ThirdFirst Quarter 20052006


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 OctoberApril 1, 20052006

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)

 

(I.R.S. Employer

Identification No.)

2100 Rexford Road, Charlotte, North Carolina 28211
(Address of principal executive offices) (Zip Code)

(704) 366-7000

(Registrant’s telephone number, including area code)

 


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, (as definedor a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act).    YesAct.

Large accelerated filer  x    NoAccelerated filer  ¨

    Non-accelerated filer  ¨

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

155,618,850155,798,286 shares of common stock were outstanding at OctoberApril 1, 2005.2006.

 



Nucor Corporation

Form 10-Q

OctoberApril 1, 20052006

INDEX

 

      Page

Part I  Financial Information  
Item 1  Financial StatementsItem 1  Financial Statements
  Condensed Consolidated Statements of Earnings - Nine Months (39 Weeks) and Three Months (13 Weeks) Ended OctoberApril 1, 20052006 and OctoberApril 2, 20042005  3
  Condensed Consolidated Balance Sheets - OctoberApril 1, 20052006 and December 31, 20042005  4
  Condensed Consolidated Statements of Cash Flows - NineThree Months (39(13 Weeks) Ended OctoberApril 1, 20052006 and OctoberApril 2, 20042005  5
  Notes to Condensed Consolidated Financial Statements  6
Item 2  Item 2Management’s Discussion and Analysis of Financial Condition and Results of Operations  1112
Item 3  Item 3Quantitative and Qualitative Disclosures About Market Risk  1415
Item 4  Item 4Controls and Procedures  15
Part II  Other Information  
Item 1  Legal ProceedingsItem 1A  15Risk Factors16
Item 2  Item 2Unregistered Sales of Equity Securities and Use of Proceeds  1516
Item 5  Other InformationItem 6  15
Item 6Exhibits  Exhibits1716
Signatures  1617
List of Exhibits to Form 10-Q  1718


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Nucor Corporation Condensed Consolidated Statements of Earnings (Unaudited)

(In thousands, except per share amounts)

 

  Nine Months (39 Weeks) Ended

 Three Months (13 Weeks) Ended

  Three Months (13 Weeks) Ended 
  Oct. 1, 2005

 Oct. 2, 2004

 Oct. 1, 2005

  Oct. 2, 2004

  

April 1,

2006

 

April 2,

2005

 

Net sales

  $9,493,535  $8,287,830  $3,025,911  $3,239,592  $3,545,097  $3,322,621 
  


 


 

  

       

Costs, expenses and other:

         

Cost of products sold

   7,575,996   6,683,803   2,435,276   2,433,518   2,768,142   2,620,628 

Marketing, administrative and other expenses

   346,178   318,978   118,130   131,573   154,100   125,429 

Interest expense, net

   7,396   17,831   922   5,053

Interest (income) expense, net

   (5,732)  4,133 

Minority interests

   76,595   60,347   24,915   34,061   40,326   31,165 

Other income

   (9,200)  (1,596)  —     —     —     (9,200)
  


 


 

  

       
   7,996,965   7,079,363   2,579,243   2,604,205   2,956,836   2,772,155 
  


 


 

  

       

Earnings before income taxes

   1,496,570   1,208,467   446,668   635,387   588,261   550,466 

Provision for income taxes

   527,320   428,400   154,791   220,000   209,100   195,800 
  


 


 

  

       

Net earnings

  $969,250  $780,067  $291,877  $415,387  $379,161  $354,666 
  


 


 

  

       

Net earnings per share:

         

Basic

  $6.14  $4.93  $1.87  $2.62  $2.44  $2.22 
  


 


 

  

       

Diluted

  $6.08  $4.90  $1.86  $2.59  $2.42  $2.20 
  


 


 

  

       

Average shares outstanding:

         

Basic

   157,865   158,094   155,832   158,796   155,313   159,708 

Diluted

   159,316   159,347   157,236   160,229   156,874   161,246 
Dividends declared per share  $1.20  $0.34  $0.40  $0.13  $0.70  $0.40 

See notes to condensed consolidated financial statements.

3


Nucor Corporation Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

 

  October 1, 2005

 Dec. 31, 2004

   

April 1,

2006

 

Dec. 31,

2005

 

Assets

      

Current assets:

      

Cash and short-term investments

  $1,607,238  $779,049 

Accounts receivable

   1,017,900   962,755 

Cash and cash equivalents

  $1,127,978  $980,150 

Short-term investments

   1,077,023   857,360 

Accounts receivable, net

   1,068,752   1,000,629 

Inventories

   951,143   1,239,888    941,223   945,054 

Other current assets

   228,729   193,256    247,139   288,360 
  


 


       

Total current assets

   3,805,010   3,174,948    4,462,115   4,071,553 

Property, plant and equipment, net

   2,845,587   2,818,307    2,829,925   2,855,717 

Other assets

   308,278   139,952    212,106   211,517 
  


 


       

Total assets

  $6,958,875  $6,133,207   $7,504,146  $7,138,787 
  


 


       

Liabilities and stockholders’ equity

      

Current liabilities:

      

Long-term debt due within one year

  $1,250  $—     $1,250  $1,250 

Accounts payable

   573,477   471,549    592,373   501,624 

Federal income taxes payable

   —     28,957    155,123   —   

Salaries, wages and related accruals

   336,032   320,276    218,436   368,568 

Accrued expenses and other current liabilities

   348,836   245,008    405,147   384,257 
  


 


       

Total current liabilities

   1,259,595   1,065,790    1,372,329   1,255,699 
  


 


       

Long-term debt due after one year

   922,300   923,550    922,300   922,300 
  


 


       

Deferred credits and other liabilities

   517,971   514,569    460,368   486,910 
  


 


       

Minority interests

   169,257   173,313    184,270   194,090 
  


 


       

Stockholders’ equity:

      

Common stock

   73,987   73,753    74,337   74,120 

Additional paid-in capital

   172,241   147,206    225,030   191,850 

Retained earnings

   4,468,930   3,688,555    4,979,167   4,709,111 

Unearned compensation

   (3,887)  (392)   —     (3,287)

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

   71,100   (1,177)
  


 


Accumulated other comprehensive income, net of income taxes

   29,222   46,600 
   4,782,371   3,907,945        
   5,307,756   5,018,394 

Treasury stock

   (692,619)  (451,960)   (742,877)  (738,606)
  


 


       

Total stockholders’ equity

   4,089,752   3,455,985    4,564,879   4,279,788 
  


 


       

Total liabilities and stockholders’ equity

  $6,958,875  $6,133,207   $7,504,146  $7,138,787 
  


 


       

See notes to condensed consolidated financial statements.

