Certain statements made in this Quarterly Report on Form 10-Q, or in other
public filings, press releases, or other written or oral communications made by
Nucor, which are not historical facts are forward-looking statements subject to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements involve risks and uncertainties which we
expect will or may occur in the future and may impact our business, financial
condition and results of operations. The words "anticipate," "believe,"
"expect," "project," "may," "will," "should," "could" and similar expressions
are intended to identify those forward-looking statements. These forward-looking
statements reflect the Company's best judgment based on current information,
and, although we base these statements on circumstances that we believe to be
reasonable when made, there can be no assurance that future events will not
affect the accuracy of such forward-looking information. As such, the
forward-looking statements are not guarantees of future performance, and actual
results may vary materially from the projected results and expectations
discussed in this report. Factors that might cause the Company's actual results
to differ materially from those anticipated in forward-looking statements
include, but are not limited to: (1) competitive pressure on sales and pricing,
including pressure from imports and substitute materials; (2) U.S. and foreign
trade policies affecting steel imports or exports; (3) the sensitivity of the
results of our operations to prevailing market steel prices and changes in the
supply and cost of raw materials, including pig iron, iron ore and scrap steel;
(4) the availability and cost of electricity and natural gas which could
negatively affect our cost of steel production or result in a delay or
cancellation of existing or future drilling within our natural gas drilling
programs; (5) critical equipment failures and business interruptions; (6) market
demand for steel products, which, in the case of many of our products, is driven
by the level of nonresidential construction activity in the United States, as
well as prevailing domestic prices for oil and gas; (7) impairment in the
recorded value of inventory, equity investments, fixed assets, goodwill or other
long-lived assets; (8) uncertainties surrounding the global economy, including
excess world capacity for steel production; (9) fluctuations in currency
conversion rates; (10) significant changes in laws or government regulations
affecting environmental compliance, including legislation and regulations that
result in greater regulation of greenhouse gas emissions that could increase our
energy costs and our capital expenditures and operating costs or cause one or
more of our permits to be revoked or make it more difficult to obtain permit
modifications; (11) the cyclical nature of the steel industry; (12) capital
investments and their impact on our performance; (13) our safety performance;
(14) the impact of the COVID-19 pandemic; and (15) the risks discussed in "Item
1A. Risk Factors" of the Company's Annual Report on Form 10-K for the year ended
December 31, 2019 and in "Item 1A. Risk Factors" of this report and elsewhere
herein.
Caution should be taken not to place undue reliance on the forward-looking
statements included in this report. We assume no obligation to update any
forward-looking statements except as may be required by law. In evaluating
forward-looking statements, these risks and uncertainties should be considered,
together with the other risks described from time to time in our reports and
other filings with the Securities and Exchange Commission.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the unaudited condensed
consolidated financial statements and the notes thereto included elsewhere in
this report, as well as the audited consolidated financial statements and the
notes thereto, "Item 1A. Risk Factors" and "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in Nucor's
Annual Report on Form 10-K for the year ended December 31, 2019.
Overview
Nucor and its affiliates manufacture steel and steel products. Nucor also
produces DRI for use in its steel mills. Through DJJ, the Company also processes
ferrous and nonferrous metals and brokers ferrous and nonferrous metals, pig
iron, hot briquetted iron and DRI. Most of Nucor's operating facilities and
customers are located in North America. Nucor's operations include international
trading and sales companies that buy and sell steel and steel products
manufactured by the Company and others. Nucor is North America's largest
recycler, using scrap steel as the primary raw material in producing steel and
steel products.
Nucor reports its results in the following segments: steel mills, steel products
and raw materials. The steel mills segment includes carbon and alloy steel in
sheet, bars, structural and plate; steel trading businesses; rebar distribution
businesses; and Nucor's equity method investments in Duferdofin Nucor, NuMit and
Nucor-JFE. The steel products segment includes steel joists and joist girders,
steel deck, fabricated concrete reinforcing steel, cold finished steel,
precision castings, steel fasteners, metal building systems, steel grating,
tubular products businesses, piling products business, and wire and wire mesh.
The raw materials segment includes DJJ, primarily a scrap broker and processor;
Nu-Iron Unlimited and Nucor Steel Louisiana, two facilities that produce DRI
used by the steel mills; and our natural gas production operations.
