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NUCOR CORPORATION

(NUE)
  Report
Delayed Nyse  -  04:00:01 2023-02-07 pm EST
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NUCOR CORP Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/09/2022 | 04:29pm EST
Certain statements made in this report, 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," "intend,"
"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
general market conditions, and in particular, 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; (7)
impairment in the recorded value of inventory, equity investments, fixed assets,
goodwill or other long-lived assets; (8) uncertainties and volatility
surrounding the global economy, including excess world capacity for steel
production, inflation and interest rate changes; (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, 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) our ability to integrate businesses we acquire; (15) the impact of the
COVID-19 pandemic and any variants of the virus; and (16) the risks discussed in
"Item 1A. Risk Factors" of the Company's Annual Report on Form 10-K for the year
ended December 31, 2021 and elsewhere in this report.

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 United States 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, 2021.

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 and rebar distribution
businesses; and Nucor's equity method investments in 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, insulated metal panels, overhead doors,
steel grating, tubular products, steel racking, piling products, wire and wire
mesh, and utility towers and structures. 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.

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On February 1, 2022, Nucor used cash on hand to acquire a 51% controlling
ownership position in CSI for a cash purchase price of approximately $400.0
million, adjusted for net debt and working capital at closing. CSI is a
flat-rolled steel converter with the capability to produce more than two million
tons of finished steel and steel products annually. The company has five product
lines, including hot rolled, pickled and oiled, cold rolled, galvanized and ERW
pipe. Key end-use markets served by CSI include customers in the construction,
service center and energy industries. We believe this acquisition helps give
Nucor a strong presence in the Western region of the United States and grows our
ability to produce a wide range of value-added sheet products. The CSI business
financial results were included as part of the steel mills segment beginning on
February 1, 2022, the date of the acquisition of Nucor's 51% controlling
ownership position.

On June 24, 2022, Nucor used cash on hand to acquire the assets of C.H.I. for a
purchase price, net of cash acquired, of approximately $3.00 billion. C.H.I. is
a leading manufacturer of overhead doors for residential and commercial markets
in the United States and Canada. Commercial overhead doors are used in
warehousing and retail, areas that Nucor has focused its attention on recently
through other value-added products such as insulated metal panels (CENTRIA,
Metl-Span and TrueCore brands) and steel racking solutions (Nucor Warehouse
Systems). It is expected that the C.H.I. acquisition will also benefit from
Nucor's recent paint line investments at its Hickman, Arkansas and
Crawfordsville, Indiana sheet mills. The C.H.I. business financial results are
included as part of the steel products segment.

The average utilization rates of all operating facilities in the steel mills,
steel products and raw materials segments were approximately 80%, 76% and 73%,
respectively, in the first nine months of 2022 compared with approximately 96%,
77% and 75%, respectively, in the first nine months of 2021.

Results of Operations


Nucor reported consolidated net earnings of $1.69 billion, or $6.50 per diluted
share, for the third quarter of 2022, as compared to consolidated net earnings
of $2.56 billion, or $9.67 per diluted share, for the second quarter of 2022,
and $2.13 billion, or $7.28 per diluted share, for the third quarter of 2021.
The second quarter of 2022 was the most profitable quarter in Nucor's history,
and the third quarter of 2021 was the most profitable quarter in Nucor's history
at that time.

The decline in third quarter of 2022 earnings as compared to the second quarter
of 2022 was due primarily to the decreased earnings of the steel mills segment.
The steel mills segment experienced lower shipping volumes in the third quarter
of 2022 compared to the second quarter of 2022. Average selling prices in the
steel mills segment decreased more rapidly than raw materials costs in the third
quarter of 2022, resulting in contracted metal margins when compared to the
second quarter of 2022. The decreased shipping volumes and metal margin
contractions were most pronounced at our sheet and plate mills. The steel
products segment reported another strong quarter of profitability in the third
quarter of 2022 due to continued robust demand in nonresidential construction
markets. The raw materials segment's earnings increased in the third quarter of
2022 compared to the second quarter of 2022 due to the increased profitability
of our DRI facilities which more than offset declines at our scrap brokerage and
processing businesses.

