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SECOND
QUARTER
2002
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 29, 2002 Commission file number 1-4119
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NUCOR CORPORATION
- --------------------------------------------------------------------------------
(Exact name as specified in charter)
Delaware 13-1860817
- -------------------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2100 Rexford Road, Charlotte, North Carolina 28211
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(Address of principal executive offices) (Zip code)
Telephone number, including area code: (704) 366-7000
--------------------------------
Indication by check mark whether Nucor Corporation (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 twelve months, and (2) has been subject to such filing
requirements for the past 90 days: Yes X No _____
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78,170,121 shares of common stock were outstanding at June 29, 2002.
1
PART I - FINANCIAL INFORMATION
Nucor Corporation - Condensed Consolidated Statements of Earnings
Six Months (26 Weeks) Ended Three Months (13 Weeks) Ended
-------------------------------------- --------------------------------------
June 29, 2002 June 30, 2001 June 29, 2002 June 30, 2001
------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------- --------- --------- ---------
Net sales ................................ $ 2,169,841,947 $ 2,106,592,592 $ 1,141,677,480 $ 1,078,574,872
--------------- --------------- --------------- ---------------
Costs, expenses and other:
Cost of products sold .................. 1,993,235,247 1,922,335,525 1,036,218,894 978,563,139
Marketing, administrative
and other expenses ................... 78,480,294 80,220,154 41,206,520 45,540,252
Interest expense (net) ................. 5,915,809 2,405,074 3,003,764 3,178,618
Other income ........................... (29,900,000) -- (29,900,000) --
--------------- --------------- --------------- ---------------
2,047,731,350 2,004,960,753 1,050,529,178 1,027,282,009
--------------- --------------- --------------- ---------------
Earnings before
federal income taxes ................... 122,110,597 101,631,839 91,148,302 51,292,863
Federal income taxes ................... 42,100,000 35,600,000 31,400,000 18,000,000
--------------- --------------- --------------- ---------------
Net earnings ......................... $ 80,010,597 $ 66,031,839 $ 59,748,302 $ 33,292,863
=============== =============== =============== ===============
Net earnings per share:
Basic ........................... $ 1.03 $ .85 $ .77 $ .43
=============== =============== =============== ===============
Diluted ......................... $ 1.02 $ .85 $ .76 $ .43
=============== =============== =============== ===============
Average shares outstanding:
Basic ........................... 78,002,299 77,631,068 78,084,879 77,674,806
=============== =============== =============== ===============
Diluted ......................... 78,244,881 77,715,913 78,358,436 77,796,959
=============== =============== =============== ===============
Dividends declared
per share ............................ $ .38 $ .34 $ .19 $ .17
=============== =============== =============== ===============
See notes to condensed consolidated financial statements.
2
Nucor Corporation - Condensed Consolidated Balance Sheets
June 29, December 31,
2002 2001
--------------- ---------------
Assets (Unaudited) (Unaudited)
- ------ --------- ---------
Current assets:
Cash and short-term investments ........................ $ 537,578,352 $ 462,348,547
Accounts receivable .................................... 382,416,154 330,855,074
Inventories ............................................ 523,354,618 466,690,217
Other current assets ................................... 117,141,635 113,772,078
--------------- ---------------
Total current assets ................................. 1,560,490,759 1,373,665,916
Property, plant and equipment ............................ 2,290,122,715 2,365,655,061
Other assets ............................................. 24,347,756 20,027,199
--------------- ---------------
Total assets ......................................... $ 3,874,961,230 $ 3,759,348,176
=============== ===============
Liabilities and stockholders' equity
- ------------------------------------
Current liabilities:
Accounts payable ....................................... $ 281,648,306 $ 189,235,046
Federal income taxes ................................... 20,805,319 --
Salaries, wages and related accruals ................... 99,894,135 92,769,688
Accrued expenses and other current liabilities ......... 224,106,841 202,153,992
--------------- ---------------
Total current liabilities ............................ 626,454,601 484,158,726
--------------- ---------------
Long-term debt due after one year ........................ 458,550,000 460,450,000
--------------- ---------------
Deferred credits and other liabilities ................... 317,012,731 329,392,145
--------------- ---------------
Minority interests ....................................... 204,626,700 283,886,976
--------------- ---------------
Stockholders' equity:
Common stock ........................................... 36,269,946 36,130,556
Additional paid-in capital ............................. 97,315,976 81,190,155
Retained earnings ...................................... 2,589,216,295 2,538,883,994
--------------- ---------------
2,722,802,217 2,656,204,705
Treasury stock ......................................... (454,485,019) (454,744,376)
--------------- ---------------
2,268,317,198 2,201,460,329
--------------- ---------------
Total liabilities and stockholders' equity ........... $ 3,874,961,230 $ 3,759,348,176
=============== ===============
See notes to condensed consolidated financial statements.
