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
quarterly period ended March
29, 2008
|
|
|
Commission
file number 1-4119
|
|
|
NUCOR
CORPORATION
|
(Exact
name of registrant as specified in its
charter)
|
|
|
|
Delaware
|
|
13-1860817
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer
|
incorporation
or organization)
|
|
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
o
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 o Non-accelerated
filer o
Smaller
reporting company o
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule
12b-2 of the Exchange
Act).
Yes o
No
x
288,559,893
shares of common stock were outstanding at March 29,
2008.
Nucor
Corporation
|
Form
10-Q
|
March
29, 2008
|
INDEX
|
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Page
|
Part
I
|
Financial
Information
|
|
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|
Item
1
|
Financial
Statements (unaudited)
|
|
|
|
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|
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Condensed
Consolidated Statements of Earnings -
|
|
|
|
Three
Months (13 Weeks) Ended March 29, 2008 and March 31,
2007
|
3
|
|
|
|
|
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|
Condensed
Consolidated Balance Sheets - March 29, 2008 and
|
|
|
|
December
31, 2007
|
4
|
|
|
|
|
|
|
|
|
|
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Condensed
Consolidated Statements of Cash Flows -
|
|
|
|
Three
Months (13 Weeks) Ended March 29, 2008 and March 31, 2007
|
5
|
|
|
|
|
|
|
|
|
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|
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Notes
to Condensed Consolidated Financial Statements
|
6
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|
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Item
2
|
Management's
Discussion and Analysis of Financial Condition and
|
|
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|
Results
of Operations
|
16
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|
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|
|
Item
3
|
Quantitative
and Qualitative Disclosures About Market Risk
|
20
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|
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|
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|
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|
Item
4
|
Controls
and Procedures
|
21
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|
Part
II
|
Other
Information
|
|
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Item
1A
|
Risk
Factors
|
22
|
|
|
|
|
|
|
|
|
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|
Item
6
|
Exhibits
|
22
|
|
|
|
|
|
|
|
|
|
Signatures
|
22
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|
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|
|
|
List
of Exhibits to Form 10-Q
|
23
|
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
|
|
|
|
March
29, 2008
|
|
March
31, 2007
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
4,974,269
|
|
$
|
3,768,885
|
|
Costs,
expenses and other:
|
|
|
|
|
|
|
|
Cost
of products sold
|
|
|
4,071,592
|
|
|
2,991,598
|
|
Marketing,
administrative and other expenses
|
|
|
169,714
|
|
|
136,210
|
|
Interest
expense (income), net
|
|
|
18,345
|
|
|
(9,162
|
)
|
Minority
interests
|
|
|
91,771
|
|
|
60,572
|
|
|
|
|
4,351,422
|
|
|
3,179,218
|
|
|
|
|
|
|
|
|
|
Earnings
before income taxes
|
|
|
622,847
|
|
|
589,667
|
|
Provision
for income taxes
|
|
|
213,093
|
|
|
208,638
|
|
Net
earnings
|
|
$
|
409,754
|
|
$
|
381,029
|
|
|
|
|
|
|
|
|
|
Net
earnings per share:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.42
|
|
$
|
1.27
|
|
Diluted
|
|
$
|
1.41
|
|
$
|
1.26
|
|
|
|
|
|
|
|
|
|
Average
shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
|
|
288,208
|
|
|
301,034
|
|
Diluted
|
|
|
290,201
|
|
|
303,482
|
|
|
|
|
|
|
|
|
|
Dividends
declared per share
|
|
$
|
0.52
|
|
$
|
0.61
|
|
See
notes to condensed consolidated financial statements.
Nucor
Corporation Condensed Consolidated Balance Sheets
(Unaudited)
|
(In
thousands)
|
|
|
March
29, 2008
|
|
Dec.
31, 2007
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
733,995
|
|
$
|
1,393,943
|
|
Short-term
investments
|
|
|
-
|
|
|
182,450
|
|
Accounts
receivable, net
|
|
|
1,965,002
|
|
|
1,611,844
|
|
Inventories
|
|
|
1,877,371
|
|
|
1,601,600
|
|
Other
current assets
|
|
|
298,274
|
|
|
283,412
|
|
Total
current assets
|
|
|
4,874,642
|
|
|
5,073,249
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
3,631,792
|
|
|
3,232,998
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
1,698,168
|
|
|
847,887
|
|
|
|
|
|
|
|
|
|
Other
intangible assets, net
|
|
|
894,617
|
|
|
469,936
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
241,302
|
|
|
202,052
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
11,340,521
|
|
$
|
9,826,122
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Short-term
debt
|
|
$
|
12,367
|
|
$
|
22,868
|
|
Long-term
debt due within one year
|
|
|
175,000
|
|
|
-
|
|
Accounts
payable
|
|
|
1,345,322
|
|
|
691,668
|
|
Federal
income taxes payable
|
|
|
131,151
|
|
|
-
|
|
Salaries,
wages and related accruals
|
|
|
284,611
|
|
|
436,352
|
|
Accrued
expenses and other current liabilities
|
|
|
421,194
|
|
|
431,148
|
|
Total
current liabilities
|
|
|
2,369,645
|
|
|
1,582,036
|
|
|
|
|
|
|
|
|
|
Long-term
debt due after one year
|
|
|
2,491,600
|
|
|
2,250,300
|
|
|
|
|
|
|
|
|
|
Deferred
credits and other liabilities
|
|
|
766,401
|
|
|
593,423
|
|
|
|
|
|
|
|
|
|
Minority
interests
|
|
|
287,181
|
|
|
287,446
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
Common
stock
|
|
|
149,430
|
|
|
149,302
|
|
Additional
paid-in capital
|
|
|
280,981
|
|
|
256,406
|
|
Retained
earnings
|
|
|
6,880,580
|
|
|
6,621,646
|
|
Accumulated
other comprehensive income,
|
|
|
|
|
|
|
|
net
of income taxes
|
|
|
186,496
|
|
|
163,362
|
|
|
|
|
7,497,487
|
|
|
7,190,716
|
|
|
|
|
|
|
|
|
|
Treasury
stock
|
|
|
(2,071,793
|
)
|
|
(2,077,799
|
)
|
|
|
|
|
|
|
|
|
Total
stockholders' equity
|
|
|
5,425,694
|
|
|
5,112,917
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$
|
11,340,521
|
|
$
|
9,826,122
|
|
See
notes to condensed consolidated financial statements.
