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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 3, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 1-4119

 

NUCOR CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

13-1860817

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

1915 Rexford Road, Charlotte, North Carolina

 

28211

(Address of principal executive offices)

 

(Zip Code)

(704) 366-7000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.40 per share

 

NUE

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes        No   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

301,928,935 shares of the registrant’s common stock were outstanding at October 3, 2020.

 

 

 


Table of Contents

 

Nucor Corporation

Quarterly Report on Form 10-Q

For the Three Months and Nine Months Ended October 3, 2020

TABLE OF CONTENTS

 

 

 

 

 

 

 

Page

Part I

 

Financial Information

 

 

 

 

 

 

 

 

 

 

 

Item 1

 

Financial Statements (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Earnings – Three Months (13 Weeks) and Nine Months (39 Weeks) Ended October 3, 2020 and September 28, 2019

 

1

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income – Three Months (13 Weeks) and Nine Months (39 Weeks) Ended October 3, 2020 and September 28, 2019

 

2

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets – October 3, 2020 and December 31, 2019

 

3

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows – Nine Months (39 Weeks) Ended October 3, 2020 and September 28, 2019

 

4

 

 

 

 

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

5

 

 

 

 

 

 

 

 

 

Item 2

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

19

 

 

 

 

 

 

 

 

 

Item 3

 

Quantitative and Qualitative Disclosures About Market Risk

 

27

 

 

 

 

 

 

 

 

 

Item 4

 

Controls and Procedures

 

28

 

 

 

 

 

 

 

Part II

 

Other Information

 

 

 

 

 

 

 

 

 

 

 

Item 1

 

Legal Proceedings

 

29

 

 

 

 

 

 

 

 

 

Item 1A

 

Risk Factors

 

29

 

 

 

 

 

 

 

 

 

Item 6

 

Exhibits

 

30

 

 

 

 

 

 

 

Signatures

 

31

 

 

 

 

 

 

 

 

 

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Table of Contents

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Nucor Corporation Condensed Consolidated Statements of Earnings (Unaudited)

(In thousands, except per share amounts)

 

 

 

Three Months (13 Weeks) Ended

 

 

Nine Months (39 Weeks) Ended

 

 

 

Oct. 3, 2020

 

 

Sept. 28, 2019

 

 

Oct. 3, 2020

 

 

Sept. 28, 2019

 

Net sales

 

$

4,927,960

 

 

$

5,464,502

 

 

$

14,879,603

 

 

$

17,457,112

 

Costs, expenses and other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products sold

 

 

4,425,765

 

 

 

4,891,991

 

 

 

13,370,181

 

 

 

15,213,215

 

Marketing, administrative and other expenses

 

 

165,513

 

 

 

159,301

 

 

 

460,922

 

 

 

549,020

 

Equity in losses (earnings) of unconsolidated affiliates

 

 

(479

)

 

 

1,585

 

 

 

14,422

 

 

 

(2,459

)

Losses on assets

 

 

6,604

 

 

 

-

 

 

 

299,450

 

 

 

-

 

Interest expense, net

 

 

40,139

 

 

 

31,286

 

 

 

116,856

 

 

 

92,759

 

 

 

 

4,637,542

 

 

 

5,084,163

 

 

 

14,261,831

 

 

 

15,852,535

 

Earnings before income taxes and noncontrolling interests

 

 

290,418

 

 

 

380,339

 

 

 

617,772

 

 

 

1,604,577

 

Provision for income taxes

 

 

67,788

 

 

 

86,752

 

 

 

207,610

 

 

 

367,920

 

Net earnings

 

 

222,630

 

 

 

293,587

 

 

 

410,162

 

 

 

1,236,657

 

Earnings attributable to noncontrolling interests

 

 

29,215

 

 

 

18,556

 

 

 

87,535

 

 

 

73,337

 

Net earnings attributable to Nucor stockholders

 

$

193,415

 

 

$

275,031

 

 

$

322,627

 

 

$

1,163,320

 

Net earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.63

 

 

$

0.90

 

 

$

1.06

 

 

$

3.79

 

Diluted

 

$

0.63

 

 

$

0.90

 

 

$

1.06

 

 

$

3.78

 

Average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

303,394

 

 

 

304,637

 

 

 

303,072

 

 

 

305,553

 

Diluted

 

 

303,441

 

 

 

304,980

 

 

 

303,099

 

 

 

306,029

 

 

See notes to condensed consolidated financial statements.