The average utilization rates of all operating facilities in the steel mills,
steel products and raw materials segments were approximately 89%, 73% and 73%,
respectively, in the first quarter of 2020 compared with approximately 87%, 67%
and 71%, respectively, in the first quarter of 2019.
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COVID-19 Update
The COVID-19 pandemic began to impact Nucor's operations in the final weeks of
the first quarter of 2020 and has rapidly become the most significant ongoing
event impacting almost all aspects of our business. Our most important value is
the health and safety of our teammates, their families and the communities where
we operate. We have formed several internal task forces to closely monitor
developments related to the pandemic and provide guidance to Nucor facilities.
Our facilities around the country are each taking steps to respond to COVID-19
based on the nature of their operations and the actions being taken by their
state and local governments. We have restricted travel, upgraded the cleaning
practices at our facilities and offices, implemented remote work for teammates
wherever possible, and instituted social distancing measures throughout the
Company. Across Nucor, we remain committed to protecting our teammates while
minimizing disruptions to our customers and supply chain.
Shelter-in-place or stay-at-home orders have been implemented in most of the
states where we operate production facilities. In all of these jurisdictions,
Nucor has been deemed an essential or life-sustaining operation. Accordingly, we
are maintaining production operations sufficient to meet our customers' ongoing
needs. Our DRI facility in Trinidad stopped production on March 30 to comply
with the country's stay-at-home orders. Our DRI facility in Louisiana halted
production on April 2 in response to market conditions and out of concern for
the health and safety of our teammates in an area of the country that has
experienced a particularly aggressive outbreak of COVID-19 cases. The Louisiana
DRI facility resumed production operations on April 25 with additional
procedures in place to help protect our teammates at that facility.
Results of Operations
Nucor reported net earnings of $20.3 million, or $0.07 per diluted share in the
first quarter of 2020, a significant decrease from the first quarter of 2019
earnings of $501.8 million, or $1.63 per diluted share. The first quarter of
2019 earnings were the highest quarterly earnings of 2019 as market conditions
for the remainder of 2019 were negatively impacted by inventory destocking. The
first quarter of 2020 started off with strong performance from our steel
products segment and an 89% utilization rate for our steel mills segment,
showing an upward trajectory from the fourth quarter of 2019.
However, the first quarter of 2020 ended with the rapidly intensifying impact of
the COVID-19 pandemic which began affecting our business late in the quarter.
Adverse developments in the commercial outlook for Duferdofin Nucor, an Italian
joint venture in which we have an equity method investment, were exacerbated by
the COVID-19 pandemic. We determined these negative impacts on the joint
venture's strategic direction was a triggering event that resulted in a $250.0
million impairment charge related to our investment. In addition to the
impairment charge, we fully reserved the €35.0 million ($37.8 million)
outstanding note receivable from the joint venture, resulting in $287.8 million
in total losses on assets related to Duferdofin Nucor in the first quarter of
2020.
The following discussion will provide greater quantitative and qualitative
analysis of Nucor's performance in the first quarter of 2020 as compared to the
first quarter of 2019.
Net Sales
Net sales to external customers by segment for the first quarter of 2020 and
2019 were as follows (in thousands):
Three Months (13 Weeks) Ended
April 4, 2020 March 30, 2019 % Change
Steel mills $3,519,270 $3,949,402 -11%
Steel products 1,726,854 1,654,522 4%
Raw materials 378,213 492,700 -23%
Total net sales $5,624,337 $6,096,624 -8%
Net sales for the first quarter of 2020 decreased 8% from the first quarter of
2019. Average sales price per ton decreased 13% from $901 in the first quarter
of 2019 to $783 in the first quarter of 2020. Total tons shipped to outside
customers in the first quarter of 2020 were 7,187,000 tons, a 6% increase from
the first quarter of 2019.
In the steel mills segment, sales tons for the first quarter of 2020 and 2019
were as follows (in thousands):
Three Months (13 Weeks) Ended
April 4, 2020 March 30, 2019 % Change
Outside steel shipments 5,182 4,772 9%
Inside steel shipments 1,316 1,217 8%
Total steel shipments 6,498 5,989 8%
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Net sales for the steel mills segment decreased 11% in the first quarter of 2020
from the first quarter of 2019, due primarily to an 18% decrease in the average
sales price per ton from $826 to $680 which was partially offset by a 9%
increase in tons sold to outside customers. Average selling prices decreased
across all product groups within the steel mills segment in the first quarter of
2020 as compared to the first quarter of 2019.
