Table of Contents

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 October 4, 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

318,999,937 shares of common stock were outstanding at October 4, 2014.


Table of Contents

Nucor Corporation

Form 10-Q

October 4, 2014

INDEX

 

               Page  

Part I

  

Financial Information

  
  

Item 1

  

Financial Statements (Unaudited)

  
     

Condensed Consolidated Statements of Earnings -
Three Months (13 Weeks) and Nine Months (39 Weeks) Ended October 4, 2014 and September 28, 2013

     3   
     

Condensed Consolidated Statements of Comprehensive Income -
Three Months (13 Weeks) and Nine Months (39 Weeks) Ended October 4, 2014 and September 28, 2013

     4   
     

Condensed Consolidated Balance Sheets -
October 4, 2014 and December 31, 2013

     5   
     

Condensed Consolidated Statements of Cash Flows -
Nine Months (39 Weeks) Ended October  4, 2014 and September 28, 2013

     6   
     

Notes to Condensed Consolidated Financial Statements

     7   
  

Item 2

  

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

     23   
  

Item 3

  

Quantitative and Qualitative Disclosures About Market Risk

     32   
  

Item 4

  

Controls and Procedures

     34   

Part II

  

Other Information

  
  

Item 1

  

Legal Proceedings

     34   
  

Item 1A

  

Risk Factors

     34   
  

Item 6

  

Exhibits

     35   

Signatures

     35   

List of Exhibits to Form 10-Q

     36   

 

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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     Nine Months (39 Weeks) Ended  
     Oct. 4, 2014     Sept. 28, 2013     Oct. 4, 2014     Sept. 28, 2013  

Net sales

   $ 5,701,869      $ 4,940,936      $ 16,101,388      $ 14,157,296   
  

 

 

   

 

 

   

 

 

   

 

 

 

Costs, expenses and other:

        

Cost of products sold

     5,102,283        4,532,393        14,708,733        13,132,412   

Marketing, administrative and other expenses

     152,604        125,126        418,851        364,501   

Equity in earnings of unconsolidated affiliates

     (2,352     (2,252     (10,028     (2,665

Interest expense, net

     45,349        37,467        130,481        109,186   
  

 

 

   

 

 

   

 

 

   

 

 

 
     5,297,884        4,692,734        15,248,037        13,603,434   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes and noncontrolling interests

     403,985        248,202        853,351        553,862   

Provision for income taxes

     129,784        70,087        282,519        158,749   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

     274,201        178,115        570,832        395,113   

Earnings attributable to noncontrolling interests

     28,754        30,518        67,313        77,582   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings attributable to Nucor stockholders

   $ 245,447      $ 147,597      $ 503,519      $ 317,531   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings per share:

        

Basic

   $ 0.76      $ 0.46      $ 1.57      $ 0.99   

Diluted

   $ 0.76      $ 0.46      $ 1.57      $ 0.99   

Average shares outstanding:

        

Basic

     320,023        319,341        319,737        318,979   

Diluted

     320,337        319,526        320,025        319,132   

Dividends declared per share

   $ 0.37      $ 0.3675      $ 1.11      $ 1.1025   

See notes to condensed consolidated financial statements.

 

 

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Nucor Corporation Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

 

     Three Months (13 Weeks) Ended     Nine Months (39 Weeks) Ended  
     Oct. 4, 2014     Sept. 28, 2013     Oct. 4, 2014     Sept. 28, 2013  

Net earnings

   $ 274,201      $ 178,115      $ 570,832      $ 395,113   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss):

        

Net unrealized gain (loss) on hedging derivatives, net of income taxes of $100 and $0 for the third quarter of 2014 and 2013, respectively, and ($900) and $0 for the first nine months of 2014 and 2013, respectively

     103               (1,530       

Reclassification adjustment for loss on settlement of hedging derivatives included in net income, net of income taxes of $100 and $0 for the third quarter of 2014 and 2013, respectively, and $200 and $0 for the first nine months of 2014 and 2013, respectively

     197               430          

Foreign currency translation (loss) gain, net of income taxes of $0 and $500 for the third quarter of 2014 and 2013, respectively, and ($400) and $300 for the first nine months of 2014 and 2013, respectively

     (81,689     31,879        (93,321     (34,216
  

 

 

   

 

 

   

 

 

   

 

 

 
     (81,389     31,879        (94,421     (34,216
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     192,812        209,994        476,411        360,897   

Comprehensive income attributable to noncontrolling interests

     (28,754     (30,518     (67,313     (77,582
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to Nucor stockholders

   $ 164,058      $ 179,476      $ 409,098      $ 283,315   
  

 

 

   

 

 

   

 

 

   

 

 

 

See notes to condensed consolidated financial statements.

 

 

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Nucor Corporation Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

 

     Oct. 4, 2014     Dec. 31, 2013  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 1,295,945      $ 1,483,252   

Short-term investments

     100,000        28,191   

Accounts receivable, net

     2,243,908        1,810,987   

Inventories, net

     2,683,235        2,605,609   

Other current assets

     473,156        482,007   
  

 

 

   

 

 

 

Total current assets

     6,796,244        6,410,046   

Property, plant and equipment, net

     4,884,010        4,917,024   

Goodwill

     1,982,776        1,973,608   

Other intangible assets, net

     819,078        874,154   

Other assets

     1,011,486        1,028,451   
  

 

 

   

 

 

 

Total assets

   $ 15,493,594      $ 15,203,283   
  

 

 

   

 

 

 

LIABILITIES

    

Current liabilities:

    

Short-term debt

   $ 41,101      $ 29,202   

Long-term debt due within one year

     16,300        3,300   

Accounts payable

     1,113,284        1,117,078   

Federal income taxes payable

     65,096          

Salaries, wages and related accruals

     341,875        282,860   

Accrued expenses and other current liabilities

     578,840        527,776   
  

 

 

   

 

 

 

Total current liabilities

     2,156,496        1,960,216   

Long-term debt due after one year

     4,360,600        4,376,900   

Deferred credits and other liabilities

     960,795        955,889   
  

 

 

   

 

 

 

Total liabilities

     7,477,891        7,293,005   
  

 

 

   

 

 

 

EQUITY

    

Nucor stockholders’ equity:

    

Common stock

     151,227        151,010   

Additional paid-in capital

     1,876,728        1,843,353   

Retained earnings

     7,287,500        7,140,440   

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

     (85,341     9,080   

Treasury stock

     (1,494,832     (1,498,114
  

 

 

   

 

 

 

Total Nucor stockholders’ equity

     7,735,282        7,645,769   

Noncontrolling interests

     280,421        264,509   
  

 

 

   

 

 

 

Total equity

     8,015,703        7,910,278   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 15,493,594      $ 15,203,283   
  

 

 

   

 

 

 

See notes to condensed consolidated financial statements.

 

 

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Nucor Corporation Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

     Nine Months (39 Weeks) Ended  
     Oct. 4, 2014     Sept. 28, 2013  

Operating activities:

    

Net earnings

   $ 570,832      $ 395,113   

Adjustments:

    

Depreciation

     486,684        390,495   

Amortization

     54,127        56,051   

Stock-based compensation

     40,325        40,551   

Deferred income taxes

     (43,712     10,881   

Distributions from affiliates

     11,504        7,708   

Equity in earnings of unconsolidated affiliates

     (10,028     (2,665

Loss on assets

     21,546        14,000   

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

    

Accounts receivable

     (418,353     (204,540

Inventories

     (80,975     (129,280

Accounts payable

     84,161        122,520   

Federal income taxes

     94,999        70,210   

Salaries, wages and related accruals

     65,027        12,796   

Other operating activities

     49,426        99,800   
  

 

 

   

 

 

 

Cash provided by operating activities

     925,563        883,640   
  

 

 

   

 

 

 

Investing activities:

    

Capital expenditures

     (557,249     (887,929

Investment in and advances to affiliates

     (94,128     (64,762

Repayment of advances to affiliates

     26,500        42,000   

Disposition of plant and equipment

     18,748        29,328   

Acquisitions (net of cash acquired)

     (38,466       

Purchases of investments

     (100,000     (19,349

Proceeds from the sale of investments

     27,529        73,428   

Proceeds from the sale of restricted investments

            148,725   

Changes in restricted cash

            126,045   

Other investing activities

            4,862   
  

 

 

   

 

 

 

Cash used in investing activities

     (717,066     (547,652
  

 

 

   

 

 

 

Financing activities:

    

Net change in short-term debt

     11,900        8,331   

Proceeds from long-term debt, net of discount

            999,100   

Repayment of long-term debt

     (3,300     (250,000

Bond issuance costs

            (7,625

Issuance of common stock

     4,465          

Excess tax benefits from stock-based compensation

     3,200        2,100   

Distributions to noncontrolling interests

     (51,401     (63,318

Cash dividends

     (356,230     (353,155

Other financing activities

     (1,651     110   
  

 

 

   

 

 

 

Cash (used in) provided by financing activities

     (393,017     335,543   
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     (2,787     (1,484
  

 

 

   

 

 

 

(Decrease) increase in cash and cash equivalents

     (187,307     670,047   

Cash and cash equivalents - beginning of year

     1,483,252        1,052,862   
  

 

 

   

 

 

 

Cash and cash equivalents - end of nine months

   $ 1,295,945      $ 1,722,909   
  

 

 

   

 

 

 

Non-cash investing activity:

    

Change in accrued plant and equipment purchases

   $ (98,050   $ (30,416
  

 

 

   

 

 

 

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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In August 2014, new accounting guidance was issued that specifies the responsibility that an entity’s management has to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern. The standard is effective for interim and annual periods beginning after December 15, 2016, and is not expected to have an effect on the Company’s financial statements.

