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 September 30, 2023
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number: 1-4119
NUCOR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
13-1860817
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1915 Rexford Road, Charlotte, North Carolina
28211
(Address of principal executive offices)
(Zip Code)
(704) 366-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.40 per share
NUE
New York Stock Exchange
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
245,838,999 shares of the registrant’s common stock were outstanding at September 30, 2023.
Nucor Corporation
Quarterly Report on Form 10-Q
For the Three Months and Nine Months Ended September 30, 2023
Table of Contents
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 September 30, 2023 and October 1, 2022
1
Condensed Consolidated Statements of Comprehensive Income – Three Months (13 Weeks) and Nine Months (39 Weeks) Ended September 30, 2023 and October 1, 2022
2
Condensed Consolidated Balance Sheets – September 30, 2023 and December 31, 2022
3
Condensed Consolidated Statements of Cash Flows – Nine Months (39 Weeks) Ended September 30, 2023 and October 1, 2022
4
Notes to Condensed Consolidated Financial Statements
5
Item 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
16
Item 3
Quantitative and Qualitative Disclosures About Market Risk
24
Item 4
Controls and Procedures
26
Part II
Other Information
Legal Proceedings
27
Item 1A
Risk Factors
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
28
Item 5
Item 6
Exhibits
29
Signatures
30
i
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
September 30, 2023
October 1, 2022
Net sales
$
8,775,734
10,500,755
27,008,970
32,788,511
Costs, expenses and other:
Cost of products sold
6,854,934
7,657,364
20,588,294
22,382,718
Marketing, administrative and other expenses
385,768
486,560
1,229,051
1,574,355
Equity in losses (earnings) of unconsolidated affiliates
1,083
(8,438
)
(3,671
(23,246
Interest (income) expense, net
(14,133
42,347
648
143,245
7,227,652
8,177,833
21,814,322
24,077,072
Earnings before income taxes and noncontrolling interests
1,548,082
2,322,922
5,194,648
8,711,439
Provision for income taxes
326,827
523,879
1,154,689
1,958,044
Net earnings before noncontrolling interests
1,221,255
1,799,043
4,039,959
6,753,395
Earnings attributable to noncontrolling interests
79,749
104,295
300,557
401,791
Net earnings attributable to Nucor stockholders
1,141,506
1,694,748
3,739,402
6,351,604
Net earnings per share:
Basic
4.58
6.51
14.86
23.90
Diluted
4.57
6.50
14.83
23.85
Average shares outstanding:
248,504
259,102
250,752
264,655
248,916
259,526
251,179
265,239
See notes to condensed consolidated financial statements.
Nucor Corporation Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands)
Other comprehensive income (loss):
Net unrealized (loss) income on hedging derivatives, net of income taxes of $(1,500) and $8,800 for the third quarter of 2023 and 2022, respectively, and $(10,700) and $30,700 for the first nine months of 2023 and 2022, respectively
(4,779
27,411
(33,782
97,025
Reclassification adjustment for settlement of hedging derivatives included in net earnings, net of income taxes of $1,100 and $(5,200) for the third quarter of 2023 and 2022, respectively, and $3,100 and $(11,700) for the first nine months of 2023 and 2022, respectively
3,579
(16,311
9,982
(36,837
Foreign currency translation gain (loss), net of income taxes of $0 for the third quarter and first nine months of 2023 and 2022
(18,655
(43,843
12,490
(48,459
(19,855
(32,743
(11,310
11,729
Comprehensive income
1,201,400
1,766,300
4,028,649
6,765,124
Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Nucor stockholders
1,121,651
1,662,005
3,728,092
6,363,333
Nucor Corporation Condensed Consolidated Balance Sheets (Unaudited)
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
5,855,950
4,280,852
Short-term investments
863,140
576,946
Accounts receivable, net
3,427,697
3,591,030
Inventories, net
5,246,365
5,453,531
Other current assets
555,784
789,325
Total current assets
15,948,936
14,691,684
Property, plant and equipment, net
10,355,848
9,616,920
Restricted cash and cash equivalents
12,832
80,368
Goodwill
3,922,267
3,920,060
Other intangible assets, net
3,146,973
3,322,265
Other assets
880,930
847,913
Total assets
34,267,786
32,479,210
LIABILITIES
Current liabilities:
Short-term debt
35,938
49,081
Current portion of long-term debt and finance lease obligations
24,934
28,582
Accounts payable
1,854,707
1,649,523
Salaries, wages and related accruals
1,268,771
1,654,210
Accrued expenses and other current liabilities
1,099,498
948,348
Total current liabilities
4,283,848
4,329,744
Long-term debt and finance lease obligations due after one year
6,620,586
6,613,687
Deferred credits and other liabilities
1,854,270
1,965,873
Total liabilities
12,758,704
12,909,304
Commitments and contingencies
EQUITY
Nucor stockholders' equity:
Common stock
152,061
Additional paid-in capital
2,165,635
2,143,520
Retained earnings
28,110,225
24,754,873
Accumulated other comprehensive loss, net of income taxes
(148,827
(137,517
Treasury stock
(9,813,377
(8,498,243
Total Nucor stockholders' equity
20,465,717
18,414,694
Noncontrolling interests
1,043,365
1,155,212
Total equity
21,509,082
19,569,906
Total liabilities and equity
Nucor Corporation Condensed Consolidated Statements of Cash Flows (Unaudited)
Operating activities:
Adjustments:
Depreciation
681,153
609,933
Amortization
175,701
164,480
Stock-based compensation
101,107
99,838
Deferred income taxes
(25,750
(33,116
Distributions from affiliates
18,621
25,571
Equity in earnings of unconsolidated affiliates
Changes in assets and liabilities (exclusive of acquisitions and dispositions):
Accounts receivable
171,621
(104,751
Inventories
209,056
371,068
164,479
(299,760
Federal income taxes
240,667
(302,335
(347,026
121,243
Other operating activities
165,692
156,201
Cash provided by operating activities
5,591,609
7,538,521
Investing activities:
Capital expenditures
(1,496,248
(1,430,125
Investment in and advances to affiliates
(35,106
(246
Sale of business
-
99,681
Disposition of plant and equipment
8,617
27,278
Acquisitions (net of cash acquired)
(3,549,764
Purchases of investments
(1,200,136
(563,770
Proceeds from the sale of investments
917,332
439,348
Other investing activities
(35,001
(9,595
Cash used in investing activities
(1,840,542
(4,987,193
Financing activities:
Net change in short-term debt
(13,142
(43,074
Proceeds from issuance of long-term debt, net of discount
2,091,934
Repayment of long-term debt
(7,500
(1,108,500
Bond issuance costs
(13,138
Proceeds from exercise of stock options
10,350
21,604
Payment of tax withholdings on certain stock-based compensation
(44,456
(62,869
Distributions to noncontrolling interests
(412,404
(300,772
Cash dividends
(387,996
(404,150
Acquisition of treasury stock
(1,376,757
(2,359,971
Proceeds from government incentives
275,000
Other financing activities
(12,437
(21,085
Cash used in financing activities
(2,244,342
(1,925,021
Effect of exchange rate changes on cash
837
(5,221
Increase in cash and cash equivalents and restricted cash and cash equivalents
1,507,562
621,086
Cash and cash equivalents and restricted cash and cash equivalents - beginning of year
4,361,220
2,508,658
Cash and cash equivalents and restricted cash and cash equivalents - end of nine months
5,868,782
3,129,744
Non-cash investing activity:
Change in accrued plant and equipment purchases
40,126
(31,469
Nucor Corporation – Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Basis of Interim Presentation
The information furnished in this Item 1 reflects all adjustments which are, in the opinion of management, necessary to make 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, 2022 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 included in this Item 1 should be read in conjunction with the audited consolidated financial statements and the notes thereto included in Nucor’s Annual Report on Form 10-K for the year ended December 31, 2022.