Outside sales tonnage for the steel products segment for the first quarter of
2020 and 2019 was as follows (in thousands):
Three Months (13 Weeks) Ended
April 4, 2020 March 30, 2019 % Change
Joist sales 131 110 19%
Deck sales 125 106 18%
Cold finished sales 126 143 -12%
Fabricated concrete reinforcing steel sales 311 259 20%
Piling products sales 180 138 30%
Tubular products sales 287 263 9%
Other steel products sales 99 99 -
Total steel products sales 1,259 1,118 13%
Net sales for the steel products segment increased 4% in the first quarter of
2020 compared to the first quarter of 2019, due primarily to a 13% increase in
tons sold to outside customers which was partially offset by a 7% decrease in
the average sales price per ton from $1,480 to $1,372. Tons sold to outside
customers increased across most businesses within the steel products segment in
the first quarter of 2020 as compared to the first quarter of 2019, with the
most notable exception being our cold finish business.
Net sales for the raw materials segment decreased 23% in the first quarter of
2020 compared to the first quarter of 2019, due primarily to decreased average
selling prices and volumes at DJJ's brokerage operations and, to a lesser
extent, decreased volumes at DJJ's scrap processing operations. In the first
quarter of 2020, approximately 88% of outside sales for the raw materials
segment were from the brokerage operations of DJJ, and approximately 9% of
outside sales were from the scrap processing operations of DJJ (89% and 10%,
respectively, in the first quarter of 2019).
Gross Margins
Nucor recorded gross margins of $629.3 million (11%) in the first quarter of
2020, which was a decrease compared with $895.9 million (15%) in the first
quarter of 2019.
• The primary driver for the decrease in gross margins in the first quarter
of 2020 as compared to the first quarter of 2019 was decreased metal
margin in the steel mills segment. Metal margin is the difference between
the selling price of steel and the cost of scrap and scrap substitutes.
The average scrap and scrap substitute cost per gross ton used in the
first quarter of 2020 was $293, a 17% decrease compared to $352 in the
first quarter of 2019. Despite the decrease in average scrap and scrap
substitute cost per gross ton used and increased volumes, metal margin in
the steel mills segment decreased due to lower average selling prices.
Scrap prices are driven by the global supply and demand for scrap and other
iron-based raw materials used to make steel. As we begin the second quarter of
2020, we expect elevated volatility in scrap prices due to uncertainties caused
by the COVID-19 pandemic.
• Pre-operating and start-up costs of new facilities increased to
approximately $29 million in the first quarter of 2020 from approximately
$20 million in the first quarter of 2019. The increase in pre-operating
and start-up costs was due to increased costs at the bar mills being built
in Missouri and Florida, increased costs for the merchant bar quality mill
expansion at our bar mill in Illinois and increased costs related to the
expansion at our sheet mill in Kentucky. Nucor defines pre-operating and
start-up costs, all of which are expensed, as the losses attributable to
facilities or major projects that are either under construction or in the
early stages of operation. Once these facilities or projects have attained
a utilization rate that is consistent with our similar operating
facilities, they are no longer considered by Nucor to be in start-up.
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• Gross margins in the steel products segment increased in the first quarter
of 2020 as compared to the first quarter of 2019. The primary driver was
the increased margins across most of our steel product businesses which
were partially offset by decreased margins at our cold finish business.
The largest increases in gross margin were at our tubular products and
rebar fabrication businesses. Led by large commercial, warehouse and data
center projects, demand in nonresidential construction markets continues
to be healthy. As we enter the second quarter of 2020, backlogs for the
steel products segment are strong.
• Gross margins in the raw materials segment decreased in the first quarter
of 2020 as compared to the first quarter of 2019, primarily due to margin
contraction at our DRI facilities. Decreased margins related to DJJ's
brokerage operations were partially offset by increased margins at DJJ's
scrap processing operations.
Marketing, Administrative and Other Expenses
A major component of marketing, administrative and other expenses is profit
sharing and other incentive compensation costs. These costs, which are based
upon and fluctuate with Nucor's financial performance, decreased by
$67.3 million in the first quarter of 2020 as compared to the first quarter of
2019.
