in the second quarter of 2014; however, metal margin per ton also increased from the second quarter of 2013 due to the increase in average selling prices and volumes. The average scrap and scrap substitute cost per ton decreased 4% from $398 in the first quarter of 2014 to $384 in the second quarter of 2014; however, metal margins per ton also increased from the first quarter of 2014. Metal margin is the difference between the selling price of steel and the cost of scrap and scrap substitutes.

Scrap prices are driven by the global supply and demand for scrap and other iron based raw materials used to make steel. Scrap prices experienced a gradual decline during the second quarter of 2014 with low volatility. As we begin the third quarter, we expect continued low volatility in scrap prices.

 

   

Nucor’s gross margins can be significantly impacted by the application of the LIFO method of accounting. LIFO charges or credits for interim periods are based on management’s current estimates of both inventory costs and quantities at year-end. The actual amounts will likely differ from these estimated amounts, and such differences may be significant. Annual 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. No LIFO charge or credit was recorded for the second quarter of 2014 or 2013.

 

   

Gross margins in the steel products segment increased in the second quarter of 2014 over the second quarter of 2013 and first quarter of 2014 due in large part to the improving conditions in the nonresidential construction markets. Though conditions in the nonresidential construction markets are improving, the improvement is from historically low levels. Our deck, rebar, cold finish, and building systems operations experienced margin improvement in the second quarter of 2014 compared with the second quarter of 2013. Our joist, deck, rebar and building systems operations experienced margin improvement in the second quarter of 2014 compared with the first quarter of 2014.

 

   

Steel mill energy costs increased $1 per ton in the second quarter of 2014 over the second quarter of 2013 due to increased natural gas and electricity unit costs.

 

   

Our Nucor Steel Louisiana DRI facility experienced significant operational losses, including start-up costs of $19.4 million in the second quarter of 2014 compared with start-up costs of $5.4 million in the second quarter of 2013, which negatively impacted gross margins.

For the first half of 2014, Nucor recorded gross margins of $793.1 million (8%), compared to $616.3 million (7%) in the first half of 2013. The gross margin was impacted by a 4% increase in average sales price per ton and a 9% increase in shipments to external customers in the first six months of 2014 as compared to the first six months of 2013. Gross margins were also impacted by the following factors:

 

   

In the steel mills segment, the average scrap and scrap substitute cost per ton used increased 3% from $378 in the first half of 2013 to $391 in the first half of 2014; however, metal margins also increased.

 

   

Gross margins in the steel products segment increased in the first half of 2014 over the first half of 2013 for the reasons described above.

 

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Gross margins were negatively impacted by a $14.5 million and $18.0 million LIFO charge in the first half of 2014 and 2013, respectively.

 

   

Energy costs increased approximately $3 per ton in the first half of 2014 over the first half of 2013 due mainly to increased natural gas and electricity unit costs stemming from the harsh weather conditions in the first quarter of 2014 that drove up energy demand and costs.

 

   

The Nucor Steel Louisiana DRI facility experienced significant operational losses, including start-up costs of $40.1 million in the first half of 2014 compared with start-up costs of $9.2 million in the first half of 2013.

 

   

Within the raw materials segment, DJJ’s gross margins for the first half of 2014 improved significantly over the first half of 2013, particularly within DJJ’s recycling business. Third party sales volumes and margins have improved significantly year-over-year despite the impact of recent price declines in both ferrous and nonferrous markets.

Marketing, Administrative and Other Expenses The major component of marketing, administrative and other expenses is profit sharing and other incentive compensation costs. These costs, which are based upon and fluctuate with Nucor’s financial performance, increased $8.9 million in the second quarter of 2014 compared to the second quarter of 2013, and increased $14.9 million in the first half of 2014 compared to the first half of 2013, due to the increased profitability of the Company. Profit sharing and other incentive compensation costs increased $16.2 million in the second quarter of 2014 compared to the first quarter of 2014 due to the annual restricted stock unit grant and the stock option grant that occurred in the second quarter of 2014.

Included in marketing, administrative and other expenses in the first half of 2014 is a $9.0 million charge related to the disposal of assets within the steel mill segment (none in the first half of 2013).

Equity in Earnings of Unconsolidated Affiliates Equity method investment earnings, including amortization expense and other purchase accounting adjustments, were $3.2 million and $1.6 million in the second quarter of 2014 and 2013, respectively, and $7.7 million and $0.4 million in the first half of 2014 and 2013, respectively. The increase in the equity method investment earnings is primarily due to a decrease in losses at Duferdofin Nucor S.r.l. and higher equity method earnings at NuMit LLC during both the second quarter and the first half of 2014 compared with the respective prior year periods.

In the fourth quarter of 2013, Nucor assessed its equity investment in Duferdofin Nucor for impairment due to the protracted challenging steel market conditions in Europe. After completing its assessment, the Company determined that the estimated fair value exceeded its carrying amount and that there was no need for impairment. Steel market conditions in Europe have continued to be challenging through the first half of 2014, and, therefore, it is reasonably possible that material deviation of future performance from the estimates used in our most recent valuation could result in further impairment of our investment in Duferdofin Nucor. Nucor recorded a $30.0 million impairment charge against its investment in Duferdofin Nucor in the second quarter of 2012.

Interest Expense (Income) Net interest expense for the second quarter and first half of 2014 and 2013 was as follows (in thousands):

 

     Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     July 5, 2014     June 29, 2013     July 5, 2014     June 29, 2013  

Interest expense

   $ 45,878      $ 40,676      $ 87,771      $ 74,356   

Interest income

     (1,487     (1,448     (2,639     (2,637
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense, net

   $ 44,391      $ 39,228      $ 85,132      $ 71,719   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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In the second quarter of 2014, gross interest expense increased 13% from the second quarter of 2013 due to a 23% increase in average debt outstanding. Gross interest income increased 3% due mainly to increases in average investments outstanding.