Nucor
Corporation Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
(In
thousands)
|
|
|
Three
Months (13 Weeks) Ended
|
|
|
|
March
29, 2008
|
|
March
31, 2007
|
|
|
|
|
|
|
|
Operating
activities:
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
409,754
|
|
$
|
381,029
|
|
Adjustments:
|
|
|
|
|
|
|
|
Depreciation
|
|
|
109,662
|
|
|
98,402
|
|
Amortization
|
|
|
13,411
|
|
|
2,005
|
|
Stock-based
compensation
|
|
|
9,635
|
|
|
7,649
|
|
Deferred
income taxes
|
|
|
(8,663
|
)
|
|
(16,946
|
)
|
Minority
interests
|
|
|
91,769
|
|
|
60,572
|
|
Settlement
of derivative hedges
|
|
|
(283
|
)
|
|
(1,584
|
)
|
Changes
in assets and liabilities (exclusive of
acquisitions):
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
33,005
|
|
|
(122,598
|
)
|
Inventories
|
|
|
8,014
|
|
|
(5,314
|
)
|
Accounts
payable
|
|
|
16,245
|
|
|
220,207
|
|
Federal
income taxes
|
|
|
189,411
|
|
|
204,993
|
|
Salaries,
wages and related accruals
|
|
|
(162,496
|
)
|
|
(232,499
|
)
|
Other
|
|
|
(41,985
|
)
|
|
(30,406
|
)
|
|
|
|
|
|
|
|
|
Cash
provided by operating activities
|
|
|
667,479
|
|
|
565,510
|
|
|
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(226,238
|
)
|
|
(91,349
|
)
|
Sale
of interest in affiliates
|
|
|
-
|
|
|
29,500
|
|
Investment
in affiliates
|
|
|
(17,118
|
)
|
|
(8,761
|
)
|
Disposition
of plant and equipment
|
|
|
1,250
|
|
|
178
|
|
Acquisitions
(net of cash acquired)
|
|
|
(1,402,179
|
)
|
|
(1,060,080
|
)
|
Purchases
of investments
|
|
|
(209,605
|
)
|
|
(74,265
|
)
|
Proceeds
from the sale of investments
|
|
|
392,055
|
|
|
997,433
|
|
Proceeds
from currency derivative contracts
|
|
|
-
|
|
|
517,241
|
|
Settlement
of currency derivative contracts
|
|
|
-
|
|
|
(511,394
|
)
|
|
|
|
|
|
|
|
|
Cash
used in investing activities
|
|
|
(1,461,835
|
)
|
|
(201,497
|
)
|
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
|
|
Net
change in short-term debt
|
|
|
(10,501
|
)
|
|
6,096
|
|
Proceeds
from the issuance of long-term debt
|
|
|
400,000
|
|
|
-
|
|
Issuance
of common stock
|
|
|
6,158
|
|
|
6,601
|
|
Excess
tax benefits from stock-based compensation
|
|
|
7,300
|
|
|
6,000
|
|
Distributions
to minority interests
|
|
|
(91,993
|
)
|
|
(105,600
|
)
|
Cash
dividends
|
|
|
(176,556
|
)
|
|
(181,155
|
)
|
|
|
|
|
|
|
|
|
Cash
provided by (used in) financing activities
|
|
|
134,408
|
|
|
(268,058
|
)
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
|
|
(659,948
|
)
|
|
95,955
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - beginning of year
|
|
|
1,393,943
|
|
|
785,651
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - end of three months
|
|
$
|
733,995
|
|
$
|
881,606
|
|
See
notes to condensed consolidated financial
statements.
Nucor
Corporation - Notes to Condensed Consolidated Financial Statements
(Unaudited)
1.
|
BASIS
OF INTERIM PRESENTATION: The information furnished in Item I reflects
all
adjustments which are, in the opinion of management, necessary
to
a fair statement of the results for the interim periods and are of
a
normal and recurring nature. The information furnished has not been
audited; however, the December 31, 2007 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 condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in Nucor’s annual
report for the fiscal year ended December 31, 2007. Certain amounts
for
the prior year have been reclassified to conform to the 2008
presentation.
|
Accounting
Pronouncements Recently Adopted
- Effective January 1, 2008, Nucor adopted FASB Statement No. 157, “Fair Value
Measurements” (“SFAS 157”), as it applies to financial assets and liabilities,
which defines fair value, establishes a framework for measuring fair value
and
expands disclosures. The adoption of SFAS 157 for financial assets and
liabilities did not have a material impact on our consolidated financial
statements. See Note 9 for additional information regarding the adoption of
this
standard.
Recent
Accounting Pronouncements
- In March 2008, the FASB issued Statement No. 161, “Disclosures about
Derivative Instruments and Hedging Activities” (SFAS 161), which is effective
for Nucor in 2009. SFAS 161 amends SFAS 133, “Accounting for Derivative
Instruments and Hedging Activities” and requires enhanced disclosures about a
company’s derivative and hedging activities. This standard is not expected to
have a material impact on Nucor’s consolidated financial
statements.
2. |
ACQUISITION:
On
February 29, 2008, Nucor completed the acquisition of the stock of
SHV
North America Corporation, which owns 100% of The David J. Joseph
Company
(“DJJ”) and related affiliates, for a purchase price of approximately
$1.44 billion. DJJ has been the broker of ferrous scrap for Nucor
since
1969. In addition to its scrap processing and brokerage operations,
DJJ
owns over 2,000 scrap-related railcars and provides complete fleet
management and logistics services to third
parties.
|
Since
scrap is Nucor’s largest single cost, the acquisition of DJJ provides an ideal
growth platform for Nucor to expand our direct ownership in the steel scrap
supply chain and further our raw materials strategy. The acquisition of DJJ’s
scrap processing assets provide a partial hedge to our steel mills against
scrap
market volatility.