 

2. ACCOUNTS RECEIVABLE: An allowance for doubtful accounts is maintained for estimated losses resulting from the inability of our customers to make required payments. Accounts receivable are stated net of an allowance for doubtful accounts of $62.1 million at October 4, 2014 ($58.3 million at December 31, 2013).

 

3. INVENTORIES: Inventories consisted of approximately 40% raw materials and supplies and 60% finished and semi-finished products at October 4, 2014 and 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 46% of total inventories as of October 4, 2014 (45% as of December 31, 2013). If the first-in, first-out (FIFO) method of accounting had been used, inventories would have been $624.7 million higher at both October 4, 2014 and December 31, 2013. Use of the lower of cost or market methodology reduced inventories by $2.6 million at October 4, 2014 ($2.1 million at December 31, 2013).

 

4. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is recorded net of accumulated depreciation of $7.07 billion at October 4, 2014 ($6.63 billion at December 31, 2013).

Included within property, plant and equipment, net at October 4, 2014 is $23.5 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 $23.7 million at October 4, 2014 (none at December 31, 2013), of which $2.2 million was classified in accrued expenses and other current liabilities and $21.5 million was classified in deferred credits and other liabilities.

In the third quarter of 2013, one of three iron ore 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. The two remaining storage domes have a carrying value of approximately $21 million. Nucor continues to assess these two domes and the assets associated with them. As a result of the ongoing assessment, it is possible that Nucor will make operational decisions that could impact the carrying value of the domes and associated assets and the amount of insurance proceeds received.

 

5. RESTRICTED CASH AND INVESTMENTS: There were no restricted cash or investments as of October 4, 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 $274.9 million being disbursed in the first nine months of 2013. The remaining funds were disbursed over the remainder of 2013.

 

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6. GOODWILL AND OTHER INTANGIBLE ASSETS: The change in the net carrying amount of goodwill for the nine months ended October 4, 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   

Other

             311        26,352         26,663   

Translation

             (17,495             (17,495
  

 

 

    

 

 

   

 

 

    

 

 

 

Balance at October 4, 2014

   $ 495,897       $ 757,302      $ 729,577       $ 1,982,776   
  

 

 

    

 

 

   

 

 

    

 

 

 

Goodwill increased by $26.4 million in the third quarter of 2014 due to a correction of deferred taxes related to purchase accounting for the acquisition of The David J. Joseph Company in 2008. This correction did not have an impact on the condensed consolidated statements of earnings, condensed consolidated statements of comprehensive income and the condensed consolidated statements of cash flows in the periods presented and in prior years. Also, this correction had no impact on the results of the goodwill impairment assessments performed in prior periods.

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.

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):

 

     Oct. 4, 2014      Dec. 31, 2013  
     Gross
Amount
     Accumulated
Amortization
     Gross
Amount
     Accumulated
Amortization
 

Customer relationships

   $ 1,146,859       $ 438,649       $ 1,147,786       $ 391,254   

Trademarks and trade names

     150,355         46,100         151,332         40,397   

Other

     22,823         16,210         21,869         15,182   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,320,037       $ 500,959       $ 1,320,987       $ 446,833   
  

 

 

    

 

 

    

 

 

    

 

 

 

Intangible asset amortization expense in the third quarter of 2014 and 2013 was $17.9 million and $18.5 million, respectively, and was $54.1 million and $56.1 million in the first nine months of 2014 and 2013, respectively. Annual amortization expense is estimated to be $71.4 million in 2014; $68.6 million in 2015; $66.9 million in 2016; $65.2 million in 2017; and $61.5 million in 2018.

 

7. EQUITY INVESTMENTS: The carrying value of our equity investments in domestic and foreign companies was $923.2 million at October 4, 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 October 4, 2014 was $431.0 million ($465.4 million at December 31, 2013). Nucor’s 50% share of the total net assets of Duferdofin Nucor was $58.9 million at October 4, 2014, resulting in a basis difference of $372.1 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 ($302.2 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

 

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accounting adjustments associated with the fair value step-up were $2.6 million and $2.8 million in the third quarter of 2014 and 2013, respectively, and were $8.0 million and $8.5 million in the first nine months of 2014 and 2013, respectively.

As of October 4, 2014, Nucor had outstanding notes receivable of €35.0 million ($43.8 million) from Duferdofin Nucor (€35.0 million, or $48.2 million, at December 31, 2013). The notes receivable bear interest at 1.34% and 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 on the condensed consolidated balance sheets as of October 4, 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 October 4, 2014, Duferdofin Nucor had €105.0 million ($131.4 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 October 4, 2014, Duferdofin Nucor had the maximum borrowing amount of €60.0 million ($75.1 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.

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 October 4, 2014 was $334.9 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 October 4, 2014, and it resets quarterly to the three-month London Interbank Offered Rate (LIBOR) plus 90 basis points. Steel Technologies, LLC paid this note subsequent to the balance sheet date with additional funds drawn from the line of credit discussed below. The second note receivable of $44.0 million was issued on May 2, 2014. It bears interest at 1.44% as of October 4, 2014 and matures May 1, 2015. In addition, Nucor has extended a $60.0 million line of credit (of which $8.5 million was outstanding at October 4, 2014) to Steel Technologies LLC. As of October 4, 2014, the amounts outstanding on the line of credit bear interest at 1.34% and mature on April 1, 2015. As of October 4, 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 October 4, 2014 was $137.9 million ($134.5 million at December 31, 2013).

 

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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 nine 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.

 

8. CURRENT LIABILITIES: Book overdrafts, included in accounts payable in the condensed consolidated balance sheets, were $118.2 million at October 4, 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 October 4, 2014 ($118.7 million at December 31, 2013).

 

9. 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.

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.

At October 4, 2014, natural gas swaps covering approximately 16.0 million MMBTUs (extending through February 2017) were outstanding.

 

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

Fair Value of Derivative Instruments

 

          Fair Value at  
    

Balance Sheet Location

   Oct. 4,
2014
    Dec. 31,
2013
 

Asset derivatives not designated as hedging instruments:

       

Commodity contracts

   Other current assets    $ 1,384      $   

Foreign exchange contracts

   Other current assets      57          
     

 

 

   

 

 

 

Total asset derivatives

      $ 1,441      $   
     

 

 

   

 

 

 

Liability derivatives designated as hedging instruments:

       

Commodity contracts

   Accrued expenses and other current liabilities      (1,700       

Commodity contracts

   Deferred credits and other liabilities      (100       
     

 

 

   

 

 

 

Total Liability derivatives designated as hedging instruments

        (1,800       

Liability derivatives not designated as hedging instruments:

       

Commodity contracts

   Accrued expenses and other current liabilities             (553

Foreign exchange contracts

   Accrued expenses and other current liabilities             (2
     

 

 

   

 

 

 

Total liability derivatives not designated as hedging instruments

               (555

Total liability derivatives

      $ (1,800   $ (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
 
     Oct. 4, 2014     Sept. 28, 2013     Oct. 4, 2014     Sept. 28, 2013     Oct. 4, 2014     Sept. 28, 2013  

Commodity contracts

   Cost of products sold   $ 103      $      $ (197   $      $      $   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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)
 
     Nine Months
(39 weeks) Ended
    Nine Months
(39 weeks) Ended
    Nine Months
(39 weeks) Ended
 
     Oct. 4, 2014     Sept. 28, 2013     Oct. 4, 2014     Sept. 28, 2013     Oct. 4, 2014     Sept. 28, 2013  

Commodity contracts

   Cost of products sold   $ (1,530   $      $ (430   $      $      $   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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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     Nine Months (39 weeks) Ended  
      Oct. 4,
2014
     Sept. 28,
2013
    Oct. 4,
2014
     Sept. 28,
2013
 

Commodity contracts

   Cost of products sold    $ 844       $ (789   $ 1,282       $ 4,193   

Foreign exchange contracts

   Cost of products sold      314         134        266         253   
     

 

 

    

 

 

   

 

 

    

 

 

 

Total

      $ 1,158       $ (655   $ 1,548       $ 4,446   
     

 

 

    

 

 

   

 

 

    

 

 

 

 

10. FAIR VALUE MEASUREMENTS: The following table summarizes information regarding Nucor’s financial assets and financial liabilities that were measured at fair value as of October 4, 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 October 4, 2014

         

Assets:

         

Cash equivalents

   $ 1,140,092      $ 1,140,092       $      $   

Short-term investments

     100,000        100,000                  

Foreign exchange and commodity contracts

     1,441                1,441          
  

 

 

   

 

 

    

 

 

   

 

 

 

Total assets

   $ 1,241,533      $ 1,240,092       $ 1,441      $   
  

 

 

   

 

 

    

 

 

   

 

 

 

Liabilities:

         

Commodity contracts

   $ (1,800   $       $ (1,800   $   
  

 

 

   

 

 

    

 

 

   

 

 

 

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 $4.78 billion at October 4, 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 October 4, 2014 and December 31, 2013, or similar debt with the same maturities, rating and interest rates.