In the first half of 2014, gross interest expense increased 18% from the first half of 2013 due to a 22% increase in average debt outstanding. Gross interest income remained flat between the first half of 2014 and 2013.

Earnings Before Income Taxes and Noncontrolling Interests Earnings before income taxes and noncontrolling interests by segment for the second quarter and first half of 2014 and 2013 were as follows (in thousands):

 

     Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     July 5, 2014     June 29, 2013     July 5, 2014     June 29, 2013  

Steel mills

   $ 368,138      $ 237,102      $ 685,935      $ 509,360   

Steel products

     42,612        32,073        44,332        20,149   

Raw materials

     (9,635     12,218        (1,276     13,754   

Corporate/eliminations

     (159,250     (129,061     (279,625     (237,603
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 241,865      $ 152,332      $ 449,366      $ 305,660   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes and noncontrolling interests in the steel mills segment for the second quarter and first six months of 2014 increased significantly from the second quarter and first six months of 2013 due to higher sales volume, higher average sales prices and higher metal margins resulting from factors discussed above. Our recent capital project expansions have allowed us to broaden our product offerings and market share, particularly in the special bar quality, cold rolled and galvanized sheet and plate steel products. These higher value product offerings benefited the profitability of the steel mills segment in the second quarter and first half of 2014. Structural steel shipments and earnings were negatively impacted by the planned three week outage at Nucor-Yamato Steel related to a capital project that will expand its sheet piling production capabilities. The improved results of the steel mills segment were achieved despite imports being at levels not seen since 2006. Earnings before income taxes and noncontrolling interests in the steel mills segment for the second quarter of 2014 increased from the first quarter of 2014 due to higher average sales prices, higher volumes and higher metal margins. Market conditions improved in the second quarter of 2014 as the weather conditions improved from the severe conditions experienced in the first quarter of 2014.

The profitability of the steel mills segment in the second quarter and first half of 2014 also benefited from improved results from the NuMit and Duferdofin Nucor equity method investments as compared with the respective prior year periods. Partially offsetting these factors were the increased energy costs and a $9.0 million charge related to the disposal of assets within the steel mills segment in the first half of 2014 (none in the first half of 2013).

In the steel products segment, earnings before income taxes and noncontrolling interests increased significantly from the second quarter and first half of 2013. Profitability at our deck, rebar, cold finish and building systems operations increased in the second quarter and first half of 2014 compared with the respective periods in the prior year. The steel products segment has benefited from the improving conditions in the nonresidential construction markets. Though conditions in the nonresidential construction markets are improving, the improvement is from historically low levels. Earnings before income taxes and noncontrolling interests in the steel products segment increased significantly from the first quarter of 2014 due to typical seasonality that occurs in the second quarter as improved weather conditions benefit nonresidential construction markets. This seasonality was exacerbated in the current year due to extreme weather conditions that were experienced in the first quarter of 2014.

 

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The decrease in profitability of our raw materials segment for the second quarter and first half of 2014 as compared to the second quarter and first half of 2013 is due primarily to increased operational losses, which included increased start-up costs, at our new Louisiana DRI facility. The Louisiana DRI plant underwent a three week outage in the second quarter to implement adjustments that will improve yield and conversion costs. Partially offsetting the losses at the Louisiana DRI plant was increased profitability from DJJ’s brokerage and scrap processing operations due to increased volumes and margin improvement, and increased profitability from our natural gas working interest drilling investment.

Noncontrolling Interests Noncontrolling interests represent the income attributable to the noncontrolling partners of Nucor’s joint ventures, primarily Nucor-Yamato Steel Company (NYS), of which Nucor owns 51%. The decrease in earnings attributable to noncontrolling interests in the second quarter of 2014 as compared to the second quarter of 2013 was primarily attributable to a planned three week outage this quarter associated with a capital project. The decrease in earnings attributable to noncontrolling interests in the first half of 2014 from the first half of 2013 is mainly the result of lower selling prices and margins in the first quarter of 2014 compared with the first quarter of 2013 and the planned three week outage mentioned above. Selling prices and margins at NYS in the second quarter of 2014 increased over both the first quarter of 2014 and the second quarter of 2013. Under the NYS limited partnership agreement, the minimum amount of cash to be distributed each year to the partners is the amount needed by each partner to pay applicable U.S. federal and state income taxes. In the first six months of 2013, the amount of cash distributed to noncontrolling interest holders exceeded the earnings attributable to noncontrolling interests based on mutual agreement of the general partners; however, the cumulative amount of cash distributed to partners was less than the cumulative net earnings of the partnership.

Provision for Income Taxes Nucor had an effective tax rate of 31.0% in the second quarter of 2014 compared with 30.2% in the second quarter of 2013. The expected rate for the full year of 2014 will be approximately 32.3% compared with 26.0% for the full year of 2013. The increase in the effective tax rate for the second quarter of 2014 as compared to the second quarter of 2013 is primarily due to the change in relative proportions of net earnings attributable to noncontrolling interests to total pre-tax earnings between the periods. The increase in the expected rate for the full year of 2014 as compared to the full year of 2013 is due to a charge of $12.8 million which is primarily related to tax legislation changes in the state of New York during the first quarter of 2014 and the $21.3 million favorable non-cash out-of-period adjustment to deferred tax balances in the fourth quarter of 2013.

We estimate that in the next twelve months our gross uncertain tax positions, which totaled $68.5 million at July 5, 2014 exclusive of interest, could decrease by as much as $12.2 million as a result of the expiration of the statute of limitations, substantially all of which would impact the effective tax rate.

The Internal Revenue Service (IRS) is currently examining Nucor’s 2012 federal income tax return. Management believes that the Company has adequately provided for any adjustments that may arise from this audit. Nucor has concluded U.S. federal income tax matters for years through 2009. The 2010, 2011, and 2013 tax years also are open to examination by the IRS. The tax years 2009 through 2013 remain open to examination by other major taxing jurisdictions to which Nucor is subject (primarily Canada and state and local jurisdictions).