We
have preliminarily allocated the purchase price to the individual assets
acquired and liabilities assumed. Our valuations are subject to adjustment
as
additional information is obtained; however, these adjustments are not expected
to be material. The following table summarizes the estimated fair values of
the
assets acquired and liabilities assumed of DJJ as of the date of acquisition
(in
thousands):
Nucor
Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited),
continued
Current
assets
|
|
$
|
742,168
|
|
Property,
plant and equipment
|
|
|
286,947
|
|
Goodwill
|
|
|
856,074
|
|
Other
intangible assets
|
|
|
444,367
|
|
Other
assets
|
|
|
6,211
|
|
Total
assets acquired
|
|
|
2,335,767
|
|
|
|
|
|
|
Current
liabilities
|
|
|
(695,520
|
)
|
Long-term
debt
|
|
|
(16,300
|
)
|
Deferred
credits and other liabilities
|
|
|
(180,340
|
)
|
Total
liabilities assumed
|
|
|
(892,160
|
)
|
|
|
|
|
|
Net
assets acquired
|
|
$
|
1,443,607
|
|
The
preliminary purchase price allocation to the identifiable intangible assets
is
as follows (in thousands, except years):
|
|
|
|
Weighted
-
Average
Life
|
|
Customer
relationships
|
|
$
|
384,500
|
|
|
20
years
|
|
Trade
names
|
|
|
56,100
|
|
|
20
years
|
|
Other
|
|
|
3,767
|
|
|
18
years
|
|
|
|
$
|
444,367
|
|
|
20
years
|
|
The
goodwill has been preliminarily allocated to the raw materials segment (see
Note
5).
The
results of DJJ have been included in the consolidated financial statements
from
the date of acquisition. Unaudited pro forma operating results for Nucor,
assuming the acquisition of DJJ occurred at the beginning of each period are
as
follows (in thousands, except per share data):
|
|
Three
Months (13 Weeks) Ended
|
|
|
|
March
29, 2008
|
|
March
31, 2007
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
5,423,256
|
|
$
|
4,289,631
|
|
Net
earnings
|
|
|
421,515
|
|
|
395,550
|
|
Net
earnings per share:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.46
|
|
$
|
1.31
|
|
Diluted
|
|
$
|
1.45
|
|
$
|
1.30
|
|
3.
|
INVENTORIES:
Inventories consist of approximately 47% raw materials and supplies
and
53% finished and semi-finished products at March 29, 2008 (43% and
57%,
respectively, at December 31, 2007). 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 represent
approximately 37% of total inventories as of March 29, 2008 (46% as of December
31, 2007). If the first-in, first-out (FIFO) method of accounting had been
used,
inventories would have been $650.5 million higher
at March 29, 2008 ($581.5 million higher at December 31, 2007). The percentage
of inventories valued using the LIFO method of accounting has decreased since,
in general, the cost of
Nucor
Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited),
continued
inventories
carried by subsidiaries that Nucor has acquired is valued using the FIFO method
of accounting.
4.
|
PROPERTY,
PLANT AND EQUIPMENT:
Property, plant and equipment is recorded net of accumulated depreciation
of $4.03 billion at March 29, 2008 ($3.92 billion at December 31,
2007).
|
5.
|
GOODWILL
AND OTHER INTANGIBLE ASSETS: The change in the net carrying amount
of
goodwill for the quarter ended March 29, 2008 by segment is as follows
(in
thousands):
|
|
|
Steel
Mills
|
|
Steel
Products
|
|
Raw
Materials
|
|
All
Other
|
|
Total
|
|
Balance
at December 31, 2007
|
|
$
|
2,007
|
|
$
|
786,491
|
|
$
|
-
|
|
$
|
59,389
|
|
$
|
847,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
-
|
|
|
444
|
|
|
856,074
|
|
|
-
|
|
|
856,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
price adjustments of previous
|
|
|
-
|
|
|
2,316
|
|
|
-
|
|
|
-
|
|
|
2,316
|
|
acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation
|
|
|
-
|
|
|
(8,553
|
)
|
|
-
|
|
|
-
|
|
|
(8,553
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 29, 2008
|
|
$
|
2,007
|
|
$
|
780,698
|
|
$
|
856,074
|
|
$
|
59,389
|
|
$
|
1,698,168
|
|
Goodwill
resulting from the acquisition of DJJ accounts for the majority of the increase
in goodwill in the current period and is presented based upon Nucor’s
preliminary purchase price allocation. The majority of goodwill is not tax
deductible.
Intangible
assets with estimated useful lives of two to 22 years are comprised of the
following (in thousands):
|
|
March
29, 2008
|
|
December
31, 2007
|
|
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Customer
relationships
|
|
$
|
793,434
|
|
$
|
31,573
|
|
$
|
414,514
|
|
$
|
20,042
|
|
Trademarks
and trade names
|
|
|
114,837
|
|
|
2,723
|
|
|
59,431
|
|
|
1,746
|
|
Other
|
|
|
27,868
|
|
|
7,226
|
|
|
24,102
|
|
|
6,323
|
|
|
|
$
|
936,139
|
|
$
|
41,522
|
|
$
|
498,047
|
|
$
|
28,111
|
|
Intangible
asset amortization expense for the first quarter of 2008 and 2007 was $13.4
million and $2.0 million, respectively. Annual amortization expense is estimated
to be $66.4 million in 2008; $67.6 million in 2009; $63.3 million in 2010;
$59.5
million in 2011; and $56.1 million in 2012.
6.
|
CURRENT
LIABILITIES: Dividends
payable, included in accrued expenses and other current liabilities
in the
balance sheet, was $150.8 million at March 29, 2008 ($176.5 million
at
December 31, 2007). Book overdrafts, included in accounts payable
in the
balance sheet, were $157.8 million at March 29, 2008 (none at December
31,
2007).
|
7.
|
DEBT
AND OTHER FINANCING ARRANGEMENTS: During the first quarter of 2008,
Nucor
issued $400 million of commercial paper. Nucor’s $1 billion revolving
credit facility, which matures in November 2012, provides the ability
to
refinance this short-term obligation on a long-term basis. Accordingly,
the commercial paper is classified as long-term debt. The current
average
interest rate on Nucor’s commercial paper is
2.865%.
|
Nucor
Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited),
continued
8.
|
DERIVATIVES:
Nucor uses derivative financial instruments from time-to-time primarily
to
partially manage its exposure to price risk related to natural gas
purchases used in the production process as well as copper and aluminum
purchased for resale to its customers. In addition, Nucor uses derivatives
from time-to-time 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 would be recorded
as
adjustments to other comprehensive income (loss), net of tax, or recognized
in
net earnings, as appropriate.
In
January 2008, the Company entered into forward foreign currency contracts in
order to mitigate the risk of currency fluctuation on the anticipated joint
venture with the Duferco Group. These contracts have a notional value of €200
million and mature in the second quarter of 2008.
