First Quarter 2019

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

For the quarterly period ended JuneMarch 30, 20182019

OR

For the transition period from                    to                    

Commission File Number:1-4119

NUCOR CORPORATION

(Exact name of registrant as specified in its charter)

(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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-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 Rule12b-2 of the Exchange Act.

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 Rule12b-2 of the Exchange Act).    Yes  ☐    No  ☒

316,343,488Securities registered pursuant to Section 12(b) of the Act:

304,785,686 shares of the registrant’s common stock were outstanding at JuneMarch 30, 2018.2019.

Nucor Corporation

Quarterly Report on Form10-Q

For the Three Months and Six Months Ended JuneMarch 30, 20182019

Table of ContentsTABLE OF CONTENTS

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PART I. FINANCIAL INFORMATION

Nucor Corporation Condensed Consolidated Statements of Earnings (Unaudited)

(In thousands, except per share amounts)

See notes to condensed consolidated financial statements.

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Nucor Corporation Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

See notes to condensed consolidated financial statements.

4

Nucor Corporation Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

See notes to condensed consolidated financial statements.

5

Nucor Corporation Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

See notes to condensed consolidated financial statements.

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

Reclassifications – In the first quarter of 2018, the Company began reporting its tubular products and piling businesses as part of the steel products segment. These businesses were previously included in the steel mills segment and were reclassified to the steel products segment as part of a realignment of Nucor’s reportable segments to reflect the way in which they are now viewed by management and how segment performance assessments will be made by the chief operating decision maker beginning in such period. As a result, certain prior period amounts have been reclassified to conform to the current year presentation. These reclassifications did not have an impact on the condensed consolidated financial statements of the Company for the prior periods presented. See Note 15 for more information related to this segment realignment.

Recently Adopted Accounting Pronouncements – In the first quarter of 2018, we2019, Nucor adopted new accounting guidance related to revenue recognition for all contractslease accounting using the modified retrospective method. The modified retrospective method requires that the cumulative effect of initially applying this new guidance be recorded as anapproach, which permits companies to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the condensed consolidatedperiod of adoption without adjusting the comparative periods prior to adoption. The new lease guidance requires all lessees to recognize on the balance sheet. The adoption of this new accounting guidance did not have an impact on any prior period earnings attributable to Nucor stockholders,sheetright-of-use assets and no adjustment was recorded to the opening retained earnings balance as of January 1, 2018. Retrospective adjustment of comparative prior period information is not required when using the modified retrospective adoption method, and no comparative prior periods have been adjustedlease liabilities for the newrights and obligations created by lease arrangements with terms greater than 12 months, including operating leases. Expenses are recognized in the statement of earnings in a manner similar to previous accounting guidance.

In addition, we elected the package of practical expedients permitted under the transition guidance within the new lease standard, which among other things, allowed us to carry forward the historical lease classification. We also elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements, and the short-term lease exemption policy such that the new lease guidance was applied to leases greater than one year in duration. The adoption of the new revenue accounting guidance did not significantly change the way we recognize revenue. To illustrate this, if we had continued using the previous accounting guidance in effect before the adoption of the new revenue accounting guidance, our consolidated net sales for the second quarter and first six months of 2018 would have increased approximately $22.7 million, or 0.4%, and $32.9 million, or 0.3%, respectively, and cost of products sold would have increased by the same amounts. There would have been no impact on any other financial statement line items in the condensed consolidated financial statements for the second quarter or first six months of 2018. See Note 16 for disclosures required by the new revenue accounting guidance.    

In the first quarter of 2018, we adopted new accounting guidance regarding the recognition and measurement of financial assets and financial liabilities. Changes to the current accounting guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the Financial Accounting Standards Board clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses onavailable-for-sale debt securities. The accounting for other financial instruments, such as loans, investments in debt securities and financial liabilities, is largely unchanged. The adoption of this new guidancelease standard did not have a material impact on the Company’sour consolidated financial statements.statements as it resulted in an increase of 0.5% and 1.2% to our total assets and total liabilities, respectively, on our consolidated balance sheet at January 1, 2019. The new lease standard did not materially impact our consolidated net earnings and had no impact on our cash flows. See Note 4 for further information.

In the first quarter of 2018,2019, we also adopted new accounting guidance regardingrelated to tax effects of the presentationTax Cuts and classificationJobs Act of certain cash receipts and cash payments in2017. As a result of the statementadoption of cash flows. Thethe new guidance, addresses specific cash flow presentation issues in orderwe elected to reduce diversity in existing practice. The adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements.