 

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11. 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 $19.3 million of accrued environmental costs at October 4, 2014 ($22.9 million at December 31, 2013), $4.7 million was classified in accrued expenses and other current liabilities ($6.9 million at December 31, 2013) and $14.6 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 reached court approved settlements with the plaintiffs. 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 its 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.

 

12. 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 nine 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

     (112   $ 40.01          $ 1,891   

Canceled

                    
  

 

 

         

Outstanding at October 4, 2014

     2,446      $ 42.43         7.7 years       $ 23,349   
  

 

 

         

Options exercisable at October 4, 2014

     1,287      $ 40.53         6.7 years       $ 14,744   
  

 

 

         

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 $0.1 million in the third quarter of 2014 (none in the third quarter of 2013), and $7.7 million and $8.6 million in the first nine months of 2014 and 2013, respectively. As of October 4, 2014, unrecognized compensation expense related to options was $0.5 million, which is expected to be recognized over 2.7 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.

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.

 

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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 nine 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

     (749   $ 44.90   

Canceled

     (13   $ 42.66   
  

 

 

   

Unvested at October 4, 2014

     1,015      $ 45.98   
  

 

 

   

Shares reserved for future grants (stock options and RSUs)

     11,860     
  

 

 

   

Compensation expense for RSUs was $5.3 million in the third quarter of both 2014 and 2013, respectively, and $27.8 million and $27.5 million in the first nine months of 2014 and 2013, respectively. As of October 4, 2014, unrecognized compensation expense related to unvested RSUs was $33.9 million, which is expected to be recognized over a weighted-average period of 2.2 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 nine 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

     (135   $ 48.76   

Canceled

              
  

 

 

   

Unvested at October 4, 2014

     65      $ 48.20   
  

 

 

   

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 $1.8 million and $1.2 million in the third quarter of 2014 and 2013, respectively, and $4.9 million and $4.5 million in the first nine months of 2014 and 2013, respectively. At October 4, 2014, unrecognized compensation expense related to unvested restricted stock awards was $1.0 million, which is expected to be recognized over a weighted-average period of 1.8 years.

 

13. 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 $37.3 million and $22.5 million in the third quarter of 2014 and 2013, respectively, and was $77.5 million and $49.2 million in the first nine months of 2014 and 2013, respectively. The related liability for these benefits is included in salaries, wages and related accruals.

 

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

 

     Three Months (13 Weeks) Ended     Nine Months (39 Weeks) Ended  
     Oct. 4, 2014     Sept. 28, 2013     Oct. 4, 2014     Sept. 28, 2013  

Interest expense

   $ 46,624      $ 38,621      $ 134,395      $ 112,978   

Interest income

     (1,275     (1,154     (3,914     (3,792
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense, net

   $ 45,349      $ 37,467      $ 130,481      $ 109,186   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

15. INCOME TAXES: The effective tax rate for the third quarter of 2014 was 32.1% compared to 28.2% for the third quarter of 2013. The change in the effective tax rate for the third quarter of 2014 as compared to the third 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 and the adjustment of tax expense to previously filed returns. 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 2010. The 2011 and 2013 tax years are also open to examination by the IRS. Nucor has been informed by the Canada Revenue Authority of its intention to audit the Company’s 2012 Canadian returns. The tax years 2009 through 2013 remain open to examination by other major taxing jurisdictions to which Nucor is subject (primarily Canada and other state and local jurisdictions).

 

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Current deferred tax assets included in other current assets were $259.9 million at October 4, 2014 ($255.5 million at December 31, 2013). Current deferred tax liabilities included in accrued expenses and other current liabilities were $13.4 million at October 4, 2014 ($14.6 million at December 31, 2013). Non-current deferred tax liabilities included in deferred credits and other liabilities were $661.9 million at October 4, 2014 ($676.2 million at December 31, 2013).

 

16. 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

     409,098        67,313        476,411   

Stock options

     12,132               12,132   

Issuance of stock under award plans, net of forfeitures

     24,242               24,242   

Amortization of unearned compensation

     500               500   

Dividends declared

     (356,459            (356,459

Distributions to noncontrolling interests

            (51,401     (51,401
  

 

 

   

 

 

   

 

 

 

Stockholders’ equity at October 4, 2014

   $ 7,735,282      $ 280,421      $ 8,015,703   
  

 

 

   

 

 

   

 

 

 
     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

     283,315        77,582        360,897   

Stock options

     8,575               8,575   

Issuance of stock under award plans, net of forfeitures

     24,568               24,568   

Amortization of unearned compensation

     601               601   

Dividends declared

     (353,424            (353,424

Distributions to noncontrolling interests

            (63,318     (63,318
  

 

 

   

 

 

   

 

 

 

Stockholders’ equity at September 28, 2013

   $ 7,605,206      $ 258,067      $ 7,863,273   
  

 

 

   

 

 

   

 

 

 

 

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17. 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
October 4, 2014
 
    

Gains and Losses on

Hedging Derivatives

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

July 5, 2014

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

Other comprehensive (loss) income before reclassifications

     103        (81,689             (81,586

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

     197                       197   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net current-period other comprehensive (loss) income

     300        (81,689             (81,389

October 4, 2014

   $ (1,100   $ (100,759   $ 16,518       $ (85,341

 

     Nine Month (39 week) Period Ended
October 4, 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 (loss) income before reclassifications

     (1,530     (93,321             (94,851

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

     430                       430   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net current-period other comprehensive (loss) income

     (1,100     (93,321             (94,421

October 4, 2014

   $ (1,100   $ (100,759   $ 16,518       $ (85,341

 

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Table of Contents
     Three Month (13 week) Period Ended
September 28, 2013
 
     Gains and Losses on
Hedging Derivatives
    Foreign Currency
Gain (Loss)
    Adjustment to Early
Retiree Medical Plan
     Total  

June 29, 2013

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

Other comprehensive (loss) income before reclassifications

            31,879                31,879   

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

                             
  

 

 

   

 

 

   

 

 

    

 

 

 

Net current-period other comprehensive (loss) income

            31,879                31,879   

September 28, 2013

   $      $    11,965      $ 10,580       $  22,545   

 

    

Nine Month (39 week) Period Ended

September 28, 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 (loss) income before reclassifications

            (34,216             (34,216

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

                             
  

 

 

   

 

 

   

 

 

    

 

 

 

Net current-period other comprehensive (loss) income

            (34,216             (34,216

September 28, 2013

   $      $    11,965      $ 10,580       $ 22,545   

 

18. 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 direct reduced iron 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.

 

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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.

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

 

     Three Months (13 Weeks) Ended     Nine Months (39 Weeks) Ended  
     Oct. 4, 2014     Sept. 28, 2013     Oct. 4, 2014     Sept. 28, 2013  

Net sales to external customers:

        

Steel mills

   $ 3,898,031      $ 3,435,884      $ 11,179,935      $ 9,901,471   

Steel products

     1,142,043        964,153        3,052,135        2,690,604   

Raw materials

     661,795        540,899        1,869,318        1,565,221   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 5,701,869      $ 4,940,936      $ 16,101,388      $ 14,157,296   
  

 

 

   

 

 

   

 

 

   

 

 

 

Intercompany sales:

        

Steel mills

   $ 797,396      $ 652,077      $ 2,248,462      $ 1,924,222   

Steel products

     34,215        24,909        82,257        75,036   

Raw materials

     2,492,453        2,391,502        7,463,951        6,738,485   

Corporate/eliminations

     (3,324,064     (3,068,488     (9,794,670     (8,737,743
  

 

 

   

 

 

   

 

 

   

 

 

 
   $      $      $      $   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes and noncontrolling interests:

        

Steel mills

   $ 502,703      $ 310,591      $ 1,188,638      $ 819,951   

Steel products

     63,890        31,018        108,222        51,167   

Raw materials

     (19,321     (493     (20,597     13,261   

Corporate/eliminations

     (143,287     (92,914     (422,912     (330,517
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 403,985      $ 248,202      $ 853,351      $ 553,862   
  

 

 

   

 

 

   

 

 

   

 

 

 
     Oct. 4, 2014     Dec. 31, 2013              

Segment assets:

        

Steel mills

   $ 8,489,079      $ 8,365,023       

Steel products

     3,028,321        2,861,403       

Raw materials

     4,026,534        3,956,913       

Corporate/eliminations

     (50,340     19,944       
  

 

 

   

 

 

     
   $ 15,493,594      $ 15,203,283       
  

 

 

   

 

 

     

 

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19. 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     Nine Months (39 Weeks) Ended  
     Oct. 4, 2014     Sept. 28, 2013     Oct. 4, 2014     Sept. 28, 2013  

Basic net earnings per share:

        

Basic net earnings

   $ 245,447      $ 147,597      $ 503,519      $ 317,531   

Earnings allocated to participating securities

     (781     (518     (1,659     (1,324
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings available to common stockholders