Of
the total $55.0 million fair value of commodity contracts at March 29, 2008,
$38.4 million is recorded in other current assets, $23.7 million is recorded
in
other assets and $7.1 million is recorded in accrued expenses and other current
liabilities. Of the total fair value of $10.2 million of foreign currency and
interest rate derivative contracts at March 29, 2008, $11.8 million is recorded
in other current assets and $1.6 million is recorded in accrued expenses and
other current liabilities. Of the total $6.1 million fair value of commodity
contracts at December 31, 2007, $10.5 million is included in other assets and
$4.4 million is recorded in accrued expenses and other current liabilities.
9.
|
FAIR
VALUE MEASUREMENTS: Effective January 1, 2008, Nucor adopted SFAS
157 as
described in Note 1. SFAS 157 is effective for Nucor in 2008 for
financial
assets and liabilities and effective for non-financial assets and
liabilities in 2009. The implementation of SFAS 157 for financial
assets
and liabilities did not have a material impact on our consolidated
financial statements. Management has not yet determined the impact
from
the adoption of SFAS 157 as it pertains to non-financial assets and
liabilities.
|
The
following table summarizes information regarding Nucor’s financial assets and
financial liabilities that are measured at fair value as of March 29, 2008
(in
thousands):
|
|
|
|
Fair
Value Measurements at Reporting Date Using
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Amount
in
Consolidated
|
|
Quoted
Prices
in
Active
Markets
for
Identical
Assets
|
|
Significant
Other
Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
|
Description
|
|
Balance
Sheet
|
|
(Level
1)
|
|
(Level
2)
|
|
(Level
3)
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
$
|
65,180
|
|
$
|
-
|
|
$
|
65,180
|
|
$
|
-
|
|
Nucor
uses derivatives from time to time to mitigate the effect of natural gas cost
fluctuations, foreign currency fluctuations, interest rate movements, and price
fluctuations of aluminum and copper purchased for resale to its customers.
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,
spot
and future commodity prices and spot and future exchange
rates.
10.
|
CONTINGENCIES:
Nucor is subject to environmental laws and regulations established
by
federal, state and local authorities and, accordingly, makes provision
for
the estimated costs of compliance. Of the undiscounted total
$28.9
million of accrued environmental costs at March 29, 2008 ($19.9 million
at
December 31, 2007), $14.9 million was classified in accrued expenses
and
other current liabilities ($16.6 million at December 31, 2007) and
$14.0
million was classified in deferred credits and other liabilities
($3.3
million at December 31, 2007).
|
Nucor
Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited),
continued
Other
contingent liabilities with respect to product warranties, legal proceedings
and
other matters arise in the normal course of business. In the opinion of
management, no such matters exist that would have a material effect on the
consolidated financial statements.
11.
|
STOCK-BASED
COMPENSATION: Stock
Options -
A summary of activity under Nucor’s stock option plans for the quarter
ended March 29, 2008 is as follows (in thousands, except year and
per
share amounts):
|
|
|
|
|
Weighted
-
|
|
Weighted
-
|
|
|
|
|
|
|
|
Average
|
|
Average
|
|
Aggregate
|
|
|
|
|
|
Exercise
|
|
Remaining
|
|
Intrinsic
|
|
|
|
Shares
|
|
Price
|
|
Contractual
Life
|
|
Value
|
|
Number
of shares under option:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at beginning of year
|
|
|
1,852
|
|
$
|
20.37
|
|
|
|
|
|
|
|
Exercised
|
|
|
(317
|
)
|
|
19.41
|
|
|
|
|
$
|
15,511
|
|
Canceled
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Outstanding
at March 29, 2008
|
|
|
1,535
|
|
$
|
20.57
|
|
|
3.1
years
|
|
$
|
74,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercisable at March 29, 2008
|
|
|
1,535
|
|
$
|
20.57
|
|
|
3.1
years
|
|
$
|
74,402
|
|
As
of March 1, 2006, all outstanding options were vested; therefore, no
compensation expense related to stock options was recorded in the first quarters
of 2008 or 2007. The amount of cash received for the exercise of stock options
totaled $6.2 million and $6.6 million in the first quarter of 2008 and 2007,
respectively.
Restricted
Stock Awards - Nucor’s
Senior Officers Annual Incentive Plan (the “AIP”) and Long-Term Incentive Plan
(the “LTIP”) authorize the award of shares of common stock to officers subject
to certain conditions and restrictions. The LTIP provides for the award of
shares of restricted common stock at the end of each LTIP performance
measurement period at no cost to officers if certain financial performance
goals
are met during the period. One-third of the LTIP restricted stock award
vests
upon each of the first three anniversaries of the award date or, if earlier,
upon the officer’s attainment of age fifty-five while employed by Nucor.
Although participants are entitled to cash dividends and may vote 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 fifty-five
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.
Nucor
Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited),
continued
A
summary of Nucor’s restricted stock activity under the AIP and LTIP for the
first quarter of 2008 is as follows (shares in thousands):
|
|
|
|
Grant
Date
|
|
|
|
Shares
|
|
Fair
Value
|
|
Restricted
stock awards and units:
|
|
|
|
|
|
|
|
Unvested
at beginning of year
|
|
|
479
|
|
$
|
51.93
|
|
Granted
|
|
|
280
|
|
|
67.33
|
|
Vested
|
|
|
(379
|
)
|
|
53.85
|
|
Canceled
|
|
|
-
|
|
|
-
|
|
Unvested
at March 29, 2008
|
|
|
380
|
|
$
|
61.37
|
|
|
|
|
|
|
|
|
|
Shares
reserved for future grants
|
|
|
1,987
|
|
|
|
|
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 $4.3
million and $5.0 million in the first quarter of 2008 and 2007, respectively.
At
March 29, 2008, unrecognized compensation expense related to unvested restricted
stock was $7.9 million, which is expected to be recognized over a
weighted-average period of two 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 after satisfying age and years of service requirements.
RSUs granted to non-employee directors are fully vested on the grant date and
are payable to the non-employee director in the form of common stock after
the
termination of the director’s service on the board of
directors.
RSUs
granted to employees who are eligible for retirement on the date of grant or
will become retirement-eligible prior to the end of the vesting term are
expensed over the period through which the employee will become
retirement-eligible since 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.
The
fair value of the RSUs is determined based on the closing stock price of Nucor’s
common stock on the day before the grant.