4


Nucor Corporation Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

  Nine Months (39 Weeks) Ended

   Three Months (13 Weeks) Ended 
  Oct. 1, 2005

 Oct. 2, 2004

   

April 1,

2006

 

April 2,

2005

 

Operating activities:

      

Net earnings

  $969,250  $780,067   $379,161  $354,666 

Adjustments:

      

Depreciation

   281,499   291,805    90,825   91,290 

Impairment of assets

   —     13,200 

Deferred income taxes

   (44,910)  (52,900)   (18,800)  (16,200)

Minority interests

   76,583   60,345    40,322   31,161 

Changes in (exclusive of acquisitions):

   

Settlement of natural gas hedges

   (4,931)  —   

Changes in (exclusive of acquisition):

   

Current assets

   280,213   (832,629)   (78,984)  2,802 

Current liabilities

   176,316   631,457    163,669   137,066 

Other

   (11,624)  3,972    (3,871)  (12,847)
  


 


       

Cash provided by operating activities

   1,727,327   895,317    567,391   587,938 
  


 


       

Investing activities:

      

Capital expenditures

   (222,629)  (198,007)   (69,871)  (71,259)

Investment in affiliates

   (37,450)  (68,550)   (14,704)  (8,176)

Disposition of plant and equipment

   709   2,813    1,439   294 

Acquisitions (net of cash acquired)

   (154,864)  (169,646)

Acquisition (net of cash acquired)

   —     (44,136)

Purchases of short-term investments

   (220,308)  —   

Proceeds from sales of short-term investments

   645   —   
  


 


       

Cash used in investing activities

   (414,234)  (433,390)   (302,799)  (123,277)
  


 


       

Financing activities:

      

Proceeds from long-term debt

   —     20,000 

Issuance of common stock

   29,768   46,769    38,011   25,262 

Tax benefit from stock options exercised

   6,500   —   

Distributions to minority interests

   (80,639)  (71,775)   (50,142)  (2,181)

Cash dividends

   (188,875)  (53,901)   (100,870)  (64,080)

Acquisition of treasury stock

   (245,158)  —      (10,263)  —   

Termination of interest rate swap agreement

   —     4,800 
  


 


       

Cash used in financing activities

   (484,904)  (54,107)   (116,764)  (40,999)
  


 


       

Increase in cash and short-term investments

   828,189   407,820 

Increase in cash and cash equivalents

   147,828   423,662 

Cash and short-term investments - beginning of year

   779,049   350,332 

Cash and cash equivalents - beginning of year

   980,150   779,049 
  


 


       

Cash and short-term investments - end of nine months

  $1,607,238  $758,152 

Cash and cash equivalents - end of three months

  $1,127,978  $1,202,711 
  


 


       

See notes to condensed consolidated financial statements.

5


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 tofor 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, 20042005 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, 2004. Certain amounts for the prior year have been reclassified to conform to the 2005 presentation.2005.

 

2.STOCK SPLIT: In September 2004, Nucor’s BoardFINANCIAL STATEMENT REVISION: Certain prior year amounts have been revised to present variable rate demand notes (“VRDN’s”) as short-term investments instead of Directors approved a two-for-one stock split of common stock in the form of a stock dividend.cash equivalents. As a result, stockholdersVRDN’s in the amount of record received one additional share on October 15,$857.4 million at December 31, 2005, which had previously been included in cash and cash equivalents, are presented as short-term investments in the accompanying condensed consolidated balance sheet at December 31, 2005. There were no purchases or sales of these securities during the quarter ended April 2, 2005, therefore no revision has been presented in the condensed consolidated statement of cash flows.

VRDN’s were previously classified as cash equivalents when the period for interest rate resets were 90 days or less, based on the ability to either liquidate the short-term investments or roll them over to the next reset period. We reevaluated the presentation of these short-term investments considering the original maturity dates associated with the underlying bonds. This revision had no impact on Nucor’s net earnings, changes in stockholders’ equity, or cash flows from operating activities and financing activities. The effects of this revision to our 2005 financial statements follow. We had no VRDN’s in 2004 and 2003.

   Year Ended December 31, 2005 
   

As Originally

Reported

  

As

Revised

 

Cash flow from investing activities:

   

Purchases of short-term investments

  $—    $(919,950)

Proceeds from sales of short- term investments

   —     62,590 

Cash used in investing activities

   (527,481)  (1,384,841)

Increase in cash and cash equivalents

   1,058,461   201,101 

Cash and cash equivalents at end of year

   1,837,510   980,150 

Short-term investments

   —     857,360 

Total current assets

   4,071,553   4,071,553 

3.FOREIGN CURRENCY TRANSLATION: The functional currency for each share held as ofcertain joint ventures is the record date of September 30, 2004. The par value of Nucor’s common stock remains $0.40 per share. All sharelocal currency. Gains and per share amounts have been restatedlosses resulting from translating assets and liabilities from the functional currency to reflectU.S. dollars are included in accumulated other comprehensive income. Foreign currency transaction gains and losses are included in operations in the two-for-one stock split.period they occur.

 

3.4.CASH AND SHORT-TERM INVESTMENTS: Short-term investmentsCASH EQUIVALENTS: Cash equivalents are recorded at cost plus accrued interest, which approximates market, and have original maturities of three months or less at the date of purchase. Cash and short-term investmentscash equivalents are maintained primarily with a few high-credit quality financial institutions.