3
Nucor Corporation - Condensed Consolidated Statements of Cash Flows
Six Months (26 Weeks) Ended
--------------------------------
June 29, 2002 June 30, 2001
------------- -------------
(Unaudited) (Unaudited)
--------- ---------
Operating activities:
Net earnings .................................................... $ 80,010,597 $ 66,031,839
Adjustments:
Depreciation of plant and equipment ........................... 152,019,727 143,799,820
Minority interests ............................................ 54,215,724 47,582,899
Changes in (exclusive of acquisition):
Current assets .............................................. (111,595,038) (57,681,415)
Current liabilities ......................................... 142,295,875 24,245,896
Other ....................................................... (13,290,487) 15,317,769
------------- -------------
Cash provided by operating activities ......................... 303,656,398 239,296,808
------------- -------------
Investing activities:
Capital expenditures (net) ...................................... (76,491,618) (126,120,959)
Investment in affiliates ........................................ (3,405,247) --
Proceeds from sale of facility .................................. -- 15,724,799
Acquisition (net of cash acquired) .............................. -- (114,980,402)
------------- -------------
Cash used in investing activities ............................. (79,896,865) (225,376,562)
------------- -------------
Financing activities:
Decrease in long-term debt ...................................... (1,900,000) --
Distributions to minority interests ............................. (133,476,000) (100,386,500)
Issuance of common stock ........................................ 16,524,568 7,485,540
Cash dividends .................................................. (29,678,296) (26,424,927)
------------- -------------
Cash used in financing activities ............................. (148,529,728) (119,325,887)
------------- -------------
Increase (decrease) in cash and short-term investments ............ $ 75,229,805 $(105,405,641)
============= =============
See notes to condensed consolidated financial statements.
4
Nucor Corporation - Notes to Condensed Consolidated Financial Statements -
Unaudited
1. BASIS OF INTERIM PRESENTATION: The information furnished in Part I reflects
all adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim periods. The information
furnished has not been audited; however, the December 31, 2001 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, 2001.
2. INVENTORIES: Inventories consisted of approximately 45% raw materials and
supplies, and 55% finished and semi-finished products, at June 29, 2002
(40% and 60%, respectively, at December 31, 2001). Inventories valued on
the last-in, first-out (LIFO) method of accounting represent approximately
87% of total inventories as of June 29, 2002 (approximately 85% at December
31, 2001). If the first-in, first-out method (FIFO) of accounting had been
used, inventories would have been $19,291,126 higher at June 29, 2002
($8,291,126 higher at December 31, 2001). Use of the lower of cost or
market reduced inventories by $602,474 at June 29, 2002 ($6,319,664 at
December 31, 2001).
3. CONTINGENCIES: Nucor is subject to environmental laws and regulations
established by federal, state and local authorities and makes provision for
the estimated costs related to compliance. Of the undiscounted total
$87,913,000 of accrued environmental costs at June 29, 2002 ($104,960,000
at December 31, 2001), $49,163,000 was classified in accrued expenses and
other current liabilities ($49,210,000 at December 31, 2001) and
$38,750,000 was classified in deferred credits and other liabilities
($55,750,000 at December 31, 2001). In December 2000, the United States
Environmental Protection Agency and the Department of Justice announced an
agreement with Nucor and certain states that resolved alleged environmental
violations. Nucor continues to implement the various components of the
consent decree which involve air and water pollution control technology
demonstrations along with other environmental management practices.