A summary of Nucor’s restricted stock for the first quarter of 2008 is as
follows (shares in thousands):
Nucor
Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited),
continued
|
|
|
|
Grant
Date
|
|
|
|
Shares
|
|
Fair
Value
|
|
Restricted
stock units:
|
|
|
|
|
|
|
|
Unvested
at beginning of year
|
|
|
918
|
|
$
|
60.82
|
|
Granted
|
|
|
-
|
|
|
-
|
|
Vested
|
|
|
(3
|
)
|
|
60.67
|
|
Canceled
|
|
|
-
|
|
|
-
|
|
Unvested
at March 29, 2008
|
|
|
915
|
|
$
|
60.82
|
|
|
|
|
|
|
|
|
|
Shares
reserved for future grants
|
|
|
17,683
|
|
|
|
|
Compensation
expense for RSUs was $5.3 million in the first quarter of 2008 ($2.6 million
in
the first quarter of 2007). As of March 29, 2008, there was $35.7 million of
total unrecognized compensation cost related to nonvested RSUs, which is
expected to be recognized over a weighted-average period of 1.6
years.
12.
|
EMPLOYEE
BENEFIT PLAN: Nucor has a Profit Sharing and Retirement Savings Plan
for
qualified employees. Nucor’s expense for these benefits was $67.8 million
and $62.7 million in the first quarter of 2008 and 2007,
respectively.
|
13. |
INTEREST
EXPENSE (INCOME): The components of net interest expense (income)
are as
follows (in thousands):
|
|
|
Three
Months (13 Weeks) Ended
|
|
|
|
March
29, 2008
|
|
March
31, 2007
|
|
|
|
|
|
|
|
Interest
expense
|
|
$
|
29,784
|
|
$
|
10,491
|
|
Interest
income
|
|
|
(11,439
|
)
|
|
(19,653
|
)
|
Interest
expense (income), net
|
|
$
|
18,345
|
|
$
|
(9,162
|
)
|
14. |
INCOME
TAXES: The Internal Revenue Service (“IRS”) is currently examining Nucor’s
2005 and 2006 federal income tax returns. Management believes that
the Company has adequately provided for any adjustments that may
arise
from this audit. Nucor has substantially concluded U.S. federal
income tax matters for years through 2004. The 2007 tax year is open
to examination by the IRS. The tax years 2003 through 2007 remain
open to examination by other major taxing jurisdictions to which
Nucor is
subject.
|
15.
|
COMPREHENSIVE
INCOME: The components of total comprehensive income are as follows
(in
thousands):
|
Nucor
Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited),
continued
|
|
Three
Months (13 Weeks) Ended
|
|
|
|
March
29, 2008
|
|
March
31, 2007
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
409,754
|
|
$
|
381,029
|
|
Net
unrealized gain on hedging derivatives,
|
|
|
|
|
|
|
|
net
of income taxes
|
|
|
35,756
|
|
|
11,916
|
|
Reclassification
adjustment for loss on settlement
|
|
|
|
|
|
|
|
of
hedging derivatives included in net income,
|
|
|
|
|
|
|
|
net
of income taxes
|
|
|
183
|
|
|
984
|
|
Foreign
currency translation gain (loss),
|
|
|
|
|
|
|
|
net
of income taxes
|
|
|
(12,805
|
)
|
|
2,486
|
|
Other
|
|
|
-
|
|
|
3,208
|
|
Total
comprehensive income
|
|
$
|
432,888
|
|
$
|
399,623
|
|
16.
|
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. The steel products
segment includes steel joists and joist girders, steel deck, fabricated
concrete reinforcing steel, cold finish steel, steel fasteners, metal
building systems, light gauge steel framing, steel grating and expanded
metal, and wire and wire mesh. The raw materials segment includes
DJJ, the
scrap broker and processor that Nucor acquired on February 29, 2008;
Nu-Iron Unlimited, a facility that produces direct reduced iron used
by
the steel mills; and certain equity method investments. The “All other”
category primarily includes Novosteel S.A., a steel trading business
of
which Nucor owns 75%. The segments are consistent with the way Nucor
manages its business, which is primarily based upon the similarity
of the
types of products produced and sold by each
segment.
|
Interest
expense, minority interests, other income, profit sharing expense and changes
in
the LIFO reserve and environmental accruals are shown under
Corporate/eliminations. Corporate assets primarily include cash and cash
equivalents, short-term investments, deferred income tax assets and investments
in affiliates.
Nucor
Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited),
continued
The
company’s results by segment were as follows (in
thousands):
|
|
Three
Months (13 Weeks) Ended
|
|
|
|
March
29, 2008
|
|
March
31, 2007
|
|
Net
sales to external customers:
|
|
|
|
|
|
|
|
Steel
mills
|
|
$
|
3,759,453
|
|
$
|
3,273,254
|
|
Steel
products
|
|
|
885,507
|
|
|
484,032
|
|
Raw
materials
|
|
|
235,229
|
|
|
-
|
|
All
other
|
|
|
94,080
|
|
|
11,599
|
|
|
|
$
|
4,974,269
|
|
$
|
3,768,885
|
|
|
|
|
|
|
|
|
|
Intercompany
sales:
|
|
|
|
|
|
|
|
Steel
mills
|
|
$
|
486,555
|
|
$
|
255,152
|
|
Steel
products
|
|
|
8,298
|
|
|
6,202
|
|
Raw
materials
|
|
|
668,327
|
|
|
62,807
|
|
All
other
|
|
|
342
|
|
|
281
|
|
Corporate/eliminations
|
|
|
(1,163,522
|
)
|
|
(324,442
|
)
|
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Earnings
before income taxes:
|
|
|
|
|
|
|
|
Steel
mills
|
|
$
|
799,284
|
|
$
|
735,329
|
|
Steel
products
|
|
|
50,186
|
|
|
49,525
|
|
Raw
materials
|
|
|
16,576
|
|
|
1,570
|
|
All
other
|
|
|
2,768
|
|
|
181
|
|
Corporate/eliminations
|
|
|
(245,967
|
)
|
|
(196,938
|
)
|
|
|
$
|
622,847
|
|
$
|
589,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
29, 2008
|
|
Dec.
