NUCOR CORPORATION 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 byNucor , 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 inthe 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 endedDecember 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 theSecurities 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 and "Item 1A. Risk Factors" 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 inNucor's Annual Report on Form 10-K for the year endedDecember 31, 2019 . OverviewNucor 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 ofNucor's operating facilities and customers are located inNorth 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 isNorth 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; andNucor'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 NSLA, 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 80%, 71% and 65%, respectively, in the first nine months of 2020 compared with approximately 85%, 71% and 70%, respectively, in the first nine months of 2019. 19
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Table of Contents COVID-19 Update The COVID-19 pandemic continues to impactNucor's operations and we believe it is currently 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 toNucor 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 arrangements for teammates wherever possible, and instituted social distancing measures throughout the Company. AcrossNucor , we remain committed to protecting our teammates while minimizing disruptions to our customers and supply chain.
Results of Operations
Nucor reported net earnings of$193.4 million , or$0.63 per diluted share, for the third quarter of 2020 and$322.6 million , or$1.06 per diluted share, for the first nine months of 2020. These are significant decreases when compared to the respective prior year periods in which we reported net earnings of$275.0 million , or$0.90 per diluted share, for the third quarter of 2019 and$1.16 billion , or$3.78 per diluted share, for the first nine months of 2019. The major factor driving the decreased 2020 performance has been the ongoing COVID-19 pandemic that began to impact the domestic economy and our business late in the first quarter of 2020. Third quarter of 2020 net earnings of$193.4 million , or$0.63 per diluted share, is an increase compared to the second quarter of 2020 net earnings of$108.9 million , or$0.36 per diluted share. Utilization rates rebounded in the third quarter of 2020 as compared to the second quarter of 2020. The average utilization rates of all operating facilities in the steel mills, steel products and raw materials segments were approximately 83%, 75% and 69%, respectively, in the third quarter of 2020 compared with approximately 68%, 66% and 51%, respectively, in the second quarter of 2020. Nonresidential construction markets have been resilient during the pandemic and remained strong in the third quarter of 2020. The strength of nonresidential construction markets in the third quarter of 2020 benefited our bar and structural mills in the steel mills segment and spurred our steel products segment to another strong quarter. Market conditions for our sheet and plate mills in the steel mills segment remained challenged in the third quarter of 2020, but we currently expect improved performance in the fourth quarter of 2020 due to positive pricing momentum in sheet and plate markets.
The following discussion will provide greater quantitative and qualitative
analysis of
Net sales to external customers by segment for the third quarter and first nine months of 2020 and 2019 were as follows (in thousands):
Three Months (13 Weeks) Ended Nine Months (39 Weeks) Ended
Oct. 3, 2020 Sept. 28, 2019 % Change Oct. 3, 2020 Sept. 28, 2019 % Change
Steel mills $2,842,625 $3,244,473 -12% $8,875,856 $10,897,322 -19%
Steel products 1,738,004 1,820,359 -5% 4,988,026 5,225,064 -5%
Raw materials 347,331 399,670 -13% 1,015,721 1,334,726 -24%
Total net sales $4,927,960 $5,464,502 -10% $14,879,603 $17,457,112 -15%
Net sales for the third quarter of 2020 decreased 10% from the third quarter of
2019. Average sales price per ton decreased 7% from $834 in the third quarter of
2019 to $774 in the third quarter of 2020. Total tons shipped to outside
customers in the third quarter of 2020 were 6,367,000 tons, a 3% decrease from
the third quarter of 2019.
Net sales for the first nine months of 2020 decreased 15% from the first nine
months of 2019. Average sales price per ton decreased 10% from $871 in the first
nine months of 2019 to $782 in the first nine months of 2020. Total tons shipped
to outside customers in the first nine months of 2020 were 19,033,000 tons, a 5%
decrease from the first nine months of 2019.
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In the steel mills segment, sales tons for the third quarter and first nine months of 2020 and 2019 were as follows (in thousands):
Three Months (13 Weeks) Ended Nine Months (39 Weeks) Ended
Sept. Sept.
Oct. 3, 2020 28, 2019 % Change Oct. 3, 2020 28, 2019 % Change
Outside steel shipments 4,442 4,559 -3% 13,382 14,013 -5%
Inside steel shipments 1,184 1,229 -4% 3,511 3,564 -1%
Total steel shipments 5,626 5,788 -3% 16,893 17,577 -4%
Net sales for the steel mills segment decreased 12% in the third quarter of 2020
from the third quarter of 2019, due primarily to a 10% decrease in the average
sales price per ton from $711 to $639 and a 3% decrease in tons sold to outside
customers. Average selling prices decreased across all product groups within the
steel mills segment in the third quarter of 2020 as compared to the third
quarter of 2019.