In the first quarter of 2018, we adopted new accounting guidance regarding intra-entity transfers of assetsreclassify stranded tax effects from accumulated other than inventory. The new guidance requires that an entity should recognize thecomprehensive income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs.to retained earnings, effective January 1, 2019. The adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements.

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As a result of Nucor’s three groupsthe impairment assessment, Nucor recorded an impairment charge of $110.0 million relating to two fields of wells passedin the impairment test.third quarter of 2018. The post-impairment combined carrying value of the three groups of wellsthese two fields was $241.0$69.6 million at JuneMarch 30, 20182019 ($252.071.0 million at December 31, 2017)2018). The third field was not impaired and had a carrying value of $50.7 million at March 30, 2019 ($51.8 million at December 31, 2018). Changes in the natural gas industry or a continuation of theprolonged low price environment beyond what had already been assumed in the analysisassessment could cause management to revise the natural gas and natural gas liquids price assumptions, the estimated reserves or the estimated drilling production costs. Unfavorable revisions to these assumptions or estimates could possibly result in an impairment of some or all of the groupsfields of proved well assets.

Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The exercise of lease renewal options is at our sole discretion and we consider these options in determining the lease term used to establish ourright-of-use assets and lease liabilities. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or a purchase option reasonably certain of exercise.

We determine that a contract contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In evaluating whether we have the right to control an identified asset, we assess whether or not we have the right to direct the use of the identified asset and obtain substantially all of the economic benefit from the use of the identified asset.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.    

Certain of our lease agreements include payments that adjust periodically for consumption of goods provided by the right-of-use asset in excess of contractually determined minimum amounts and for inflation. These variable lease payments are not significant. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Total lease costs were $11.0 million in the first quarter of 2019. Finance lease costs were $5.2 million in the first quarter of 2019, with $2.3 million being included in costs of products sold related to amortization of leased assets and $2.9 million being included in interest expense, net related to interest on lease liabilities in the condensed consolidated statement of earnings. Operating lease costs were $5.8 million in the first quarter of 2019 and were included in cost of products sold in the condensed consolidated statement of earnings.

Supplemental cash flow information andnon-cash activity related to our leases are as follows (in thousands):

Supplemental balance sheet information related to our leases is as follows (in thousands):

Weighted-average remaining lease term and discount rate for our leases are as follows:

The reason for the substantial weighted-average discount rate – finance leases, of 31.8%, is due to Nucor’s past accounting for the respective finance leases following the former accounting guidance for capital leases. Pursuant to the former lease accounting guidance, the recognition of a capital lease asset and associated capital lease liability could not exceed the fair market value of the leased asset at lease commencement. Accordingly, the incremental borrowing rate was adjusted upward so that the present value of the minimum lease payments would equal the fair value of the asset.

Maturities of lease liabilities by fiscal year for our leases are as follows as of March 30, 2019 (in thousands):

Prior Period Disclosures

As a result of adopting the new lease accounting guidance on January 1, 2019 under the modified retrospective approach, the Company is required to present future minimum lease commitments for capital leases and operating leases having initial or noncancellable lease terms in excess of one year that were previously disclosed in our 2018 Annual Report on Form 10-K and accounted for under previous lease guidance.

Total future minimum lease payments related to capital leases at December 31, 2018 were $154.8 million, with the timing of those payments estimated at that date to be made as follows: $17.7 million in 2019; a total of $33.6 million to be paid between 2020 and 2021; a total of $30.0 million to be paid between 2022 and 2023; and $73.4 million to be paid thereafter.

Total future minimum lease payments related to operating leases having initial or noncancellable lease terms in excess of one year were $128.6 million, with the timing of those payments estimated at that date to be made as follows: $31.8 million in 2019; a total of $45.0 million to be paid between 2020 and 2021; a total of $28.4 million to be paid between 2022 and 2023; and $23.5 million to be paid thereafter.

The gross amount of assets recorded under capital leases was $89.4 million as of December 31, 2018, and were primarily buildings and improvements or machinery and equipment.

Previously, Nucor’s tubular products and piling businesses were reported in the steel mills segment. Beginning in the first quarter of 2018, these businesses were reclassified to the steel products segment to better reflect the way in which they are viewed by management.

Nucor completed its most recent annual goodwill impairment testing during the fourth quarter of 20172018 and concluded that as of such time there was no impairment of goodwill for any of its reporting units.