Net Earnings Attributable to Nucor Stockholders and Return on Equity Nucor reported consolidated net earnings of $147.0 million, or $0.46 per diluted share, in the second quarter of 2014 compared with consolidated net earnings of $85.1 million, or $0.27 per diluted share, in the second quarter of 2013. Net earnings attributable to Nucor stockholders as a percentage of net sales were 3% and 2% in the second quarter of 2014 and 2013, respectively.

Nucor reported consolidated net earnings of $258.1 million, or $0.80 per diluted share, in the first half of 2014, compared to consolidated net earnings of $169.9 million, or $0.53 per diluted share, in the first half of 2013. Net earnings attributable to Nucor stockholders as a percentage of net sales was 2% in both the first half of 2014 and 2013. Return on average stockholders’ equity was approximately 7% and 4% in the first half of 2014 and 2013, respectively.

 

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Outlook We currently expect to see a stronger improvement in earnings for the third quarter of 2014. Although non-residential construction markets remain at historically low levels, they are improving at a moderate pace. We therefore expect further increased operating profits in our downstream products businesses. Steel mill profitability is also expected to improve in the third quarter of 2014 as our Nucor-Yamato Steel division has no planned outage and sheet and plate margins continue to benefit from positive pricing trends. We also expect improvement in the performance of the Louisiana DRI facility in the third quarter, with profitable performance anticipated by the end of the year.

Nucor’s largest exposure to market risk is via our steel mills and steel products segments. Our largest single customer in the first half of 2014 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.

Liquidity and capital resources

Cash provided by operating activities was $443.3 million in the first half of 2014, compared with cash provided by operating activities of $485.0 million in the first half of 2013. The year-over-year decrease is primarily due to changes in operating assets and liabilities, which were ($257.5) million in the first half of 2014 compared with ($81.6) million in the first half of 2013. The change in operating assets and liabilities was partially offset by higher net earnings which included increased levels of depreciation expense. The funding of our working capital increased over the prior year period due mainly to increases in accounts receivable and inventories and a decrease in accounts payable. Accounts receivable increased due to increased outside shipments in the second quarter of 2014 over the fourth quarter of 2013, as well as an increase in the sales price per ton during that same period. There was also an increase in cash used to purchase inventory during the first half of 2014 as inventory tons on hand increased approximately 3% from year-end 2013 to the end of the second quarter of 2014 resulting from improved customer demand. Cash used to purchase inventories decreased from year-end 2012 to the end of the second quarter of 2013 as inventory tons on hand decreased slightly and scrap cost per ton in ending inventory decreased. The decrease in cash used to fund accounts payable during the first half of 2014 is due to a significant decrease in accrued plant and equipment purchases and a decrease in scrap cost per ton in ending inventory from year-end 2013 to the end of the second quarter. Partially offsetting the net decrease in cash from changes in operating assets and liabilities was the $79.6 million increase in net earnings from the first half of 2013 to the first half of 2014. The higher net earnings included $68.0 million of additional depreciation expense over the first half of 2013. The increase in depreciation expense is primarily due to the completion of our DRI facility in Louisiana and additional assets related to our natural gas drilling working interests.

The current ratio was 3.2 at the end of the second quarter of 2014 and 3.3 at year-end 2013. Accounts receivable and inventories increased 14% and 5%, respectively, since year-end, while sales for the second quarter of 2014 increased by 8% from the fourth quarter of 2013. In the second quarter of 2014, total accounts receivable turned approximately every five weeks and inventories turned approximately every seven weeks, which is consistent with the second quarter of 2013 turnover. The current ratio was also impacted by a 23% decrease in cash and cash equivalents and short-term investments from year-end 2013. The decrease in cash and cash equivalents and short-term investments is primarily attributable to their use in capital project spending and the payment of dividends.

Cash used in investing activities increased $232.3 million over the prior year period. The largest factor contributing to the increase in cash used in investing activities was the net decrease of $330.6 million in proceeds from the sale of investments and restricted investments (net of purchases) and changes in restricted cash from 2013. Additionally, cash used to fund several small acquisitions was $38.5 million in the first half of 2014 compared with none in 2013. Partially offsetting those changes was a $174.5 million decrease in capital expenditures in large part due to the completion of our Louisiana DRI facility and reduced spending with our natural gas working interest drilling program.

 

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Cash used in financing activities decreased by $278.5 million from the first half of 2013 due primarily to the repayment of a $250.0 million note in June 2013.

Nucor’s conservative financial practices have served us well in the past and are serving us well today. Our cash and cash equivalents and short-term investments position remains strong at $1.17 billion as of July 5, 2014. Our $1.5 billion revolving credit facility is undrawn and does not expire until August 2018. We believe our financial strength is a key strategic advantage among domestic steel producers, particularly during recessionary business cycles. We carry the highest credit ratings of any metals and mining company in North America, with an A rating from Standard and 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.

Our credit facility includes only one financial covenant, which is a limit of 60% on the ratio of funded debt to total capitalization. In addition, the credit facility contains customary non-financial covenants, including a limit on Nucor’s ability to pledge the Company’s assets and a limit on consolidations, mergers and sales of assets. As of July 5, 2014, our funded debt to total capital ratio was 36%, and we were in compliance with all other covenants under our credit facility. No borrowings were outstanding under the credit facility as of July 5, 2014.