Net sales for the steel mills segment decreased 19% in the first nine months of
2020 from the first nine months of 2019, due to a 14% decrease in the average
sales price per ton and a 5% decrease in tons sold to outside customers.
Outside sales tonnage for the steel products segment for the third quarter and first nine months of 2020 and 2019 was as follows (in thousands):
Three Months (13 Weeks) Ended Nine Months (39 Weeks) Ended
Sept. Sept.
Oct. 3, 2020 28, 2019 % Change Oct. 3, 2020 28, 2019 % Change
Joist 153 133 15% 406 359 13%
Deck 129 132 -2% 365 354 3%
Cold finish 99 116 -15% 300 390 -23%
Rebar fabrication 328 342 -4% 948 929 2%
Piling products 186 160 16% 522 462 13%
Tubular products 280 272 3% 816 780 5%
Other steel products 92 107 -14% 278 303 -8%
Total steel products 1,267 1,262 - 3,635 3,577 2%
Net sales for the steel products segment decreased 5% in the third quarter of
2020 compared to the third quarter of 2019, due to a 5% decrease in the average
sales price per ton from $1,442 to $1,371 . Average selling prices decreased
across all businesses within the steel products segment in the third quarter of
2020 as compared to the third quarter of 2019.
Net sales for the steel products segment decreased 5% in the first nine months
of 2020 compared to the first nine months of 2019, due primarily to a 6%
decrease in the average sales price per ton from $1,461 to $1,372 which was
partially offset by a 2% increase in tons sold to outside customers. Average
selling prices decreased across most businesses within the steel products
segment in the first nine months of 2020 as compared to the first nine months of
2019, with the exception being our rebar fabrication business.
Net sales for the raw materials segment decreased 13% and 24% in the third
quarter and first nine months of 2020, respectively, from the same prior year
periods. The decreases were primarily due to decreased average selling prices at
DJJ's brokerage operations and decreased volumes at both DJJ's scrap processing
and brokerage operations. In the third quarter of 2020, approximately 89% 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 third quarter of 2019). In
the first nine months of 2020, approximately 89% 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 (90% and
9%, respectively, in the first nine months of 2019).
Gross Margins
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• The primary driver for the decrease in gross margins in the third quarter
of 2020 as compared to the third 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
third quarter of 2020 was $277 , a 7% decrease compared to $299 in the
third quarter of 2019. Despite the decrease in average scrap and scrap
substitute cost per gross ton used, metal margin in the steel millssegment decreased due to lower volumes and 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 fourth quarter of 2020, we currently expect a stable outlook for scrap prices.
• Pre-operating and start-up costs of new facilities decreased to
approximately
in the third quarter of 2020 primarily related to the bar mill being built
in Florida , the plate mill being built in Kentucky , the sheet mill
expansion in Kentucky and the merchant bar quality mill expansion at our
bar mill in Illinois . In the third quarter of 2019, pre-operating and
start-up costs related primarily to the cold mill expansion at our sheet
mill in
Kentucky , the upgrades at our Louisiana DRI facility and the bar mill being built inFlorida .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
• Gross margins in the steel products segment increased in the third quarter
of 2020 as compared to the third quarter of 2019. The primary driver was
the large increases in margins from our rebar fabrication and joist
products businesses as demand in the nonresidential construction market
remains resilient. These large increases were partially offset by
decreased margins at our building systems business.
• Gross margins in the raw materials segment increased in the third quarter
of 2020 as compared to the third quarter of 2019, primarily due to
improved performance at our DRI facilities that resulted in lower losses.
The improved performance was partially offset by decreased margins at
DJJ's brokerage operations.
Nucor recorded gross margins of $1.51 billion (10%) in the first nine months of
2020, which was a decrease compared with $2.24 billion (13%) in the first nine
months of 2019.
• The primary driver for the decrease in gross margins in the first nine
months of 2020 as compared to the first nine months of 2019 was decreased
metal margin in the steel mills segment. The average scrap and scrap
substitute cost per gross ton used in the first nine months of 2020 was
$285 , a 13% decrease compared to $328 in the first nine months of 2019.