31, 2007
|
|
Segment
assets:
|
|
|
|
|
|
|
|
Steel
mills
|
|
$
|
5,300,298
|
|
$
|
5,134,277
|
|
Steel
products
|
|
|
2,974,324
|
|
|
2,938,964
|
|
Raw
materials
|
|
|
2,941,942
|
|
|
465,105
|
|
All
other
|
|
|
179,563
|
|
|
182,840
|
|
Corporate/eliminations
|
|
|
(55,606
|
)
|
|
1,104,936
|
|
|
|
$
|
11,340,521
|
|
$
|
9,826,122
|
|
Nucor
Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited),
continued
17.
|
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
|
|
|
|
March
29, 2008
|
|
March
31, 2007
|
|
Basic
net earnings per share:
|
|
|
|
|
|
|
|
Basic
net earnings
|
|
$
|
409,754
|
|
$
|
381,029
|
|
|
|
|
|
|
|
|
|
Average
shares outstanding
|
|
|
288,208
|
|
|
301,034
|
|
|
|
|
|
|
|
|
|
Basic
net earnings per share
|
|
$
|
1.42
|
|
$
|
1.27
|
|
|
|
|
|
|
|
|
|
Diluted
net earnings per share:
|
|
|
|
|
|
|
|
Diluted
net earnings
|
|
$
|
409,754
|
|
$
|
381,029
|
|
|
|
|
|
|
|
|
|
Diluted
average shares outstanding:
|
|
|
|
|
|
|
|
Basic
shares outstanding
|
|
|
288,208
|
|
|
301,034
|
|
Dilutive
effect of stock options and other
|
|
|
1,993
|
|
|
2,448
|
|
|
|
|
290,201
|
|
|
303,482
|
|
|
|
|
|
|
|
|
|
Diluted
net earnings per share
|
|
$
|
1.41
|
|
$
|
1.26
|
|
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. These forward-looking statements reflect the
Company’s best judgment based on current information, and although we base these
statements on circumstances that we believe to be reasonable when made, there
can be no assurance that future events will not affect the accuracy of such
forward-looking information. As such, the forward-looking statements are not
guarantees of future performance, and actual results may vary materially from
the results and expectations discussed in this report. Factors that might cause
the Company’s actual results to differ materially from those anticipated in
forward-looking statements include, but are not limited to: (1) the sensitivity
of the results of our operations to volatility in steel prices and changes
in
the supply and cost of raw materials, including scrap steel; (2) availability
and cost of electricity and natural gas; (3) market demand for steel products,
which, in the case of many of our products, is driven by the level of
non-residential construction activity in the U.S.; (4) competitive pressure
on
sales and pricing, including pressure from imports and substitute materials;
(5)
uncertainties surrounding the global economy, including excess world capacity
for steel production and fluctuations in currency conversion rates; (6) U.S.
and
foreign trade policy affecting steel imports or exports; (7) significant changes
in government regulations affecting environmental compliance; (8) the cyclical
nature of the steel industry; (9) capital investments and their impact on our
performance; and (10) our safety performance.
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 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,
2007.
Overview
Nucor
and affiliates are manufacturers of steel products, with operating facilities
primarily in the U.S. and Canada. The
steel mills segment produces carbon and alloy steel in bars, beams, sheet and
plate. The steel products segment produces steel joists and joist girders;
steel
deck; fabricated concrete reinforcing steel; cold finished steel; steel
fasteners; metal building systems; light gauge steel framing; steel grating
and
expanded metal; and wire and wire mesh. The raw materials segment produces
direct reduced iron used by the steel mills; brokers ferrous and nonferrous
metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous
and
nonferrous scrap. Nucor
is North America's largest recycler.
In
February 2008, Nucor completed its acquisition of the stock of SHV North America
Corporation, which owns 100% of The David J. Joseph Company and related
affiliates, for a purchase price of approximately $1.44 billion. DJJ now
operates as a wholly owned subsidiary of Nucor Corporation and is headquartered
in Cincinnati, Ohio. The
principal activities of
DJJ, which has been the broker of ferrous scrap to Nucor since 1969, include
the
operation of scrap recycling facilities (processing); brokerage services for
scrap, ferro-alloys, pig iron and scrap substitutes; mill and industrial
services; and rail and logistics services. DJJ has been included in Nucor’s raw
materials segment.
Since
scrap is Nucor’s largest single cost, the acquisition of DJJ provides an ideal
growth platform for Nucor to expand our direct ownership in the steel scrap
supply chain and further our raw materials strategy. The acquisition of DJJ’s
scrap processing assets provide a partial hedge to our steel mills against
scrap
market volatility.
Operations
The
first quarter of 2008 includes the results of Harris Steel, LMP Steel & Wire
Company (“LMP”), Magnatrax Corporation, Nelson Steel, Inc. and other companies
acquired in 2007 while the first quarter of 2007 does not.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations,
continued
Net
sales for the first quarter of 2008 increased
32% to a record $4.97 billion, compared with $3.77 billion
in the first quarter of 2007. Approximately 20% of the increase in sales is
due
to the acquisition of DJJ on February 29, 2008. Other factors contributing
to
the increase in net sales include a 15% increase in average steel sales price
per ton, an 11% increase in average steel products sales price per ton, and
a
65% increase in steel products shipments primarily attributable to acquisitions
made in 2007.
In
the first quarter of 2008, steel production was 5,831,000 tons, compared with
5,585,000 tons produced
in the first quarter of 2007, an increase of 4%. Total steel shipments
increased
5% to 5,951,000
tons in the first quarter of 2008, compared with 5,660,000
tons in last year’s first quarter. Both steel production and total shipments
increased primarily due to increased demand for sheet and plate products. Steel
sales to outside customers remained flat at 5,203,000 tons, compared with
5,229,000 tons in last year’s first quarter. In March 2007 Nucor acquired a
large customer, Harris Steel, causing a shift from outside sales tons to inside
sales tons. If Nucor continues to acquire downstream businesses, the percentage
of our steel production sold to inside customers may continue to
increase.
In
the steel products segment, steel joist production during the first quarter
was
132,000 tons, compared with 121,000 tons in the first quarter of 2007, an
increase of 9%. Steel deck sales were 116,000 tons, compared with 106,000 tons
in last year's first quarter, an increase of 9%. Cold finished steel sales
increased 51% to 136,000 tons, compared with 90,000 tons in the first quarter
of
2007 primarily due to the acquisitions of LMP in August 2007 and Laurel Cold
Finish (part of Harris Steel) in March 2007. Sales of fabricated concrete
reinforcing steel increased from 40,000 tons in the month of March 2007 (when
Nucor acquired Harris Steel Group Inc.) to 179,000 tons in the first quarter
of
2008.
In
the raw materials segment, approximately 71% of the sales are from the brokerage
operations of DJJ and approximately 26% of the sales are from the scrap
processing facilities.
During
the first quarter of 2008, the average utilization rates of all operating
facilities in the steel mills, steel products and raw materials segments were
approximately 92%, 70% and 76%, respectively, compared with 88%, 74% and 75%,
respectively, in the first quarter of 2007.