Included in marketing, administrative and other expenses in the first quarter of
2019 was a benefit of $33.7 million related to the gain on the sale of an equity
method investment in the raw materials segment.
Equity in Losses (Earnings) of Unconsolidated Affiliates
Equity in losses of unconsolidated affiliates was $0.8 million in the first
quarter of 2020, which compared to equity in earnings of unconsolidated
affiliates of $2.9 million in the first quarter of 2019. The decreases in equity
method investment earnings from the first quarter of 2020 to the first quarter
of 2019 was primarily due to increased losses at Duferdofin-Nucor and Nucor JFE.
Losses on Assets
Included in the first quarter of 2020 earnings were losses on assets of $287.8
million related to our equity method investment in Duferdofin Nucor. Nucor
determined that a triggering event occurred in the first quarter of 2020 due to
adverse developments in the joint venture's commercial outlook, which has been
exacerbated by the COVID19 pandemic, all of which have negatively impacted the
joint venture's strategic direction.
As a part of the losses on assets, Nucor recorded a noncash impairment charge
of $250.0 million on its equity method investment in Duferdofin Nucor that is
included in the steel mills segment earnings. Additionally, the Company fully
reserved its €35.0 million ($37.8 million) outstanding note receivable with
Duferdofin Nucor. This impact is recorded in the corporate/eliminations line.
Interest Expense (Income)
Net interest expense for the first quarter of 2020 and 2019 was as follows (in
thousands):
Three Months (13 Weeks) Ended
April 4, 2020 March 30, 2019
Interest expense $ 47,596 $ 37,062
Interest income (6,686 ) (8,619 )
Interest expense, net $ 40,910 $ 28,443Interest expense increased in the first quarter of 2020 as compared to the first
quarter of 2019 due to a significant decrease in capitalized interest. Several
capital projects that were under construction in the first quarter of 2019 have
been completed and are no longer subject to having interest capitalized.
Interest expense also increased due to higher interest expense related to our
industrial development revenue bonds ("IDRBs").
Interest income decreased in the first quarter of 2020 as compared to the first
quarter of 2019 due to a decrease in average interest rates on investments.
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Earnings (Loss) Before Income Taxes and Noncontrolling Interests
Earnings (loss) before income taxes and noncontrolling interests by segment for
the first quarter of 2020 and 2019 were as follows (in thousands):
Three Months
(13 Weeks) Ended
April 4, 2020 March 30, 2019
Steel mills $ 156,506 $ 689,398
Steel products 162,559 77,433
Raw materials (7,911 ) 53,223
Corporate/eliminations (164,857 ) (130,438 )
$ 146,297 $ 689,616Earnings before income taxes and noncontrolling interests for the steel mills
segment in the first quarter 2020 decreased significantly as compared to the
first quarter of 2019, primarily due to a $250.0 million loss on assets related
to our equity method investment in Duferdofin Nucor as well as the previously
mentioned lower average selling prices and metal margin.
In the steel products segment, earnings before income taxes and noncontrolling
interests increased in the first quarter of 2020 as compared to the first
quarter of 2019, primarily due to the reasons discussed above.
The performance of our raw materials segment decreased in the first quarter of
2020 as compared to the first quarter of 2019, primarily due to the absence of
the $33.7 million benefit related to the gain on the sale of an equity method
investment in the first quarter of 2019 as well as decreased performance from
our DRI facilities and DJJ's brokerage operations.
The increase in the loss of the corporate/eliminations line in the first quarter
of 2020 as compared to the first quarter of 2019 was primarily due to the
Company fully reserving its €35.0 million ($37.8 million) outstanding note
receivable with Duferdofin Nucor.
Noncontrolling Interests
Noncontrolling interests represent the income attributable to the noncontrolling
partners of Nucor's joint ventures, primarily Nucor-Yamato Steel Company
(Limited Partnership) ("NYS") of which Nucor owns 51%. The increase in earnings
attributable to noncontrolling interests in the first quarter of 2020 as
compared to the first quarter of 2019 was primarily due to the increased
earnings of NYS, which was a result of increased sales volume in the first
quarter of 2020 as compared to the first quarter of 2019. Under the NYS limited
partnership agreement, the minimum amount of cash to be distributed each year to
the partners is the amount needed by each partner to pay applicable U.S. federal
and state income taxes. In the first quarter of both 2020 and 2019, the amount
of cash distributed to noncontrolling interest holders exceeded the earnings
attributable to noncontrolling interests based on mutual agreement of the
general partners.