Despite the decrease in average scrap and scrap substitute cost per gross
ton used, metal margin in the steel mills segment decreased due to lower
average selling prices and lower volumes.
• Pre-operating and start-up costs of new facilities increased to
approximately $73 million in the first nine months of 2020 from
approximately $68 million in the first nine months of 2019.
• Gross margins in the steel products segment increased in the first nine
months of 2020 as compared to the first nine months of 2019, primarily due
to increased margins across most of our steel product businesses, most
notably at our rebar fabrication and tubular products businesses, which
were partially offset by decreased margins at our building systems and
cold finish businesses.
• Gross margins in the raw materials segment decreased in the first nine
months of 2020 as compared to the first nine months of 2019, primarily due
to decreased margins at DJJ's brokerage and scrap processing operations,
as well as margin contraction at our DRI facilities.
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 withNucor's financial performance, decreased by$9.8 million in the third quarter of 2020 as compared to the third quarter of 2019, and decreased by$121.0 million in the first nine months of 2020 as compared to the first nine months of 2019. These decreases were due toNucor's decreased profitability in the third quarter and first nine months of 2020 as compared to the respective prior year periods, which resulted in significantly decreased accruals related to profit sharing. Included in marketing, administrative and other expenses in the first nine months of 2020 was$18.2 million of restructuring charges related to the realignment ofNucor's metal buildings business in the steel products segment. Of that amount,$16.4 million was recorded in the third quarter of 2020. Included in marketing, administrative and other expenses in the first nine months of 2019 was a benefit of$33.7 million related to the gain on the sale of an equity method investment in the raw materials segment. 22
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Equity in Losses (Earnings) of Unconsolidated Affiliates
Equity in losses (earnings) of unconsolidated affiliates was$(0.5) million and$1.6 million in the third quarter of 2020 and 2019, respectively. The increase in equity method investment earnings was primarily due to the improved results ofNuMit . Equity in losses (earnings) of unconsolidated affiliates was$14.4 million and$(2.5) million in the first nine months of 2020 and 2019, respectively. The decrease in equity method investment earnings was primarily due to decreased results ofNuMit and Nucor-JFE.
Losses on Assets
Included in the first nine months of 2020 earnings were losses on assets of$299.5 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 have been exacerbated by the COVID19 pandemic, 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$261.6 million on its equity method investment in Duferdofin Nucor that is included in the steel mills segment earnings. Additionally, the Company recorded a$37.9 million charge to fully reserve its outstanding note receivable from Duferdofin Nucor. This impact is recorded in the Corporate/eliminations line. Interest Expense (Income)
Net interest expense for the third quarter and first nine months of 2020 and 2019 was as follows (in thousands):
Three Months (13 Weeks) Ended Nine Months (39 Weeks) Ended
Oct. 3, 2020 Sept. 28, 2019 Oct. 3, 2020 Sept. 28, 2019
Interest expense $ 42,281 $ 40,721 $ 128,726 $ 119,736
Interest income (2,142 ) (9,435 ) (11,870 ) (26,977 )
Interest expense, net $ 40,139 $ 31,286 $ 116,856 $ 92,759
Interest expense increased in the third quarter of 2020 compared to the third
quarter of 2019 due to increased average debt outstanding. Interest expense
increased in the first nine months of 2020 compared to the first nine months of
2019 due to decreased capitalized interest and increased average debt
outstanding.
Interest income decreased in the third quarter and first nine months of 2020 as
compared to the third quarter and first nine months of 2019 due to a decrease in
average interest rates on investments.
Earnings (Loss) Before Income Taxes and Noncontrolling Interests
The following table presents earnings (loss) before income taxes and
noncontrolling interests by segment for the third quarter and first nine months
of 2020 and 2019 (in thousands). The changes between periods were driven by the
quantitative and qualitative factors previously discussed.