The
major component of cost of products sold is raw material costs. In the first
quarter of 2008, the average price of raw materials increased 27% from the
first
quarter of 2007.
In
the steel mills segment, the average prices of raw materials used increased
approximately 28% from the first quarter of 2007. The average scrap and scrap
substitute cost per ton used in our steel mills segment was
$333 in
the first quarter of 2008, an increase of 29% from $259 in
the first quarter of 2007.
Changes
in scrap prices are based on changes in the global supply and demand for scrap,
which is tied to the global supply and demand for steel products. Demand for
scrap and other raw materials has risen sharply in recent years in response
to
increased demand, both domestically and internationally, for a wide range of
products made from steel without a corresponding increase in the global supply
of those raw materials. Our surcharges are based upon changes in
widely-available market indices for prices of scrap and other raw materials.
We
monitor those changes closely and make adjustments as needed, but generally
on a
monthly basis, to the surcharges and sometimes directly to the selling prices,
for our products. Although there will always be a timing difference between
changes in the prices we pay for raw materials and the adjustments we make,
we
believe that the surcharge mechanism, which our customers understand is a
necessary response by us to the market forces of supply and demand for our
raw
materials, continues to be an effective means of maintaining our margins.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations,
continued
Nucor
incurred a charge to value inventories using the last-in, first-out (LIFO)
method of accounting of $69.0 million in the first quarter of 2008, compared
with a charge of $24.5 million in the first quarter of 2007. The LIFO charges
for these interim periods are based on management’s estimates of both inventory
prices and quantities at year-end. These estimates will likely differ from
actual amounts, and such differences may be significant.
In
the steel products segment, the average price of raw materials used increased
approximately 9% from the first quarter of 2007.
Total
energy costs increased approximately $4 per ton from the first quarter of 2007
to the first quarter of 2008.
Pre-operating
and start-up costs of new facilities increased to $22.9 million in the first
quarter of 2008, compared with $11.2 million in the first quarter of 2007.
For
the first quarter of 2008, these costs primarily related to the HIsmelt project
in Kwinana, Western Australia, the construction of our SBQ mill in Memphis,
Tennessee, the start-up of our building systems facility in Brigham City, Utah,
and the Castrip® project in Blytheville, Arkansas. For the first quarter of
2007, these costs primarily related to the Hlsmelt project and the SBQ mill
in
Memphis, Tennessee.
Gross
margins were approximately 18% for the first quarter of 2008 compared with
approximately 21% for the first quarter of 2007. The decrease in our gross
margin percentage was primarily due to the escalating prices of raw materials,
including scrap and energy, and the increased LIFO charge. In addition, DJJ’s
business of collecting and processing ferrous and non-ferrous materials for
resale typically operates at lower margins than Nucor has historically
experienced as a manufacturer of steel and steel products.
The
major components of marketing, administrative and other expenses are freight
and
profit sharing costs. Unit freight costs increased 6% from the first quarter
of
2007 to the first quarter of 2008. Profit sharing costs, which are based upon
and generally fluctuate with pre-tax earnings, increased 10% from
the
first quarter of 2007 to the first quarter of 2008. Profit sharing costs also
fluctuate based on Nucor’s achievement of certain financial performance goals,
including comparisons of Nucor’s financial performance to peers in the steel
industry and to other high performing companies.
Nucor
incurred net interest expense of $18.3 million in the first quarter of 2008
compared to net interest income of $9.2 million in the first quarter of 2007.
Gross interest expense increased from $10.5 million in the first quarter of
2007
to $29.8 million in the first quarter of 2008 due to an increase of more than
150% in average debt outstanding accompanied by an increase in average interest
rates from 4.5% to 5.1%. Nucor issued $1.3 billion in notes in the fourth
quarter of 2007 and $400 million of commercial paper in the first quarter of
2008. The interest rates on the $1.3 billion in notes are higher than the rates
on the majority of Nucor’s existing debt. Gross interest income decreased from
$19.7 million in the first quarter of 2007 to $11.4 million in the first quarter
of 2008 due to a 33% decrease in average investments combined with a decrease
in
the average interest rate earned on investments. Average investments decreased
due to cash payments for acquisitions in 2007 and the first quarter of 2008
and
repurchases of common stock during 2007.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations,
continued
Minority
interests represent the income attributable to the minority partners of Nucor’s
joint ventures, Nucor-Yamato Steel Company (“NYS”), Novosteel S.A., and Barker
Steel Company, Inc., of which Nucor owns 51%, 75% and 90%, respectively. The
52%
increase in minority interests is primarily attributable to the increased
earnings of NYS, which is due to the strength of the structural steel market.
Under the NYS partnership agreement, the minimum amount of cash to be
distributed each year to the partners is the amount needed by each partner
to
pay applicable U.S. federal and state income taxes. In the first quarter of
2008
and 2007, the amount of cash distributed to minority interest holders exceeded
amounts allocated to minority interests based on mutual agreement of the general
partners; however, the cumulative amount of cash distributed to partners was
less than the cumulative net earnings of the partnership.
Nucor
had an effective tax rate of 34.2% in the first quarter of 2008, compared with
35.4% in the first quarter 2007. The IRS is currently examining Nucor’s 2005 and
2006 federal income tax returns. Management believes that the Company has
adequately provided for any adjustments that may arise from this
audit.
Net
earnings for the first quarter of 2008 increased 8% to $409.8 million compared
to the first quarter of 2007’s net earnings of $381.0 million. Diluted net
earnings per share increased 12% to $1.41 from $1.26 in the first quarter of
2007. The 12% increase in earnings per share is partially due to the reduced
number of shares outstanding as a result of stock repurchases made in 2007.
Net
earnings as a percentage of net sales were 8.2% in the first quarter of 2008
and
10.1% in the first quarter of 2007. Return on average stockholders’ equity was
32.0% and 30.9% in the first quarter of 2008 and 2007,
respectively.
The
outlook for the second quarter remains positive as we expect continued strength
in our sheet, plate, beam and bar businesses due to the solid global demand
for
steel. In our overall downstream businesses we expect conditions to continue
to
be good, particularly for rebar fabrication, cold finish bars, steel grating,
and wire rod and mesh products. We believe our upstream raw material businesses
will be accretive in the second quarter.
