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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 28, 2019July 4, 2020

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)

Securities registered pursuant to Section 12(b) of the Act:

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.

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   ☒

303,215,267301,895,077 shares of the registrant’s common stock were outstanding at September 28, 2019.July 4, 2020.

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Nucor Corporation

Quarterly Report on Form 10-Q

For the Three Months and NineSix Months Ended September 28, 2019July 4, 2020

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Nucor Corporation Condensed Consolidated Statements of Earnings (Unaudited)

(In thousands, except per share amounts)

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.

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Nucor Corporation Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

See notes to condensed consolidated financial statements.

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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)

Recently Adopted Accounting Pronouncements– In the first quarter of 2019, Nucor adopted new guidance related to lease accounting using the modified retrospective approach, which permits companies to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the periodopinion of adoption without adjustingmanagement, necessary to a fair statement of the comparative periods prior to adoption. The new lease guidance requires all lessees to recognize on the balance sheet right-of-use assets and lease liabilitiesresults for the rightsinterim periods presented and obligations created by lease arrangements with terms greater than 12 months, including operating leases. Expenses are recognized inof a normal and recurring nature unless otherwise noted. The information furnished has not been audited; however, the statement of earnings in a manner similar to previous accounting guidance.

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 lease standard did not have a material impact on our consolidated financial 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. Finance lease right-of-use assets and liabilities are presented separately from operating lease right-of-use assets and liabilities in theDecember 31, 2019 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in accordancethe United States of America. The unaudited condensed consolidated financial statements included in this Item 1 should be read in conjunction with the new lease standard. See Note 4 for further information.

In the first quarter of 2019, we also adopted new accounting guidance related to tax effects of the Tax Cuts and Jobs Act of 2017. As a result of the adoption of the new guidance, we elected to reclassify stranded tax effects from accumulated other comprehensive income to retained earnings, effective January 1, 2019. The adoption of this new guidance did not have a material impact on the Company’saudited consolidated financial statements.statements and the notes thereto included in Nucor’s Annual Report on Form 10-K for the year ended December 31, 2019.

Nucor performed an impairment assessment of its proved producing natural gas well assets in September 2018.the fourth quarter of 2019. One of the main assumptions that most significantly affects the undiscounted cash flows determination is management’s estimate of future pricing of natural gas and natural gas liquids. The pricing used in the impairment assessment was developed by management based on projected natural gas market supply and demand dynamics, in conjunction with a review of projections by market analysts. Management also makes key estimates on the expected reserve levels and on the expected drilling productionlease operating costs. The impairment assessment was performed on each of Nucor’s three groups (“fields”) of wells, with each field defined by common geographic location.

As a result of the impairment assessment, Nucor recorded ana non-cash impairment charge of $110.0$35.0 million relating to two fieldsone field of wells in the thirdfourth quarter of 2018.2019. The post-impairment carrying value of this field was $11.8 million at July 4, 2020 ($12.3 million at December 31, 2019). The remaining two fields were not impaired as a result of the assessment and had a combined carrying value of these two fields was $68.0$63.9 million at September 28, 2019July 4, 2020 ($71.066.6 million at December 31, 2018)2019). The third field was not impaired and had a carrying value of $48.3 million at September 28, 2019 ($51.8 million at December 31, 2018). Changes in the natural gas industry or a prolonged low pricelow-price environment beyond what had already been assumed in the assessmentassessments could cause management to revise the natural gas and natural gas liquids price assumptions, the estimated reserves or the estimated drilling productionlease operating costs. Unfavorable revisions to these assumptions or estimates could possibly result in anfurther impairment of some or all of the fields of proved well assets.

Nucor owns a 49% leasehold interest in unproved oil and natural gas properties covering approximately 54,000 acres in the South Piceance Basin located in Colorado. Nucor is subject to forfeiture of a portion of its leasehold interest in these properties if we do not drill new wells within various contractually specified time periods. A decision to not develop a portion of these properties within the specified time periods would likely result in a partial asset impairment in the future. The carrying value of the entire leasehold interest at July 4, 2020 was $165.0 million. Nucor has full discretion on its participation in all future drilling capital investments related to the leasehold interest.