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 which would have a
material effect on the consolidated financial statements.
4. OTHER INCOME: In the second quarter of 2002, Nucor received $29,900,000
related to a graphite electrodes anti-trust settlement.
5. SUBSEQUENT EVENT: On July 22, 2002, Nucor's wholly-owned subsidiary, Nucor
Steel Decatur, LLC, purchased substantially all of the assets of Trico
Steel Company, LLC ("Trico") for a purchase price of $116,700,000. The
purchase price included approximately $86,000,000 of Trico's debt that was
assumed by Nucor. The solid waste disposal revenue bonds assumed are due
from 2026 to 2027 and have a variable interest rate that was 2.05% on July
22, 2002.
5
Nucor Corporation - Notes to Condensed Consolidated Financial Statements,
continued
6. EARNINGS PER SHARE:
Six Months (26 Weeks) Ended Three Months (13 Weeks) Ended
---------------------------- -----------------------------
June 29,2002 June 30, 2001 June 29, 2002 June 30,2001
------------ ------------- ------------- ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------- --------- --------- ---------
Basic:
Basic net earnings ..... $80,010,597 $66,031,839 $59,748,302 $33,292,863
=========== =========== =========== ===========
Average shares
outstanding .......... 78,002,299 77,631,068 78,084,879 77,674,806
=========== =========== =========== ===========
Basic net earnings
per share ............ $ 1.03 $ .85 $ .77 $ .43
=========== =========== =========== ===========
Diluted:
Diluted net earnings ... $80,010,597 $66,031,839 $59,748,302 $33,292,863
=========== =========== =========== ===========
Diluted average
shares outstanding:
Basic shares
outstanding ........ 78,002,299 77,631,068 78,084,879 77,674,806
Dilutive effect of
employee stock
options ............ 242,582 84,845 273,557 122,153
----------- ----------- ----------- -----------
78,244,881 77,715,913 78,358,436 77,796,959
=========== =========== =========== ===========
Diluted net earnings
per share ............ $ 1.02 $ .85 $ .76 $ .43
=========== =========== =========== ===========
6
Nucor Corporation - Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion contains forward-looking statements that involve
risks and uncertainties. These forward-looking statements reflect our 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 other factors will not affect the accuracy of such
forward-looking information. 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) changes in the supply and cost
of raw materials, including steel scrap; (2) availability and cost of
electricity and natural gas; (3) competitive pressure on sales and pricing; (4)
uncertainties surrounding the global economy; (5) U.S. and foreign trade policy
affecting steel imports or exports; (6) changes in significant government
regulations affecting environmental compliance; and (7) other factors described
in the Company's filings with the Securities and Exchange Commission.
Operations
Net sales for the second quarter of 2002 increased 6% from the second
quarter of 2001 primarily due to a 5% increase in total tons shipped to outside
customers. Composite sales price remained relatively unchanged at $334 per ton
in the second quarter of 2002 compared to $333 per ton in the second quarter of
2001.
Net sales for the first half of 2002 increased 3% from the first half of
2001. Composite sales price per ton decreased 4% from $339 in the first half of
2001 to $325 in the first half of 2002, while total tons shipped to outside
customers increased 7%. The second quarter and first half of 2002 established
new tonnage records for steel production, total steel shipments and steel
shipments to outside customers. In the first half of 2002, steel production was
6,754,000 tons, compared with 6,206,000 tons produced in the first half of 2001.
Total steel shipments were 6,665,000 tons in the first half of 2002, compared
with 6,163,000 tons in last year's first half. Steel shipments to outside
customers were 6,156,000 tons, compared with 5,594,000 tons in the year earlier
half. Steel joist production during the first half of 2002 was 210,000 tons,
compared with 265,000 tons a year earlier. Steel deck sales were 137,000 tons,
compared with 168,000 tons in last year's first half. Cold finished steel sales
were 113,000 tons, compared with 115,000 tons in the first half of 2001.