   $ 244,666      $ 147,079      $ 501,860      $ 316,207   
  

 

 

   

 

 

   

 

 

   

 

 

 

Average shares outstanding

     320,023        319,341        319,737        318,979   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic net earnings per share

   $ 0.76      $ 0.46      $ 1.57      $ 0.99   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net earnings per share:

        

Diluted net earnings

   $ 245,447      $ 147,597      $ 503,519      $ 317,531   

Earnings allocated to participating securities

     (781     (518     (1,659     (1,324
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings available to common stockholders

   $ 244,666      $ 147,079      $ 501,860      $ 316,207   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted average shares outstanding:

        

Basic shares outstanding

     320,023        319,341        319,737        318,979   

Dilutive effect of stock options and other

     314        185        288        153   
  

 

 

   

 

 

   

 

 

   

 

 

 
     320,337        319,526        320,025        319,132   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net earnings per share

   $ 0.76      $ 0.46      $ 1.57      $ 0.99   
  

 

 

   

 

 

   

 

 

   

 

 

 

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      Nine Months (39 Weeks) Ended  
     Oct. 4, 2014      Sept. 28, 2013      Oct. 4, 2014      Sept. 28, 2013  

Anti-dilutive stock options:

           

Weighted average shares

                             183   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average exercise price

   $       $       $       $ 44.51   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

20. SUBSEQUENT EVENTS: On October 8, 2014, Nucor acquired the entire equity interest in Gallatin Steel Company for a cash purchase price of approximately $775.1 million, including our most recent estimate of working capital adjustments. The acquisition was partially funded by the issuance of approximately $300 million of commercial paper subsequent to the end of the third quarter, with the remaining funds coming from cash on hand. Located on the Ohio River in Ghent, Kentucky, Gallatin has an annual sheet steel production capacity of approximately 1,800,000 tons. This acquisition is strategically important as it expands Nucor’s footprint in the Midwestern United States market, and it will broaden Nucor’s product offerings in the growing steel pipe and tube segment.

On November 2, 2014, a major equipment failure occurred at Nucor Steel Louisiana in St. James Parish related to the process gas heater. There were no injuries, no environmental impact and no damage to any other part of the direct reduced iron facility as a result of this incident. Production operations were suspended after the failure. Nucor is still assessing the extent of the equipment damage and cannot currently estimate the length of time needed to make the necessary repairs to the process gas heater. Additionally, Nucor is not able to estimate the extent of any possible write down to the carrying value of the affected equipment at this time.

 

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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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Table of Contents

Our new direct reduced iron plant in St. James Parish, Louisiana began production in late December 2013 and has produced excellent quality DRI through the first nine months of 2014. The plant has experienced operational challenges in 2014, which in our experience is not unusual when a new facility is in the early stages of production. Outages in June, July and September were necessary to implement changes intended to improve consistency in the production process and yield performance. However, in November, subsequent to the end of the third quarter, the process gas heater experienced a major failure. There were no injuries, no environmental impact and no damage to any other part of the facility as a result of this incident. Production operations were suspended after the failure. We are still assessing the extent of the equipment damage and cannot estimate the length of time needed to make the necessary repairs to the process gas heater. We currently estimate that the negative impact on Nucor Steel Louisiana’s financial performance in the fourth quarter of 2014 will be somewhat less than the operating loss the facility experienced in the third quarter of 2014, which was approximately $45 million. It is important to note that the process gas heater is not a part of the DRI technology utilized by Nucor Steel Louisiana, but is a piece of equipment necessary for the facility to operate. The process gas heater is an auxiliary unit that is standard equipment in several industrial applications, particularly the chemical industry.

In October, subsequent to the end of the third quarter, Nucor closed on its acquisition of Gallatin Steel Company for a cash purchase price of approximately $775.1 million, including our most recent estimate of working capital adjustments. The acquisition was partially funded by the issuance of approximately $300 million of commercial paper subsequent to the end of the third quarter, with the remaining funds coming from cash on hand. Located on the Ohio River in Ghent, Kentucky, Gallatin has an annual sheet steel production capacity of approximately 1,800,000 tons. This acquisition is strategically important as it expands Nucor’s footprint in the Midwestern United States market, and it will broaden Nucor’s product offerings in the growing steel pipe and tube segment.

The average utilization rates of all operating facilities in the steel mills, steel products and raw materials segments were approximately 78%, 65% and 66%, respectively, in the first nine months of 2014 compared with 74%, 58% and 62%, respectively, in the first nine months of 2013.

Results of Operations

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

 

     Three Months (13 Weeks) Ended     Nine Months (39 Weeks) Ended  
     October 4, 2014      September 28, 2013      % Change     October 4, 2014      September 28, 2013      % Change  

Steel mills

   $ 3,898,031       $ 3,435,884         13   $ 11,179,935       $ 9,901,471         13

Steel products

     1,142,043         964,153         18     3,052,135         2,690,604         13

Raw materials

     661,795         540,899         22     1,869,318         1,565,221         19
  

 

 

    

 

 

      

 

 

    

 

 

    

Net sales

   $ 5,701,869       $ 4,940,936         15   $ 16,101,388       $ 14,157,296         14
  

 

 

    

 

 

      

 

 

    

 

 

    

Net sales for the third quarter of 2014 increased 15% over the third quarter of 2013. Average sales price per ton increased 5% from $801 in the third quarter of 2013 to $840 in the third quarter of 2014, while total tons sold to outside customers increased 10% from the same period last year.

Net sales for the first nine months of 2014 increased 14% from the first nine months of 2013. Average sales price per ton increased 4% from $799 in the first nine months of 2013 to $832 in the first nine months of 2014, while total tons sold to outside customers increased 9% over the same period last year.

 

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

 

     Three Months (13 Weeks) Ended     Nine Months (39 Weeks) Ended  
     October 4, 2014      Sept. 28, 2013      % Change     October 4, 2014      Sept. 28, 2013      % Change  

Steel production

     5,412         5,202         4     15,930         14,912         7
  

 

 

    

 

 

      

 

 

    

 

 

    

Outside steel shipments

     4,851         4,640         5     14,097         13,248         6

Inside steel shipments

     890         719         24     2,553         2,211         15
  

 

 

    

 

 

      

 

 

    

 

 

    

Total steel shipments

     5,741         5,359         7     16,650         15,459         8
  

 

 

    

 

 

      

 

 

    

 

 

    

Net sales for the steel mills segment increased 13% over the third quarter of 2013 due to a 5% increase in tons sold to outside customers and a 9% increase in the average sales price per ton from $741 to $805. The sheet, bar, structural and plate product groups all experienced an increase in average sales price per ton over the third quarter of 2013. The strongest markets for the steel mills segment continue to be manufactured goods, including energy and automotive. Though average sales prices increased for the steel mills segment in the third quarter of 2014 compared to the third quarter of 2013, imports continued to apply pressure on pricing during the third quarter of 2014. In its most recent monthly report, the Steel Import Monitoring and Analysis System reported a 35.7% increase in year-to-date 2014 U.S. imports of steel mill products from the same period in 2013.

Net sales for the steel mills segment in the first nine months of 2014 increased 13% over the first nine months of 2013 primarily due to a 6% increase in the average sales price per ton from $747 to $792, and a 6% increase in tons sold to outside customers.

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

 

     Three Months (13 weeks) Ended     Nine Months (39 weeks) Ended  
     Oct. 4, 2014      Sept. 28, 2013      % Change     Oct. 4, 2014      Sept. 28, 2013      % Change  

Joist sales

     128         86         49     317         248         28

Deck sales

     113         90         26     301         242         24

Cold finish sales

     129         113         14     400         359         11

Fabricated concrete reinforcing steel sales

     342         305         12     902         813         11

The 18% increase in the steel products segment’s sales from the third quarter of 2013 was due to a 18% increase in tons sold to outside customers and a 1% increase in average sales price per ton from $1,369 to $1,386. The 13% increase in the steel products segment’s sales for the first nine months of the year was due to a 14% increase in tons sold to outside customers while the average sales price per ton decreased slightly from $1,374 to $1,369. The significant increase in the quantity of steel products sold is largely due to the continued improvement in the nonresidential construction markets. Although conditions in nonresidential construction markets are improving, they remain at historically low levels.

The sales for the raw materials segment increased 22% over the third quarter of 2013 and 19% over the first nine months of 2013 primarily due to increased volumes at DJJ’s recycling and brokerage businesses and our natural gas drilling activities. In the third quarter of 2014, approximately 81% of outside sales in the raw materials segment were from the brokerage operations of DJJ and approximately 13% of the outside sales were from the scrap processing facilities (82% and 13%, respectively, in the third quarter of 2013). In the first nine months of 2014, approximately 79% of outside sales for the raw materials segment were from the brokerage operations of DJJ and approximately 13% of outside sales were from the scrap processing facilities (83% and 13%, respectively, in the first nine months of 2013).