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Table of Contents

 

 

Nucor Corporation Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

 

 

 

Three Months (13 Weeks) Ended

 

 

Nine Months (39 Weeks) Ended

 

 

 

Oct. 3, 2020

 

 

Sept. 28, 2019

 

 

Oct. 3, 2020

 

 

Sept. 28, 2019

 

Net earnings

 

$

222,630

 

 

$

293,587

 

 

$

410,162

 

 

$

1,236,657

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized income (loss) on hedging derivatives, net

   of income taxes of $2,000 and $(1,000) for the third

   quarter of 2020 and 2019, respectively, and $1,400

   and $(2,500) for the first nine months of 2020 and

   2019, respectively

 

 

6,387

 

 

 

(3,315

)

 

 

4,888

 

 

 

(7,801

)

Reclassification adjustment for settlement of hedging

   derivatives included in net income, net of income

   taxes of $700 and $500 for the third quarter of 2020

   and 2019, respectively, and $2,300 and $500 for the

   first nine months of 2020 and 2019, respectively

 

 

2,113

 

 

 

1,615

 

 

 

6,712

 

 

 

1,501

 

Foreign currency translation gain (loss), net of income

   taxes of $0 for the third quarter and first nine months

   of 2020 and 2019

 

 

16,867

 

 

 

(14,306

)

 

 

(24,103

)

 

 

(5,219

)

 

 

 

25,367

 

 

 

(16,006

)

 

 

(12,503

)

 

 

(11,519

)

Comprehensive income

 

 

247,997

 

 

 

277,581

 

 

 

397,659

 

 

 

1,225,138

 

Comprehensive income attributable to noncontrolling

   interests

 

 

(29,215

)

 

 

(18,556

)

 

 

(87,535

)

 

 

(73,337

)

Comprehensive income attributable to Nucor stockholders

 

$

218,782

 

 

$

259,025

 

 

$

310,124

 

 

$

1,151,801

 

 

See notes to condensed consolidated financial statements.

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Table of Contents

 

 

Nucor Corporation Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

 

 

 

Oct. 3, 2020

 

 

Dec. 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,866,578

 

 

$

1,534,605

 

Short-term investments

 

 

412,401

 

 

 

300,040

 

Accounts receivable, net

 

 

2,119,421

 

 

 

2,160,102

 

Inventories, net

 

 

3,260,685

 

 

 

3,842,095

 

Other current assets

 

 

306,762

 

 

 

389,528

 

Total current assets

 

 

8,965,847

 

 

 

8,226,370

 

Property, plant and equipment, net

 

 

6,829,733

 

 

 

6,178,555

 

Restricted cash and cash equivalents

 

 

131,623

 

 

 

-

 

Goodwill

 

 

2,195,788

 

 

 

2,201,063

 

Other intangible assets, net

 

 

678,558

 

 

 

742,186

 

Other assets

 

 

717,728

 

 

 

996,492

 

Total assets

 

$

19,519,277

 

 

$

18,344,666

 

LIABILITIES

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Short-term debt

 

$

63,778

 

 

$

62,444

 

Current portion of long-term debt and finance lease obligations

 

 

10,475

 

 

 

29,264

 

Accounts payable

 

 

1,210,987

 

 

 

1,201,698

 

Salaries, wages and related accruals

 

 

432,767

 

 

 

510,844

 

Accrued expenses and other current liabilities

 

 

655,288

 

 

 

659,524

 

Total current liabilities

 

 

2,373,295

 

 

 

2,463,774

 

Long-term debt and finance lease obligations due after one year

 

 

5,452,193

 

 

 

4,291,301

 

Deferred credits and other liabilities

 

 

976,722

 

 

 

798,415

 

Total liabilities

 

 

8,802,210

 

 

 

7,553,490

 

EQUITY

 

 

 

 

 

 

 

 

Nucor stockholders' equity:

 

 

 

 

 

 

 

 

Common stock

 

 

152,061

 

 

 

152,061

 

Additional paid-in capital

 

 

2,117,582

 

 

 

2,107,646

 

Retained earnings

 

 

11,068,908

 

 

 

11,115,056

 

Accumulated other comprehensive loss,

   net of income taxes

 

 

(315,469

)

 

 

(302,966

)

Treasury stock

 

 

(2,720,668

)

 

 

(2,713,931

)

Total Nucor stockholders' equity

 

 

10,302,414

 

 

 

10,357,866

 

Noncontrolling interests

 

 

414,653

 

 

 

433,310

 

Total equity

 

 

10,717,067

 

 

 

10,791,176

 

Total liabilities and equity

 

$

19,519,277

 

 

$

18,344,666

 

 

See notes to condensed consolidated financial statements.