The decline in earnings in the third quarter of 2022 as compared to the third
quarter of 2021 also was due primarily to the decreased earnings of the steel
mills segment, which had decreased shipping volumes and average selling prices
in the third quarter of 2022. The steel products segment earnings increased
significantly in the third quarter of 2022 as compared to the third quarter of
2021 due to increased average selling prices and margin expansion. The earnings
of the raw materials segment in the third quarter of 2022 as compared to the
third quarter of 2021 increased due to the increased profitability of our DRI
facilities.

Nucor reported consolidated net earnings of $6.35 billion, or $23.85 per diluted
share, for the first nine months of 2022, which established a new record for
earnings in the first nine months of a year. By comparison, Nucor reported
consolidated net earnings of $4.58 billion, or $15.34 per diluted share, for the
first nine months of 2021, which was the previous Company record for earnings in
the first nine months of a year. Nucor had Company record-setting quarterly
profitability in the first quarter of 2021, which increased significantly in the
second half of 2021 due to strong demand in most of the end markets we serve and
increased average selling prices. The trend of strong profitability continued
into 2022, and began to decline in the third quarter of 2022, a trend that we
expect to continue into the fourth quarter of the year. The primary driver for
the increase in earnings in the first nine months of 2022 was the increased
profitability of the steel products segment. After a strong year of
profitability in 2021 fueled by robust demand in nonresidential construction
markets, the steel products segment experienced increases in margin expansion
due to higher average selling prices, particularly at our joist and deck
businesses, in the first nine months of 2022. The profitability of the steel
mills segment in the first nine months of 2022 increased from the first nine
months of 2021, due to the much stronger start to 2022 as compared to the first
nine months of 2021. The primary driver for the increase in the raw materials
segment earnings in the first nine months of 2022 as compared to the first nine
months of 2021 was the increased profitability of our DRI facilities.


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The ongoing conflict in Ukraine, other geopolitical tensions and rapid U.S. and
international monetary policy actions attempting to lower inflation likely mean
tempered near-term demand and a stronger U.S. dollar, both of which are
challenging elements for Nucor's customer base. Service centers in particular
are cautious at this time, negatively impacting pricing and volumes for the
steel mills segment. Even with this uncertainty, we believe that the medium- and
long-term outlook for our business is positive. We continue to see good demand
in our steel products segment largely due to nonresidential construction
markets.

The following discussion provides a greater quantitative and qualitative analysis of Nucor's performance in the third quarter and first nine months of 2022 as compared to the third quarter and first nine months of 2021.

Net Sales

Net sales to external customers by segment for the third quarter and first nine months of 2022 and 2021 were as follows (in thousands):


                                    Three Months (13 Weeks) Ended           

Nine Months (39 Weeks) Ended

                             October 1, 2022   October 2, 2021   % Change   October 1, 2022   October 2, 2021   % Change
Steel mills                       $5,908,153        $6,862,133       -14%       $19,682,829       $17,380,819        13%
Steel products                     4,087,107         2,744,279        49%        11,253,143         6,795,441        66%
Raw materials                        505,495           706,811       -28%         1,852,539         1,943,267        -5%
Total net sales to
external customers               $10,500,755       $10,313,223         2%       $32,788,511       $26,119,527        26%



Net sales for the third quarter of 2022 increased 2% from the third quarter of
2021. Average sales price per ton increased 14% from $1,438 in the third quarter
of 2021 to $1,637 in the third quarter of 2022. Total tons shipped to outside
customers in the third quarter of 2022 were 6,415,000 tons, an 11% decrease from
the third quarter of 2021.

Net sales for the first nine months of 2022 increased 26% from the first nine
months of 2021. Average sales price per ton increased 39% from $1,196 in the
first nine months of 2021 to $1,657 in the first nine months of 2022. Total tons
shipped to outside customers in the first nine months of 2022 were 19,786,000
tons, a 9% decrease from the first nine months of 2021.