2. Inventories
Inventories consisted of approximately 37% raw materials and supplies and 63% finished and semi-finished products at September 30, 2023 (37% and 63%, respectively, at December 31, 2022). 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.
3. Property, Plant and Equipment
Property, plant and equipment is recorded net of accumulated depreciation of $11.66 billion at September 30, 2023 ($11.12 billion at December 31, 2022).
4. Goodwill and Other Intangible Assets
The change in the net carrying amount of goodwill for the nine months ended September 30, 2023 by segment was as follows (in thousands):
Steel Mills
Steel Products
Raw Materials
Total
Balance at December 31, 2022
675,186
2,510,045
734,829
Acquisitions
(2,120
Translation
4,327
Balance at September 30, 2023
2,512,252
Nucor completed its most recent annual goodwill impairment testing as of the first day of the fourth quarter of 2022 and concluded that as of such date there was no impairment of goodwill for any of its reporting units.
The annual assessment performed in 2022 for one of the Company’s reporting units, Rebar Fabrication (which is included in the Steel Products segment), used forward-looking projections in future cash flows. The fair value of this reporting unit exceeded its carrying value by approximately 34% in the most recent assessment. If our assessment of the relevant facts and circumstances changes, including if the expected future performance of this reporting unit declines from the most recent assessment, non-cash impairment charges may be required. Total goodwill associated with the Rebar Fabrication reporting unit was $351.5 million as of September 30, 2023 ($347.6 million as of December 31, 2022). An impairment of goodwill may also lead us to record an impairment of other intangible assets. Total finite-lived intangible assets associated with the Rebar Fabrication reporting unit were $31.3 million as of September 30, 2023 ($36.3 million as of December 31, 2022). There have been no triggering events requiring an interim assessment for impairment of the Rebar Fabrication reporting unit since the most recent annual goodwill impairment testing date.
Intangible assets with estimated useful lives of five to 25 years are amortized on a straight-line or accelerated basis and consisted of the following as of September 30, 2023 and December 31, 2022 (in thousands):
Gross Amount
AccumulatedAmortization
Customer relationships
4,175,065
1,243,668
4,174,724
1,087,834
Trademarks and trade names
364,173
159,369
364,106
142,363
Other
109,747
98,975
109,746
96,114
4,648,985
1,502,012
4,648,576
1,326,311
Intangible asset amortization expense in the third quarter of 2023 and 2022 was $58.5 million and $77.2 million, respectively, and $175.7 million and $164.5 million in the first nine months of 2023 and 2022, respectively. Annual amortization expense is estimated to be $232.8 million in 2023; $233.3 million in 2024; $232.3 million in 2025; $229.4 million in 2026; and $225.1 million in 2027.
5. Current Liabilities
Book overdrafts, included in accounts payable in the condensed consolidated balance sheets, were $155.2 million at September 30, 2023 ($163.6 million at December 31, 2022). Dividends payable, included in accrued expenses and other current liabilities in the condensed consolidated balance sheets, were $126.6 million at September 30, 2023 ($130.5 million at December 31, 2022).
6. Fair Value Measurements
The following table summarizes information regarding Nucor’s financial assets and financial liabilities that were measured at fair value as of September 30, 2023 and December 31, 2022 (in thousands). Nucor does not have any non-financial assets or non-financial liabilities that are measured at fair value on a recurring basis.
Fair Value Measurements at Reporting Date Using
Description
CarryingAmount inCondensedConsolidatedBalanceSheets
Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1)
SignificantOtherObservableInputs(Level 2)
SignificantUnobservableInputs(Level 3)
As of September 30, 2023
Assets:
Cash equivalents
5,224,958
Derivative contracts
4,345
6,105,276
6,100,931
Liabilities:
(3,027
As of December 31, 2022
3,182,631
34,400
3,874,345
3,839,945
(1,370
6
Fair value measurements for Nucor’s cash equivalents, short-term investments and restricted cash and cash equivalents are classified under Level 1 because such measurements are based on quoted market prices in active markets for identical assets. Our short-term investments at September 30, 2023 consisted of certificates of deposit, commercial paper and corporate notes. Fair value measurements for Nucor’s derivatives, which are typically commodity or foreign exchange contracts, 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. There were no transfers between the levels in the fair value hierarchy for the periods presented.
The fair value of short-term and long-term debt, including current maturities, was approximately $5.77 billion at September 30, 2023 (approximately $5.93 billion at December 31, 2022). The debt fair value estimates are classified under Level 2 because such estimates are based on readily available market prices of our debt at September 30, 2023 and December 31, 2022, or similar debt with the same maturities, ratings and interest rates.
7. Contingencies
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. Nucor maintains liability insurance with self-insurance limits for certain risks.