 

6


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

4.5.SHORT-TERM INVESTMENTS: Short-term investments are recorded at cost plus accrued interest, which approximates market. Unrealized gains and losses on investments classified as available-for-sale are recorded as a component of accumulated other comprehensive income. Management determines the appropriate classification of its investments at the time of purchase and re-evaluates such determination at each balance sheet date. The Company periodically reviews its investments for impairment and adjusts these investments to their fair value when a decline in market value is deemed to be other than temporary.

As of April 1, 2006 and December 31, 2005, short-term investments consisted entirely of VRDN’s. VRDN’s are variable bonds tied to short-term interest rates with maturities on the face of the securities in excess of 90 days. VRDN’s have interest rate resets every one, seven or 35 days. All of the VRDN’s in which Nucor invests are backed by a letter of credit issued by high-credit quality financial institutions. Nucor is able to receive the principal invested and interest accrued thereon no later than seven days after notification to the financial institution. VRDN’s trade at par value; therefore, no realized or unrealized gains or losses were incurred. Aggregate contractual maturities of the Company’s short-term investments are $17.8 million in 2009 and $1.06 billion in 2019 and thereafter.

6.INVENTORIES: Inventories consist of approximately 55%49% raw materials and supplies and 45%51% finished and semi-finished products at OctoberApril 1, 20052006 (50% and 50%, respectively, at December 31, 2004.2005). 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 71%66% of total inventories as of OctoberApril 1, 2005 (78% of total inventories2006 (68% as of December 31, 2004)2005). If the first-in, first-out (FIFO) method of accounting had been used, inventories would have been $385.5$390.9 million higher at OctoberApril 1, 20052006 ($533.5381.9 million higher at December 31, 2004)2005).

 

5.7.PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is recorded net of accumulated depreciation of $3.12$3.29 billion at OctoberApril 1, 20052006 ($2.883.20 billion at December 31, 2004)2005).

 

6.8.REVOLVING CREDIT FACILITY: In June 2005, Nucor entered into a new five-year unsecured revolving credit facility that provides for up to $700.0 million in revolving loans. Up to the equivalent of $600.0 million of the new credit facility will be available for foreign currency loans, and up to $450.0 million will be available for the issuance of letters of credit. The new credit facility may be increased by up to $300.0 million at the election of the Company in accordance with the terms set forth in the credit agreement. No borrowings were outstanding under the credit facility as of October 1, 2005. The new credit facility provides for grid-based interest pricing based upon the credit rating of Nucor’s senior unsecured long-term debt and, alternatively, interest rates quoted by lenders in connection with competitive bidding. The credit facility includes customary financial and other covenants, including a limit on the ratio of debt to total capital of 60%, a limit on Nucor’s ability to pledge the Company’s assets, and a limit on consolidations, mergers and sales of assets.

In connection with the new credit facility, in June 2005, Nucor terminated (a) a $125.0 million 364-day revolver maturing in September 2005, and (b) a $300.0 million multi-currency revolver maturing in October 2007. At the date of termination, there were no borrowings under either terminated credit facility.

7.DIVIDENDS PAYABLE: DividendsCURRENT LIABILITIES: Drafts payable, included in accrued expenses and other current liabilitiesaccounts payable in the balance sheet, was $62.4$121.6 million at OctoberApril 1, 20052006 ($20.976.3 million at December 31, 2004)2005).

Dividends payable, included in accrued expenses and other current liabilities in the balance sheet, was $109.1 million at April 1, 2006 ($100.9 million at December 31, 2005).

9.STOCK-BASED COMPENSATION: Effective January 1, 2006, Nucor adopted Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment,” and selected the modified prospective method. As a result, compensation expense has been recorded over the remaining vesting period for the unvested portion of previously issued awards that were outstanding at January 1, 2006. The Company uses the Black-Scholes option-pricing model to determine the fair value of all option grants. Assumptions used in the model for the prior year grants are described in Nucor’s Annual Report on Form 10-K. Expected volatilities are based on historical experience. Nucor did not grant any options during the quarter ended April 1, 2006 and does not expect to grant options to its directors, officers or employees in future periods. Nucor intends instead to award restricted stock in future periods.

7


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

Through 2005, Nucor accounted for stock-based compensation plans under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. Accordingly, no compensation expense was recorded, other than for restricted stock grants, since the exercise price of the stock options is equal to the market price of the underlying stock on the grant date. The following presents pro forma net earnings and per share data as if a fair value based method had been used to account for stock-based compensation for the first quarter of 2005 (in thousands, except per share amounts):

8.STOCK-BASED COMPENSATION: Nucor accounts for stock-based compensation plans under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Accordingly, no compensation expense is recorded, other than for restricted stock grants, since the exercise price of the stock options is equal to the market price of the underlying stock on the grant date. Had compensation cost for the stock options issued been determined consistent with Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” net earnings and net earnings per share would have been reduced to the following pro forma amounts (in thousands, except per share data):

 

  Nine Months (39 Weeks) Ended

 Three Months (13 Weeks) Ended

 
  Oct. 1, 2005

 Oct. 2, 2004

 Oct. 1, 2005

 Oct. 2, 2004

   

Three Months

(13 Weeks) Ended

April 2, 2005

 

Net earnings - as reported

  $969,250  $780,067  $291,877  $415,387   $354,666 

Add: Stock-based employee compensation expense included in reported net earnings, net of income taxes

   7,979   7,455   4,912   1,912    3,150 

Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of income taxes

   (17,752)  (12,068)  (8,657)  (3,369)   (5,475)
  


 


 


 


    

Net earnings - pro forma

  $959,477  $775,454  $288,132  $413,930   $352,341 
  


 


 


 


    

Net earnings per share - as reported:

     

Basic

  $6.14  $4.93  $1.87  $2.62   $2.22 

Diluted

   6.08   4.90   1.86   2.59    2.20 

Net earnings per share - pro forma:

     