In the steel mills segment, sales tons for the third quarter and first nine months of 2022 and 2021 were as follows (in thousands):

                             Three Months (13 Weeks) Ended      Nine Months (39 Weeks) Ended
                             October    October                October     October
                             1, 2022    2, 2021    % Change    1, 2022     2, 2021    % Change
Outside steel shipments         4,553      5,144       -11%      14,133      15,690       -10%
Inside steel shipments          1,316      1,399        -6%       3,998       4,131        -3%
Total steel shipments           5,869      6,543       -10%      18,131      19,821        -9%



Net sales for the steel mills segment decreased 14% in the third quarter of 2022
from the third quarter of 2021, due primarily to a 3% decrease in the average
sales price per ton, from $1,339 to $1,296, and an 11% decrease in tons sold to
outside customers.

Net sales for the steel mills segment increased 13% in the first nine months of
2022 from the first nine months of 2021, due to a 25% increase in the average
sales price per ton from $1,112 to $1,388, partially offset by a 10% decrease in
tons sold to outside customers.

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Outside sales tonnage for the steel products segment for the third quarter and first nine months of 2022 and 2021 was as follows (in thousands):

                                Three Months (13 Weeks) Ended     Nine Months (39 Weeks) Ended
                               October     October                October   October
                               1, 2022     2, 2021    % Change    1, 2022   2, 2021    % Change
Joist sales                         160         190        -16%       497        529        -6%
Deck sales                          129         139         -7%       388        404        -4%
Cold finished sales                 112         123         -9%       368        383        -4%
Rebar fabrication sales             350         323          8%       980        943         4%
Piling products sales               119         144        -17%       349        451       -23%
Tubular products sales              231         260        -11%       735        779        -6%
Other steel products sales          190         128         48%       520        337        54%
Total steel products sales        1,291       1,307         -1%     3,837      3,826          -



Net sales for the steel products segment increased 49% in the third quarter of
2022 compared to the third quarter of 2021, due to a 51% increase in the average
sales price per ton, from $2,101 to $3,167, which was partially offset by a 1%
decrease in shipping volumes. Average selling prices increased across most
businesses within the steel products segment in the third quarter of 2022 as
compared to the third quarter of 2021, most notably at our joist and deck
businesses.

Net sales for the steel products segment increased 66% in the first nine months
of 2022 compared to the first nine months of 2021, due to a 65% increase in the
average sales price per ton, from $1,776 to $2,933. Average selling prices
increased across all businesses within the steel products segment in the first
nine months of 2022 as compared to the first nine months of 2021, most notably
at our joist and deck businesses.

Net sales for the raw materials segment decreased 28% in the third quarter of
2022 compared to the third quarter of 2021, due to decreases for both DJJ
brokerage and scrap processing operations in average sales price per ton and
tons shipped to outside customers. In the third quarter of 2022, approximately
90% of outside sales for the raw materials segment were from the brokerage
operations of DJJ, and approximately 6% of outside sales were from the scrap
processing operations of DJJ (91% and 7%, respectively, in the third quarter of
2021).

Net sales for the raw materials segment decreased 5% in the first nine months of
2022 compared to the first nine months of 2021, due to decreased average sales
price per ton in the scrap processing operations and decreased tons shipped to
outside customers in both the DJJ brokerage and scrap processing operations. In
the first nine months of 2022, approximately 91% of outside sales for the raw
materials segment were from the brokerage operations of DJJ, and approximately
7% of outside sales were from the scrap processing operations of DJJ (90% and
8%, respectively, in the first nine months of 2021).

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Gross Margins

Nucor recorded gross margins of $2.84 billion (27%) in the third quarter of 2022, which was a decrease compared with $3.41 billion (33%) in the third quarter of 2021.