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 our right-of-use assets and lease liabilities. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or a purchase option reasonably certain of exercise.

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4. We determine that a contract contains a lease ifGoodwill and Other Intangible Assets

The change in the contract conveysnet carrying amount of goodwill for 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 the use of an identified asset, we assess whether or not we have the right to direct the use of the identified asset and to 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 the commencement date in determining the present value of lease payments.    

Certain of our lease agreements include payments that adjust periodically for consumption of goods providedsix months ended July 4, 2020 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.

Supplemental statement of earnings information related to our leases issegment was as follows (in thousands):

Supplemental cash flow information related to our leases is 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:

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The reason for the substantial weighted-average discount rate – finance leases, of 30.8%, 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 the 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 were as follows as of September 28, 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 Annual Report on Form 10-K for the year ended December 31, 2018 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 at December 31, 2018 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, which primarily consisted of buildings and improvements or machinery and equipment.

Nucor completed its most recent annual goodwill impairment testing during the fourth quarter of 20182019 and concluded that as of such time there was no0 impairment of goodwill for any of its reporting units.

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The assessment performed in 20182019 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%56% in the most recent assessment. The reporting unit’s profitability in the first half of 2020 significantly increased from the first half of 2019. We expect the 20192020 operating results of thisthe Rebar Fabrication reporting unit will continue to improve as compared to 2018.2019. If our assessment of the relevant facts and circumstances changes, or the actual performance of this reporting unit falls short of expected results, noncashnon-cash impairment charges may be required. Total goodwill associated with the Rebar Fabrication reporting unit was $354.9$347.8 million as of September 28, 2019July 4, 2020 ($353.0356.6 million as of December 31, 2018)2019). 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 $69.4$61.3 million as of September 28, 2019July 4, 2020 ($76.767.2 million as of December 31, 2018)2019). 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.

The Company has monitored one of its reporting units, Grating, for potential triggering events since the impairment assessment performed in the fourth quarter of 2018. Due to lower than expected operating performanceresults and anticipated changes to the Grating reporting unit’s business strategy and structure, the Company determined a triggering event occurred in the third quarter of 2019 and performed an impairment assessment. The fair value of the Grating reporting unit exceeded its carrying value by approximately 17% in the most recentthat assessment. If our assessment of the relevant facts and circumstances changes, or the actual performance of this reporting unit falls short of expected results, noncashnon-cash impairment charges may be required. An impairment ofTotal goodwill may also lead us to record an impairment of other intangible assets. As of September 28, 2019, total goodwill and finite-lived intangible assets associated with the Grating reporting unit were $36.7was $36.5 million and $3.3as of July 4, 2020 ($36.8 million respectively.as of December 31, 2019).

Intangible assets with estimated useful lives of five to 22 years are amortized on a straight-line or accelerated basis and were comprised of the following as of September 28, 2019July 4, 2020 and December 31, 20182019 (in thousands):

Intangible asset amortization expense in the thirdsecond quarter of 2020 and 2019 and 2018 was $22.0$20.7 million and $22.1$21.2 million, respectively, and was $64.7$42.2 million and $66.7$42.7 million in the first ninesix months of 20192020 and 2018,2019, respectively. Annual amortization expense is estimated to be $87.1 million in 2019; $84.7$83.5 million in 2020; $83.5$82.3 million in 2021; $81.2$80.7 million in 2022; and $80.0 million in 2023.2023; and $79.2 million in 2024.

5. Equity Investments

NUMITThe carrying value of our equity investments in domestic and foreign companies was $521.5 million at July 4, 2020 ($793.2 million at December 31, 2019) and is recorded in other assets in the condensed consolidated balance sheets.

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 a one-month lag basis) under the equity method, as control and risk

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of loss are shared equally between the members. Nucor’s investment in NuMit was $323.9$316.7 million at September 28, 2019July 4, 2020 ($337.2319.8 million at December 31, 2018)2019). Nucor received distributions of $27.4$2.0 million and $28.3$27.4 million from NuMit during the first ninesix months of 2020 and 2019, and 2018, respectively.