Three Months Nine Months
(13 Weeks) Ended (39 Weeks) Ended
Oct. 3, 2020 Sept. 28, 2019 Oct. 3, 2020 Sept. 28, 2019
Steel mills $ 205,152 $ 309,939 $ 512,082 $ 1,578,257
Steel products 186,976 170,214 502,409 363,731
Raw materials 6,232 (10,599 ) (3,068 ) 64,333
Corporate/eliminations (107,942 ) (89,215 ) (393,651 ) (401,744 )
$ 290,418 $ 380,339 $ 617,772 $ 1,604,577
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Table of Contents Noncontrolling Interests Noncontrolling interests represent the income attributable to the noncontrolling partners ofNucor's joint ventures, primarilyNucor-Yamato Steel Company (Limited Partnership) ("NYS") of whichNucor owns 51%. The increase in earnings attributable to noncontrolling interests in the third quarter and first nine months of 2020 as compared to the third quarter and first nine months of 2019 was mainly the result of the higher earnings of NYS, which was due to increased sales volume in the first nine months of 2020 as compared to the first nine months 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 applicableU.S. federal and state income taxes. In the first nine months of 2020, the amount of cash distributed to noncontrolling interest holders exceeded the earnings attributable to noncontrolling interests based on mutual agreement of the general partners; however, the cumulative amount of cash distributed to partners was less than the cumulative net earnings of the partnership.
Provision for Income Taxes
The effective tax rate for the third quarter of 2020 was 23.3% as compared to 22.8% for the third quarter of 2019. The expected effective tax rate for the full year of 2020 is approximately 31.5% as compared to 23.1% for the full year of 2019. The increase in the expected effective tax rate for the full year of 2020 as compared to the rate for the full year of 2019 is primarily due to the$261.6 million financial statement impairment of our equity method investment in Duferdofin Nucor in the first nine months of 2020. The impairment has no corresponding impact to the provision for income taxes. We estimate that in the next 12 months our gross unrecognized tax benefits, which totaled$51.1 million atOctober 3, 2020 , exclusive of interest, could decrease by as much as$6.2 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 concludedU.S. federal income tax matters for years through 2016, except for 2015. The tax years 2015 and 2017 through 2019 remain open to examination by the Internal Revenue Service. The 2015 Canadian income tax returns forHarris Steel Group Inc. and certain related affiliates are currently under examination by theCanada Revenue Agency . The tax years 2013 through 2019 remain open to examination by other major taxing jurisdictions to whichNucor is subject (primarilyCanada and other state and local jurisdictions). From time to time in the ordinary course of business,Nucor is involved in tax disputes with federal, state and local taxing jurisdictions, which are, individually and in the aggregate, immaterial toNucor .
Net Earnings Attributable to Nucor Stockholders and Return on Equity
Nucor reported consolidated net earnings of$193.4 million , or$0.63 per diluted share, in the third quarter of 2020 as compared to consolidated net earnings of$275.0 million , or$0.90 per diluted share, in the third quarter of 2019. Net earnings attributable toNucor stockholders as a percentage of net sales were 4% and 5% in the third quarter of 2020 and 2019, respectively.Nucor reported consolidated net earnings of$322.6 million , or$1.06 per diluted share, in the first nine months of 2020 as compared to consolidated net earnings of$1.16 billion , or$3.78 per diluted share, in the first nine months of 2019. Net earnings attributable toNucor stockholders as a percentage of net sales were 2% and 7% in the first nine months of 2020 and 2019, respectively. Annualized return on average stockholders' equity was 4% and 15% in the first nine months of 2020 and 2019, respectively.
Outlook
The ongoing COVID-19 pandemic continues to cause uncertainty, making it difficult to accurately forecast future market conditions and demand trends. While many of the marketsNucor serves have typically experienced a seasonal slowdown in the fourth quarter, the Company expects higher earnings in the fourth quarter of 2020 as compared to the third quarter of 2020 due primarily to improved pricing at our sheet and plate mills.Nucor also expects the raw materials segment's earnings to increase in the fourth quarter of 2020 as compared to the third quarter of 2020 due to the improved margins at the Company's DRI facilities.Nucor's largest exposure to market risk is via our steel mills and steel products segments. Our largest single customer in the third 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. 24
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Liquidity and Capital Resources
As a result of the COVID-19 pandemic and the significant uncertainty it will
continue to have on
• Capital Expenditures - We began the year with a capital expenditures
budget of
decided to delay certain capital projects that had not begun, briefly
paused a few of our larger projects and continued with certain projectsthat were either close to completion or where work had been scheduled.
As a result, our 2020 capital expenditures estimate is approximately
• Working Capital - Our net working capital position has contracted to
provide a source of incremental liquidity as business activity has
slowed. In addition, we are maintaining reduced raw material inventory
levels in line with our anticipated near-term production requirements, a
change we believe is sustainable and we intend to maintain after the
pandemic.
• 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 implemented a temporary compensation floor for
production and non-production hourly teammates and have committed to
offering at least their normal benefits during the crisis. Nucor's
executive compensation program intentionally sets base salaries belowthe market median for similar size industrial and materials companies.