8. Stock-Based Compensation
Stock Options
A summary of activity under Nucor’s stock option plans for the first nine months of 2023 is as follows (shares and aggregate intrinsic value in thousands):
Weighted-
Average
Aggregate
Exercise
Remaining
Intrinsic
Shares
Price
Contractual Life
Value
Number of shares under stock options:
Outstanding at beginning of year
66.76
Granted
91
133.03
Exercised
(181
57.10
20,865
Canceled
Outstanding at September 30, 2023
747
77.16
7.3 years
59,133
Stock options exercisable at September 30, 2023
462
48.31
6.4 years
49,910
Compensation expense for stock options was $0.4 million and $0.5 million in the third quarter of 2023 and 2022, respectively, and $4.3 million and $4.9 million in the first nine months of 2023 and 2022, respectively. As of September 30, 2023, unrecognized compensation expense related to stock options was $2.4 million, which we expect to recognize over a weighted-average period of 2.0 years.
7
Restricted Stock Units
A summary of Nucor’s restricted stock unit (“RSU”) activity for the first nine months of 2023 is as follows (shares in thousands):
Grant DateFair ValuePer Share
Restricted stock units:
Unvested at beginning of year
1,003
98.66
831
Vested
(870
102.72
(12
103.58
Unvested at September 30, 2023
952
124.91
Compensation expense for RSUs was $14.0 million and $16.3 million in the third quarter of 2023 and 2022, respectively, and $74.7 million and $67.2 million in the first nine months of 2023 and 2022, respectively. As of September 30, 2023, unrecognized compensation expense related to unvested RSUs was $97.6 million, which we expect to recognize over a weighted-average period of 1.5 years.
Restricted Stock Awards
A summary of Nucor’s restricted stock activity under the Nucor Corporation Senior Officers Annual Incentive Plan (a supplement to the Nucor Corporation 2014 Omnibus Incentive Compensation Plan, the “AIP”) and the Nucor Corporation Senior Officers Long-Term Incentive Plan (a supplement to the Nucor Corporation 2014 Omnibus Incentive Compensation Plan, the “LTIP”) for the first nine months of 2023 is as follows (shares in thousands):
Grant Date
Fair ValuePer Share
Restricted stock units and restricted stock awards:
209
108.55
414
171.38
(406
152.68
(7
154.05
210
145.55
Compensation expense for common stock and common stock units awarded under the AIP and the 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 $3.1 million and $8.9 million in the third quarter of 2023 and 2022, respectively, and $22.5 million and $27.7 million in the first nine months of 2023 and 2022, respectively. As of September 30, 2023, unrecognized compensation expense related to unvested restricted stock awards was $9.1 million, which we expect to recognize over a weighted-average period of 1.8 years.
9. 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 totaled $148.6 million and $214.4 million in the third quarter of 2023 and 2022, respectively, and $505.2 million and $834.3 million in the first nine months of 2023 and 2022, respectively. The related liability for these benefits is included in salaries, wages and related accruals in the condensed consolidated balance sheets.
8
10. Interest (Income) Expense
The components of net interest (income) expense for the third quarter and first nine months of 2023 and 2022 are as follows (in thousands):
Interest expense
63,228
54,569
186,716
162,159
Interest income
(77,361
(12,222
(186,068
(18,914
11. Income Taxes
The effective tax rate for the third quarter of 2023 was 21.1% compared to 22.6% for the third quarter of 2022.The decrease in the effective tax rate for the third quarter of 2023 as compared to the third quarter of 2022 was primarily due to increased federal tax credits and the change in relative proportions of net earnings attributable to noncontrolling interests to total pre-tax earnings between the periods.
The Internal Revenue Service (the “IRS”) is currently examining Nucor’s 2015, 2019, and 2020 federal income tax returns. Nucor has concluded U.S. federal income tax matters for the tax years through 2014, and for the tax years 2016 and 2018. The tax years 2017, 2021, and 2022 remain open to examination by the IRS. The 2015 through 2021 Canadian income tax returns for Harris Steel Group Inc. and certain related affiliates are currently under examination by the Canada Revenue Agency. The tax years 2016 through 2022 remain open to examination by other major taxing jurisdictions to which Nucor is subject (primarily Canada, Trinidad & Tobago, and other state and local jurisdictions).
Non-current deferred tax assets included in other assets in the condensed consolidated balance sheets were $9.4 million at September 30, 2023 ($19.3 million at December 31, 2022). Non-current deferred tax liabilities included in deferred credits and other liabilities in the condensed consolidated balance sheets were $1.26 billion at September 30, 2023 ($1.30 billion at December 31, 2022).
9
12. Stockholders’ Equity
The following tables reflect the changes in stockholders’ equity attributable to Nucor and the noncontrolling interests of Nucor’s joint ventures, Nucor-Yamato Steel Company (Limited Partnership) (“NYS”) and California Steel Industries, Inc. (“CSI”), in both of which Nucor owns 51%, for the three months and nine months ended September 30, 2023 and October 1, 2022 (in thousands):
Three Months (13 Weeks) Ended September 30, 2023
Accumulated
Additional
Treasury Stock
Nucor
Common Stock
Paid-in
Retained
Comprehensive
(at cost)
Stockholders'
Noncontrolling
Amount
Capital
Earnings
Income (Loss)
Equity
Interests
BALANCES, July 1, 2023
20,940,928
380,154
2,149,693
27,095,661
(128,972
131,431
(9,314,764
19,953,679
987,249
Other comprehensive income (loss)
Stock options exercised
3,227
(386
(50
3,613
Stock option expense
392
Issuance of stock under award plans, net of forfeitures
16,353
14,337
(28
2,016
Amortization of unearned compensation
1,599
Treasury stock acquired and net impact of excise tax
(504,242
2,962
Cash dividends declared
(126,942
(23,633
BALANCES, September 30, 2023
134,315
Nine Months (39 Weeks) Ended September 30, 2023
BALANCES, December 31, 2022
126,661
(2,135
12,485
4,314
76,322
15,072
(917
61,250
4,864
(1,388,869
8,752
(384,050
10
Three Months (13 Weeks) Ended October 1, 2022
BALANCES, July 2, 2022
17,852,808
2,115,178
22,064,383
(70,810
118,368
(7,452,168
16,808,644
1,044,164
2,784
(1,181
(62
3,965
475
15,009
12,949
(31
2,060
1,100
Treasury stock acquired
(652,078
5,334
(129,482
(32,237
BALANCES, October 1, 2022
18,824,679
2,128,521
23,629,649
(103,553
123,609
(8,098,221
17,708,457
1,116,222
Nine Months (39 Weeks) Ended October 1, 2022
BALANCES, December 31, 2021
14,603,794
2,140,608
17,674,100
(115,282
107,742
(5,835,098
14,016,389
587,405
(2,489
(421
24,093
4,897
54,560
(18,195
(1,194
72,755
3,700
17,482
(396,055
Acquisition of noncontrolling interest in CSI
427,798
Dividends declared per share were $0.51 per share in the third quarter of 2023 ($0.50 per share in the third quarter of 2022) and $1.53 per share in the first nine months of 2023 ($1.50 per share in the first nine months of 2022).