Basic

   6.08   4.91   1.85   2.61    2.21 

Diluted

   6.02   4.87   1.83   2.58    2.19 

STOCK OPTIONS: A summary of Nucor’s stock option plans for the first quarter ended April 1, 2006 is as follows (in thousands, except year and per share amounts):

   Shares  

Weighted

Average

Exercise

Price

  

Weighted

Average

Remaing

Contractual Life

  

Aggregate

Intrinsic

Value

Number of shares under option:

       

Outstanding at beginning of year

  2,183  $39.86    

Exercised

  (543)  39.64    $25,951

Canceled

  (1)  57.72    
           

Outstanding at April 1, 2006

  1,639  $39.92  4.9 years  $106,306
           

Options exercisable at April 1, 2006

  1,639  $39.92  4.9 years  $106,306
           

For the quarter ended April 1, 2006, Nucor recorded $2.5 million for stock-based compensation expense related to stock option grants made in the prior year. This amount is included in marketing, administrative and other expenses.

 

The assumptions used8


Nucor Corporation – Notes to calculateCondensed Consolidated Financial Statements (Unaudited), continued

RESTRICTED STOCK AWARDS: A summary of Nucor’s restricted stock for the fairfirst quarter of 2006 is as follows (shares in thousands):

   Shares  

Weighted

Average

Price

Restricted stock awards and units:

   

Unvested at beginning of year

  204  $54.65

Granted

  294   95.08

Vested

  (180)  78.49

Canceled

  —     —  
       

Unvested at April 1, 2006

  318  $78.52
       

Shares reserved for future grants

  1,362  
     

Compensation expense for common stock and common stock units awarded under the Annual Incentive Plan and the Long-Term Incentive Plan is recorded over the performance measurement and vesting periods based on the anticipated number and market value of options granted are evaluatedshares of common stock and revised, as necessary,common stock units to reflect changing market conditionsbe awarded. Compensation expense for anticipated awards based upon Nucor’s financial performance, exclusive of amounts payable in cash, was $5.8 million and experience.$3.5 million in the first quarter of 2006 and 2005, respectively. At April 1, 2006, unrecognized compensation expense related to unvested restricted stock was $7.7 million.

 

9.10.CONTINGENCIES: Nucor is subject to environmental laws and regulations established by federal, state and local authorities and, accordingly, makes provision for the estimated costs related toof compliance. Of the undiscounted total of $33.3$23.7 million of accrued environmental costs at OctoberApril 1, 20052006 ($44.724.0 million at December 31, 2004)2005), $20.3$19.7 million was classified in accrued expenses and other current liabilities ($22.220.0 million at December 31, 2004)2005) and $13.0$4.0 million was classified in deferred credits and other liabilities ($22.54.0 million at December 31, 2004)2005).

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 whichthat would have a material effect on the consolidated financial statements.

 

10.11.EMPLOYEE BENEFIT PLAN: Nucor has a Profit Sharing and Retirement Savings Plan for qualified employees. Nucor’s expense for these benefits was $45.3$62.6 million and $69.5 million in the third quarter of 2005 and 2004, respectively, and was $153.8 million and $132.5$57.4 million in the first nine months of 2005 and 2004, respectively.

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

11.INTEREST EXPENSE: Interest expense is stated net of interest income of $8.2 million and $1.9 million in the third quarter of 20052006 and 2004, respectively, and net of interest income of $19.6 million and $3.5 million in the first nine months of 2005, and 2004, respectively.

 

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

   Three Months (13 Weeks) Ended 
   April 1,
2006
  April 2,
2005
 

Interest expense

  $9,726  $8,687 

Interest income

   (15,458)  (4,554)
         

Interest (income) expense, net

  $(5,732) $4,133 
         

13.OTHER INCOME: In the first quarter of 2005, Nucor received $9.2 million in settlement of claims against third parties related to environmental matters. Nucor has made claims for reimbursement of additional amounts. No amounts have been recorded for such reimbursements,settlements, if any, that may be received. In the first quarter of 2004, Nucor realized a pre-tax gain of $1.6 million on the sale of equipment.

 

9


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

13.14.COMPREHENSIVE INCOME: The components of comprehensive income are as follows (in thousands):

 

  Nine Months (39 Weeks) Ended

  Three Months (13 Weeks) Ended

  Three Months (13 Weeks) Ended
  Oct. 1, 2005

  Oct. 2, 2004

  Oct. 1, 2005

  Oct. 2, 2004

  April 1,
2006
 April 2,
2005

Net earnings

  $969,250  $780,067  $291,877  $415,387  $379,161  $354,666

Net unrealized gain on hedging derivatives, net of income taxes

   72,277   —     50,400   —  

Net unrealized gain (loss) on hedging derivatives

   (25,466)  18,377

Foreign currency translation

   8,088   —  
  

  

  

  

      

Total comprehensive income

  $1,041,527  $780,067  $342,277  $415,387  $361,783  $373,043
  

  

  

  

      

The only items of comprehensiveComprehensive income for Nucor wereincludes net unrealized cash flow hedging gains (losses) on derivatives and foreign currency translation adjustments, both of which are presented net of tax.

 

14.15.SEGMENTS: Nucor reports its results in two segments, steel mills and steel products. 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, cold finished steel, steel fasteners, metal building systems and light gauge steel framing. 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/other. Corporate assets primarily include cash and cash equivalents, short-term investments, deferred income tax assets and investments in affiliates. The company’s results by segment were as follows (in thousands):

   Three Months (13 Weeks) Ended 
   

April 1,

2006

  

April 2,

2005

 

Net sales to external customers:

   

Steel mills

  $3,149,426  $2,950,918 

Steel products

   395,671   371,703 
         
  $3,545,097  $3,322,621 
         

Intercompany sales:

   

Steel mills

  $255,398  $205,464 

Steel products

   5,818   3,954 

Corporate/eliminations/other

   (261,216)  (209,418)
         
  $—    $—   
         

Earnings (loss) before income taxes:

   