In challenging market conditions such as we are experiencing today, our financial strength allows a number of capital preservation options. Nucor’s robust capital investment and maintenance practices give us the flexibility to reduce spending by prioritizing our capital projects, potentially rescheduling certain projects, and selectively allocating capital to investments with the greatest impact on our long-term earnings power. Capital expenditures for 2014 are projected to be approximately $600 million compared to $1.2 billion in 2013. The decrease in projected 2014 capital expenditures is primarily due to decreased capital expenditures related to our DRI facility in Louisiana and the suspension of drilling new natural gas wells associated with our drilling program that was announced in the fourth quarter of 2013.

In June 2014, Nucor’s board of directors declared a quarterly cash dividend on Nucor’s common stock of $0.37 per share payable on August 11, 2014 to stockholders of record on June 30, 2014. This dividend is Nucor’s 165th consecutive quarterly cash dividend.

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Interest Rate Risk - Nucor manages interest rate risk by using a combination of variable-rate and fixed-rate debt. Nucor also occasionally makes use of interest rate swaps to manage net exposure to interest rate changes. Management does not believe that Nucor’s exposure to interest rate market risk has significantly changed since December 31, 2013. There were no interest rate swaps outstanding at July 5, 2014.

 

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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.

Natural gas produced by Nucor’s working interest drilling program is being sold to third parties to offset its exposure to changes in the price of gas consumed by its Louisiana DRI facility. In addition to its natural gas needs at the new DRI facility in Louisiana, Nucor is also a substantial consumer of natural gas at its steel mill operations. In future years, we expect that the natural gas produced through the drilling program will be sufficient to cover Nucor’s demand at all of its steel mills in the United States plus the demand of its two DRI plants or, alternatively, at three DRI plants, if additional capacity were to be added. 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 six months ended July 5, 2014, the volume of natural gas sold from our natural gas working interest drilling program was approximately 72% of the volume of natural gas purchased for consumption in our domestic steelmaking facilities and our DRI facility in Louisiana.

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 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. We believe 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 periodically uses derivative financial instruments to hedge a portion of our exposure to price risk related to natural gas purchases used in the production process and to hedge a portion of our scrap, aluminum and copper purchases and sales. Gains and losses from derivatives designated as hedges are deferred in accumulated other comprehensive (loss) income on the condensed consolidated balance sheets and recognized into earnings in the same period as the underlying physical transaction. At July 5, 2014, accumulated other comprehensive (loss) income included $1.4 million in unrealized net-of-tax losses for the fair value of these derivative instruments. Changes in the fair values of derivatives not designated as hedges are recognized in earnings each period. The following table presents the negative effect on pre-tax earnings of a hypothetical change in the fair value of derivative instruments outstanding at July 5, 2014, 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

   $ 455       $ 1,136   

Aluminum

     2,129         5,323   

Copper

     278         694   

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.

 

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Foreign Currency Risk – Nucor 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.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures – As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and 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 July 5, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On April 19, 2012, MM Steel LP filed an action against Nucor and five other co-defendants in the U.S. District Court for the Southern District of Texas and has asserted violations of federal antitrust law. On March 25, 2014, the jury returned a verdict of $52.0 million in damages against all defendants jointly and severally, which amount was subject to trebling under the federal antitrust laws. On June 1, 2014, the court awarded a judgment jointly and severally against the defendants totaling $160.8 million after trebling and including costs and attorneys’ fees. Although the Company has filed an appeal with the U.S. Court of Appeals for the Fifth Circuit, the ultimate resolution of the case is uncertain.

We are from time to time a party to various other lawsuits, claims and 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.

Item 1A. Risk Factors

There have been no material changes in Nucor’s risk factors from those included in Nucor’s Annual Report on Form 10-K for the year ended December 31, 2013.

 

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Item 6. Exhibits

 

Exhibit
No.

  

Description of Exhibit

10    Nucor Corporation Omnibus Incentive Compensation Plan (incorporated by reference to Appendix A of the Proxy Statement on Schedule 14A filed on March 25, 2014) (#)
  10.1    Form of Award Agreement for Annual Stock Option Grants (#)
  10.2    Employment Agreement of Chad Utermark (#)
12    Computation of Ratio of Earnings to Fixed Charges
31    Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  31.1    Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32    Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  32.1    Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101    Financial statements from the quarterly report on Form 10-Q of Nucor Corporation for the quarter ended July 5, 2014, filed on August 13, 2014, formatted in XBRL: (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements.

 

(#) Indicates a management contract or compensatory plan or arrangement.

SIGNATURES

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

 

NUCOR CORPORATION
By:   /s/ James D. Frias
 

James D. Frias

Chief Financial Officer, Treasurer

and Executive Vice President

Dated: August 13, 2014

 

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NUCOR CORPORATION

List of Exhibits to Form 10-Q – July 5, 2014

 

Exhibit
No.

  

Description of Exhibit

10    Nucor Corporation Omnibus Incentive Compensation Plan (incorporated by reference to Appendix A of the Proxy Statement on Schedule 14A filed on March 25, 2014) (#)
  10.1    Form of Award Agreement for Annual Stock Option Grants (#)
  10.2    Employment Agreement of Chad Utermark (#)
12    Computation of Ratio of Earnings to Fixed Charges
31    Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  31.1    Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32    Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  32.1    Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  101    Financial statements (unaudited) from the quarterly report on Form 10-Q of Nucor Corporation for the quarter ended July 5, 2014, filed on August 13, 2014, formatted in XBRL: (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements.

 

(#) Indicates a management contract or compensatory plan or arrangement.

 

34

EX-10.1

Exhibit 10.1

NOTICE OF GRANT

to

[                    ]

(“Grantee”)

by

NUCOR CORPORATION

of

 

 

Nonqualified Stock Options (“Options”)

each of which shall represent the right to purchase, when and as provided herein, one (1) share of Common Stock, par value $0.40, of Nucor Corporation at an Option Price of [                ] per share of Common Stock.

This grant shall be subject in all respects to the provisions of the Nucor Corporation 2014 Omnibus Incentive Compensation Plan and the terms and conditions set forth in the Nonqualified Stock Option Award Agreement attached hereto and incorporated herein by reference.