• The primary driver of the decrease in gross margin in the third quarter of

2022 as compared to the third quarter of 2021 was lower metal margins in the

steel mills segment. Metal margin is the difference between the selling

price of steel and the cost of scrap and scrap substitutes.




Scrap and scrap substitutes are the most significant element in the total cost
of steel production. The average scrap and scrap substitute cost per gross ton
used in the third quarter of 2022 was $502, a 2% decrease compared to $511 in
the third quarter of 2021. The decrease in scrap and scrap substitute cost was
more than offset by decreased average selling prices and lower shipments to
external customers, resulting in lower total metal margins.

Scrap prices are driven by the global supply and demand for scrap and other
iron-based raw materials used to make steel. Scrap prices were volatile during
the first nine months of 2022 as the conflict in Ukraine and other factors
disrupted global supply chains. As we enter the fourth quarter of 2022, scrap
prices continue to decrease.

• The decrease in total gross margin was partially offset by increases in

gross margins in the steel products segment. The largest increases in gross

margins in the steel products segment were at our joist, deck and building

systems businesses. Demand in nonresidential construction markets continues

to be strong. As we enter the fourth quarter of 2022, backlogs for the steel

products segment are strong.

• Pre-operating and start-up costs of new facilities were approximately $52

million in the third quarter of 2022 and approximately $36 million in the

third quarter of 2021. Pre-operating and start-up costs in the third quarter

of 2022 and 2021 primarily included costs related to the plate mill being

built in Kentucky, the galvanizing line at our sheet mill expansion in

Arkansas, and the construction of the sheet mill in West Virginia. 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, Nucor no longer considers them to be in
      start-up.

• Gross margins in the raw materials segment increased in the third quarter of

2022 as compared to the third quarter of 2021, primarily due to increased

gross margins at our DRI facilities, which had strong profitability in the

third quarter of 2022.



Nucor recorded gross margins of $10.41 billion (32%) in the first nine months of
2022, which was an increase compared with $7.50 billion (29%) in the first nine
months of 2021.

• The primary driver of the increase in gross margin in the first nine months

of 2022 as compared to the first nine months of 2021 was gross margins in

the steel products segment, which benefitted from higher average selling

prices and continued robust demand in nonresidential construction markets.

• The steel mills segment had increased gross margins in the first nine months

of 2022 compared to the first nine months of 2021. The average scrap and

scrap substitute cost per gross ton used in the first nine months of 2022

was $511, a 12% increase compared to $457 in the first nine months of 2021.

      The increase in scrap and scrap substitute cost was more than offset by
      increased average selling prices.


   •  Pre-operating and start-up costs of new facilities increased to
      approximately $174 million in the first nine months of 2022 from

approximately $76 million in the first nine months of 2021. Pre-operating

and start-up costs in the first nine months of 2022 and 2021 primarily

included costs related to the plate mill being built in Kentucky, the sheet

mill expansion in Kentucky, and the galvanizing line at our sheet mill

expansion in Arkansas.

• Gross margins in the raw materials segment increased in the first nine

months of 2022 as compared to the first nine months of 2021, primarily due

to increased gross margins at our DRI facilities and increased average

      selling prices for DJJ brokerage operations.



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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
$87.1 million in the third quarter of 2022 as compared to the third quarter of
2021, and increased by $179.7 million in the first nine months of 2022 as
compared to the first nine months of 2021. The decrease in the third quarter of
2022 was due to the Company's decreased earnings in the third quarter of 2022 as
compared to the third quarter of 2021. The increase in the first nine months of
2022 was due to Nucor's increased profitability in the first nine months of 2022
as compared to the first nine months of 2021, which resulted in significantly
increased accruals related to profit sharing.

Equity in Earnings of Unconsolidated Affiliates


Equity in earnings of unconsolidated affiliates was $8.4 million and $32.5
million in the third quarter of 2022 and 2021, respectively, and $23.2 million
and $65.1 million in the first nine months of 2022 and 2021, respectively. The
decreases in equity method investment earnings were primarily due to increased
losses at Nucor-JFE, which is still in the start-up phase of its operations.