 

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Gross Margins For the third quarter of 2014, Nucor recorded gross margins of $599.6 million (11%), compared to $408.5 million (8%) in the third quarter of 2013. The gross margin was impacted by the 5% increase in average sales price per ton and the 10% increase in tons sold 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 $372 in the third quarter of 2013 to $379 in the third quarter of 2014; however, metal margins also increased in the third quarter of 2014 compared to the third quarter of 2013 as the 2% increase in average scrap and scrap substitute cost per ton was more than offset by the 9% increase in average sales price per ton and 5% increase in tons sold to outside customers. The increase in gross margins between the third quarter of 2014 and the second quarter 2014 was greatly impacted by the increase in metal margins. The average scrap and scrap substitute cost per ton decreased from $384 in the second quarter of 2014 to $379 in the third quarter of 2014, while the average sales price per ton increased 2% and tons sold to outside customers increased 4% in the third quarter of 2014 as compared to the second quarter of 2014.

Scrap prices are driven by the global supply and demand for scrap and other iron based raw materials used to make steel. During the third quarter of 2014, scrap prices have experienced only minor fluctuations. We have seen scrap prices decrease in October and expect the cost of scrap to trend slightly downward throughout the fourth quarter.

 

   

Nucor’s gross margins are 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. Gross margins were impacted by a LIFO credit of $14.5 million in the third quarter of 2014, compared with a credit of $18.0 million in the third quarter of 2013.

 

   

Steel mill energy costs increased approximately $1 per ton in the third quarter of 2014 over the third quarter of 2013. The slight increase in per ton energy costs is primarily due to increased natural gas unit costs.

 

   

Gross margins in the steel products segment increased in the third quarter of 2014 over the third quarter of 2013 and second 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 joist, deck, rebar, cold finish, and building systems operations experienced margin improvement in the third quarter of 2014 compared with both the third quarter of 2013 and the second quarter of 2014.

 

   

Our Nucor Steel Louisiana DRI facility experienced significant operational losses, including start-up costs of $13.3 million in the third quarter of 2014 compared with start-up costs of $10.6 million in the third quarter of 2013, which negatively impacted gross margins. The start-up costs at Nucor Steel Louisiana are primarily due to yield loss, which in our experience is not unusual when a new facility is in the early stages of production. Although Nucor Steel Louisiana has had operational losses, it has achieved excellent quality and volume levels.

In November, subsequent to the end of the third quarter, the process gas heater experienced a major failure at Nucor Steel Louisiana. Production operations were suspended after the failure. We are still assessing the extent of the equipment damage and cannot estimate the length of time needed to make the necessary repairs to the process gas heater. We currently estimate that the negative impact on Nucor Steel Louisiana’s financial performance in the fourth quarter of 2014 will be somewhat less than the operating loss the facility experienced in the third quarter of 2014.

 

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For the first nine months of 2014, Nucor recorded gross margins of $1.39 billion (9%), compared to $1.02 billion (7%) in the first nine months of 2013. The gross margin was impacted by the following factors:

 

   

In the steel mills segment, the average scrap and scrap substitute cost per ton used increased 3% from $376 in the first nine months of 2013 to $387 in the first nine months of 2014; however, metal margins also increased.

 

   

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

 

   

There was no LIFO credit or charge recorded in the first nine months of 2014 or 2013 as the credits taken in the third quarters of 2014 and 2013, described above, offset the cumulative charge that was recorded in the first half of the respective years.

 

   

Energy costs increased approximately $2 per ton from the first nine months 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 $53.5 million in the first nine months of 2014 compared with start-up costs of $19.8 million in the first nine months of 2013.

 

   

Within the raw materials segment, DJJ’s gross margins for the first nine months of 2014 improved significantly over the first nine months of 2013, particularly within DJJ’s recycling business. Third party sales volumes and margins have improved significantly year-over-year.

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 $16.0 million in the third quarter of 2014 compared to the third quarter of 2013, and increased $30.9 million in the first nine months of 2014 compared to the first nine months of 2013 due to the increased profitability of the company. Profit sharing and other incentive compensation costs increased $3.6 million in the third quarter of 2014 compared to the second quarter of 2014 due to increased profitability in the third quarter, partially offset by the decrease in expenses related to stock options and restricted stock units from the higher second quarter expenses related to the annual grants that occurred in June.

Included in marketing, administrative and other expenses in the third quarter and first nine months of 2014 are charges of $12.5 million and $21.5 million, respectively, related to the partial write down of assets within the steel mills segment (none in the third quarter or first nine months of 2013).

In the third quarter of 2013, one of three iron ore 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 $7.0 million of inventory and $21.0 million of property, plant and equipment, offset by a $14.0 million insurance receivable that was based on management’s estimate of probable insurance recoveries. The net $14.0 million charge on the Nucor Steel Louisiana assets is included in marketing, administrative and other expenses in the condensed consolidated statement of earnings in the third quarter and first nine months of 2013 (no charge in the third quarter or first nine months of 2014). The two remaining storage domes have a carrying value of approximately $21 million. Nucor continues to assess these two domes and the assets associated with them. As a result of the ongoing assessment, it is possible that Nucor will make operational decisions that could impact the carrying value of the domes and associated assets and the amount of insurance proceeds received.

 

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Equity in Earnings of Unconsolidated Affiliates Equity method investment earnings, including amortization expense and other purchase accounting adjustments, were $2.4 million and $2.3 million in the third quarter of 2014 and 2013, respectively, and $10.0 million and $2.7 million in the first nine months 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. for the first nine months of 2014 and higher equity method earnings at NuMit LLC during both the third quarter and the first nine months 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 nine 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.

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

 

     Three Months (13 Weeks) Ended     Nine Months (39 Weeks) Ended  
     Oct. 4, 2014     Sept. 28, 2013     Oct. 4, 2014     Sept. 28, 2013  

Interest expense

   $ 46,624      $ 38,621      $ 134,395      $ 112,978   

Interest income

     (1,275     (1,154     (3,914     (3,792
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense, net

   $ 45,349      $ 37,467      $ 130,481      $ 109,186   
  

 

 

   

 

 

   

 

 

   

 

 

 

In the third quarter of 2014 gross interest expense increased 21% from the third quarter of 2013 due to an increase in average debt outstanding and a slight increase in the average interest rate on our debt. Gross interest income increased due to an increase in the average interest rate earned on investments that was partially offset by a decrease in average investments outstanding.

In the first nine months of 2014, gross interest expense increased 19% from the first nine months of 2013 due mainly to an increase in average debt outstanding that was partially offset by a decrease in the average interest rate. Gross interest income increased due to an increase in the average interest rate earned on investments combined with an increase in average investments outstanding.

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

 

     Three Months (13 Weeks) Ended     Nine Months (39 Weeks) Ended  
     Oct. 4, 2014     Sept. 28, 2013     Oct. 4, 2014     Sept. 28, 2013  

Steel mills

   $ 502,703      $ 310,591      $ 1,188,638      $ 819,951   

Steel products

     63,890        31,018        108,222        51,167   

Raw materials

     (19,321     (493     (20,597     13,261   

Corporate/eliminations

     (143,287     (92,914     (422,912     (330,517
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 403,985      $ 248,202      $ 853,351      $ 553,862   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes and noncontrolling interests in the steel mills segment for the third quarter and first nine months of 2014 increased significantly from the third quarter and first nine 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

 

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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 third quarter and first nine months of 2014. Structural steel shipments and earnings were negatively impacted in the first nine months of 2014 by the planned three week outage at Nucor-Yamato Steel that occurred in the second quarter related to a capital project that has expanded its sheet piling production capabilities. The improved results of the steel mills segment were achieved despite imports being at levels not seen since 2006. The strongest markets for the steel mills segment continue to be manufactured goods, including energy and automotive. Heightened demand due to small but noticeable improvements in the nonresidential construction markets had a positive effect on earnings. Earnings before income taxes and noncontrolling interests in the steel mills segment for the third quarter of 2014 increased from the second quarter of 2014 due to higher average sales prices, higher volumes and higher metal margins.

The profitability of the steel mills segment in the third quarter and first nine months of 2014 also benefited from improved results from the NuMit equity method investment compared with the prior year periods. The Duferdofin Nucor equity method investment also experienced improved results in the first nine months of 2014 as compared to the first nine months of 2013. Partially offsetting these improvements was the $12.5 million charge in the third quarter of 2014 (none in the third quarter of 2013) related to the partial write down of assets. Charges related to the partial write down of assets were $21.5 million in the first nine months of 2014 in the steel mills segment (none in the first nine months of 2013). The steel mills segment’s profitability was also impacted by higher energy costs in the third quarter and first nine months of 2014 compared to the prior year periods.

In the steel products segment, earnings before income taxes and noncontrolling interests increased significantly from the third quarter and first nine months of 2013. Profitability at our joist, deck, rebar, cold finish and building systems operations increased in the third quarter and first nine months 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 in the third quarter of 2014 increased significantly from the second quarter of 2014 due to increased profitability at our joist, deck, rebar, cold finish and building systems operations.

The decrease in profitability of our raw materials segment for the first nine months of 2014 as compared to the first nine months of 2013 is due primarily to operating losses, which include start-up costs, of approximately $45 million in the third quarter of 2014 and approximately $100 million in the first nine months of 2014 at our Louisiana DRI facility (production did not begin at the facility until late December 2013). Production outages in June, July and September were necessary to implement changes intended to improve consistency in the production process and yield performance. An additional factor affecting the performance of Nucor Steel Louisiana is the impact of consuming higher cost iron ore purchased early in the year under a quarterly lag pricing mechanism. Earnings before income taxes and noncontrolling interest in the raw materials segment in the third quarter and first nine months of 2013 was impacted by the charges related to the net $14.0 million write down of inventory and property, plant and equipment as a result of the dome collapse at Nucor Steel Louisiana that occurred in the third quarter of 2013.

