NUE

NUCOR CORP 10-Q Summary: Period Ended July 2, 2005

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended July 2, 2005, and the six-month period ended on the same date. Nucor Corporation operates in two primary segments: Steel Mills (carbon and alloy steel) and Steel Products (joists, deck, fasteners, etc.). The company reported 156,234,619 shares of common stock outstanding as of the period end.

Key Financial Metrics

Note: All figures in thousands except per share data.

Margins: Gross margins were approximately 20% for the second quarter of 2005 and 21% for the first half of 2005, compared to 19% and 16% respectively in the prior year periods. The effective tax rate was 35.4% for the quarter and 35.5% for the six-month period.

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased 28% year-over-year for the six-month period, driven by a 25% increase in average sales price per ton ($642 vs. $514) and a 3% increase in tons shipped.
• Profitability: Net earnings surged 86% for the six-month period. This was driven by higher selling prices, improved gross margins, a $96.0 million LIFO credit (vs. a $99.3 million charge in 2004), and reduced pre-operating costs.
• Cost Pressures: Raw material costs increased 24% year-over-year for the six-month period. Scrap costs rose 21% to $259 per ton. Energy costs increased 12% per ton.
• Acquisitions: The company spent approximately $152.9 million on acquisitions in the first half of 2005, including Marion Steel Company ($108.7 million) and Fort Howard Steel assets ($44.1 million).
• Shareholder Returns: Dividends declared per share increased to $0.80 for the six months (vs. $0.21 prior year). The company repurchased 4.0 million shares for $205.8 million in the second quarter.

Guidance, Outlook, and Risks

Outlook: Management noted softening conditions in the sheet market during the second quarter but expects improvements to continue. Approximately 58% of sheet mill volume is under contract, limiting spot market exposure. Demand is supported by non-residential construction activity.

Capital Plan: Capital expenditures are projected to be approximately $415.0 million for the full year 2005. The company maintains a $700 million unsecured revolving credit facility with no borrowings outstanding as of July 2, 2005.

Risks and Contingencies:

• Market Volatility: Results are sensitive to steel price volatility, raw material supply (scrap), and energy costs.
• Environmental: Accrued environmental costs totaled $40.5 million. The company received a $9.2 million settlement for environmental claims in Q1 2005.
• Accounting Changes: The company must adopt SFAS No. 123(R) regarding share-based payments in the first quarter of 2006, which will impact reported earnings.

Investor Verification Checklist

• LIFO Impact: Verify the sustainability of the $96.0 million LIFO credit, which significantly boosted earnings compared to the prior year's charge.
• Raw Material Hedging: Assess the effectiveness of the raw material surcharge mechanism in passing through the 24% increase in scrap costs.
• Acquisition Integration: Monitor the performance of recent acquisitions (Marion Steel, Fort Howard) to ensure they contribute to projected margins.
• Sheet Market Trends: Watch for continued softening in the sheet market and the impact on pricing power outside of contracted volumes.
• Share Repurchase: Confirm the remaining authorization for the stock repurchase program (approx. 4.5 million shares) and future buyback activity.