Losses on Assets


Included in the first nine months of 2021 earnings was a non-cash loss on assets
of $42.0 million related to our leasehold interest in unproved oil and natural
gas properties in the raw materials segment. Also included in the first nine
months of 2021 earnings were losses on assets of $9.0 million in the steel
products segment.

Interest Expense (Income)

Net interest expense for the third quarter and first nine months of 2022 and 2021 was as follows (in thousands):


                                            Three Months (13 Weeks) Ended        Nine Months (39 Weeks) Ended
                                                                 October 2,      October 1,        October 2,
                                          October 1, 2022           2021            2022              2021
Interest expense                          $         54,569       $    43,908     $   162,159       $   122,539
Interest income                                    (12,222 )            (623 )       (18,914 )          (3,830 )
Interest expense, net                     $         42,347       $    43,285     $   143,245       $   118,709



Interest expense increased in the third quarter and first nine months of 2022
compared to the third quarter and first nine months of 2021, primarily due to
the following: an increase in average debt outstanding; higher average interest
rates on debt; and approximately $9.3 million related to the early redemption of
the 2023 Notes. Interest income increased in the third quarter and first nine
months of 2022 compared to the third quarter and first nine months of 2021 due
to higher average interest rates on investments and an increase in average
investment levels.

Earnings Before Income Taxes and Noncontrolling Interests


The table below presents earnings before income taxes and noncontrolling
interests by segment for the third quarter and first nine months of 2022 and
2021 (in thousands). The changes between periods were driven by the quantitative
and qualitative factors previously discussed.


                              Three Months (13 Weeks) Ended            Nine 

Months (39 Weeks) Ended

                            Oct. 1, 2022          Oct. 2, 2021       Oct. 1, 2022         Oct. 2, 2021
Steel mills                $     1,287,855       $    3,116,539     $     6,682,432      $    6,606,320
Steel products                   1,196,845              368,595           3,011,644             839,737
Raw materials                      279,189              161,870             638,640             505,248
Corporate/eliminations            (440,967 )           (777,897 )        (1,621,277 )        (1,758,204 )
                           $     2,322,922       $    2,869,107     $     8,711,439      $    6,193,101





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Noncontrolling Interests

Noncontrolling interests represent the income attributable to the holders of
noncontrolling interests in Nucor's joint ventures, NYS and CSI. Nucor owns a
51% controlling interest in each of NYS and CSI. The increase in earnings
attributable to noncontrolling interests in the third quarter and first nine
months of 2022 as compared to the third quarter and first nine months of 2021
was due to the increased earnings of NYS, which was a result of the increased
metal margins, as well as the earnings of CSI, for which results were
consolidated beginning on February 1, 2022, the date Nucor acquired its 51%
controlling ownership position.

Provision for Income Taxes


The effective tax rate for the third quarter of 2022 was 22.6% compared to 22.5%
for the third quarter of 2021. The expected effective tax rate for the full year
of 2022 is approximately 22.6%.

We estimate that in the next 12 months our gross unrecognized tax benefits,
which totaled $136.9 million at October 1, 2022, exclusive of interest, could
decrease by as much as $8.5 million as a result of the expiration of the statute
of limitations and the closures of examinations, substantially all of which
would impact the effective tax rate.

The IRS is currently examining Nucor's 2015, 2019 and 2020 federal income tax
returns. Nucor has concluded U.S. federal income tax matters for tax years
through 2014, and for tax years 2016 and 2018. The tax years 2017 and 2021
remain open to examination by the IRS. The 2015 and 2018 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 2016 through 2021
remain open to examination by other major taxing jurisdictions to which Nucor is
subject (primarily Canada and other state and local jurisdictions).