On May 11, 2023, the Company announced that its Board of Directors had approved a new share repurchase program under which the Company is authorized to repurchase up to $4.00 billion of the Company’s common stock and terminated all previously authorized share repurchase programs. Share repurchases will be made from time to time in the open market at prevailing market prices or through private transactions or block trades. The timing and amount of repurchases will depend on market conditions, share price, applicable legal requirements and other factors. The share repurchase authorization is discretionary and has no expiration date. As of September 30, 2023, the Company had approximately $3.50 billion available for share repurchases under the program authorized by the Company’s Board of Directors.
11
13. Accumulated Other Comprehensive Income (Loss)
The following tables reflect the changes in accumulated other comprehensive income (loss) by component for the three months and nine months ended September 30, 2023 and October 1, 2022 (in thousands):
Three-Month (13-Week) Period Ended
Gains and (Losses) on
Foreign Currency
Adjustment to Early
Hedging Derivatives
Gains (Losses)
Retiree Medical Plan
Accumulated other comprehensive income (loss) at July 1, 2023
3,500
(149,071
16,599
Other comprehensive income (loss) before reclassifications
(23,434
Amounts reclassified from accumulated other comprehensive income (loss) into earnings (1)
Net current-period other comprehensive income (loss)
(1,200
Accumulated other comprehensive income (loss) at September 30, 2023
2,300
(167,726
Nine-Month (39-Week) Period Ended
Accumulated other comprehensive income (loss) at December 31, 2022
26,100
(180,216
(21,292
(23,800
12
Accumulated other comprehensive income (loss) at July 2, 2022
50,200
(129,484
8,474
(16,432
Amounts reclassified from accumulated other comprehensive income (loss) into earnings (2)
11,100
Accumulated other comprehensive income (loss) at October 1, 2022
61,300
(173,327
Accumulated other comprehensive income (loss) at December 31, 2021
1,112
(124,868
48,566
60,188
14. 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 trading and rebar distribution businesses; and Nucor’s equity method investments in NuMit LLC (“NuMit”) and Nucor-JFE Steel Mexico, S. de R.L. de C.V. ("NJSM"). The steel products segment includes steel joists and joist girders, steel deck, fabricated concrete reinforcing steel, cold finished steel, precision castings, steel fasteners, metal building systems, insulated metal panels, overhead doors, steel grating, tubular products, steel racking, piling products, wire and wire mesh, and utility towers and structures. The raw materials segment includes The David J. Joseph Company and its affiliates (“DJJ”), primarily a scrap broker and processor; Nu-Iron Unlimited and Nucor Steel Louisiana LLC (“Nucor Steel Louisiana”), two facilities that produce direct reduced iron (“DRI”) used by the steel mills; and our natural gas production operations.
Corporate/eliminations include items such as net interest expense on long-term debt, charges and credits associated with changes in allowances to eliminate intercompany profit in inventory, profit sharing expense and stock-based compensation. Corporate assets primarily include cash and cash equivalents, short-term investments, restricted cash and cash equivalents, allowances to eliminate intercompany profit in inventory, deferred income tax assets, federal and state income taxes receivable and investments in and advances to affiliates.
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Nucor’s results by segment for the third quarter and first nine months of 2023 and 2022 were as follows (in thousands):
Net sales to external customers:
Steel mills
5,091,479
5,908,153
15,636,508
19,682,829
Steel products
3,235,969
4,087,107
9,954,828
11,253,143
Raw materials
448,286
505,495
1,417,634
1,852,539
Intercompany sales:
1,201,648
1,486,378
3,726,346
4,843,199
132,481
139,146
333,099
391,141
2,894,079
3,690,120
9,653,600
11,382,329
Corporate/eliminations
(4,228,208
(5,315,644
(13,713,045
(16,616,669
Earnings before income taxes and noncontrolling interests:
882,614
1,287,855
3,124,549
6,682,432
806,731
1,196,845
2,788,322
3,011,644
71,367
279,189
267,918
638,640
(212,630
(440,967
(986,141
(1,621,277
Segment assets:
14,786,460
14,157,229
11,199,598
12,087,145
3,287,907
3,383,114
4,993,821
2,851,722
15. Revenue
The following tables disaggregate our revenue by major source for the third quarter and first nine months of 2023 and 2022 (in thousands):
SteelMills
SteelProducts
RawMaterials
Sheet
2,351,705
7,100,216
Bar
1,448,433
4,646,285
Structural
626,633
1,846,892
Plate
664,708
2,043,115
Tubular Products
370,472
1,246,006
Rebar Fabrication
604,684
1,718,615
Joist
528,018
1,802,809
Deck
411,352
1,370,570
Other Steel Products
1,321,443
3,816,828
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2,712,426
9,511,822
1,761,335
5,581,529
785,930
2,352,322
648,462
2,237,156
459,427
1,583,818
628,923
1,653,155
789,249
2,089,366
634,901
1,768,224
1,574,607
4,158,580
Contract liabilities are primarily related to deferred revenue resulting from cash payments received in advance from customers to protect against credit risk. Contract liabilities totaled $333.5 million as of September 30, 2023 ($285.0 million as of December 31, 2022) and are included in accrued expenses and other current liabilities in the condensed consolidated balance sheets.