Unless vested earlier in accordance with Section 3 of the Nonqualified Stock Option Award Agreement, the Options shall become vested in and exercisable by the Grantee as follows, provided the Grantee has been continuously employed by the Company from the Grant Date until the date of vesting:

 

Percentage of Units Vested

 

Date of Vesting

100%   Third Anniversary of Grant Date

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

 

NUCOR CORPORATION
By:  

/s/ James D. Frias

Name:   James D. Frias
Title:   Executive Vice President, Treasurer & CFO
Grant Date: [                    ]
Expiration Date: [                    ]

 


NUCOR CORPORATION

2014 Omnibus Incentive Compensation Plan

Nonqualified Stock Option Award Agreement

This NONQUALIFIED STOCK OPTION AWARD AGREEMENT (this “Award Agreement”) is made and entered into as of the [                    ], by and between Nucor Corporation, a Delaware corporation (the “Company”), and the individual (the “Grantee”) identified in the accompanying Notice of Grant of Nonqualified Stock Options (the “Notice”).

TERMS AND CONDITIONS

1. Grant of Options. The Company hereby grants to the Grantee, subject to the restrictions and the other terms and conditions set forth in the Nucor Corporation 2014 Omnibus Incentive Compensation Plan (the “Plan”) and in this Award Agreement, the number of nonqualified stock options (the “Options”) set forth in the Notice, each of which shall represent the right to purchase, when and as provided herein, one (1) Common Share. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Plan.

2. Date of Grant, Expiration Date and Option Price. The Date of Grant, Expiration Date and Option Price of the Options are specified in the Notice.

3. Vesting of Options. The Options shall vest in and be exercisable by the Grantee on the earliest to occur of the following:

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

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

(c) A Change in Control of the Company.

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

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

 

Age

     65         64         63         62         61         60         59         58         57         56         55   

Years of Service

     -0-         2         4         6         8         10         12         14         16         18         20   

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

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

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

 


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

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

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

4. Exercise of Options.

(a) General. The Grantee may exercise the Options for all or any portion (in whole shares) of the Common Shares subject to the Options at any time after the Options become vested and exercisable as prescribed in Section 3. Except to the extent otherwise provided in Section 5, once the Options have become vested and exercisable in accordance with the preceding sentence, the Options shall continue to be exercisable until the earlier of the termination of Grantee’s rights hereunder pursuant to Section 5, or until the Expiration Date.

 

   2   


(b) Method of Exercise and Payment for Shares. This Option shall be exercised by written or electronic notice, in a form prescribed by the Company, delivered to the Company or its designee by mail, overnight delivery service, in person or via other means authorized by the Company. Such notice shall be accompanied by either (i) irrevocable instructions to a broker-dealer to sell or margin a sufficient portion of the shares as to which the Options are to be exercised and to deliver the sale or margin loan proceeds directly to the Company to pay the Option Price or (ii) payment in full of the Option Price in cash or cash equivalent acceptable to the Committee. The Grantee’s right to exercise the Options shall be conditioned upon and subject to satisfaction, in a manner acceptable to the Company, of any withholding tax liability under any state or federal law arising in connection with exercise of the Options.

5. Exercise Period.

(a) Normal Retirement, Death or Disability. In the event the Grantee’s employment with the Company and its Subsidiaries is terminated due to the Grantee’s Normal Retirement or Disability of the Grantee dies while employed by the Company or a Subsidiary, the vested Options may be exercised by the Grantee during the remainder of the period preceding the Expiration Date.

(b) Early Retirement. In the event the Grantee’s employment with the Company or a Subsidiary is terminated due to the Grantee’s Early Retirement, the vested Options may be exercised by the Grantee, or, in the case of the Grantee’s death, by the Grantee’s estate, or the person or persons to whom the Grantee’s rights under the Options shall pass by will or the laws of descent and distribution, until the date that is twelve (12) months after the date of such termination of employment or during the remainder of the period preceding the Expiration Date, whichever is shorter.

(b) Other Termination of Employment. In the event the Grantee’s employment with the Company and its Subsidiaries is terminated by the Company without Cause or by the Grantee’s resignation for any reason other than the Grantee’s death, Disability, Early Retirement or Normal Retirement, the vested Options may be exercised by the Grantee until the date that is three (3) months after the date of such termination of employment or during the remainder of the period preceding the Expiration Date, whichever is shorter.

(c) Termination for Cause. All of the Options (whether vested or unvested) shall immediately terminate on the date the Grantee’s employment with the Company and all Subsidiaries is terminated for Cause, and none of the Options shall be exercisable thereafter.

(d) Definitions. The following terms shall have the meanings set forth herein:

(i) “Cause” means “Cause” as defined in any employment agreement between the Grantee and the Company or, if there is no such employment agreement, (A) theft, fraud, dishonesty or gross and willful misconduct by the Grantee that is demonstrably and materially injurious to the Company, whether monetarily or otherwise, or (B) the Grantee’s failure to comply with the policies, standards, regulations or directives from Company’s Board of Directors as issued from time to time, which is not corrected within ten (10) days of notice by Company to Grantee regarding such alleged failure to comply.

(ii) “Early Retirement” means the Grantee’s Retirement (as defined in Section 3 above) prior to the date the Grantee has attained age sixty-three (63) and completed ten (10) years of service.

(iii) “Normal Retirement” means the Grantee’s Retirement (as defined in Section 3 above) on or after the date the Grantee has attained age sixty-three (63) and completed ten (10) years of service.

 

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6. Limitation of Rights. The Options do not confer upon the Grantee, or the Grantee’s estate in the event of the Grantee’s death, any rights as a stockholder of the Company unless and until the Options are exercised and Common Shares are purchased by such person in respect of the Options. Nothing in this Award Agreement shall interfere with or limit in any way the right of the Company to terminate the Grantee’s service at any time, nor confer upon the Grantee any right to continue in the service of the Company.