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 third quarter of 2014 as compared to the third quarter of 2013 was primarily attributable to lower volume partially offset by higher selling prices and margins. The decrease in earnings attributable to noncontrolling interests in the first

 

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nine months of 2014 from the first nine months of 2013 is mainly the result of lower volumes and the impact of a planned three week outage associated with a capital project in the second quarter of 2014, partially offset by higher average selling prices and margins.

Provision for Income Taxes The effective tax rate was 32.1% in the third quarter of 2014 compared with 28.2% in the third quarter of 2013. The expected rate for the full year of 2014 will be approximately 32.6% compared with 26.0% for the full year of 2013. The change in the effective tax rate for the third quarter of 2014 as compared to the third 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 and the adjustment of tax expense to previously filed returns. 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 $68.2 million at October 4, 2014 exclusive of interest, could decrease by as much as $9.3 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 2010. The 2011 and 2013 tax years are also open to examination by the IRS. Nucor has been informed by the Canada Revenue Authority of its intention to audit the Company’s 2012 Canadian returns. The tax years 2009 through 2013 remain open to examination by other major taxing jurisdictions to which Nucor is subject (primarily Canada and other state and local jurisdictions).

Net Earnings Attributable to Nucor Stockholders and Return on Equity Nucor reported consolidated net earnings of $245.4 million, or $0.76 per diluted share, in the third quarter of 2014 compared to consolidated net earnings of $147.6 million, or $0.46 per diluted share, in the third quarter of 2013. Net earnings attributable to Nucor stockholders as a percentage of net sales were 4% and 3% in the third quarter of 2014 and 2013, respectively.

Nucor reported consolidated net earnings of $503.5 million, or $1.57 per diluted share, in the first nine months of 2014, compared to consolidated net earnings of $317.5 million, or $0.99 per diluted share, in the first nine months of 2013. Net earnings attributable to Nucor stockholders as a percentage of net sales were 3% and 2% in the first nine months of 2014 and 2013, respectively. Return on average stockholders’ equity was approximately 9% and 6% in the first nine months of 2014 and 2013, respectively.

Outlook We currently expect to see a moderate decrease in earnings for the fourth quarter of 2014. The profitability of the steel mills and downstream products segments is expected to be impacted by end of year seasonality that is typical in the fourth quarter.

Nucor’s largest exposure to market risk is via our steel mills and steel products segments. Our largest single customer in the first nine months 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 $925.6 million in the first nine months of 2014, an increase of 5% compared with cash provided by operating activities of $883.6 million in the first nine months of 2013. The primary reason for the change was higher net earnings which included increased levels of depreciation expense. Partially offsetting the increase in cash generated from higher earnings were

 

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changes in operating assets and liabilities that were ($205.7) million in the first nine months of 2014 compared with ($28.5) million in the first nine months of 2013. The funding of our working capital increased over the prior year period due mainly to increases in accounts receivable and other operating activities and a decrease in cash used to fund salaries, wages and related accruals. Accounts receivable increased due to a 3% increase in average sales price per ton and a 13% increase in outside shipments in the third quarter of 2014 over the fourth quarter of 2013. There was a decrease in cash from other operating activities as there was a smaller increase in accrued expenses and other current liabilities during the first nine months of 2014 compared with the first nine months of 2013 due to the timing of payments. Increased cash from changes in salaries, wages and related accruals is primarily due to increased liabilities associated with profit sharing and other incentive compensation costs, which are based upon Nucor’s financial performance that has improved significantly over the prior year period. Also affecting cash provided by operating activities was a ($54.6) million change in deferred income taxes from the first nine months of 2013 to the first nine months of 2014.

The current ratio was 3.2 at the end of the third quarter of 2014 and 3.3 at year-end 2013. Accounts receivable and inventories increased 24% and 3%, respectively, since year-end, while sales increased 16% from the fourth quarter of 2013. Accounts receivable increased due to the reasons cited above, and inventory increased from year-end 2013 to the end of the third quarter of 2014 mainly due to a 2% increase in the tons on hand resulting from improved customer demand. In the third quarter of 2014, total accounts receivable turned approximately every five weeks and inventories turned approximately every seven weeks, which is consistent with the third quarter of 2013 accounts receivable and inventory turnover. The current ratio was also impacted by a 21% increase in salaries, wages and related accruals and a change from a federal tax receivable balance at year-end to a $65.1 million federal tax payable balance at the end of the third quarter.

Cash used in investing activities increased $169.4 million from the prior year period. The largest factor contributing to the increase in cash used in investing activities was the net decrease of $401.3 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 nine months of 2014 compared with none in 2013. Partially offsetting those changes was a $330.7 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.

Cash used in financing activities in the first nine months of 2014 was ($393.0) million compared with cash provided by financing activities of $335.5 million during the first nine months of 2013. During the third quarter of 2013, Nucor issued $500.0 million of 4.00% notes due in 2023 and $500.0 million of 5.2% notes due in 2043. Net of discounts, the 2013 debt issuance increased cash provided by financing activities by $999.1 million. There were no issuances of long-term debt during the first nine months of 2014. Additionally, cash used to repay debt maturities was only $3.3 million through the first three quarters of 2014 compared to $250.0 million in the prior year period.

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 remained strong at $1.40 billion as of October 4, 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. This was evidenced when, subsequent to the end of the third quarter of 2014, we issued approximately $300 million of commercial paper to partially fund the acquisition of Gallatin Steel Company. 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.

 

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Our credit facility includes only one financial covenant, which is a limit of 60% on the ratio of funded debt to total capitalization. In addition, the credit facility contains customary non-financial covenants, including a limit on Nucor’s ability to pledge the Company’s assets and a limit on consolidations, mergers and sales of assets. As of October 4, 2014, our funded debt to total capital ratio was 36%, and we were in compliance with all other non-financial covenants under our credit facility. No borrowings were outstanding under the credit facility as of October 4, 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 expected 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 spending at our Louisiana DRI facility, as it started operations in December 2013 and the suspension of drilling new natural gas wells in 2014 associated with our drilling program that was announced in the fourth quarter of 2013.

In September 2014, Nucor’s board of directors declared a quarterly cash dividend on Nucor’s common stock of $0.37 per share payable on November 10, 2014 to stockholders of record on September 30, 2014. This dividend is Nucor’s 166th 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 October 4, 2014.

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 our Louisiana DRI facility. In addition to natural gas needs at our Louisiana DRI facility, Nucor is also a substantial consumer of natural gas at our 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 our steel mills in the United States plus the demand of our 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 nine months ended October 4, 2014, the volume of natural gas sold from our natural gas working interest drilling program was approximately 69% of the volume of natural gas purchased for consumption in our domestic steelmaking facilities and our Louisiana DRI facility.

 

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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 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 during 2014. This joint decision was made due to the current weak natural gas pricing environment. In the fourth quarter of 2014, Nucor and Encana agreed to further suspend drilling through calendar year 2015, except for a de minimus number of wells that are necessary in order to retain leasehold rights. 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 October 4, 2014, accumulated other comprehensive (loss) income included $1.1 million in unrealized net-of-tax losses for the fair value of these derivative instruments. Changes in the fair values of derivatives not designated as hedges are recognized in earnings each period. The following table presents the negative effect on pre-tax earnings of a hypothetical change in the fair value of derivative instruments outstanding at October 4, 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

   $ 6,708       $ 16,769   

Aluminum

     2,545         6,362   

Copper

     173         432   

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

Foreign Currency Risk – Nucor is exposed to foreign currency risk through its operations in Canada, Europe and Trinidad. We periodically use derivative contracts to mitigate the risk of currency fluctuations.

 

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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 October 4, 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

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 reached court approved settlements with the plaintiffs. 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 April 19, 2012, MM Steel LP filed an action against Nucor and its 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 and believes that it has valid grounds to have the judgment vacated or reversed, the ultimate resolution of the case is uncertain.

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

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    Retirement, Separation, Waiver and Release Agreement of Keith B. Grass (#)
  10.1    Employment Agreement of David A. Sumoski (#)
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 October 4, 2014, filed on November 12, 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: November 12, 2014

 

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NUCOR CORPORATION

List of Exhibits to Form 10-Q – October 4, 2014

 

Exhibit
No.

  

Description of Exhibit

10    Retirement, Separation, Waiver and Release Agreement of Keith B. Grass (#)
  10.1    Employment Agreement of David A. Sumoski (#)
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 October 4, 2014, filed on November 12, 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.

 

36

EX-10

Exhibit 10

RETIREMENT, SEPARATION, WAIVER AND RELEASE AGREEMENT

This Retirement, Separation, Waiver and Release Agreement (“Agreement”) is entered into as of the 5th day of August, 2014, by and between Keith Grass (“Executive”) and Nucor Corporation.