16. Earnings Per Share
The computations of basic and diluted net earnings per share for the third quarter and first nine months of 2023 and 2022 are as follows (in thousands, except per share amounts):
Basic net earnings per share:
Basic net earnings
Earnings allocated to participating securities
(4,501
(6,893
(13,788
(26,238
Net earnings available to common stockholders
1,137,005
1,687,855
3,725,614
6,325,366
Basic average shares outstanding
Basic net earnings per share
Diluted net earnings per share:
Diluted net earnings
(4,488
(6,872
(13,747
(26,145
1,137,018
1,687,876
3,725,655
6,325,459
Diluted average shares outstanding:
Dilutive effect of stock options and other
412
424
427
584
Diluted net earnings per share
The following stock options were excluded from the computation of diluted net earnings per share for the third quarter and first nine months of 2023 and 2022 because their effect would have been anti-dilutive (shares in thousands):
Anti-dilutive stock options:
Weighted-average shares
98
33
Weighted-average exercise price
130.71
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Certain statements made in this report, or in other public filings, press releases, or other written or oral communications made by Nucor, which are not historical facts are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties which we expect will or may occur in the future and may impact our business, financial condition and results of operations. The words “anticipate,” “believe,” “expect,” “intend,” “project,” “may,” “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) competitive pressure on sales and pricing, including pressure from imports and substitute materials; (2) U.S. and foreign trade policies affecting steel imports or exports; (3) the sensitivity of the results of our operations to general market conditions, and in particular, prevailing market steel prices and changes in the supply and cost of raw materials, including pig iron, iron ore and scrap steel; (4) the availability and cost of electricity and natural gas, which could negatively affect our cost of steel production or result in a delay or cancellation of existing or future drilling within our natural gas drilling programs; (5) critical equipment failures and business interruptions; (6) 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 United States; (7) impairment in the recorded value of inventory, equity investments, fixed assets, goodwill or other long-lived assets; (8) uncertainties and volatility surrounding the global economy, including excess world capacity for steel production, inflation and interest rate changes; (9) fluctuations in currency conversion rates; (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, 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; (13) our safety performance; (14) our ability to integrate businesses we acquire; (15) the impact of the COVID-19 pandemic, any variants of the virus, and any other similar pandemic or public health situation; and (16) the risks discussed in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and elsewhere in this report.
Caution should be taken not to place undue reliance on the forward-looking statements included in this report. We assume no obligation to update any forward-looking statements except as may be required by law. In evaluating forward-looking statements, these risks and uncertainties should be considered, together with the other risks described from time to time in our reports and other filings with the United States Securities and Exchange Commission.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this report, as well as the audited consolidated financial statements and the notes thereto, “Item 1A. Risk Factors” and “Item 7. 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, 2022.
Overview
Nucor and its affiliates manufacture steel and steel products. Nucor also produces DRI for use in its steel mills. Through DJJ, the Company also processes ferrous and nonferrous metals and brokers ferrous and nonferrous metals, pig iron, hot briquetted iron and DRI. Most of Nucor’s operating facilities and customers are located in North America. Nucor’s operations include 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 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 trading and rebar distribution businesses; and Nucor’s equity method investments in NuMit and NJSM. The steel products segment includes steel joists and joist girders, steel deck, fabricated concrete reinforcing steel, cold finished steel, precision castings, steel fasteners, metal building systems, insulated metal panels, overhead doors, steel grating, tubular products, steel racking, piling products, wire and wire mesh, and utility towers and structures. The raw materials segment includes DJJ, primarily a
scrap broker and processor; Nu-Iron Unlimited and Nucor Steel Louisiana, two facilities that produce DRI used by the steel mills; and our natural gas production operations.
The average utilization rates of all operating facilities in the steel mills, steel products and raw materials segments were approximately 80%, 66% and 74%, respectively, in the first nine months of 2023 compared with approximately 80%, 76% and 73%, respectively, in the first nine months of 2022.
Results of Operations
Nucor reported net earnings attributable to Nucor stockholders of $1.14 billion, or $4.57 per diluted share, for the third quarter of 2023, as compared to net earnings attributable to Nucor stockholders of $1.46 billion, or $5.81 per diluted share, for the second quarter of 2023, and $1.69 billion, or $6.50 per diluted share, for the third quarter of 2022.
Earnings decreased in the third quarter of 2023 as compared to the third quarter of 2022 across all three operating segments. All product groups within the steel mills segment had decreased profitability in the third quarter of 2023 as compared to the third quarter of 2022 due to lower realized average selling prices. Lower volumes and decreased average sales prices were the primary drivers for the decreased profitability in the steel products segment during the third quarter of 2023 as compared to the third quarter of 2022. Though profitability of our joist and deck businesses continued to moderate in the third quarter of 2023 from historically high levels, it remained well above historical averages. Partially offsetting the decreased profitability of most of the businesses in the steel products segment were our rebar fabrication operations, which had a strong increase in profitability in the third quarter of 2023 as compared to the third quarter of 2022. Earnings for the raw materials segment decreased in the third quarter of 2023 as compared to the third quarter of 2022 due primarily to the decreased earnings of our DRI facilities.
Nucor reported net earnings attributable to Nucor stockholders of $3.74 billion, or $14.83 per diluted share, for the first nine months of 2023, as compared to net earnings attributable to Nucor stockholders of $6.35 billion, or $23.85 per diluted share, for the first nine months of 2022. The largest contributor to this year-over-year decrease was the decreased earnings of the steel mills segment, particularly at our sheet mills. Pricing for sheet products declined significantly in the first nine months of 2023 as compared to the first nine months of 2022.
The following discussion provides a greater quantitative and qualitative analysis of Nucor’s performance in the third quarter and first nine months of 2023 as compared to the third quarter and first nine months of 2022.
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Net Sales
Net sales to external customers by segment for the third quarter and first nine months of 2023 and 2022 were as follows (in thousands):
% Change
$5,091,479
$5,908,153
-14%
$15,636,508
$19,682,829
-21%
-12%
-11%
-23%
Total net sales to external customers
$8,775,734
$10,500,755
-16%
$27,008,970
$32,788,511
-18%
Net sales for the third quarter of 2023 decreased 16% from the third quarter of 2022. Average sales price per ton decreased 14% from $1,637 in the third quarter of 2022 to $1,406 in the third quarter of 2023. Total tons shipped to outside customers in the third quarter of 2023 were approximately 6,240,000 tons, a 3% decrease from the third quarter of 2022.
Net sales for the first nine months of 2023 decreased 18% from the first nine months of 2022. Average sales price per ton decreased 15% from $1,657 in the first nine months of 2022 to $1,402 in the first nine months of 2023. Total tons shipped to outside customers in the first nine months of 2023 were approximately 19,271,000 tons, a 3% decrease from the first nine months of 2022.
In the steel mills segment, sales tons for the third quarter and first nine months of 2023 and 2022 were as follows (in thousands):
Outside steel shipments
4,578
4,553
1%
14,156
14,133
Inside steel shipments
1,168
1,316
3,604
3,998
-10%
Total steel shipments
5,746
5,869
-2%
17,760
18,131
Net sales for the steel mills segment decreased 14% in the third quarter of 2023 from the third quarter of 2022, due primarily to a 14% decrease in the average sales price per ton, from $1,296 to $1,114.