Net Earnings Attributable to Nucor Stockholders and Return on Equity


Nucor reported consolidated net earnings of $1.69 billion, or $6.50 per diluted
share, in the third quarter of 2022 as compared to consolidated net earnings of
$2.13 billion, or $7.28 per diluted share, in the third quarter of 2021. Net
earnings attributable to Nucor stockholders as a percentage of net sales were
16.1% and 20.6% in the third quarter of 2022 and 2021, respectively.

Nucor reported consolidated net earnings of $6.35 billion, or $23.85 per diluted
share, in the first nine months of 2022 as compared to consolidated net earnings
of $4.58 billion, or $15.34 per diluted share, in the first nine months of 2021.
Net earnings attributable to Nucor stockholders as a percentage of net sales
were 19.4% and 17.5% in the first nine months of 2022 and 2021, respectively.
Annualized return on average stockholders' equity was 53.4% and 50.4% in the
first nine months of 2022 and 2021, respectively.

Outlook

We continue to believe that 2022 will be the most profitable year for earnings in Nucor's history. As we approach the end of the year, we are seeing increasingly challenging market conditions amid economic uncertainty.


We expect fourth quarter of 2022 earnings to be decreased from the third quarter
of 2022. In the steel mills segment, we expect considerably lower earnings in
the fourth quarter of 2022 as compared to the third quarter of 2022 due to lower
average selling prices and lower volumes, with the largest decrease in
profitability expected at our sheet mills. The steel products segment is
expected to have another strong quarter in the fourth quarter of 2022, but the
segment's profitability is anticipated to decrease from the third quarter of
2022 primarily due to typical seasonality experienced in the fourth quarter. The
raw materials segment is expected to have significantly decreased earnings in
the fourth quarter of 2022 as compared to the third quarter of 2022 due to
decreased selling prices for raw materials.

Nucor's largest exposure to market risk is in our steel mills and steel products
segments. Our largest single customer in the third quarter of 2022 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. Businesses within the
steel mills segment account for the majority of the raw materials segment's
sales.


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Liquidity and Capital Resources


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.

Our liquidity position as of October 1, 2022 remained strong, consisting of
total cash and cash equivalents, short-term investments and restricted cash and
cash equivalents of $3.51 billion as of such date compared to $2.76 billion as
of December 31, 2021. Of these totals, the amount of restricted cash and cash
equivalents was $79.9 million at October 1, 2022 and $143.8 million at December
31, 2021. Approximately $896.3 million of the cash and cash equivalents position
at October 1, 2022, was held by our majority-owned and controlled subsidiaries,
including CSI which was acquired on February 1, 2022, as compared to
$540.3 million at December 31, 2021.

Cash provided by operating activities was $7.54 billion in the first nine months
of 2022 as compared to $3.62 billion in the first nine months of 2021. The $3.92
billion increase was primarily driven by net earnings of $6.75 billion for the
first nine months of 2022, an increase of $1.97 billion over net earnings in the
prior year period of $4.78 billion. In addition, changes in operating assets and
operating liabilities (exclusive of acquisitions) only used cash of $58.3
million in the first nine months of 2022 as compared to $2.04 billion in the
first nine months of 2021.

The funding of our working capital in the first nine months of 2022 decreased by
$1.98 billion over the first nine months of 2021 mainly due to the change in
accounts receivable using $1.52 billion less cash and the change in inventories
using $2.35 billion less cash as compared to the same period in 2021. The change
in accounts receivable used cash of $104.8 million in the first nine months of
2022 as compared to $1.62 billion in the first nine months of 2021. The change
in inventories provided cash of $371.1 million in the first nine months of 2022
as compared to using cash of $1.98 billion in the same period of 2021. These
changes were offset by the changes in accounts payable, federal income taxes and
salaries, wages and related accruals in the first nine months of 2022 as
compared to the first nine months of 2021. The change in accounts payable used
cash of $299.8 million in the first nine months of 2022 as compared to providing
cash of $343.0 million in the first nine months of 2021, a decrease of $642.8
million. The change in federal income taxes used cash of $302.3 million in the
first nine months of 2022 as compared to providing cash of $262.2 million in the
first nine months of 2021, a decrease of $564.5 million. The change in salaries,
wages and related accruals provided cash of $121.2 million in the first nine
months of 2022 as compared to $835.4 million in the first nine months of 2021, a
decrease of $714.1 million, due primarily to the payout in the first nine months
of 2022 of the incentive compensation for 2021, which was higher than the
incentive compensation for 2020 that was paid out in the first nine months of
2021 due to higher earnings in 2021.