7. Restrictions on Transfer and Pledge. No right or interest of the Grantee in the Options may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary, or shall be subject to any lien, obligation, or liability of the Grantee to any other party other than the Company or a Subsidiary. The Options may not be assigned, pledged or otherwise transferred by the Grantee other than by will or the laws of descent and distribution. During the lifetime of the Grantee, the Options may be exercised or surrendered only by the Grantee.

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

9. Amendment. The Company may amend or terminate this Award Agreement without the consent of the Grantee; provided, however, that such amendment or termination shall not, without the Grantee’s consent, reduce or diminish the value of this award determined as if it had been fully vested on the date of such amendment or termination.

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

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

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

Nucor Corporation

1915 Rexford Road

Charlotte, North Carolina 28211

Attn: Corporate Secretary

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

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

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

 

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EX-10.2

Exhibit 10.2

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into between NUCOR CORPORATION, a Delaware corporation with its principal place of business in Charlotte, North Carolina, on behalf of itself and each of its affiliates and subsidiaries (all such entities, collectively, “Nucor”), and CHAD UTERMARK (“Executive”), a resident of Arkansas as of the date hereof, but who will be relocating to the Charlotte, North Carolina area pursuant to the performance of his duties following his promotion discussed herein.

WHEREAS, Executive has heretofore been employed at Nucor Corporation’s Nucor-Yamato Steel Company subsidiary as an at-will employee of Nucor in the position of Vice President of Nucor Corporation and General Manager of Nucor-Yamato Steel Company (the “Prior Position”); and

WHEREAS, Nucor has offered Executive a promotion to the position of Executive Vice President of Beam and Plate Products effective May 11, 2014, contingent upon Executive’s execution of this Agreement, and Executive has accepted the promotion; and

WHEREAS, Nucor Corporation’s Board of Directors (the “Board”) has approved Executive’s promotion to the position of Executive Vice President of Beam and Plate Products contingent upon Executive’s execution of this Agreement; and

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

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

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

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

NOW, THEREFORE, in consideration for the promises and mutual agreements contained herein, the parties agree, effective as of May 11, 2014, as follows:

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

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

(a) Nucor will pay Executive a base salary of Three Hundred Forty Four Thousand Five Hundred Dollars ($344,500) per year, paid not less frequently than monthly in accordance


with Nucor’s normal payroll practices, subject to withholding by Nucor and other deductions as required by law. The parties acknowledge and agree that this amount exceeds the base salary Executive was entitled to receive in the Prior Position. Executive’s base salary is subject to adjustment up or down by the Board at its sole discretion and without notice to Executive.

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

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

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

3. Compensation Following Termination.

(a) From the date of Executive’s termination of employment with Nucor, whether by Executive or Nucor for any or no reason, and provided that (i) Executive executes and returns to Nucor a separation and release agreement in form and substance satisfactory to Nucor, in its sole discretion, releasing any and all claims Executive has or may have against Nucor at the time of his termination of employment from Nucor, (ii) Executive is employed as an Executive Vice President of Nucor at the time of Executive’s termination of employment with Nucor, and (iii), except in the event Executive’s employment with Nucor is terminated in accordance with applicable laws, rules and regulations due to Executive’s disability, Executive is at least fifty eight (58) years of age and has served as an Executive Vice President of Nucor for at least five (5) consecutive years at the time of Executive’s termination of employment with Nucor (the “Monthly Payment Requirements”), Nucor will pay Executive the Monthly Amount (as defined below) for twenty-four (24) months following Executive’s termination. Nucor shall have no obligation to make any payments of the Monthly Amount if, at the time of Executive’s termination of employment with Nucor, all of the Monthly Payment Requirements are not satisfied. The “Monthly Amount” shall be an amount equal to (i) the product of (A) the amount of Executive’s highest base salary level during the twelve (12) month period immediately prior to his date of termination, multiplied by (B) 3.36, (ii) divided by twelve (12). Subject to the provisions of Section 24 of this Agreement, the payments of any Monthly Amount due shall be made at the end of each month following Executive’s termination of employment with Nucor on Nucor’s regular monthly payroll date.

(b) In exchange for Nucor’s agreement to pay the Monthly Amount as set forth in this Section 3, and other good and valuable consideration, including without limitation the compensation and benefits set forth in Section 2 of this Agreement, Executive agrees to strictly abide by the terms of Sections 8 through 13 of this Agreement.

(c) If Executive is employed by Nucor at the time of Executive’s death, Nucor’s obligations to make any payments of the Monthly Amount under this Agreement will automatically terminate and Executive’s estate and executors will have no rights to any payments of the Monthly Amount under this Agreement. If Executive dies during the first twelve (12) months following Executive’s termination from employment with Nucor, then Nucor will pay

 

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Executive’s estate the payments of the Monthly Amount due pursuant to Section 3(a) of this Agreement through the end of the twelfth (12th) month following Executive’s termination from employment with Nucor. If Executive dies twelve (12) or more months after termination of Executive’s employment with Nucor, then Nucor’s obligations to make any payments of the Monthly Amount under Section 3(a) of this Agreement will automatically terminate without the necessity of Nucor providing notice, written or otherwise.

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

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

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

6. Change in Executive’s Position. In the event that Nucor transfers, demotes, promotes, or otherwise changes Executive’s compensation or position with Nucor, the restrictions and post-termination obligations set forth in Sections 8 through 13 of this Agreement shall remain in full force and effect.