With much lower profitability expected in 2020, we anticipate 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.
To further enhance our liquidity, Nucor took advantage of attractive market
conditions during the second quarter of 2020 to issue low coupon debt in the
form of long-term notes. In May, Nucor issued $500.0 million of 2.000% Notes due
2025 and $500.0 million of 2.700% Notes due 2030. Additionally, in July, Nucor
became an obligor with respect to $162.6 million in 40-year variable-rate Green
Bonds to partially fund the capital costs associated with the construction of
our plate mill located in Brandenburg, Kentucky . Our credit ratings of an A-
long-term rating from Standard & Poor's and a Baa1 long-term rating from Moody's
were unchanged by these debt issuances.
Nucor operates a capital-intensive business in highly cyclical markets. We
therefore utilize conservative financial practices that maximize our financial
strength during economic downturns like the one we are currently experiencing
that was caused by the COVID-19 pandemic. Our liquidity position, consisting of
cash and cash equivalents, short-term investments and restricted cash and cash
equivalents, remained strong at $3.41 billion as of October 3, 2020 .
Additionally, Nucor has no significant debt maturities until September 2022 .
Nucor's strong liquidity position maximizes our flexibility for prudent
deployment of our capital. We have three priorities 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 still currently intend to
return a minimum of 40% of our net earnings to our 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 new share
repurchase program which authorized the Company to repurchase up to
$2.00 billion of its common stock. As of October 3, 2020 , the Company had
approximately $1.16 billion remaining available for share repurchases under the
program.
Cash provided by operating activities was $2.21 billion in the first nine months
of 2020 as compared to $2.12 billion in the first nine months of 2019. Net
earnings declined by $826.5 million over the prior year period, which included a
$299.5 million non-cash loss on assets related to our equity method investment
in Duferdofin Nucor. The decrease in net earnings in the first nine months of
2020 as compared to the first nine months of 2019 was partially offset by a
$528.3 million increase in cash provided by operating assets and operating
liabilities in the same period. Changes in operating assets and liabilities
(exclusive of acquisitions) provided cash of $693.2 million in the first nine
months of 2020 as compared to $165.0 million in the prior year period. The
funding of our working capital in the first nine months of 2020 decreased as
compared to the first nine months of 2019 mainly due to decreases in inventory
and other current assets, specifically the federal income tax receivable, and an
increase in other non-current liabilities, but also due to more moderate
fluctuations in accounts receivable and accounts payable from year-end 2019 to
the end of the third quarter of 2020 as compared to the same prior year period.
Inventory reduction, especially scrap, was a particular focus due to uncertainty
from the COVID-19 pandemic
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beginning in the second quarter of 2020, and our investment in inventory at the end of the third quarter of 2020 continued to decline from prior quarter-end levels. As a result, inventories decreased by over 1.2 million tons, or 17%, in the third quarter of 2020 from the fourth quarter of 2019. The decrease in federal income tax receivable was mainly a function of the timing of federal tax payments. The increase in other non-current liabilities was mainly driven by an increase in deferredSocial Security tax accruals permitted under the CARES Act. Also contributing to the increase in cash provided by operating assets and operating liabilities when comparing the first nine months of 2020 to the same prior year period was the more moderate cash outflow related to salaries, wages, and related accruals. The decrease in cash used to fund salaries, wages and related accruals in the first nine months of 2020 as compared to the first nine months of 2019 was due to the timing of incentive compensation payments and lower current year profit sharing accruals due to the decreased profitability of the Company. Cash provided by accounts receivable was more moderate in the first nine months of 2020 than in the first nine months of 2019. Accounts receivable decreased in the first nine months of 2019 from year-end 2018 due to an 11% decrease in composite sales price per ton, while composite sales price dropped only 2% from year-end 2019 to the end of the third quarter of 2020. Similarly, accounts payable provided cash of$15.4 million in the first nine months of 2020 as opposed to using cash of$180.4 million in the same prior year period. Accounts payable decreased from year-end 2018 to the end of the third quarter of 2019 due to an 18% decline in average scrap and scrap substitutes cost per gross ton in inventory and an 8% decline in total inventory tons on hand, whereas accounts payable was flat from year-end 2019 to the end of the third quarter of 2020. The current ratio was 3.8 at the end of the third quarter of 2020 and 3.3 at year-end 2019. The current ratio was positively impacted by the 79% increase in cash and cash equivalents and short-term investments and the 15% decrease in salaries, wages and related accruals, partially offset by the 15% decrease in inventory previously discussed. The increase in cash and cash equivalents and short-term