The evaluation performed in 2018 used forward-looking projections and included significant expected improvements in the future cash flows of one of the Company’s reporting units, Rebar Fabrication. The fair value of this reporting unit exceeded its carrying value by approximately 8% in the most recent evaluation. The operating results of this reporting unit declined significantly and remained depressed throughout 2018. Nucor expects the operating results of this reporting unit to improve when the price of steel in relation to the reporting unit’s backlog pricing stabilizes. If our assessment of the relevant facts and circumstances changes, or the actual performance of this reporting unit falls short of expected results, noncash impairment charges may be required. Total goodwill associated with the Rebar Fabrication reporting unit was $352.5 million as of March 30, 2019 ($353.0 million as of December 31, 2018). 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 $74.0 million as of March 30, 2019 ($76.7 million as of December 31, 2018). There have been no triggering events requiring an interim assessment for impairment since the most recent annual goodwill impairment testing date.

During the first quarter of 2019, the operating results and updated future projections of one of the Company’s reporting units, Grating, decreased from the assumptions used in our most recent impairment assessment. The fair value of this reporting unit exceeded its carrying value by approximately 19% in that assessment. The short-term three-month decline in operating results was determined not to be indicative of a long-term decline representing a triggering event given the amount the fair value of the reporting unit exceeded its carrying amount in the most recent assessment. As of March 30, 2019, total goodwill and finite-lived intangible assets associated with the Grating reporting unit were $36.6 million and $3.6 million, respectively. Management will continue to monitor the Grating reporting unit for potential triggering events that would require an interim assessment for impairment.

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NUMIT

Nucor owns a 50% economic and voting interest in NuMit LLC (“NuMit”). NuMit owns 100% of the equity interest in Steel Technologies LLC, an operator of 26 sheet processing facilities located throughout the United States, Canada and Mexico. Nucor accounts for the investment in NuMit (on aone-month lag basis) under the equity method, as control and risk of loss are shared equally between the members. Nucor’s investment in NuMit was $316.6 million at JuneMarch 30, 2018 was $317.7 million2019 ($321.4337.2 million at December 31, 2017)2018). Nucor received distributions of $27.5$26.0 million and $46.9$25.2 million from NuMit during the first six monthsquarter of 2019 and 2018, and 2017, respectively.

DUFERDOFIN NUCOR

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

Nucor’s investment in Duferdofin Nucor was $260.8 million at JuneMarch 30, 2018 was $275.2 million2019 ($285.9269.1 million at December 31, 2017)2018). Nucor’s 50% share of the total net assets of Duferdofin Nucor was $114.5$110.4 million at JuneMarch 30, 2018,2019, resulting in a basis difference of $160.7$150.4 million due to thestep-up to fair value of certain assets and liabilities attributable to Duferdofin Nucor as well as the identification of goodwill ($89.886.5 million) and finite-lived intangible assets. This basis difference, excluding the portion attributable to goodwill, is being amortized based on the remaining estimated useful lives of the various underlying net assets, as appropriate. Amortization expense associated with the fair valuestep-up was $2.3$2.2 million and $2.2$2.4 million induring the secondfirst quarter of 2019 and 2018, and 2017, respectively, and was $4.8 million and $4.3 million in the first six months of 2018 and 2017, respectively.

As of JuneMarch 30, 2018,2019, Nucor had outstanding notes receivable of €35.0 million ($40.839.3 million) from Duferdofin Nucor (€35.0 million, or $41.9$40.2 million, as of December 31, 2017)2018). The notes receivable bear interest at 0.83%0.84% and reset annually on September 30 to the12-month Euro Interbank Offered Rate plus 1% per year. The maturity date of the principal amounts was extended to January 31, 2022 during the first quarter of 2018. As of JuneMarch 30, 20182019 and December 31, 2017,2018, the notes receivable were classified in other assets in the condensed consolidated balance sheets.

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On January 16, 2019, Nucor entered into an agreement to guarantee a percentage, equal to its ownership percentage (50%), ofNucor-JFE’s borrowings under the General Financing Agreement and Promissory Note (the “Facility”). The fair value of the guarantee is immaterial. Nucor’s guarantee expires on April 30, 2020. Under the Facility, the maximum amountNucor-JFE could borrow was $65.0 million as of March 30, 2019. The Facility is uncommitted. As of March 30, 2019, there was $40.0 million outstanding under the Facility. IfNucor-JFE fails to pay when due any amounts for which it is obligated under the Facility, Nucor could be required to pay 50% of such amounts pursuant to and in accordance with the terms of its guarantee. Nucor has not recorded any liability associated with this guarantee.