DUFERDOFIN NUCORDuferdofin Nucor

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

Nucor’s investment in Duferdofin Nucor was $256.0$2.5 million at September 28, 2019July 4, 2020 ($269.1263.0 million at December 31, 2018)2019). Nucor’s 50% share of the total net assets of Duferdofin Nucor was $107.0$115.9 million at September 28, 2019,July 4, 2020, resulting in a negative basis difference of $149.0$113.4 million. This is due to the $255.0 million due toimpairment charge taken against the Company’s investment in Duferdofin Nucor in the first half of 2020 as discussed below, offset by the step-up to fair value of certain assets and liabilities attributable to Duferdofin Nucor, as well as the identification of goodwill ($84.3 million)86.5 million at December 31, 2019) and finite-lived intangible assets. This basis difference prior to the impairment charge, excluding the portion attributable to goodwill, iswas being amortized based on the remaining estimated useful lives of the various underlying net assets, as appropriate, through the first quarter of 2020. Beginning with the second quarter of 2020, the negative basis difference of $113.4 million began amortizing based on the remaining useful lives of the various underlying net assets, as appropriate. Amortization expense associated with the fair value step-upnegative basis in the second quarter of 2020 was $2.2

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$1.8 million, andcompared to an expense of $2.3 million in the thirdsecond quarter of 2019, and 2018, respectively, andassociated with the fair value step-up. Net amortization expense was $6.7$0.3 million and $7.1$4.5 million in the first ninesix months of 2020 and 2019, and 2018, respectively.

As of September 28, 2019,July 4, 2020, Nucor had outstanding notes receivable of €35.0 million ($38.339.4 million) from Duferdofin Nucor (€35.0 million, or $40.2$39.3 million, as of December 31, 2018)2019). The notes receivable bear interest at a rate that resets annually on September 30 to the 12-month Euro Interbank Offered Rate plus 0.75% per year. The maturity date of the principal amounts was extended tois January 31, 2022 during the first quarter of 2018.2022. As of September 28, 2019July 4, 2020 and December 31, 2018,2019, the notes receivable were classified in other assets in the condensed consolidated balance sheets. These notes were fully reserved in connection with the $255.0 million impairment charge taken against the Company’s investment in Duferdofin Nucor in the first half of 2020 as discussed below.

Nucor has issued a guarantee for its ownership percentage (50%) of Duferdofin Nucor’s borrowings under Facility A of a Structured Trade Finance Facilities Agreement (“Facility A”). The fair value of the guarantee is immaterial. In April 2018, Duferdofin Nucor amended and extended Facility A to mature on April 16, 2021. The maximum amount Duferdofin Nucor could borrow under Facility A was €160.0 million ($175.1180.0 million) at September 28, 2019.July 4, 2020. As of September 28, 2019,July 4, 2020, there was €154.0€147.0 million ($168.5165.4 million) outstanding under that facility (€155.0147.0 million, or $178.0$164.9 million, as of December 31, 2018)2019). If Duferdofin Nucor fails to pay when due any amounts for which it is obligated under Facility A, Nucor could be required to pay 50% of such amounts pursuant to and in accordance with the terms of its guarantee. Any indebtedness of Duferdofin Nucor to Nucor is effectively subordinated to the indebtedness of Duferdofin Nucor under Facility A. Nucor has not recorded any liability associated with this guarantee.

NUCOR-JFENucor-JFE

Nucor owns a 50% economic and voting interest in Nucor-JFE Steel Mexico, S. de R.L. de C.V. (“Nucor-JFE”), a 50-50 joint venture with JFE Steel Corporation of Japan, to build and operate a galvanized sheet steel plant in central Mexico. Nucor-JFE plant construction is substantially complete and operations are expected to begin by the end of 2019. Nucor accounts for the investment in Nucor-JFE (on a one-month lag basis) under the equity method, as control and risk of loss are shared equally between the members. Nucor’s investment in Nucor-JFE was $150.1$153.6 million at September 28, 2019July 4, 2020 ($135.7163.2 million at December 31, 2018)2019).