Steel mills

  $731,438  $658,135 

Steel products

   41,768   46,615 

Corporate/eliminations/other

   (184,945)  (154,284)
         
  $588,261  $550,466 
         
   

April 1,

2006

  

Dec. 31,

2005

 

Segment assets:

   

Steel mills

  $4,614,835  $4,623,462 

Steel products

   572,146   519,562 

Corporate/eliminations/other

   2,317,165   1,995,763 
         
  $7,504,146  $7,138,787 
         

10


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

 

   Nine Months (39 Weeks) Ended

  Three Months (13 Weeks) Ended

 
   Oct. 1, 2005

  Oct. 2, 2004

  Oct. 1, 2005

  Oct. 2, 2004

 

Net sales to external customers:

                 

Steel mills

  $8,273,537  $7,393,626  $2,605,942  $2,868,483 

Steel products

   1,219,998   894,204   419,969   371,109 
   


 


 


 


   $9,493,535  $8,287,830  $3,025,911  $3,239,592 
   


 


 


 


Intercompany sales:

                 

Steel mills

  $657,216  $654,076  $228,329  $254,910 

Steel products

   26,094   6,140   17,732   3,037 

Corporate/eliminations/other

   (683,310)  (660,216)  (246,061)  (257,947)
   


 


 


 


   $—    $—    $—    $—   
   


 


 


 


Earnings before income taxes:

                 

Steel mills

  $1,671,266  $1,563,449  $488,892  $795,434 

Steel products

   136,584   93,550   44,213   56,182 

Corporate/eliminations/other

   (311,280)  (448,532)  (86,437)  (216,229)
   


 


 


 


   $1,496,570  $1,208,467  $446,668  $635,387 
   


 


 


 


   Oct. 1, 2005

  Dec. 31, 2004

Segment assets:

        

Steel mills

  $4,646,735  $4,978,616

Steel products

   553,324   488,571

Corporate/eliminations/other

   1,758,816   666,020
   

  

   $6,958,875  $6,133,207
   

  

15.16.INVESTMENTS AND ACQUISITIONS: In JuneFebruary 2005, Nucor’s wholly owned subsidiary, Nucor Steel Marion, Inc., purchased substantially all of the assets of MarionFort Howard Steel, CompanyInc.’s operations in Oak Creek, Wisconsin, for a cash purchase price of approximately $110.7$44.1 million. This facility produces angles, flats, rebar, rounds and signposts.cold finish bar products.

In February 2005, Nucor purchased the assets of Fort Howard Steel, Inc.’s operations in Oak Creek, Wisconsin, for a cash purchase price of approximately $44.1 million. This facility produces cold finish bar product.

In January 2005, Nucor entered into an agreement with Ambassador Steel Corporation to form Nufab Rebar LLC (“Nufab”), a rebar fabrication joint venture. Nucor owns 49% of the joint venture. At October 1, 2005, Nucor held a note receivable from Nufab in the amount of $10.8 million. This note receivable bears interest, payable quarterly, at a rate of LIBOR plus 120 basis points. The note was classified in Other Assets.

In February 2004, Nucor purchased a one-half interest in Harris Steel, Inc., a wholly owned subsidiary of Harris Steel Group, Inc., for a cash purchase priceInc.. As of approximately $21.0 million. In addition, Harris Steel Group may receive up to an additional $6.0 million upon the achievement of certain operating results of the venture through 2008. At OctoberApril 1, 2005,2006, Nucor held a note receivable from Harris Steel, Inc. in the amount of $10.0 million. This note receivable bears interest, payable upon maturity, at a rate of LIBOR plus 100 basis points. The note was classified in Other Current Assets.

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

In July 2004, Nucor’s wholly owned subsidiary, Nucor Steel Tuscaloosa, Inc., purchased substantially all of the steelmaking assets of Corus Tuscaloosa for a price of approximately $89.4 million. The facility is a coiled plate mill that manufactures pressure vessel steel coil, discrete plate and cut-to-length plate products.

In August 2004, Nucor’s wholly owned subsidiary, Nucor Steel Decatur, LLC, purchased certain assets of Worthington Industries, Inc. cold rolling mill in Decatur, Alabama, for a cash purchase price of approximately $80.3 million. The assets include all of the buildings, the pickle line, four-stand tandem cold mill, temper mill and annealing furnaces adjacent to the current Nucor Steel Decatur, LLC, steel plant.

 

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

 

  Nine Months (39 Weeks) Ended

  Three Months (13 Weeks) Ended

  Three Months (13 Weeks) Ended
  Oct. 1, 2005

  Oct. 2, 2004

  Oct. 1, 2005

  Oct. 2, 2004

  April 1,
2006
  April 2,
2005

Basic net earnings per share:

                

Basic net earnings

  $969,250  $780,067  $291,877  $415,387  $379,161  $354,666
  

  

  

  

      

Average shares outstanding

   157,865   158,094   155,832   158,796   155,313   159,708
  

  

  

  

      

Basic net earnings per share

  $6.14  $4.93  $1.87  $2.62  $2.44  $2.22
  

  

  

  

      

Diluted net earnings per share:

                

Diluted net earnings

  $969,250  $780,067  $291,877  $415,387  $379,161  $354,666
  

  

  

  

      

Diluted average shares outstanding:

                

Basic shares outstanding

   157,865   158,094   155,832   158,796   155,313   159,708

Dilutive effect of stock options and other

   1,451   1,253   1,404   1,433   1,561   1,538
  

  

  

  

      
   159,316   159,347   157,236   160,229   156,874   161,246
  

  

  

  

      

Diluted net earnings per share

  $6.08  $4.90  $1.86  $2.59  $2.42  $2.20
  

  

  

  

      

 

17.18.RECENT ACCOUNTING PRONOUNCEMENTS: In December 2004,SUBSEQUENT EVENT: On May 1, 2006, Nucor’s wholly owned subsidiary, Nucor Steel Connecticut, Inc., purchased substantially all of the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), “Share Based Payment,” which requires all share-based paymentsassets of Connecticut Steel Corporation for a cash purchase price of approximately $43.0 million, subject to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. We are required to adopt the provisions of this statement in the first quarter of 2006. Management does not expect the adoption of SFAS 123(R) to have a material impact on its consolidated financial positionpost-closing adjustments. This facility produces wire rod, rebar, wire mesh fabrication and results of operations.structural mesh fabrication.