The major component of cost of products sold is raw material costs. The
average price of raw materials increased approximately 3% in the second quarter
of 2002 compared with the second quarter of 2001, and decreased about 1% in the
first half of 2002 compared with the first half of 2001. The average scrap and
scrap substitute cost per ton used increased from $102 in the second quarter of
2001 to $107 in the second quarter of 2002, and remained unchanged at $102 for
both the first half of 2002 and the first half of 2001.
Margins were approximately 9% for the second quarter of 2002 and about 8%
for the first half of 2002, compared with approximately 9% for both the second
quarter and for the first half of 2001.
7
Nucor Corporation - Management's Discussion and Analysis of Financial Condition
and Results of Operations, continued
Major components of marketing, administrative and other expenses are
freight and profit sharing costs. Unit freight costs increased about 2% from the
second quarter of 2001 to the second quarter of 2002, and increased about 1%
from the first half of 2001 to the first half of 2002. Profit sharing costs
increased about 78% from the second quarter of 2001 to the second quarter of
2002, and increased by 20% from the first half of 2001 to the first half of
2002. Profit sharing costs are based upon and generally fluctuate with pre-tax
earnings. In the second quarter of 2001, marketing, administrative and other
expenses also included additional costs for employment agreements entered into
during the period.
Interest expense, net of interest income, decreased slightly from the
second quarter of 2001 to the second quarter of 2002. Interest expense, net of
interest income, increased from the first half of 2001 to the first half of
2002, due primarily to decreased average interest rates on short-term
investments.
In the second quarter of 2002, Nucor received $29,900,000 related to a
graphite electrodes anti-trust settlement.
Federal income taxes were at a rate of 34.5% for the second quarter and
first half of 2002, and approximately 35% for the second quarter and first half
of 2001.
Net earnings increased during the second quarter of 2002 compared with
the second quarter of 2001 due to increased sales volume and increased other
income related to the graphite electrodes anti-trust settlement. Net earnings
increased during the first half of 2002 compared with the first half of 2001 due
to the graphite electrodes anti-trust settlement.
Liquidity and capital resources
The current ratio was 2.5 at the end of the first half of 2002, and 2.8
at year-end 2001. The percentage of long-term debt to total capital was 16% at
the end of the first half of 2002 and at year-end 2001. Nucor has a simple
capital structure with no off-balance sheet financing arrangements or
relationships with special purpose entities.
Capital expenditures decreased 39% from the first half of 2001 to the
first half of 2002. In addition, during the first half of 2001, Nucor purchased
substantially all of the assets of Auburn Steel Company, Inc.'s steel bar
facility for approximately $115,000,000. The acquisition was not material to the
consolidated financial statements and did not result in material goodwill or
other intangible assets. Capital expenditures are projected to be less than
$200,000,000 for all of 2002. Funds provided from operations, existing credit
facilities, and new borrowings are expected to be more than adequate to meet
future capital expenditure and working capital requirements for existing
operations on both a short and long-term basis. Nucor has the financial ability
to borrow significant additional funds and still maintain reasonable leverage in
order to finance major acquisitions.
In May 2002, Nucor and Birmingham Steel Corporation ("Birmingham Steel")
signed a definitive agreement for Nucor's acquisition of substantially all of
Birmingham Steel's assets for $615,000,000 in cash. The assets to be purchased
include an estimated $120,000,000 of accounts receivable and inventory.
Birmingham Steel has filed for Chapter 11 bankruptcy pursuant to a pre-arranged
plan, which has been agreed to by Nucor, Birmingham Steel and its secured
creditors. Closing will occur after receiving the approval of the Delaware
bankruptcy court and required regulatory approvals. We expect closing to occur
late in the fourth quarter of 2002.
8
Nucor Corporation - Management's Discussion and Analysis of Financial Condition
and Results of Operations, continued
Assets to be included in the purchase are Birmingham Steel's four
operating mills in Birmingham, Alabama, Kankakee, Illinois, Seattle, Washington
and Jackson, Mississippi, with an estimated combined annual capacity of
approximately 2,000,000 tons. Other included assets are the corporate office
located in Birmingham, Alabama; the mill in Memphis, Tennessee, which is
currently not operating; the assets of Port Everglades Steel Corporation; the
assets of the Klean Steel Division; Birmingham Steel's ownership in Richmond
Steel Recycling Limited; as well as all inventory and receivables related to the
acquired assets.