The current ratio was 3.1 at the end of the third quarter of 2022 and 2.5 at
year-end 2021. The increase in the current ratio at the end of the third quarter
of 2022 compared to year-end 2021 was due to the increase in cash and cash
equivalents and short-term investments and the decrease in the current portion
of long-term debt due to the payment of the $600.0 million aggregate principal
amount outstanding of the 2022 Notes in the third quarter of 2022.

Cash used in investing activities during the first nine months of 2022 was $4.99
billion as compared to $2.38 billion in the prior year period, an increase of
$2.61 billion. The primary reason for the change was an increase in cash used
for acquisitions (net of cash acquired) of $2.20 billion for the acquisitions of
CSI on February 1, 2022 and C.H.I. on June 24, 2022. Cash used for capital
expenditures of $1.43 billion in the first nine months of 2022 increased by
$223.0 million over the same period of 2021 primarily due to the plate
mill under construction in Kentucky, the sheet mill expansion in Indiana and the
sheet mill under construction in West Virginia. Capital expenditures
for 2022 are estimated to be approximately $2.0 billion as compared to
$1.70 billion in 2021. The projects that we anticipate will have the largest
capital expenditures in 2022 are the plate mill under construction in Kentucky,
the sheet mill expansions in Kentucky and Indiana and the sheet mill under
construction in West Virginia.

Cash used in financing activities during the first nine months of 2022 was $1.93
billion as compared to $1.95 billion in the first nine months of 2021. The
primary uses of cash were: (i) stock repurchases of $2.36 billion in the first
nine months of 2022 as compared to $1.77 billion in the first nine months of
2021, an increase of $586.1 million; (ii) repayments of long-term debt of $1.11
billion in the first nine months of 2022 (none in the same period of 2021); and
(iii) distributions to noncontrolling interests of $300.8 million in the first
nine months of 2022 as compared to $120.6 million in the first nine months of
2021, an increase of $180.2 million. The primary source of cash offsetting these
uses of cash was proceeds from long-term debt, net of discount to the public, of
$2.09 billion in the first nine months of 2022 as compared to $197.0 million in
the first nine months of 2021, an increase of $1.89 billion. In the first nine
months of 2022, Nucor issued $500.0 million aggregate principal amount of the
2025 Notes, $500.0 million aggregate principal amount of the 2027 Notes, $550.0
million aggregate

                                       26

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Table of Contents


principal amount of the 2032 Notes and $550.0 million aggregate principal amount
of the 2052 Notes. On April 25, 2022, Nucor redeemed all $500.0 million
aggregate principal amount outstanding of the 2023 Notes. On August 15, 2022,
Nucor redeemed all $600.0 million aggregate principal amount outstanding of the
2022 Notes.

Nucor's $1.75 billion revolving credit facility matures on November 5, 2026. The
revolving credit facility includes only one financial covenant, which is a limit
of 60% on the ratio of funded debt to total capital. In addition, the revolving
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 October 1, 2022, the funded debt to total
capital ratio was 26.3% and we were in compliance with all non-financial
covenants under the revolving credit facility. No borrowings were outstanding
under the revolving credit facility as of October 1, 2022.

In September 2022, Nucor's Board of Directors declared a quarterly cash dividend on Nucor's common stock of $0.50 per share payable on November 10, 2022 to stockholders of record on September 30, 2022. This dividend is Nucor's 198th 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. We also believe we have adequate access to capital
markets for liquidity purposes.

© Edgar Online, source Glimpses

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