Provision for Income Taxes
The effective tax rate for the first quarter of 2020 was 62.8% as compared to
23.0% for the first quarter of 2019. The increase in the effective tax rate
between 2019 and 2020 is primarily due to the $250.0 million financial statement
impairment of our equity method investment in Duferdofin Nucor in the first
quarter of 2020. The impairment had no corresponding impact to the provision for
income taxes. The expected effective rate for the full year of 2020 is
approximately 34.3% as compared to 23.1% for the full year of 2019.
We estimate that in the next 12 months our gross unrecognized tax benefits,
which totaled $53.9 million at April 4, 2020, exclusive of interest, could
decrease by as much as $7.1 million as a result of the expiration of the statute
of limitations and closures of examinations, substantially all of which would
impact the effective tax rate.
Nucor has concluded U.S. federal income tax matters for years through 2014. The
tax years 2015 through 2018 remain open to examination by the Internal Revenue
Service. The 2015 Canadian income tax returns for Harris Steel Group Inc. and
certain related affiliates are currently under examination by the Canada Revenue
Agency. The tax years 2013 through 2018 remain open to examination by other
major taxing jurisdictions to which Nucor is subject (primarily Canada and other
state and local jurisdictions).
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Net Earnings Attributable to Nucor Stockholders and Return on Equity
Nucor reported consolidated net earnings of $20.3 million, or $0.07 per diluted
share, in the first quarter of 2020 as compared to consolidated net earnings of
$501.8 million, or $1.63 per diluted share, in the first quarter of 2019. Net
earnings attributable to Nucor stockholders as a percentage of net sales were
0.4% and 8.2% in the first quarter of 2020 and 2019, respectively. Annualized
return on average stockholders' equity was 0.8% and 20.2% in the first quarter
of 2020 and 2019, respectively.
Outlook
The COVID-19 pandemic's impact on market conditions has been varied across our
different product groups. While the automotive and energy markets have seen the
sharpest decline, nonresidential construction, which is our largest end market,
has shown resiliency moving through this pandemic. Where we have seen impact on
nonresidential construction activity, the sentiment is projects would be delayed
rather than cancelled. It is also worth noting that there has been a fairly
significant supply side response to the pandemic, with a number of our
competitors having idled capacity in response to these challenging conditions.
It is likely that the Company will report a loss in the second quarter of 2020.
While the economic outlook is highly uncertain at the present, with the duration
of the COVID-19 induced downturn difficult to predict, we currently believe that
market conditions for the steel industry will bottom in the second quarter and
Nucor will return to profitability in the second half of this year.
Nucor's largest exposure to market risk is via our steel mills and steel
products segments. Our largest single customer in the first quarter of 2020
represented approximately 5% of sales and has consistently paid within terms. In
the raw materials segment, we are exposed to price fluctuations related to the
purchase of scrap and scrap substitutes, pig iron and iron ore. Our exposure to
market risk is mitigated by the fact that our steel mills use a significant
portion of the products of the raw materials segment.
Liquidity and Capital Resources
As a result of the COVID-19 pandemic and the significant uncertainty it will
have on Nucor and our stakeholders, we have instituted enterprise-wide efforts
to enhance our liquidity and support our teammates, which include, among other
things:
• Capital Expenditures - We have reviewed our capital expenditures budget
and decided to freeze spending on certain capital projects currently in
process and delay capital projects that have not begun. As a result, we
have revised our 2020 capital expenditures estimate down to less than
$1.50 billion from our initial projection of approximately $2.0 billion
for the year.
• Working Capital - Our net working capital position is expected to
contract and provide a source of incremental liquidity as business
activity has slowed significantly in recent weeks. In addition, we are
taking deliberate steps to reduce raw material inventory, bringing it
more in line with our anticipated near-term production requirements.