 

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4,” which clarifies that abnormal amounts of idle facility expense, freight, handling costs and spoilage should be recognized as current period charges and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. We are required to adopt the provisions of this statement in the first quarter of 2006. Management does not expect the adoption of SFAS 151 to have a material impact on its consolidated financial position and results of operations.11


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 inprevailing steel prices and the changes in the supply and cost of raw materials, particularlyincluding scrap steel; (2) availability and cost of electricity and natural gas; (3) market demand for steel products; (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;production and fluctuations in international 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, 2004.

2005.

Operations

Net sales for the thirdfirst quarter of 2006 increased 7% to $3.55 billion, compared with $3.32 billion in the first quarter of 2005 decreased 7% to $3.03 billion, compared with $3.24 billion in the third quarter of 2004. The decrease was primarily due to an increase in total tons shipped to outside customers partially offset by a 15% decrease in average sales price per ton from $668 in the third quarter of 2004 to $571 in the third quarter of 2005.ton. Total tons shipped to outside customers increased 9%12% from the third quarter of 2004 to the third quarter of 2005. Net sales for the first nine months of 2005 increased 15% to $9.49 billion, compared with $8.29 billion in last year’s first nine months. Average sales price per ton increased 9% from $5655,015,000 tons in the first nine monthsquarter of 20042005 to $6175,621,000 tons in the first nine monthsquarter of 2005, while total tons shipped to outside customers increased 5%.2006. Average sales price per ton decreased 8%5% from $621$663 in the secondfirst quarter of 2005 to $571$631 in the thirdfirst quarter of 2005, while total tons shipped to outside customers increased 5%.2006.

In the first quarter of 2006, Nucor established company records in the steel mills segment for steel production, total steel shipments and steel sales to outside customers. Steel production was 15,136,0005,791,000 tons in the first nine monthsquarter of 2005,2006, compared with 15,153,0005,108,000 tons produced in the first nine monthsquarter of 2004.2005, an increase of 13%. Total steel shipments were 15,504,000increased 13% to 5,721,000 tons in the first nine monthsquarter of 2005,2006, compared with 15,018,0005,043,000 tons in last year’s first nine months.quarter. Steel sales to outside customers were 14,295,000increased 12% to 5,263,000 tons, in the first nine months of 2005, compared with 13,674,0004,688,000 tons in last year’s first nine months.quarter. In the steel products segment, steel joist production during the first nine monthsquarter was 413,000139,000 tons, compared with 396,000123,000 tons in the first nine monthsquarter of 2004.2005, an increase of 13%. Steel deck sales were 285,00085,000 tons, in the first nine months of 2005, compared with 271,00080,000 tons in last year’s first nine months.quarter, an increase of 6%. Cold finished steel sales were 261,000increased 8% to a record 96,000 tons, compared with 89,000 tons in the first nine monthsquarter of 2005, compared with 211,000 tons in2005. During the first nine monthsquarter of 2004. During the third quarter and first nine months of 2005,2006, the average utilization rates of all operating facilities in the steel mills segmentand steel products segments were approximately 81%93% and 82%77%, respectively. During the third quarter and first nine months of 2005, the average utilization rates of all operating facilities in the steel products segment were approximately 82% and 78%, respectively. Capacities were revised in the third quarter to reflect continual process improvement, resulting in lower utilization rates compared to prior periods.

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

The major component of cost of products sold is raw material costs. In the thirdfirst quarter of 2005,2006, the average price of raw materials decreased approximately 10%13% from the thirdfirst quarter of 2004, and increased approximately 11% in the first nine months of 2005 compared with the first nine months of 2004. The average prices of raw materials used in the steel mills segment decreased approximately 12% and increased approximately 10% from the third quarter of 2004 and the first nine months of 2004, respectively. The average prices of raw materials used in the steel products segment increased approximately 18% and 33%, from the third quarter and first nine months of 2004, respectively.2005. The average scrap and scrap substitute cost per ton used in our steel mills segment was $217$237 in the thirdfirst quarter of 2005,2006, a decrease of 13% from $248 in the third quarter of 2004, and was $245$272 in the first nine months of 2005, an increase of 9% from $225 in the first nine months of 2004. Primarily as a result of the 12% decrease in average scrap and scrap substitute cost in the third quarter of 2005 from $246 in the second quarter of 2005,2005. Nucor incurred a credit of $52.0 million in the third quartercharge to value inventories using the last-in, first-out (LIFO) method of accounting compared with a charge of $124.1 million in the third quarter of 2004 when scrap prices were increasing. In the first nine months of 2005, the LIFO credit was $148.0 million, compared with a charge of $223.4$9.0 million in the first nine monthsquarter of 2004.2006, compared with a credit of $26.1 million in the first quarter of 2005. The LIFO charges (credits) 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.

 

12


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

Total energy costs increased approximately $12 (42%) per ton from the third quarter of 2004 to the third quarter of 2005 and increased approximately $6$7 (21%) per ton from the first nine monthsquarter of 20042005 to the first nine monthsquarter of 2006 and decreased approximately $4 (10%) per ton from the fourth quarter of 2005.

Pre-operating and start-up costs of new facilities decreasedincreased to $1.3 million in the third quarter of 2005, compared with $4.5 million in the third quarter of 2004. For the first nine months of 2005, pre-operating and start-up costs decreased to $6.9 million, compared with $21.3$6.1 million in the first nine monthsquarter of 2004.2006, compared with $3.4 million in the first quarter of 2005. For the first quarter of 2006, these costs primarily related to the HIsmelt project in Kwinana, Western Australia and the refurbishment of our direct reduced iron facility in Trinidad. In the first quarter of 2005, these costs primarily related to the dismantling of the direct reduced iron plant located in Louisiana and itspreparing it for relocation to Trinidad, as well as for the modernization of rolling mill #2 at the bar mill in Darlington, South Carolina. In 2004, these costs primarily related to the start-up of the Castrip® facility at our sheet mill in Crawfordsville, Indiana. Since the Castrip process achieved commercial viability at the end of 2004, the costs associated with this facility are no longer included in start-up costs.