Net sales for the steel mills segment decreased 21% in the first nine months of 2023 from the first nine months of 2022, due primarily to a 20% decrease in the average sales price per ton, from $1,388 to $1,105.
Outside sales tonnage for the steel products segment for the third quarter and first nine months of 2023 and 2022 was as follows (in thousands):
Joist sales
127
160
404
497
-19%
Deck sales
104
129
310
388
-20%
Cold finished sales
103
112
-8%
332
368
Rebar fabrication sales
307
350
918
980
-6%
Piling products sales
117
119
331
349
-5%
Tubular products sales
223
231
-3%
737
735
Other steel products sales
190
443
520
-15%
Total steel products sales
1,141
1,291
3,475
3,837
-9%
Net sales for the steel products segment decreased 21% in the third quarter of 2023 compared to the third quarter of 2022, due to a 12% decrease in shipping volumes and a 10% decrease in the average sales price per ton, from $3,167 to $2,837.
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Net sales for the steel products segment decreased 12% in the first nine months of 2023 compared to the first nine months of 2022, due to a 9% decrease in shipping volumes and a 2% decrease in the average sales price per ton, from $2,933 to $2,865.
Net sales for the raw materials segment decreased 11% in the third quarter of 2023 compared to the third quarter of 2022, due to decreases for both DJJ brokerage and scrap processing operations in average sales price per ton and tons shipped to outside customers. In the third quarter of 2023, approximately 92% of outside sales for the raw materials segment were from the brokerage operations of DJJ, and approximately 4% of outside sales were from the scrap processing operations of DJJ (90% and 6%, respectively, in the third quarter of 2022).
Net sales for the raw materials segment decreased 23% in the first nine months of 2023 compared to the first nine months of 2022, due to decreases in average sales price per ton and tons shipped to outside customers for both DJJ brokerage and scrap processing operations. In the first nine months of 2023, approximately 93% of outside sales for the raw materials segment were from the brokerage operations of DJJ, and approximately 3% of outside sales were from the scrap processing operations of DJJ (91% and 7%, respectively, in the first nine months of 2022).
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Gross Margins
Nucor recorded gross margins of $1.92 billion (22%) in the third quarter of 2023, which was a decrease compared to $2.84 billion (27%) in the third quarter of 2022.
Scrap and scrap substitutes are the most significant element in the total cost of steel production. The average scrap and scrap substitute cost per gross ton used in the third quarter of 2023 was $415, a 17% decrease compared to $502 in the third quarter of 2022. Though scrap and scrap substitute costs decreased in the third quarter of 2023 as compared to the third quarter of 2022, total metal margin dollars decreased as average selling prices also decreased.
Scrap prices are driven by the global supply and demand for scrap and other iron-based raw materials used to make steel. As we enter the fourth quarter of 2023, we expect scrap prices to decrease compared to the third quarter of 2023.
Nucor recorded gross margins of $6.42 billion (24%) in the first nine months of 2023, which was a decrease compared to $10.41 billion (32%) in the first nine months of 2022.
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Marketing, Administrative and Other Expenses
A major component of marketing, administrative and other expenses is profit sharing and other incentive compensation costs. These costs, which are based upon and fluctuate with Nucor’s financial performance, decreased by $125.2 million in the third quarter of 2023 as compared to the third quarter of 2022, and decreased by $371.7 million in the first nine months of 2023 as compared to the first nine months of 2022. These decreases were due to Nucor's decreased profitability in the third quarter and first nine months of 2023 as compared to the respective prior year periods, which resulted in decreased accruals related to profit sharing.
Equity in Losses/Earnings of Unconsolidated Affiliates
Equity in losses of unconsolidated affiliates was $1.1 million in the third quarter of 2023, and equity in earnings of unconsolidated affiliates was $8.4 million in the third quarter of 2022. Equity in earnings of unconsolidated affiliates was $3.7 million and $23.2 million in the first nine months of 2023 and 2022, respectively. The decreases in equity method investment earnings were primarily due to the decreased results of NuMit.
In October 2023, Nucor purchased an additional 1% interest in NJSM to bring the total investment to 51%. As such, NJSM will be accounted for on a consolidated basis starting in the fourth quarter of 2023.
Interest (Income) Expense
Net interest (income) expense for the third quarter and first nine months of 2023 and 2022 was as follows (in thousands):
Interest expense increased in the third quarter and first nine months of 2023 compared to the third quarter and first nine months of 2022 due to higher average interest rates on debt and an increase in average debt outstanding.
Interest income increased in the third quarter and first nine months of 2023 compared to the third quarter and first nine months of 2022 primarily due to an increase in average interest rates on cash investments and higher average cash investment balances held.
Earnings Before Income Taxes and Noncontrolling Interests
The table below presents earnings before income taxes and noncontrolling interests by segment for the third quarter and first nine months of 2023 and 2022 (in thousands). The changes between periods were driven by the quantitative and qualitative factors previously discussed.
21
Noncontrolling Interests
Noncontrolling interests represent the income attributable to the holders of noncontrolling interests in Nucor’s joint ventures, NYS and CSI. Nucor owns a 51% controlling interest in each of NYS and CSI. The decrease in earnings attributable to noncontrolling interests in the third quarter of 2023 as compared to the third quarter of 2022 was primarily due to the decreased earnings of NYS. The decrease in earnings attributable to noncontrolling interests in the first nine months of 2023 as compared to the first nine months of 2022 was primarily due to the decreased earnings of both NYS and CSI.
Provision for Income Taxes
The effective tax rate for the third quarter of 2023 was 21.1% compared to 22.6% for the third quarter of 2022. The decrease in the effective tax rate for the third quarter of 2023 as compared to the third quarter of 2022 was primarily due to increased federal tax credits and the change in relative proportions of net earnings attributable to noncontrolling interests to total pre-tax earnings between the periods. The expected effective tax rate for the full year of 2023 is approximately 22.3%.
We estimate that in the next 12 months our gross unrecognized tax benefits, which totaled $179.8 million at September 30, 2023, exclusive of interest, could decrease by as much as $10.6 million as a result of the expiration of the statute of limitations and the closures of examinations, substantially all of which would impact the effective tax rate.