investments was a result of the debt issuance and robust cash provided by operations during the first nine months of 2020. The decrease in salaries, wages and related accruals was due to the reasons cited above. In the first nine months of 2020, accounts receivable turned approximately every 5.5 weeks and inventories turned approximately every 10 weeks, compared to approximately every 5.5 weeks and 11 weeks, respectively, in the first nine months of 2019. Cash used in investing activities during the first nine months of 2020 was$1.33 billion as compared to$1.17 billion in the prior year period. Cash used for capital expenditures in the first nine months of 2020 increased by 20%, or$194.4 million , from the same period in 2019. The higher levels of capital expenditures were primarily related to the new micro mill greenfield expansion inFrostproof, Florida , the flex galvanizing line at Nucor Steel Arkansas, and the sheet mill expansion atNucor Steel Gallatin . Also impacting cash used in investing activities in the first nine months of 2020 was the purchase of$402.0 million of investments, as opposed to$249.6 million in the prior year period, offset by proceeds from the sale of investments of$301.2 million . Additionally, the first nine months of 2019 benefited from cash provided by the divestiture of an affiliate of$67.6 million related to the sale of an equity method investment. Cash provided by financing activities during the first nine months of 2020 was$596.6 million as compared to cash used in financing activities of$664.5 million in the prior year period. The majority of this change related to the issuance of$500.0 million of 2.000% Notes due 2025 and$500.0 million of 2.700% Notes due 2030, as well asNucor becoming an obligor with respect to$162.6 million in 40-year variable-rate Green Bonds as discussed previously. In addition, there were approximately$39.5 million of treasury stock repurchases in the first nine months of 2020 (none in the second or third quarter of 2020) as compared to$197.5 million in the first nine months of 2019. In the first quarter of 2020, one of the remarketing agents forNucor's industrial development revenue bonds ("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 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 remarketNucor'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 of 2020, 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$1.50 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$65.2 million of debt that was repaid during the first nine months of 2020 was related to a different tranche ofNucor's IDRBs that was repurchased as part of our investment strategy and the payoff of a series of IDRBs that matured during the third quarter.Nucor's $1.50 billion revolving credit facility is undrawn and was amended and restated inApril 2018 to extend the maturity date toApril 2023 . We believe our financial strength is a key strategic advantage among domestic steel producers, particularly during recessionary business cycles. We believe this was demonstrated with the second quarter of 2020 issuance of$500.0 million of 2.000% Notes due 2025 and$500.0 million of 2.700% Notes due 2030, the coupon rates of which were the lowest inNucor's history for fixed-rate debt of those durations. We currently carry the highest credit ratings of 26
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any steel producer headquartered inNorth America , with an A- long-term rating fromStandard & 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. 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 onNucor's ability to pledge the Company's assets and a limit on consolidations, mergers and sales of assets. As ofOctober 3, 2020 , our funded debt to total capital ratio was 34% and we were in compliance with all non-financial covenants under our credit facility. No borrowings were outstanding under the credit facility as ofOctober 3, 2020 . Although our business is capital intensive, we maintain 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. We have taken advantage of this flexibility in the current environment.Nucor originally estimated its 2020 capital expenditures to be$2.00 billion , adjusted it to less than$1.50 billion at the end of the first quarter, and now estimates 2020 capital expenditures to be$1.70 billion . As previously mentioned,Nucor reviewed its capital spending budget and decided delay capital projects that had not begun, briefly pause a few of our larger projects and continue with certain projects that are either close to completion or where work had been scheduled. We have made the decision to reaccelerate our investment in theBrandenburg, Kentucky plate mill and the expansion and modernization of ourGallatin, Kentucky sheet mill. We are taking this step after a thorough review of these projects and their compelling projected economic returns as well as our strong cash flow performance in the first nine months of 2020. We expect these projects, as well as the flex galvanizing line at Nucor Steel Arkansas and the micro mill greenfield expansion inFrostproof, Florida , will have the largest capital expenditures in 2020. InSeptember 2020 ,Nucor's Board of Directors declared a quarterly cash dividend onNucor's common stock of$0.4025 per share payable onNovember 10, 2020 to stockholders of record onSeptember 30, 2020 . This dividend isNucor's 190th consecutive quarterly cash dividend. Funds provided from operations, cash and cash equivalents, short-term investments, restricted cash and cash equivalents 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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