Gross margins were approximately 20%22% for the thirdfirst quarter and first nine months of 20052006 compared with approximately 25% for the third quarter of 2004 and approximately 19%21% for the first nine monthsquarter of 2004.2005.

The major components of marketing, administrative and other expenses are freight and profit sharing costs. Unit freight costs increased approximately 12%15% from the third quarter of 2004 to the thirdfirst quarter of 2005 and approximately 13% from the first nine months of 2004 to the first nine monthsquarter of 2005.2006 primarily due to higher fuel costs. Profit sharing costs, which are based upon and generally fluctuate with pre-tax earnings, decreased approximately 31%increased 14% from the third quarter of 2004 to the thirdfirst quarter of 2005 and decreased approximately 2% into the first nine monthsquarter of 2005 compared with the first nine months of 2004.2006. 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.

Effective January 1, 2006, Nucor adopted SFAS No. 123(R), “Share-Based Payment,” which requires companies to recognize in the statement of earnings the grant-date fair value of stock awards issued to employees and directors. Nucor adopted SFAS No. 123(R) using the modified prospective method. In accordance with the modified prospective method, our Consolidated Financial Statements for prior periods have not been restated to reflect the impact of SFAS No. 123(R). For the quarter ended April 1, 2006, Nucor recorded $2.5 million for stock-based compensation expense related to stock option grants made in prior years. This amount is included in marketing, administrative and other expenses.

Interest expense,Nucor earned net of interest income decreased forin the thirdfirst quarter andof 2006 compared with net interest expense in the first nine monthsquarter of 2005 from the third quarter and first nine months of 2004 primarily due to an increase in average cash equivalents and short-term investments and thean increase in average interest rates on thesethose investments, partially offset by an increase in average long-term debt and the increase in the average interest rate on long-term debt.

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 less than 100% owned joint venture, Nucor-Yamato Steel Company. Under the partnership agreement, the minimum amount of cash to be distributed each year to the partners of Nucor-Yamato Steel Company is the amount needed by each partner to pay applicable U.S. federal and state income taxes. In the first nine monthsquarter of 2004 and 2005,2006, 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.

In the first nine monthsquarter of 2005, Nucor received $9.2 million in settlement of claims against third parties related to environmental matters. In the first nine months of 2004, Nucor realized a $1.6 million gain on the sale of equipment.

Nucor had an effective tax rate of 34.7% in the third quarter of 2005, compared with 34.6% in the third quarter of 2004 and had an effective tax rate of 35.2%35.5% in the first nine monthsquarter of 20052006, compared with 35.4%35.6% in the first nine monthsquarter of 2004.2005.

 

13


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

Net earnings decreased duringand earnings per share in the thirdfirst quarter of 20052006 increased 7% and 10%, respectively, to $379.2 million and $2.42 per diluted share, compared with $354.7 million and $2.20 per diluted share in 2005. Net earnings as a percentage of net sales were 10.7% in both the thirdfirst quarter of 2004 due to lower average selling prices2006 and higher energy costs partially offset by decreased LIFO charges, decreased pre-operating and start-up costs, decreased net interest expense, and decreased income taxes. Net2005. The 10% increase in earnings increased duringper share also reflects the effect of repurchasing approximately 5.7 million shares of Nucor’s common stock since the first nine monthsquarter of 2005 compared with2005. Return on average stockholders’ equity was 34.4% and 38.9% in the first nine monthsquarter of 2004 due to higher average selling prices, increased shipments, decreased LIFO charges, increased other income, decreased pre-operating2006 and start-up costs, and decreased net interest expense partially offset by higher energy costs and increased income taxes.2005, respectively.

We expect that business conditions will remain strong through the fourth quarter of 2005 into the firstsecond quarter of 2006. Approximately 55%At this time, our sheet mill volume is completely booked through the second quarter, and more than 50% of our sheet mill volume for the third and fourth quarter is committed to annual contract customers, which limitscustomers. In addition, we expect that an additional 25% of our third and fourth quarter sheet mill volume will be committed as quarterly contracts. These contracts limit our exposure during the terms of those contracts to the volatility of prices in the spot market. Additionally,Nucor continues to be well-positioned to benefit from improving non-residential construction markets, which generate demand for products manufactured by both segments of our business. In addition, Nucor continues to benefit from the breadth of our product diversity and the relatively stronger business conditions in long products and plate products. The biggest threats to our performance in the fourth quarter are pressure on steel prices from rising levels of imports, the cost and availability of energy in a tight supply environment and a slowdown in the U.S. economy.

diversity.

Liquidity and capital resources

The current ratio was 3.03.3 at the end of the first nine monthsquarter of 20052006 and 3.2 at year-end 2004.2005. The percentage of long-term debt to total capital was 18%16% and 17% at the end of the first nine monthsquarter of 20052006 and 20% at year-end 2004. Nucor has a simple capital structure with no off-balance sheet arrangements or relationships with unconsolidated special purpose entities.2005, respectively.

Capital expenditures increaseddecreased approximately 12% in2% during the first nine monthsquarter of 20052006 compared with the first nine monthsquarter of 2004.2005. Capital expenditures are projected to be approximately $310.0$396.0 million for all of 2005.2006.

During the second quarter of 2005, Nucor’s wholly owned subsidiary, Nucor Steel Marion, Inc., purchased substantially all of the assets of Marion Steel Company for a cash purchase price of approximately $110.7 million. In February 2005, Nucor purchased the assets of Fort Howard Steel, Inc.’s operations in Oak Creek, Wisconsin, for a cash purchase price of approximately $44.1 million. These acquisitions were not material to the consolidated financial statements and did not result in material goodwill or other intangible assets.