• Pay & Benefits - We expect a significant decrease in compensation
expense in 2020 as almost all of our remuneration plans are heavily
weighted toward incentive compensation which rewards productivity and
profitability. We have implemented a temporary compensation floor for
production and non-production hourly teammates and have committed to
offering their normal benefits during the crisis. Nucor's executive
compensation program intentionally sets base salaries below the market
median for similar size industrial and materials companies. With much
lower profitability expected in 2020, we expect our executive leadership
will incur a significant reduction in earned incentive compensation on
an absolute dollar and percentage basis compared to compensation
attributable to 2019 performance.
Nucor's conservative financial practices have served us well in the past and we
believe that our financial strength will be a critical factor in helping us
overcome this sudden economic downturn. Our cash and cash equivalents and
short-term investments position remained strong at $1.39 billion as of April 4,
2020. Additionally, Nucor has no significant debt maturities until September
2022.
Nucor's strong cash and cash equivalents and short-term investments position
provides many opportunities for prudent deployment of our capital. We have three
approaches to allocating our capital. Nucor's highest capital allocation
priority is to reinvest in our business to ensure our continued profitable
growth over the long term. We have historically done this by investing to
optimize our existing operations, initiate greenfield expansions and make
acquisitions. Our second priority is to provide our stockholders with cash
dividends that are consistent with our success in delivering long-term earnings
growth. Our third priority is to supplement our base dividend with additional
returns of capital to our stockholders when both our earnings and financial
condition are strong. We intend to return a minimum of 40% of our net earnings
to our
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stockholders while maintaining a debt-to-capital ratio that supports a strong
investment grade credit rating. We will use stock repurchases or supplemental
dividends to reach this 40% return level when our base dividend is not
sufficient to meet this goal. The primary factor we will use to decide between
share repurchases and supplemental dividends will be our assessment of the
intrinsic value of a Nucor share. In September 2018, Nucor's Board of Directors
approved a share repurchase program under which the Company is authorized to
repurchase up to $2.00 billion of its common stock. As of April 4, 2020, the
Company had approximately $1.16 billion remaining for share repurchases under
the program.
Cash provided by operating activities was $201.2 million in the first quarter of
2020 as compared to $650.7 million in the first quarter of 2019. Net earnings
declined by $476.4 million over the prior year period, which included a $287.8
million non-cash loss on assets related to our equity method investment in
Duferdofin Nucor. In addition, changes in operating assets and operating
liabilities (exclusive of acquisitions) used cash of $366.7 million in the first
quarter of 2020 compared with $115.3 million of cash used in the first quarter
of 2019. The funding of our working capital in the first quarter of 2020
increased over the first quarter of 2019 due to increases in accounts receivable
and inventories and decreases in salaries, wages and related accruals from
year-end 2019, as compared to the decreases in accounts receivable and
inventories that occurred in the same prior year period. Accounts receivable
increased in the first quarter of 2020 from the fourth quarter of 2019 due to an
11% increase in tons shipped to outside customers. Inventories increased due to
a 4% increase in the cost of scrap and scrap substitutes in inventory on hand
from year-end 2019 to the end of the first quarter of 2020. Comparatively, the
average scrap and scrap substitutes cost per ton in inventory decreased 7% and
total inventory tons on hand decreased 4% at the end of the first quarter of
2019 from year-end 2018. The decrease in cash used to fund salaries, wages and
related accruals is primarily attributable to the decreased payout of accrued
profit sharing and other incentive compensation costs in the first quarter of
2020 as compared to the payouts in the first quarter of 2019. The 2019 payments
were based on Nucor's financial performance in 2018, which was a record earnings
year.
The current ratio was 3.5 at the end of the first quarter of 2020 and 3.3 at
year-end 2019. The current ratio was positively impacted by the 44% decrease in
salaries, wages and related accruals and the 5% increase in accounts receivable
from year-end 2019 due to the reasons cited above. In the first three months of
2020, accounts receivable turned approximately every five weeks and inventories
turned approximately every 10 weeks, compared to approximately every five weeks
and 11 weeks, respectively, in the first three months of 2019.
Cash used in investing activities during the first three months of 2020 was
$254.9 million as compared to $265.6 million in the prior year period. In the
first quarter of 2020, cash used for capital expenditures increased by 44%, or
$127.8 million, from the same period in 2019. The higher levels of capital
expenditures were primarily related to the sheet mill expansion at Nucor Steel
Gallatin and the new micro mill greenfield expansion in Frostproof, Florida.