WHEREAS, Executive has spent thirty six (36) years as a Nucor (as defined below) employee, and has most recently been employed as an Executive Vice President of Nucor Corporation and as Chief Executive Officer of The David J. Joseph Company (“DJJ”), an indirect wholly owned subsidiary of Nucor Corporation;

WHEREAS, Executive has decided to retire from Nucor effective September 12, 2014 (the “Effective Date”);

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

WHEREAS, pursuant to that certain Executive Employment Agreement by and between Executive and Nucor Corporation effective as of January 1, 2012 (the “Executive Agreement”), (a) Executive is entitled to certain post-separation benefits in addition to those granted under the Severance Plan provided that Executive adheres to the post-separation restrictive covenants set forth in the Executive Agreement, and (b) Executive’s prior years of service with DJJ shall be included in the calculation of severance benefits due to Executive under the Severance Plan;

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

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

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

1. Recitals; Nucor Defined. The above recitals are true and correct and are incorporated herein by reference as if fully set forth herein. For purposes of this Agreement the term “Nucor” means Nucor Corporation and its direct and indirect subsidiaries and affiliates in existence or planned as of the Effective Date.

2. Post-Retirement Benefits.

(a) Severance Plan. Executive recognizes and agrees that pursuant to the Nucor Corporation Severance Plan for Senior Officers and General Managers (the “Severance Plan”), Executive shall receive certain Severance Benefits (as defined in the Severance Plan) contingent upon his execution of this Agreement and strict compliance with the Restrictive Covenants (as hereinafter defined). Based on Executive’s (i) June 19, 1978 date of hire, (ii) effective retirement date of September 12, 2014 and (iii) current annual base salary of $442,900, Executive would be eligible to receive Severance Benefits under the Severance Plan totaling $1,337,289.21 payable in

 

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twenty-four (24) monthly installments of $55,720.38 (the “Monthly Severance Plan Payments”). Subject to the provisions of Paragraph 2(c) of this Agreement, the payments of the Monthly Severance Plan Payments shall be made each month following the Effective Date. In the event Executive dies during the first twenty-four (24) months following the Effective Date, and provided that Executive was not in breach of his obligations under this Agreement or the Restrictive Covenants at the time of his death, the remaining Monthly Severance Plan Payments that would have been paid to Executive pursuant to the Severance Plan shall be paid to Executive’s estate in a single sum payment as soon as practicable (but in any event within ninety (90) days) following Executive’s death. All Monthly Severance Plan Payments shall be subject to regular and customary withholding.

(b) Non-Competition Payment.

(i) Contingent upon his execution of this Agreement and strict compliance with the Restrictive Covenants, Nucor will pay Executive $124,012.00 each month (the “Monthly Non-Compete Payments”, and together with the Monthly Severance Plan Payments, collectively, the “Monthly Separation Payments”) for twenty-four (24) months following the Effective Date. Subject to the provisions of Paragraph 2(c) of this Agreement, the payments of the Monthly Non-Compete Payments shall be made each month following the Effective Date. All Monthly Non-Compete Payments shall be subject to regular and customary withholding.

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

(iii) Executive acknowledges and agrees that the payments described in this Paragraph 2(b): (A) are the same payments that Executive would have been entitled to pursuant to Section 3 of the Executive Agreement, and (B) are provided in lieu of, and not in addition to, the payments Executive would have been entitled to pursuant to Section 3 of the Executive Agreement.

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

 

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3. Executive Agreement Covenants. Executive and Nucor Corporation acknowledge and agree that except for Sections 1, 2, 3, 4 and 5 of the Executive Agreement, which paragraphs shall be deemed void and of no further force or effect as of the Effective Date, all of the other provisions of the Executive Agreement (collectively, the “Surviving Provisions”), including without limitation Sections 8, 9, 10, 11, 12 and 13 thereof (collectively, the “Restrictive Covenants”), shall survive and continue in full force and effect after the Effective Date in accordance with their respective terms.

4. Release; Covenant Not to Sue.

(a) Executive agrees that, in consideration for the Monthly Separation Payments, he, for himself, his heirs, executors, administrators, and assigns, hereby releases, waives, and forever discharges Nucor, its predecessors, successors and assigns, and its officers, directors, employees, agents, representatives and trustees (“Nucor Releasees”), from any and all claims or liabilities of whatever kind or nature which he ever had or which he now has, known or unknown, against any and all Nucor Releasees that are attributable to or arose during all periods of time occurring on or prior to the Effective Date, including, but not limited to, any claims arising under or pursuant to any employment agreements, including the Executive Agreement; claims for bonuses, severance pay, employee or fringe benefits; claims based on any state or federal wage, employment, or common laws, statutes, or amendments thereto, including, but not limited to: (i) any claim under the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq., or COBRA; (ii) any race, color, religion, sex, or national origin discrimination claims under Title VII of the 1964 Civil Rights Act, 42 U.S.C. § 2000(e) et seq.; (iii) any claim of disability discrimination under the Americans with Disabilities Act (“ADA”), 42 U.S.C. § 12102 et seq.; (iv) any claim of retaliation or wrongful discharge, (v) any age discrimination claims under the Age Discrimination in Employment Act, as amended (“ADEA”), 29 U.S.C. § 621 et seq.; (vi) any claim under the Fair Labor Standard Act of 1939 as amended, 29 U.S.C.§ 201 et seq.; or (vii) any claim under the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 701 et seq.; and any other claims related to or arising out of his employment relationship with Nucor or the termination thereof whether based on contract, quasi-contract, quantum merit, implied contract, tort, wrongful or constructive discharge or any other employment related claim (collectively, the “Released Claims”). Notwithstanding the foregoing, the Released Claims do not include any claims that Executive may have for incentive compensation earned under or pursuant to the Nucor Corporation Senior Officers Annual Incentive Plan, the Nucor Corporation Senior Officers Long-Term Incentive Plan or the Nucor Corporation 2014 Omnibus Incentive Compensation Plan for his employment with Nucor through the Effective Date.

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

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

 

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suspected or unsuspected, existing or claimed to exist, fixed or contingent, both at law and in equity, and the release given herein is and will remain in effect as a complete release, notwithstanding the discovery or existence of such additional or different facts.

(d) Nothing in this Paragraph 4 or elsewhere in this Agreement prevents or prohibits Executive from filing a claim with a government agency such as the United States Equal Employment Opportunity Commission that is responsible for enforcing a law on behalf of the government. However, Executive understands that because he is waiving and releasing all claims for monetary damages and any other forms of personal relief, he may only seek and receive non-financial forms of relief through any such claim.

5. Remedies. Executive agrees that in the event of a breach or threatened breach by Executive of any provision of this Agreement or any of the Restrictive Covenants, monetary remedies may not be adequate and Executive agrees that Nucor is entitled to injunctive relief, without need to post bond or similar security, in lieu of or in addition to, such monetary remedies. In the event that Executive engages in or attempts to engage in any of the conduct prohibited by any of the Restrictive Covenants or fails to comply with the provisions of Paragraph 4(b), Nucor shall be entitled, in Nucor’s sole discretion, to (a) cease all Monthly Separation Payments, and Executive shall immediately refund to Nucor any Monthly Separation Payments already paid to him, and/or (b) in addition to any other remedies available at law or in equity, to enforce any of the Restrictive Covenants hereof by temporary, preliminary and permanent injunction to restrain any violation or threatened violation by Executive of any provisions of the Restrictive Covenants. Executive further agrees to reimburse Nucor its costs (including, without limitation, attorney’s fees) incurred to enforce any of the Restrictive Covenants.

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

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

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

9. Entire Agreement. This Agreement, together with the Surviving Provisions of the Executive Agreement, collectively contain the entire agreement of the parties and supersede all prior

 

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agreements and understandings, oral or written, between the parties hereto with respect to the subject matter hereof. This Agreement may be modified or amended only by an instrument in writing signed by Executive and Nucor Corporation. The language of this Agreement and all parts shall be construed as a whole and according to its reasonable and fair meaning, and not strictly for or against either party. The parties agree they have jointly drafted this Agreement and agree that any rules requiring construction of this Agreement against its drafter shall not be applied to this Agreement. This Agreement may be executed in counterparts and by facsimile or .pdf signature, all of which together shall be considered one and the same original document.

10. No Violation of Public Policy. Executive has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon Nucor under the Restrictive Covenants and Paragraph 5 of this Agreement and acknowledges and agrees that they are reasonable in scope, time, and territory; are designed to eliminate competition which would otherwise be unfair; do not interfere with Executive’s exercise of his inherent skill and experience; are reasonably required to protect the legitimate interests of Nucor; and do not confer a benefit upon Nucor disproportionate to the detriment to Executive.

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

(a) Executive has been given a period of twenty-one (21) days to consider the terms of this Agreement;

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

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

The parties acknowledge and agree that Executive has seven (7) days after execution hereof in which to revoke the Agreement, and this Agreement shall not become effective and enforceable until the expiration of seven (7) days following its execution by Executive. To revoke this Agreement, Executive should notify the Chief Financial Officer of Nucor, by fax or email confirmed by certified mail within such seven (7) day period. No attempted revocation after the expiration of such seven (7) day period shall have any effect on the terms of this Agreement.