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

 

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8. Covenant Regarding Nucor’s Secret Information. Executive recognizes and agrees that he will have continued access to certain sensitive and confidential information of Nucor (a) that is not generally known in the steel business, which would be difficult for others to acquire or duplicate without improper means, (b) that Nucor strives to keep secret, and (c) from which Nucor derives substantial commercial benefit because of the fact that it is not generally known (the “Secret Information”), including without limitation: (i) Nucor’s process of developing and producing raw material, and designing and manufacturing steel and iron products; (ii) Nucor’s process for treating, processing or fabricating steel and iron products; (iii) Nucor’s non-public financial data, strategic business plans, competitor analysis, sales and marketing data, and proprietary margin, pricing, and cost data; and (iv) any other information or data which meets the definition of “trade secrets” under the North Carolina Trade Secrets Protection Act. Executive agrees that unless he is expressly authorized by Nucor in writing, Executive will not use or disclose or allow to be used or disclosed Nucor’s Secret Information. This covenant shall survive until the Secret Information is generally known in the industry through no act or omission of the Executive or until Nucor knowingly authorizes the disclosure of or discloses the Secret Information, without any limitations on use or confidentiality. Executive acknowledges that he did not have knowledge of Nucor’s Secret Information prior to his employment with Nucor and that the Secret Information does not include Executive’s general skills and know-how.

9. Agreement to Maintain Confidentiality.

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

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

 

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

10. Noncompetition.

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

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

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

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

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

(b) For purposes of this Agreement:

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

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

 

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(B) The United States, Canada, Mexico, Guatemala, Honduras, the Dominican Republic, Costa Rica, Colombia, Argentina and Brazil, where Executive acknowledges Nucor engages in the Business, but if such territory is deemed overbroad by a court of law, then;

(C) 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;

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

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

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

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

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

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

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

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

 

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

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

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

(c) Executive specifically agrees that the post-termination obligations and restrictions in this Section 10 and in Sections 8, 9, 11, 12 and 13 will apply to Executive regardless of whether termination of employment is initiated by Nucor or Executive and regardless of the reason for termination of Executive’s employment. Further, Executive acknowledges and agrees that Nucor’ s payments of the compensation described in Section 3, as well as any payments under the Severance Plan, are intended to compensate Executive for the limitations on Executive’s competitive activities described in this Section 10 and Sections 11 and 12 for the Restrictive Period regardless of the reason for termination. Thus, for example, in the event that Nucor terminates Executive’s employment without cause, Executive expressly agrees that the obligations and restrictions in this Section 10 and Sections 8, 9, 11, 12 and 13 will apply to Executive notwithstanding the reasons or motivations of Nucor in terminating Executive’s employment.

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

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

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

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

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

12. Antipiracy.

(a) Executive agrees for the duration of the Restrictive Period, Executive will not,

 

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directly or indirectly, encourage, contact, or attempt to induce any employees of Nucor (i) with whom Executive had regular contact with at or immediately prior to the time of Executive’s last date of full time employment with Nucor, and (ii) who are employed by Nucor at the time of the encouragement, contact or attempted inducement, to end their employment relationship with Nucor.

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

13. Assignment of Intellectual Property Rights.

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

(b) The assignment requirement in Section 13(a) shall not apply to an invention that Executive developed entirely on his own time without using Nucor’s equipment, supplies, facilities or Secret Information or Confidential Information except for those inventions that (i) relate to Nucor’s business or actual or demonstrably anticipated research or development, or (ii) result from any work performed by Executive for Nucor.

(c) In connection with any of the Developments assigned pursuant to Section 13(a): (i) Executive will promptly disclose them to Nucor’s management; and (ii) Executive will, on Nucor’s request, promptly execute a specific assignment of title to Nucor or its designee, and do anything else reasonably necessary to enable Nucor or its designee to secure a patent, copyright, or other form of protection therefore in the United States and in any other applicable country.

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

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

15. Enforcement. Executive understands and agrees that any breach or threatened breach by Executive of any of the provisions of Sections 8 through 13 of this Agreement shall be considered a material breach of this Agreement, and in the event of such a breach or threatened breach of this Agreement, Nucor shall be entitled to pursue any and all of its remedies under law or in equity arising out of such breach. If Nucor pursues either a temporary restraining order or temporary injunctive relief, then

 

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Executive agrees to expedited discovery with respect thereto and waives any requirement that Nucor post a bond. Executive further agrees that in the event of his breach of any of the provisions of Sections 8 through 13 of this Agreement, unless otherwise prohibited by law:

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

(b) Executive shall (i) forfeit any (A) unexercised Post-Agreement Date Option Grants and (B) any shares of restricted stock or restricted stock units granted under any senior officer equity incentive compensation plan that vested during the six (6) month period immediately preceding Executive’s termination of employment (the “Vested Stock”) and (ii) forfeit and immediately return upon demand by Nucor any profit realized by Executive from the exercise of any Post-Agreement Date Option Grants or sale or exchange of any Vested Stock during the six (6) month period preceding Executive’s breach of any of the provisions of Sections 8 through 13 of this Agreement.

Executive agrees that any breach or threatened breach of any of the provisions of Sections 8 through 13 will cause Nucor irreparable harm which cannot be remedied through monetary damages and the alternative relief set forth in Sections 15(a) and (b) shall not be considered an adequate remedy for the harm Nucor would incur. Executive further agrees that such remedies in Sections 15(a) and (b) will not preclude injunctive relief.

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

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

16. Reasonableness of Restrictions. Executive has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon Nucor under Sections 8, 9, 10, 11, 12, 13 and 15 and hereby acknowledges and agrees that the same are reasonable in time and territory, are designed to eliminate competition which would otherwise be unfair to Nucor, do not interfere with Executive’s exercise of his inherent skill and experience, are reasonably required to protect the legitimate interests of Nucor, and do not confer a benefit upon Nucor disproportionate to the detriment to Executive. Executive certifies that he has had the opportunity to discuss this Agreement with such legal advisors as he chooses and that he understands its provisions and has entered into this Agreement freely and voluntarily.