Offsetting the increase in cash used for capital expenditures was the sale of
$178.8 million in investments. Additionally, the first quarter of 2019
benefitted from cash provided by the divestiture of an affiliate of $67.6
million related to the sale of an equity method investment.
Cash used in financing activities during the first three months of 2020 was
$228.6 million as compared to $233.2 million in the prior year period. In the
first quarter of 2020, one of the remarketing agents for Nucor's IDRBs put a
portion of two bonds to us, resulting in repayment of $32.0 million in long-term
debt. We subsequently remarketed the bonds and received $32.0 million in
proceeds. Nucor's IDRBs are variable rate tax-exempt bonds which have interest
rates that reset on a weekly basis through an ongoing remarketing process. We
currently expect our bonds to be successfully placed with investors at the
market driven rates in the future. However, there have been times in severe
economic downturns, as was the case during the first quarter of 2020 as a result
of the economic impacts of COVID-19, that a remarketing agent is unable to
remarket Nucor's bonds successfully and is unwilling to temporarily hold the
bonds. In that situation, which has been rare in our experience, it is possible
that the bonds could be put back to us in the future. In this instance during
the first quarter, the IDRBs were remarketed successfully in a short period of
time. However, in the event of a prolonged failed remarketing we have, among
other options, availability under our $1.5 billion revolver credit facility to
repurchase the IDRBs until they are remarketed successfully. In general, Nucor
has the ability and intent to refinance the IDRB debt on a long-term basis,
therefore we classify the IDRBs as a long-term liability. The remaining $15.0
million of debt that was repaid during the first quarter of 2020 was related to
a different tranche of Nucor's IDRBs that were repurchased as part of our
investment strategy. Finally, treasury stock repurchases were $39.5 million in
the first three months of 2020 as compared to $72.8 million in the first three
months of 2019.
Nucor's $1.50 billion revolving credit facility is undrawn and was amended and
restated in April 2018 to extend the maturity date to April 2023. We believe our
financial strength is a key strategic advantage among domestic steel producers,
particularly during recessionary business cycles. We carry the highest credit
ratings of any steel producer headquartered in North America, with an A-
long-term rating from Standard & Poor's and a Baa1 long-term rating from
Moody's. Our credit ratings are dependent, however, upon a number of factors,
both qualitative and quantitative, and are subject to change at any time. The
disclosure of our credit ratings is made in order to enhance investors'
understanding of our sources of liquidity and the impact of our credit ratings
on our cost of funds.
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Our credit facility includes only one financial covenant, which is a limit of
60% on the ratio of funded debt to total capitalization. In addition, the credit
facility contains customary non-financial covenants, including a limit on
Nucor's ability to pledge the Company's assets and a limit on consolidations,
mergers and sales of assets. As of April 4, 2020, our funded debt to total
capital ratio was 29% and we were in compliance with all non-financial covenants
under our credit facility. No borrowings were outstanding under the credit
facility as of April 4, 2020.
Our financial strength allows a number of capital preservation options. Nucor's
robust capital investment and maintenance practices give us the flexibility to
reduce spending by prioritizing our capital projects, potentially rescheduling
certain projects and selectively allocating capital to investments with the
greatest impact on our long-term earnings power. Capital expenditures for 2020
are estimated to be less than $1.50 billion as compared to $1.48 billion in
2019. The projects that we anticipate will have the largest capital expenditures
in 2020 are the hot band galvanizing line at Nucor Steel Arkansas, the sheet
mill expansion at Nucor Steel Gallatin, the micro mill greenfield expansion in
Frostproof, Florida, and the plate mill greenfield expansion in Brandenburg,
Kentucky.
In February 2020, Nucor's Board of Directors declared a quarterly cash dividend
on Nucor's common stock of $0.4025 per share payable on May 11, 2020 to
stockholders of record on March 31, 2020. This dividend is Nucor's 188th
consecutive quarterly cash dividend.
Funds provided from operations, cash and cash equivalents, short-term
investments and new borrowings under our existing credit facilities are expected
to be adequate to meet future capital expenditure and working capital
requirements for existing operations for at least the next 24 months.
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NUCOR CORPORATION 