Nucor's directors have approved the purchase of up to 15,000,000 shares
of Nucor common stock. There were no repurchases during the first half of 2002
or 2001. Since the inception of the stock repurchase program in 1998, a total of
approximately 10,800,000 shares have been repurchased at a total cost of about
$444,500,000.
On July 22, 2002, Nucor's wholly-owned subsidiary, Nucor Steel Decatur,
LLC, purchased substantially all of the assets of Trico Steel Company, LLC
("Trico") for a purchase price of $116,700,000. The purchase price included
approximately $86,000,000 of Trico's debt that was assumed by Nucor. Located in
Decatur, Alabama, the sheet steel facility originally began operations in 1997
and has an annual capacity of approximately 1,900,000 tons, which will increase
Nucor's capacity for sheet production by about 30%. Start-up of the sheet mill
will commence after Nucor has completed improvements to the facility.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
In December 2000, the United States Environmental Protection Agency and
the Department of Justice announced an agreement with Nucor and certain states
that resolved alleged environmental violations. Under the terms of the agreement
or Consent Decree, Nucor will pilot new air pollution control technology and
will evaluate and improve, as appropriate, its water pollution control systems.
Nucor will also evaluate and remediate any contamination that may be present on
its sites. In July 2001, Nucor paid a $9,000,000 penalty and has agreed to spend
another $4,000,000 in Supplemental Environmental Projects under this Consent
Decree. As part of the Consent Decree, Nucor is implementing an Environmental
Management System throughout its operations. The agreement is comprehensive and
involves eight Nucor steel mills and six Vulcraft facilities throughout the
nation. Nucor is involved in various other judicial and administrative
proceedings as both plaintiff and defendant, arising in the ordinary course of
business. Nucor does not believe that any such proceedings (including matters
relating to contracts, torts, taxes, warranties and insurance) will have a
material adverse effect on its business, operating results, financial condition
or cash flows.
Item 4 - Submission of Matters to a Vote of Security Holders
At the annual meeting of stockholders held on May 9, 2002, two directors
were elected for terms of three years expiring in 2005; 58,046,710 shares were
voted for Peter C. Browning (862,150 abstained) and 58,040,351 shares were voted
for Victoria F. Haynes (868,509 abstained).
9
PART II - OTHER INFORMATION, continued
Item 5 - Other Information
Nucor's chief executive officer, chief financial officer and executive
vice presidents have signed agreements not to compete with Nucor for two years
after cessation of employment, under which they will receive as consideration
their base salary multiplied by a factor of 3.36 for each year of the
non-compete agreement. These agreements were filed as exhibits to the Form 10-Q
for the quarter ended June 30, 2001 and to the Form 10-K for the year ended
December 31, 2001, based on the dates on which the agreements were executed.
Item 6 - Exhibits and Reports on Form 8-K
a. List of Exhibits:
Exhibit No. Description of Exhibits
99.1 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
99.2 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
b. Reports on Form 8-K:
On June 7, 2002, Nucor filed a current report on Form 8-K under Item 5
concerning the definitive agreement with Birmingham Steel Corporation
("Birmingham Steel") providing for Nucor to acquire substantially all of
Birmingham Steel's assets for $615,000,000 in cash. The definitive agreement was
announced on May 30, 2002.
On July 29, 2002, Nucor filed a current report on Form 8-K under Item 5
concerning the purchase of substantially all of the assets of Trico Steel
Company, LLC for a purchase price of $116,700,000 by Nucor's wholly-owned
subsidiary, Nucor Steel Decatur, LLC. The transaction closed on July 22, 2002.
10
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, who is (1) a duly authorized officer, and (2) the principal
accounting officer.
NUCOR CORPORATION
By: /s/ Terry S. Lisenby
------------------------------------
Terry S. Lisenby
Chief Financial Officer, Treasurer
and Executive Vice President
Dated: August 8, 2002
11
NUCOR CORPORATION
List of Exhibits to Form 10-Q - June 29, 2002
Exhibit No. Description of Exhibits
99.1 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
99.2 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
12