ALL EQUITY INVESTMENTS

Nucor reviews its equity investments for impairment if and when circumstances indicate that a decline in fair value below their carrying amounts may have occurred. Nucor last assessed its equity investment in Duferdofin Nucor for impairment during the fourth quarter of 2017 due to the protracted challenging steel market conditions in Europe. After completing its assessment, the Company determined that the estimated fair value exceeded its carrying amount by a sufficient amount and that there was no need to record an impairment charge. The assumptions that most significantly affect the fair value determination include projected revenuescash flows and the discount rate. It is reasonably possible that material deviation of future performance from the estimates used in our most recent valuation could result in impairment of our investment in Duferdofin Nucor. We will continue to monitor for potential triggering events that could affect the carrying value of our investment in Duferdofin Nucor as a result of future market conditions and any changes in our business strategy.

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Fair value measurements for Nucor’s cash equivalents and short-term investments are classified under Level 1 because such measurements are based on quoted market prices in active markets for identical assets. Our short-term investments are held in similar short-term investment instruments as described in Note 4 to the consolidated financial statements included in Nucor’s Annual Report on Form10-K for the year ended December 31, 2018. 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.

The fair value of short-term and long-term debt, including current maturities, was approximately $4.53$4.62 billion at JuneMarch 30, 20182019 ($4.194.45 billion at December 31, 2017)2018). The debt fair value estimates are classified under Level 2 because such estimates are based on readily available market prices of our debt at JuneMarch 30, 20182019 and December 31, 2017,2018, or similar debt with the same maturities, ratings and interest rates.

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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.

The Company also maintains a number of inactive plans under which stock-based awards remain outstanding but no further awards may be made. As of JuneMarch 30, 2018, 2.02019, 1.6 million shares were reserved for issuance upon the future settlement of outstanding awards under such inactive plans.

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

A summary of activity under Nucor’s stock option plans for the first six monthsquarter of 20182019 is as follows (in thousands, except years and per share amounts):

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officer’s retirement. Retirement, for purposes of vesting in these RSUs only, means termination of employment with approval of the Compensation and Executive Development Committee of the Board of Directors after satisfying age and years of service requirements. RSUs granted to anon-employee director are fully vested on the grant date and are payable to thenon-employee director in the form of common stock after the termination of the director’s service on the Board of Directors.

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

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

The fair value of an RSU is determined based on the closing price of Nucor’s common stock on the date of the grant.grant. A summary of Nucor’s RSU activity for the first six monthsquarter of 20182019 is as follows (shares in thousands):

Compensation expense for RSUs was $32.6 million and $21.1 million in the second quarter of 2018 and 2017, respectively, and $38.3 million and $26.1$6.8 million in the first six monthsquarter of 2018 and 2017, respectively.2019 ($5.7 million in the first quarter of 2018). As of JuneMarch 30, 2018,2019, unrecognized compensation expense related to unvested RSUs was $62.1$39.6 million, which is expected to be recognized over a weighted-average period of 2.11.6 years.

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

A summary of Nucor’s restricted stock activity under the AIP and the LTIP for the first six monthsquarter of 20182019 is as follows (shares in thousands):

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 $5.3 million and $3.2 million in the second quarter of 2018 and 2017, respectively, and $9.7 million and $7.5$5.4 million in the first six monthsquarter of 2018 and 2017, respectively.2019 ($4.4 million in the first quarter of 2018). As of JuneMarch 30, 2018,2019, unrecognized compensation expense related to unvested restricted stock awards was $2.4$3.0 million, which is expected to be recognized over a weighted-average period of 2.02.1 years.

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Nucor has concluded U.S. federal income tax matters for years through 2013.2014. The tax years 20142015 through 20162017 remain open to examination by the Internal Revenue Service. The Canada Revenue Agency has substantially concluded its examination of the 2012 and 2013 Canadian returns for Harris Steel Group Inc. and certain related affiliates. The 2015 tax year is currently under examination by the Canada Revenue Agency. The Trinidad and Tobago Inland Revenue Division is examining theNu-Iron Unlimited 2013 corporate income tax return. The tax years 20102011 through 2017 remain open to examination by other major taxing jurisdictions to which Nucor is subject (primarily Canada and other state and local jurisdictions).

Non-current deferred tax assets included in other assets in the condensed consolidated balance sheets were $0.7$0.9 million at JuneMarch 30, 20182019 ($0.60.7 million at December 31, 2017)2018).Non-current deferred tax liabilities included in deferred credits and other liabilities in the condensed consolidated balance sheets were $376.6$352.1 million at JuneMarch 30, 20182019 ($329.3332.0 million at December 31, 2017)2018).

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