The IRS is currently examining Nucor’s 2015, 2019 and 2020 federal income tax returns. Nucor has concluded U.S. federal income tax matters for the tax years through 2014, and for the tax years 2016 and 2018. The tax years 2017, 2021 and 2022 remain open to examination by the IRS. The 2015 through 2021 Canadian income tax returns for Harris Steel Group Inc. and certain related affiliates are currently under examination by the Canada Revenue Agency. The tax years 2016 through 2022 remain open to examination by other major taxing jurisdictions to which Nucor is subject (primarily Canada, Trinidad & Tobago, and other state and local jurisdictions).
Net Earnings Attributable to Nucor Stockholders and Return on Equity
Nucor reported net earnings attributable to Nucor stockholders of $1.14 billion, or $4.57 per diluted share, in the third quarter of 2023 as compared to net earnings attributable to Nucor stockholders of $1.69 billion, or $6.50 per diluted share, in the third quarter of 2022. Net earnings attributable to Nucor stockholders as a percentage of net sales were 13.0% and 16.1% in the third quarter of 2023 and 2022, respectively.
Nucor reported net earnings attributable to Nucor stockholders of $3.74 billion, or $14.83 per diluted share, in the first nine months of 2023 as compared to net earnings attributable to Nucor stockholders of $6.35 billion, or $23.85 per diluted share, in the first nine months of 2022. Net earnings attributable to Nucor stockholders as a percentage of net sales were 13.8% and 19.4% in the first nine months of 2023 and 2022, respectively. Annualized return on average stockholders’ equity was 25.6% and 53.4% in the first nine months of 2023 and 2022, respectively.
Outlook
We expect earnings in the fourth quarter of 2023 to decrease compared to the third quarter of 2023 due primarily to lower pricing across all three operating segments, and, to a lesser extent, decreased volumes. In the steel mills segment, we expect the decrease in realized pricing to be most pronounced at our sheet mills. In the steel products segment, we expect decreased earnings due to moderating average selling prices at most of the product groups within the steel products segment and lower volumes. Earnings for the raw materials segment are expected to decrease in the fourth quarter of 2023 as compared to the third quarter of 2023 due to lower pricing for raw materials and planned outages at our DRI facilities.
Nucor’s largest exposure to market risk is in our steel mills and steel products segments. Our largest single customer in the third quarter of 2023 represented approximately 5% of sales and has consistently paid within terms. In the raw materials segment, we are exposed to price fluctuations related to the purchase of scrap and scrap substitutes, pig iron and iron ore. Businesses within the steel mills segment account for the majority of the raw materials segment’s sales.
Liquidity and Capital Resources
We currently have the highest credit ratings of any steel producer headquartered in North America, with an A- long-term rating from Standard & Poor’s, an A- rating from Fitch Ratings and a Baa1 long-term rating from Moody’s. Our credit
22
ratings are dependent, however, upon a number of factors, both qualitative and quantitative, and are subject to change at any time. The disclosure of our credit ratings is made in order to enhance investors’ understanding of our sources of liquidity and the impact of our credit ratings on our cost of funds.
Our liquidity position as of September 30, 2023 remained strong, consisting of total cash and cash equivalents, short-term investments and restricted cash and cash equivalents of $6.73 billion ($4.94 billion as of December 31, 2022). Of these totals, the amount of restricted cash and cash equivalents was $12.8 million at September 30, 2023 and $80.4 million at December 31, 2022. Approximately $888.1 million of the cash and cash equivalents position at September 30, 2023, was held by our majority-owned and controlled subsidiaries as compared to $1.04 billion at December 31, 2022.
Cash provided by operating activities was $5.59 billion in the first nine months of 2023 as compared to $7.54 billion in the first nine months of 2022. The $1.95 billion decrease was primarily driven by net earnings before noncontrolling interests of $4.04 billion for the first nine months of 2023, a decrease of $2.71 billion from net earnings before noncontrolling interests for the prior year period of $6.75 billion. Partially offsetting the decline in net earnings before noncontrolling interests were the changes in operating assets and operating liabilities (exclusive of acquisitions) which provided cash of $604.5 million in the first nine months of 2023 as compared to using cash of $58.3 million in the first nine months of 2022.
The funding of our working capital in the first nine months of 2023 decreased by $662.8 million compared to the first nine months of 2022 mainly due to the change in accounts receivable providing $171.6 million of cash in the first nine months of 2023 compared to using cash of $104.8 million in the first nine months of 2022, as well as due to the change in federal income taxes which provided cash of $240.7 million in the first nine months of 2023, compared to using cash of $302.3 million in the first nine months of 2022. Additionally, the change in accounts payable provided cash of $164.5 million in the first nine months of 2023, compared to using cash of $299.8 million in the first nine months of 2022. These changes were offset by the $468.3 million decrease in the change in salaries, wages and related accruals in the first nine months of 2023 as compared to the first nine months of 2022. The change in salaries, wages and related accruals used cash of $347.0 million in the first nine months of 2023 as compared to providing cash of $121.2 million in the first nine months of 2022, due primarily to the payout in the first nine months of 2023 of incentive compensation for 2022, which was higher than the incentive compensation for 2021 that was paid out in the first nine months of 2022 due to higher Company earnings in 2022.
The current ratio was 3.7 at the end of the third quarter of 2023 and 3.4 at year-end 2022. The increase in the current ratio at the end of the third quarter of 2023 compared to year-end 2022 was due to the $1.26 billion, or 9%, increase in current assets. The increase in current assets was primarily due to the $1.58 billion increase in cash and cash equivalents at the end of the third quarter of 2023 compared to year-end 2022.
Cash used in investing activities during the first nine months of 2023 was $1.84 billion as compared to $4.99 billion in the prior year period, a decrease of $3.15 billion. The primary reason for the decrease in cash used in investing activities was the decrease in cash used for acquisitions of $3.55 billion. Acquisitions were significantly higher in the first nine months of 2022 due to the acquisition of CSI on February 1, 2022 and C.H.I. Overhead Doors, LLC on June 24, 2022 (there have been no acquisitions to date in 2023). Cash used for capital expenditures of $1.50 billion in the first nine months of 2023 increased by $66.1 million over the same period of 2022 primarily due to the plate mill and tubular product facility being built in Kentucky, the sheet mill in West Virginia and the micro mill being built in North Carolina. Capital expenditures for 2023 are estimated to be approximately $2.40 billion as compared to $1.95 billion in 2022. The projects that we anticipate will have the largest capital expenditures in 2023 are the sheet mill under construction in West Virginia, the micro mill being built in North Carolina, the sheet mill expansion in Indiana and the plate mill in Kentucky.