 

9


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

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

19. Entire Agreement; Amendments. This Agreement discharges and cancels all previous agreements regarding Executive’s employment with Nucor, including without limitation that certain Executive Agreement by and between Nucor Corporation and Executive dated as of March 27, 2009, and constitutes the entire agreement between the parties with regard to the subject matter hereof. No agreements, representations, or statements of any party not contained herein shall be binding on either party. Further, no amendment or variation of the terms or conditions of this Agreement shall be valid unless in writing and signed by both parties.

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

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

22. No Waiver. No failure or delay by any party to this Agreement to enforce any right specified in this Agreement will operate as a waiver of such right, nor will any single or partial exercise of a right preclude any further or later enforcement of the right within the period of the applicable statute of limitations. No waiver of any provision hereof shall be effective unless such waiver is set forth in a written instrument executed by the party waiving compliance.

 

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

24. Compliance with Code Section 409A. Notwithstanding anything in this Agreement to the contrary, if (a) Executive is a “specified employee” under Section 409A(a)(2)(B)(i) of the Internal Revenue Code of 1986 (the “Code”) as of the date of his separation from service and (b) any amount or benefit that Nucor determines would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code would otherwise be payable or distributable under this Agreement by reason of Executive’s separation from service, then to the extent necessary to comply with Code Section 409A: (i) if the payment or distribution is payable in a lump sum, Executive’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of Executive’s death or the seventh month following Executive’s separation from service, and (ii) if the payment, distribution or benefit is payable or provided over time, the amount of such non-exempt deferred compensation or benefit that would otherwise be payable or provided during the six (6) month period immediately following Executive’s separation from service will be accumulated, and Executive’s right to receive payment or distribution of such accumulated amount or benefit will be delayed until the earlier of Executive’s death or the seventh month following Executive’s separation from service and paid or provided on the earlier of such dates, without interest, and the normal payment or distribution schedule for any remaining payments, distributions or benefits will commence.

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

[Signatures Appear on Following Page]

 

11


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

 

EXECUTIVE
LOGO
Chad Utermark
Date: 5/12/14
NUCOR CORPORATION
LOGO
John J. Ferriola
Chairman, Chief Executive Officer and President
Date: 5/12/14
EX-12

Exhibit 12

Nucor Corporation

2014 Form 10-Q

 

     Computation of Ratio of Earnings to Fixed Charges              
     Year-ended December 31,     Six Months
Ended
    Six Months
Ended
 
                                   July 5,     June 29,  
     2009     2010     2011     2012     2013     2014     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      $ 449,366      $ 305,660   

Plus: (earnings)/losses from equity investments

     82,341        32,082        10,043        13,323        (9,297     (7,676     (413

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        91,027        76,297   

Plus: amortization of capitalized interest

     962        2,332        2,724        2,550        3,064        2,198        1,468   

Plus: distributed income of equity investees

     7,373        4,923        3,883        9,946        8,708        11,504        7,708   

Less: interest capitalized

     (16,390     (940     (3,509     (4,715     (10,913     (2,638     (1,407

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     (38,559     (47,064
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total earnings/(loss) before fixed charges

   $ (229,240   $ 396,028      $ 1,364,903      $ 964,706      $ 849,309      $ 505,222      $ 342,249   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed charges

              

Interest cost and amortization of bond issuance and settled swaps

   $ 166,313      $ 162,213      $ 182,321      $ 178,218      $ 162,899      $ 90,408      $ 75,763   

Estimated interest on rent expense

     2,004        1,413        1,220        951        1,229        619        534   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed charges

   $ 168,317      $ 163,626      $ 183,541      $ 179,169      $ 164,128      $ 91,027      $ 76,297   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratio of earnings to fixed charges

     *        2.42        7.44        5.38        5.17        5.55        4.49   

 

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

Exhibit 31

Certification of Principal Executive Officer

Pursuant to Rule 13a-14(a)/15d-14(a)

(Section 302 of the Sarbanes-Oxley Act of 2002)

I, John J. Ferriola, certify that:

 

  1. I have reviewed this quarterly report on Form 10-Q of Nucor Corporation;

 

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

 

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

 

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

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

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

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

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

 

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

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

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

 

Date: August 13, 2014      

/s/ John J. Ferriola

      John J. Ferriola
      Chairman, Chief Executive Officer and President
EX-31.1

Exhibit 31.1

Certification of Principal Financial Officer

Pursuant to Rule 13a-14(a)/15d-14(a)

(Section 302 of the Sarbanes-Oxley Act of 2002)

I, James D. Frias, certify that:

 

  1. I have reviewed this quarterly report on Form 10-Q of Nucor Corporation;

 

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

 

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

 

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

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

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

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

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

 

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

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

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

 

Date: August 13, 2014      

/s/ James D. Frias

      James D. Frias
      Chief Financial Officer, Treasurer
and Executive Vice President
EX-32

Exhibit 32

Certification of Principal Executive Officer

Pursuant to 18 U.S.C. 1350

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

I, John J. Ferriola, Chairman, Chief Executive Officer and President (principal executive officer) of Nucor Corporation (the “Registrant”), certify, to my knowledge, based upon a review of the Quarterly Report on Form 10-Q for the period ended July 5, 2014 of the Registrant (the “Report”), that:

 

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

 

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

 

/s/ John J. Ferriola

Name: John J. Ferriola
Date: August 13, 2014
EX-32.1

Exhibit 32.1

Certification of Principal Financial Officer

Pursuant to 18 U.S.C. 1350

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

I, James D. Frias, Chief Financial Officer, Treasurer and Executive Vice President (principal financial officer) of Nucor Corporation (the “Registrant”), certify, to my knowledge, based upon a review of the Quarterly Report on Form 10-Q for the period ended July 5, 2014 of the Registrant (the “Report”), that:

 

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

 

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

 

/s/ James D. Frias

Name: James D. Frias
Date: August 13, 2014