On January 16, 2019, Nucor entered into an agreement to guarantee a percentage, equal to its ownership percentage (50%), of Nucor-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, 2020.2021. Under the Facility, the maximum amount Nucor-JFE could borrow was $65.0 million as of September 28, 2019.July 4, 2020. The Facility is uncommitted. As of September 28, 2019,July 4, 2020, there was $30.0$35.0 million outstanding under the Facility.Facility (0ne as of December 31, 2019). If Nucor-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.

On July 26, 2019,Nucor-JFE has other credit facilities that Nucor entered into another agreementhas agreed to guarantee. The principal amount subject to guarantee $17.5by Nucor for these other credit facilities was $25.0 million as of debt, plus interest and fees, totaling up to $20.0July 4, 2020 ($25.0 million under the $35.0 million Uncommitted Loan Facility Agreement and Promissory Note (the “Loan Agreement”)as of December 31, 2019). The fair value of the guaranteeguarantees is immaterial. Nucor’s guarantee expires on July 31, 2024. If Nucor-JFE fails to pay when due any amounts for which it is obligated, under the Loan Agreement, Nucor could be required to pay such amounts pursuant to and in accordance with the terms of its guarantee. Nucor has not recorded any liability associated with this guarantee.these guarantees.

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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 assesseddetermined that a triggering event occurred in the first quarter of 2020 with respect to its equity method investment in Duferdofin Nucor for impairment during the fourth quarter of 2017 due to adverse developments in the protracted challenging steel market conditions in Europe.joint venture’s commercial outlook, which have been exacerbated by the COVID-19 pandemic, all of which have negatively impacted the joint venture’s strategic direction. After completing its impairment assessment, the CompanyNucor determined that the carrying amount exceeded its estimated fair value exceededand the impairment condition was considered to be other than temporary. Therefore, Nucor recorded a $250.0 million impairment charge in the first quarter of 2020 and a $5.0 million impairment charge in the second quarter of 2020 against its carrying amount by a sufficient amountinvestment in Duferdofin Nucor. Any additional capital contributions, if necessary, that Nucor makes to Duferdofin Nucor will be subject to impairment. Additionally, the Company fully reserved its €35.0 million ($39.4 million) outstanding note receivable from Duferdofin Nucor due to an assessment of the likelihood of collection in light of these adverse developments and that there was no needits effective subordination to record an impairment charge.Facility A. These charges are included in losses on assets in the condensed consolidated statements of earnings. The assumptions that most significantly affect the fair value determination include projected cash flows and the discount rate. The Company-specific inputs for measuring fair value are considered “Level 3” or unobservable inputs that are not corroborated by market data under applicable fair value authoritative guidance, as quoted market prices are not available.

It is reasonably possible that material deviation of future performance from the estimates used in our most recent valuation could result in further impairment of our investment in Duferdofin Nucor. The outlook forNucor and affect any potential liability associated with the European economy has weakened in 2019. We will continue to monitor for potential triggering events that could affectCompany’s guarantee of the carrying valueindebtedness of our investment in Duferdofin Nucor as discussed above.

6. Current Liabilities

Book overdrafts, included in accounts payable in the condensed consolidated balance sheets, were $65.7 million at July 4, 2020 ($116.4 million at December 31, 2019). Dividends payable, included in accrued expenses and other current liabilities in the condensed consolidated balance sheets, were $123.0 million at July 4, 2020 ($122.9 million at December 31, 2019).Accrued vacation and holiday pay, included in salaries, wages and related accruals in the condensed consolidated balance sheets, were $119.0 million at July 4, 2020 ($106.2 million at December 31, 2019).

7. Fair Value Measurements

The following table summarizes information regarding Nucor’s financial assets and financial liabilities that were measured at fair value as of July 4, 2020 and December 31, 2019 (in thousands). Nucor does not have any non-financial assets or non-financial liabilities that are measured at fair value on a result of future market conditions and any changes in our business strategy.

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