Cash used in financing activities during the first nine months of 2023 was $2.24 billion as compared to $1.93 billion in the first nine months of 2022. The primary uses of cash were stock repurchases of $1.38 billion in the first nine months of 2023 as compared to $2.36 billion in the first nine months of 2022, a decrease of $983.2 million, and distributions to noncontrolling interests of $412.4 million in the first nine months of 2023 as compared to $300.8 million in the first nine months of 2022, an increase of $111.6 million. The primary change in the source of cash offsetting these uses of cash was proceeds from long-term debt, net of discount to the public, of $2.09 billion in the first nine months of 2022 as compared to none in the first nine months of 2023. In the first nine months of 2022, Nucor issued $500.0 million aggregate principal amount of its 3.950% Notes due in 2025, $500.0 million aggregate principal amount of its 4.300% Notes due in 2027, $550.0 million aggregate principal amount of its 3.125% Notes due in 2032 and $550.0 million aggregate principal amount of its 3.850% Notes due in 2052. A portion of the net proceeds from the long-term debt issued in the first nine months of 2022 was used to redeem $1.11 billion of long-term debt in the first nine months of 2022.
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Nucor’s $1.75 billion revolving credit facility matures on November 5, 2026. The revolving credit facility includes only one financial covenant, which is a limit of 60% on the ratio of funded debt to total capital. In addition, the revolving 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 September 30, 2023, the funded debt to total capital ratio was 23.7% and we were in compliance with all non-financial covenants under the revolving credit facility. No borrowings were outstanding under the revolving credit facility as of September 30, 2023.
In September 2023, Nucor’s Board of Directors declared a quarterly cash dividend on Nucor’s common stock of $0.51 per share payable on November 9, 2023 to stockholders of record on September 29, 2023. This dividend is Nucor’s 202nd consecutive quarterly cash dividend.
Funds provided from operations, cash and cash equivalents, short-term investments, restricted cash and cash equivalents 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. We also believe we have adequate access to capital markets for liquidity purposes.
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 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 risk has significantly changed since December 31, 2022. There were no interest rate swaps outstanding at September 30, 2023.
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 material and energy requirements and to obtain prices for our steel products that match market price movements in response to supply and demand. In periods of strong or stable demand for our products, we are more likely to be able to effectively reduce the normal time lag in passing through higher raw material costs so that we can maintain our gross margins. When demand for our products is weaker, this becomes more challenging. Our DRI facilities in Trinidad and Louisiana provide us with flexibility in managing our raw material requirements and our input costs. DRI is particularly important for operational flexibility when demand for prime scrap increases due to increased domestic steel production.
Natural gas produced by Nucor’s production operations is being sold to third parties to partially offset our exposure to changes in the price of natural gas consumed by our Louisiana DRI facility and our steel mills in the United States.
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, net of income taxes in the condensed consolidated balance sheets and recognized in net earnings in the same period as the underlying physical transaction. At September 30, 2023, accumulated other comprehensive loss, net of income taxes included $2.3 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 net earnings each period.
The following table presents the negative effect on pre-tax earnings of a hypothetical change in the fair value of the derivative instruments outstanding at September 30, 2023, 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
11,900
29,740
Aluminum
4,421
12,672
Copper
1,004
2,504
Any resulting changes in fair value would be recorded as adjustments to accumulated other comprehensive loss, net of income taxes or recognized in net earnings, as appropriate. These hypothetical losses would be partially offset by the benefit of lower prices paid or higher prices received for the physical commodities.
Foreign Currency Risk
Nucor is exposed to foreign currency risk primarily through its operations in Canada, Europe and Mexico. We periodically use derivative contracts to mitigate the risk of currency fluctuations. Open foreign currency derivative contracts at September 30, 2023 were insignificant.
25
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 the 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 September 30, 2023 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 is from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. With respect to all such lawsuits, claims and proceedings, we record reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. We do not believe that any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on our results of operations, financial position or cash flows. Nucor maintains liability insurance with self-insurance limits for certain risks.
During 2022, Nucor Steel Louisiana, our DRI facility located in St. James Parish, Louisiana, received allegations of violations of the Clean Air Act from the United States Environmental Protection Agency. A combined settlement is currently being negotiated with the United States Department of Justice, United States Environmental Protection Agency and the Louisiana Department of Environmental Quality. We do not believe that any aggregate settlement for these allegations will be material to Nucor.
There were no other proceedings that were pending or contemplated under federal, state or local environmental laws that the Company reasonably believes may result in monetary sanctions of at least $1.0 million (the threshold chosen by Nucor as permitted by Item 103 of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), and which Nucor believes is reasonably designed to result in disclosure of any such proceeding that is material to its business or financial condition).
Item 1A. Risk Factors
There have been no material changes in Nucor’s risk factors from those included in “Item 1A. Risk Factors” in Nucor’s Annual Report on Form 10-K for the year ended December 31, 2022.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Our share repurchase program activity for each of the three months and the quarter ended September 30, 2023 was as follows (in thousands, except per share amounts):
TotalNumberof SharesPurchased
AveragePrice Paidper Share (1)
Total Number ofShares Purchasedas Part of PubliclyAnnounced Plansor Programs (2)
ApproximateDollar Value ofShares thatMay Yet BePurchasedUnder thePlans orPrograms (2)
July 2, 2023 - July 29, 2023
4,000,000
July 30, 2023 - August 26, 2023
2,231
169.09
3,623,117
August 27, 2023 - September 30, 2023
731
168.68
3,499,941
For the Quarter Ended September 30, 2023
Item 5. Other Information
Insider Trading Arrangements
During the quarter ended September 30, 2023, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (as such terms are defined in Item 408 of Regulation S-K).
Item 6. Exhibits
Exhibit No.
Description of Exhibit
Restated Certificate of Incorporation of Nucor Corporation (incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K filed September 14, 2010 (File No. 001-04119))
3.1
Bylaws of Nucor Corporation, as amended and restated February 22, 2021 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed February 24, 2021 (File No. 001-04119))
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 September 30, 2023, filed November 8, 2023, formatted in Inline 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.
104*
Cover Page from the Quarterly Report on Form 10-Q of Nucor Corporation for the quarter ended September 30, 2023, filed November 8, 2023, formatted in Inline XBRL (included in Exhibit 101 above).
* Filed herewith.
** Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of Regulation S-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
By:
/s/ Stephen D. Laxton
Stephen D. Laxton
Chief Financial Officer, Treasurer and
Executive Vice President
Dated: November 8, 2023