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

In September 2005,2006, Nucor’s Board of Directors declaredincreased the regular quarterly cash dividend on Nucor’s common stock offrom $0.15 per share to $0.20 per share. TheIn addition to the $0.20 per share base dividend amount, the Board of Directors also approved the payment of a supplemental dividend of $0.25$0.50 per share, for a total dividend of $0.40$0.70 per share, payable on NovemberMay 11, 20052006 to stockholders of record on September 30, 2005.March 31, 2006.

During the second quarter of 2005, Nucor reactivated the previously approved stock repurchase program. Nucor repurchased approximately 722,000 shares at a cost of approximately $39.3 million during the third quarter of 2005, and repurchased approximately 4.7 million shares at a cost of about $245.2 million during the first nine months of 2005. There were no repurchases during the third quarter and first nine months of 2004. Approximately 3.8 million shares remain authorized for repurchase under the current program.

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 has the financial ability to borrow significant additional funds to finance major acquisitions and still maintain reasonable leverage. In June 2005,

Nucor entered intorepurchased 100,000 shares of Nucor’s common stock at a new five-year unsecured revolving credit facility that providescost of approximately $10.3 million under a publicly announced stock repurchase program during the first quarter of 2006 (none in the first quarter of 2005). Approximately 12.8 million shares remain authorized for up to $700.0 million in revolving loans (nothing has been borrowed). The new revolving credit facility replaces two previous credit facilities that provided for up to an aggregate of $425.0 million in revolving loans.repurchase.

14


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, 2004.2005.

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 and natural gas. We attempt to negotiate the best prices for our raw materials and energy requirementrequirements and to obtain prices for our steel products that match market price movements in response to supply and demand. In the first quarter of 2004, Nucor initiated 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 when management believes it is prudent to do so. Gains and losses from the use of these instruments are deferred in accumulated other comprehensive income (loss) on the condensed consolidated balance sheets and recognized into cost of products sold in the same period as the underlying physical transaction. At OctoberApril 1, 2005,2006, accumulated other comprehensive income (loss) includes $71.1$21.1 million in unrealized net-of-tax incomegains for the fair value of these derivative instruments. A sensitivity analysis of changes in the price of hedged natural gas purchases indicates that declines of 10% and 25% in natural gas prices would reduce the fair value of our pre-tax natural gas hedge position by $27.9$15.0 million and $69.7$36.9 million, respectively. Any resulting changes in fair value would be recorded as adjustments to other comprehensive income (loss), net of tax. Because these instruments are structured and used as hedges, these hypothetical losses would be partially offset by the benefit of lower prices paid for the natural gas used in the normal production cycle.

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.

Changes in Internal Control Over Financial Reporting– There were no changes in our internal control over financial reporting during the quarter ended OctoberApril 1, 20052006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

15


PART II. OTHER INFORMATION

Item 1. Legal Proceedings1A. Risk Factors

See the disclosure that appears under Legal ProceedingsThere have been no material changes in Item 1. Part II of our ReportNucor’s risk from those included in Nucor’s annual report on Form 10-Q for the quarter ended April 2, 2005.10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Our share repurchase program activity for each of the three months and the quarter ended OctoberApril 1, 20052006 was as follows (in thousands, except per share amounts):

 

   Total Number
of Shares
Purchased


  Average Price
Paid per Share
(1)


  

Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs

(2)


  Maximum
Number of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs
(2)


July 3, 2005 - July 30, 2005

  —    $—    —    4,476

July 31, 2005 - August 27, 2005

  600   54.34  600  3,876

August 28, 2005 - October 1, 2005

  122   54.87  122  3,754
   
  

  
  

For the Quarter Ended October 1, 2005

  722  $54.43  722  3,754
   
  

  
  
   

Total Number

of Shares

Purchased

  

Average Price

Paid per Share

(1)

  

Total Number

of Shares

Purchased as

Part of Publicly

Announced

Plans or

Programs

(2)

  

Maximum
Number of

Shares that

May Yet Be

Purchased

Under the

Plans or

Programs

(2)

January 1, 2006 - January 28, 2006

  —    $—    —    12,909

January 29, 2006 - February 25, 2006

  —     —    —    12,909

February 26, 2006 - April 1, 2006

  100   102.63  100  12,809
             

For the Quarter Ended April 1, 2006

  100  $102.63  100  12,809
             

(1)Includes commissions of $0.02 per share.
(2)On September 5, 2000, the Board of Directors approved a stock repurchase program under which the Company is authorized to repurchase up to 55.0 million shares of the Company’s common stock. On September 8, 2004, the Board of Directors resolved that the number of shares of common stock authorized for repurchase would increase 100% as a result of the 2-for-1 stock split on the record date of October 15, 2004. At that time, the number of remaining shares authorized for repurchase increased from 4,237,9004.2 million shares to 8,475,8008.5 million shares. On April 21, 2005, the Company publicly announced the reactivation of this stock repurchase program. On December 6, 2005, the Board of Directors authorized the repurchase of up to an additional 10.0 million shares of its common stock, once the current repurchase authorization is completed. This repurchase authorization does not have a scheduled expiration date.

 

Item 5. Other Information16

Thomas A. Waltermire resigned as a director of the Company effective November 1, 2005.


Item 6. Exhibits

 

Exhibit No.

 

Description of Exhibit


3110    Form of Restricted Stock Unit Award Agreement for Non-Employee Directors (1)
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

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

SIGNATURES

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

 

NUCOR CORPORATION
By: 

/s/ Terry S. Lisenby


 Terry S. Lisenby
 Chief Financial Officer, Treasurer
 and Executive Vice President

Dated: May 4, 2006

Dated: November 3, 2005

17


NUCOR CORPORATION

List of Exhibits to Form 10-Q – OctoberApril 1, 20052006

 

Exhibit No.

 

Description of Exhibit


3110    Form of Restricted Stock Unit Award Agreement for Non-Employee Directors
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

 

1718