 

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

 

Executive:    

/s/ Keith Grass

    Keith Grass
Nucor Corporation:    

/s/ A. Rae Eagle

    By:   A. Rae Eagle
    Its:   Secretary

 

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EXHIBIT A

See Attached Executive Agreement


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 KEITH B. GRASS (“Executive”), a resident of Kentucky.

WHEREAS, Executive is currently employed by The David J. Joseph Company, an indirect wholly-owned subsidiary of Nucor Corporation, as President and Chief Executive Officer;

WHEREAS, Executive also currently serves as an Executive Vice President of Nucor Corporation;

WHEREAS, contingent upon Executive’s execution of this Agreement and effective as of January 1, 2012, Nucor Corporation desires for Executive to continue his employment with each of Nucor Corporation as Executive Vice President and The David J. Joseph Company as President and Chief Executive Officer while also providing Executive with an increase in his base salary and the opportunity to receive increased severance benefits that Executive was not previously entitled to receive; and

WHEREAS, in consideration for such an increase in Executive’s base salary and the opportunity to receive such enhanced severance benefits, Executive desires to continue his employment with each of Nucor Corporation as an Executive Vice President and The David J. Joseph Company as President and Chief Executive Officer upon the terms and conditions set forth herein.

NOW, THEREFORE, in consideration for the promises and mutual agreements contained herein, the parties agree, effective as of January 1, 2012 (the “Effective Date”), as follows:

1. Employment. Nucor agrees to employ Executive in the position of Executive Vice President of Nucor Corporation and President and Chief Executive Officer of The David J. Joseph Company, and Executive agrees to accept employment in these positions, 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 receipt of the benefits set forth herein.

2. Compensation and Benefits During Employment. Nucor will provide or cause to be provided, as the case may be, the following compensation and benefits to Executive:

(a) Executive will be entitled to receive a base salary of Four Hundred Twenty Two Thousand Dollars ($422,000) per year, paid not less frequently than monthly in accordance with Nucor’s normal payroll practices, subject to withholding and other deductions as required by law. The parties acknowledge and agree that this amount exceeds the base salary Executive was entitled to receive prior to the Effective Date. Executive’s base salary is subject to adjustment up or down by the Board of Directors of Nucor Corporation (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. To the extent Executive is eligible to participate in the Nucor Corporation Severance Plan for Senior Officers and General Managers (the “Severance Plan”) pursuant to its terms, notwithstanding anything to the contrary set forth in the Severance Plan, Executive’s years of service with The David J. Joseph Company prior to such time as The David J. Joseph Company became a subsidiary of Nucor Corporation shall be deemed Years of Service (as such term is defined in the Severance Plan).

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 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, Nucor will pay Executive the Monthly Amount (as defined below) for twenty-four (24) months following Executive’s termination. The “Monthly Amount” shall be an amount equal to (i) the product of (A) the amount of Executive’s highest base salary level during the twelve (12) month period immediately prior to his date of termination, multiplied by (B) 3.36, (ii) divided by twelve (12). Subject to the provisions of Section 24 of this Agreement, the payments of the Monthly Amount shall be made at the end of each month following Executive’s termination of employment with Nucor on Nucor’s regular monthly payroll date.

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

 

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4. Duties and Responsibilities; Best Efforts. While employed by Nucor, Executive shall perform such duties for and on behalf of Nucor as may be determined and assigned to Executive from time to time by the Chief Executive Officer of Nucor Corporation, the Chief Operating 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 Effective Date.

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, marketing, sale, distribution, processing, trading, brokering, recycling 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 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 direct reduced iron and ferrous and non-ferrous scrap metal and substitutes thereof) (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.

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, processing, recycling and producing raw material (including ferrous and non-ferrous scrap metal and substitutes thereof), 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, purchase, sales and marketing data, and proprietary margin, pricing, and cost data; and (iv) any other information or data

 

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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 and processing facility designs, specifications, and layouts; equipment design, specifications, and layouts; product design and specifications; manufacturing and recycling 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).

(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

 

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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) Asia, Australia, Western Europe, Eastern Europe (including Russia), 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

(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;

 

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(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 Supplier or Prospective Customer or Supplier is located.

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

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

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

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

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

Provided, however, that the term “Customer or Supplier” 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 or Supplier” means any person or entity who does not currently or has not yet purchased the products or services of Nucor or from whom Nucor does not currently or has not yet purchased products or services, but who, at the time of Executive’s last date of full-time employment with Nucor has been targeted

 

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by Nucor as a potential user of the products or services of Nucor or supplier of products or services to 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 Suppliers or Prospective Customers or Suppliers.

(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 payment of the compensation described in Section 3 is intended to compensate Executive for the limitations on Executive’s competitive activities described in this Section 10 and Sections 11 and 12 for the Restrictive Period regardless of the reason for termination. Thus, for example, in the event that Nucor terminates Executive’s employment without cause, Executive expressly agrees that the 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 or Supplier to limit, curtail, cancel, or terminate any business it transacts with, or products it receives from or provides to Nucor;

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

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

12. Antipiracy.

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

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

 

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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 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 Effective Date (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 or similar benefit plans; and

 

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(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.

17. Applicable Law. Executive acknowledges and agrees that during the course of his employment with Nucor he has had regular contact with and taken direction from the Chief Executive Officer and/or the Chief Operating Officer of Nucor Corporation in North Carolina, regularly attends

 

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Board meetings in North Carolina, regularly visits North Carolina as part of his employment, and directly or indirectly receives compensation and benefits from Nucor’s headquarters in 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 The David J. Joseph Company and Executive dated as of February 6, 2008, 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.

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,

 

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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]

 

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

 

EXECUTIVE
/s/ Keith B. Grass
Keith B. Grass
Date:   12-20-11
NUCOR CORPORATION
By:   /s/ John Ferriola
Its:   President & COO
Date:   12/30/2011
EX-10.1

Exhibit 10.1

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 DAVID A. SUMOSKI (“Executive”), a resident of Tennessee 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 Steel Memphis, Inc. subsidiary as an at-will employee of Nucor in the position of Vice President of Nucor Corporation and General Manager of Nucor Steel Memphis, Inc. (the “Prior Position”); and

WHEREAS, Nucor has offered Executive a promotion to the position of Executive Vice President of Engineered Bar Products effective September 14, 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 Engineered Bar 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 Engineered Bar 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 September 14, 2014, as follows:

1. Employment. Nucor agrees to employ Executive in the position of Executive Vice President of Engineered Bar 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 Engineered Bar Products. Executive acknowledges that the Board’s approval of Executive’s promotion to Executive Vice President of Engineered Bar 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 $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) Provided Executive remains in the position of an executive officer of Nucor Corporation, Executive will be a participant in and eligible to receive awards of incentive and equity-based compensation under and in accordance with the applicable terms and conditions of the Nucor Corporation Senior Officers Annual Incentive Plan, the Nucor Corporation Senior Officers Long-Term Incentive Plan, and the Nucor Corporation 2014 Omnibus Incentive Compensation Plan (the “Omnibus Plan”), each as modified from time to time by, and in the sole discretion of, the Board of Directors of Nucor Corporation.

(c) Provided Executive remains in the position of an executive officer of Nucor Corporation, Executive will be eligible for all other employee benefits that are generally made available by Nucor Corporation 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 Executive’s estate the payments of the Monthly Amount due pursuant to Section 3(a) of this

 

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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).

(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

 

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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;

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.

 

6


(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, 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

 

7


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 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

 

8


(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 Engineered Bar 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 December 10, 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.

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

 

10


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]

 

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

 

EXECUTIVE

/s/ David A. Sumoski

David A. Sumoski
Date:  

9/15/14

NUCOR CORPORATION

/s/ John J. Ferriola

John J. Ferriola
Chairman, Chief Executive Officer and President
Date:  

9/15/14

EX-12

Exhibit 12

Nucor Corporation

2014 Form 10-Q

 

     Computation of Ratio of Earnings to Fixed Charges              
     Year-ended December 31,     Nine Months
Ended
    Nine Months
Ended
 
                                   October 4,     September 28,  
     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      $ 853,351      $ 553,862   

Plus: (earnings)/losses from equity investments

     82,341        32,082        10,043        13,323        (9,297     (10,028     (2,665

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        138,164        118,302   

Plus: amortization of capitalized interest

     962        2,332        2,724        2,550        3,064        3,134        2,135   

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     (2,841     (4,510

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     (67,313     (77,582
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total earnings/(loss) before fixed charges

   $ (229,240   $ 396,028      $ 1,364,903      $ 964,706      $ 849,309      $ 925,971      $ 597,250   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed charges

              

Interest cost and amortization of bond issuance and settled swaps

   $ 166,313      $ 162,213      $ 182,321      $ 178,218      $ 162,899      $ 137,236      $ 117,487   

Estimated interest on rent expense

     2,004        1,413        1,220        951        1,229        928        815   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed charges

   $ 168,317      $ 163,626      $ 183,541      $ 179,169      $ 164,128      $ 138,164      $ 118,302   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratio of earnings to fixed charges

     *        2.42        7.44        5.38        5.17        6.70        5.05   

 

* 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: November 12, 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: November 12, 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 October 4, 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: November 12, 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 October 4, 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: November 12, 2014