During
the second quarter, Nucor expects to conclude a 50/50 joint venture with the
Duferco Group (Lugano, Switzerland) for the production of beams in Italy and
the
distribution of beams in Europe and North Africa. The joint venture will
encompass the Duferco Group’s Duferdofin subsidiary and associated distribution
companies.
Liquidity
and capital resources
The
current ratio was 2.1 at the end of the first quarter of 2008 and 3.2 at
year-end 2007. The percentage of long-term debt to total capital was 32% at
the
end of the first quarter of 2008 and 29% at year-end 2007.
Accounts
receivable and inventories increased 22% and 17%, respectively, since year-end
while net sales increased 13% over the fourth quarter of 2007. The increases
in
accounts receivable and inventories are due to higher sales prices and the
rising cost of raw materials, as well as to the acquisition of DJJ in the last
month of the quarter. These increases outpaced the increase in net sales because
accounts receivable turn approximately monthly and inventories turn about every
five to six weeks while sales prices and raw material costs continued to
increase throughout the quarter. In addition, DJJ’s sales are included for only
one month in the first quarter of 2008.
Capital
expenditures more than doubled from $91.3 million during the first quarter
of
2007 to $226.3 million in the first quarter of 2008. Capital expenditures are
projected to be approximately $800 million for all of 2008.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations,
continued
In
February 2008, Nucor’s board of directors increased the regular quarterly cash
dividend on Nucor’s common stock from $0.30 per share to $0.32 per share. In
addition to the $0.32 per share base dividend amount, the board of directors
approved the payment of a supplemental dividend of $0.20 per share, for a total
dividend of $0.52 per share, payable on May 9, 2008 to stockholders of record
on
March 28, 2008.
Existing
cash and cash equivalents and short-term investments of approximately $1.44
billion funded the DJJ acquisition. During the first quarter, Nucor issued
$400
million of commercial paper. Nucor’s $1.0 billion revolving credit facility
provides the ability to refinance this short-term obligation on a long-term
basis. Accordingly, the commercial paper is classified as long-term debt. Funds
provided from operations, existing credit facilities and new borrowings are
expected to be adequate to meet future capital expenditure and working capital
requirements for existing operations for at least the next 24 months. Nucor
believes it has the ability to raise additional funds as needed to finance
acquisitions and maintain reasonable financial strength.
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 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, 2007.
Commodity
Price Risk -
In the ordinary course of business, Nucor is exposed to market risk for price
fluctuations of raw materials and energy, principally scrap steel, other ferrous
and nonferrous metals, alloys and natural gas. We attempt to negotiate the
best
prices for our raw materials and energy requirements and to obtain prices for
our steel products that match market price movements in response to supply
and
demand. Nucor has a raw material surcharge designed to pass through the
historically high cost of scrap steel and other raw materials. Our surcharge
mechanism has worked effectively to reduce the normal time lag in passing
through higher raw material costs so that we can maintain our gross
margins.
Nucor
also uses derivative financial instruments to hedge a portion of our exposure
to
price risk related to natural gas purchases used in the production process
and
to hedge a portion of our aluminum purchases and sales. Gains and losses
from derivatives designated as hedges are deferred in accumulated other
comprehensive income (loss) on the condensed consolidated balance sheets and
recognized into earnings in the same period as the underlying physical
transaction. At March 29, 2008, accumulated other comprehensive income
(loss) includes $40.0 million in unrealized net-of-tax gains for the fair value
of these derivative instruments. Changes in the fair values of derivatives
not designated as hedges are recognized in earnings each period. The following
table presents the negative effect on pre-tax income of a hypothetical change
in
the fair value of derivative instruments outstanding at March 29, 2008, due
to
an assumed 10% and 25% change in the market price of each of the indicated
commodities (in thousands):
Item
3. Quantitative and Qualitative Disclosures About Market Risk,
continued
Commodity
Derivative
|
|
10%
Change
|
|
25%
Change
|
|
Natural
gas
|
|
$
|
38,227
|
|
$
|
95,591
|
|
Aluminum
|
|
|
4,412
|
|
|
12,678
|
|
Copper
|
|
|
435
|
|
|
1,144
|
|
Any
resulting changes in fair value would be recorded as adjustments to other
comprehensive income (loss), net of tax, or recognized in net earnings, as
appropriate. These hypothetical losses would be partially offset by the benefit
of lower prices paid or higher prices received for the physical
commodities.
Foreign
Currency Risk -
Nucor is exposed to foreign currency risk through its operations in Canada
and
Trinidad and its joint ventures in Brazil and Australia. When the Company signed
a memorandum of understanding in January 2008 to establish a joint venture
with
the Duferco Group of Lugano, Switzerland for the production of beams in Italy,
Nucor hedged a portion of the exposure to fluctuations of the euro. These
contracts have a notional value of €200 million and mature in the second quarter
of 2008.
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 are effective. During the quarter ended
March
29, 2008, Nucor acquired DJJ (See Note 2 to the condensed financial statements
included in Item 1). Nucor is in the process of incorporating these operations
as part of our internal controls. Nucor has extended its Section 404
compliance program under the Sarbanes-Oxley Act of 2002 and the applicable
rules
and regulations under such Act to include DJJ. Nucor will report on its
assessment of its combined operations within the time period provided by the
Act
and the applicable SEC rules and regulations concerning business combinations.
Changes
in Internal Control Over Financial Reporting
- There were no changes in our internal control over financial reporting during
the quarter ended March 29, 2008 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART
II. OTHER INFORMATION
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.
Item
6. Exhibits
Exhibit
No.
|
Description
of Exhibit
|
|
|
|
|
2
|
Stock
Purchase Agreement by and among SHV Nederland B.V., SHV Finance
B.V.,
Parcs, LLC, SHV Holdings N.V. and Nucor Corporation, dated as of
February
7, 2008
|
|
|
10
|
Employment
Agreement of Keith B. Grass |
|
|
12.1
|
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
|
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/
Terry S. Lisenby |
|
Terry
S. Lisenby |
|
Chief
Financial Officer, Treasurer
and
Executive Vice President
|
Dated:
May 7, 2008
NUCOR
CORPORATION
List
of Exhibits to Form 10-Q - March 29, 2008
|
Exhibit
No. |
Description
of Exhibit
|
|
2
|
Stock
Purchase Agreement by and among SHV Nederland B.V., SHV Finance B.V.,
Parcs, LLC, SHV Holdings N.V. and Nucor Corporation, dated as of
February
7, 2008
|
|
10
|
Employment
Agreement of Keith B. Grass
|
|
12.1 |
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
|