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Table of Contents

 

 

Nucor Corporation Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

 

 

Nine Months (39 Weeks) Ended

 

 

 

Oct. 3, 2020

 

 

Sept. 28, 2019

 

Operating activities:

 

 

 

 

 

 

 

 

Net earnings

 

$

410,162

 

 

$

1,236,657

 

Adjustments:

 

 

 

 

 

 

 

 

Depreciation

 

 

525,688

 

 

 

477,957

 

Amortization

 

 

62,877

 

 

 

64,655

 

Stock-based compensation

 

 

56,122

 

 

 

74,311

 

Deferred income taxes

 

 

140,606

 

 

 

76,737

 

Distributions from affiliates

 

 

3,021

 

 

 

27,405

 

Equity in losses (earnings) of unconsolidated affiliates

 

 

14,422

 

 

 

(2,459

)

Losses on assets

 

 

299,450

 

 

 

-

 

Changes in assets and liabilities (exclusive of acquisitions and dispositions):

 

 

 

 

 

 

 

 

Accounts receivable

 

 

37,547

 

 

 

197,783

 

Inventories

 

 

590,434

 

 

 

476,761

 

Accounts payable

 

 

15,366

 

 

 

(180,397

)

Federal income taxes

 

 

18,848

 

 

 

(177,405

)

Salaries, wages and related accruals

 

 

(69,235

)

 

 

(157,317

)

Other operating activities

 

 

100,283

 

 

 

5,526

 

Cash provided by operating activities

 

 

2,205,591

 

 

 

2,120,214

 

Investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(1,179,081

)

 

 

(984,646

)

Investment in and advances to affiliates

 

 

(16,542

)

 

 

(27,613

)

Divestiture of affiliates

 

 

-

 

 

 

67,591

 

Disposition of plant and equipment

 

 

19,492

 

 

 

32,922

 

Acquisitions (net of cash acquired)

 

 

(20,368

)

 

 

(9,495

)

Purchase of investments

 

 

(401,986

)

 

 

(249,616

)

Proceeds from the sale of investments

 

 

301,249

 

 

 

-

 

Other investing activities

 

 

(33,536

)

 

 

2,176

 

Cash used in investing activities

 

 

(1,330,772

)

 

 

(1,168,681

)

Financing activities:

 

 

 

 

 

 

 

 

Net change in short-term debt

 

 

1,334

 

 

 

(10,145

)

Proceeds from long-term debt, net of discount

 

 

1,237,635

 

 

 

-

 

Repayment of long-term debt

 

 

(97,150

)

 

 

-

 

Bond issuance related costs

 

 

(6,250

)

 

 

-

 

Issuance of common stock

 

 

-

 

 

 

5,892

 

Payment of tax withholdings on certain stock-based compensation

 

 

(17,691

)

 

 

(15,723

)

Distributions to noncontrolling interests

 

 

(106,193

)

 

 

(71,241

)

Cash dividends

 

 

(368,636

)

 

 

(369,270

)

Acquisition of treasury stock

 

 

(39,499

)

 

 

(197,511

)

Other financing activities

 

 

(6,983

)

 

 

(6,538

)

Cash provided by (used in) financing activities

 

 

596,567

 

 

 

(664,536

)

Effect of exchange rate changes on cash

 

 

(7,790

)

 

 

482

 

Increase in cash and cash equivalents

 

 

1,463,596

 

 

 

287,479

 

Cash and cash equivalents - beginning of year

 

 

1,534,605

 

 

 

1,398,886

 

Cash and cash equivalents and restricted cash and

   cash equivalents - end of nine months

 

$

2,998,201

 

 

$

1,686,365

 

Non-cash investing activity:

 

 

 

 

 

 

 

 

Change in accrued plant and equipment purchases

 

$

-

 

 

$

62,700

 

 

See notes to condensed consolidated financial statements.

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Table of Contents

 

Nucor Corporation – Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Basis of Interim Presentation

The information furnished in this Item 1 reflects all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented and are of a normal and recurring nature unless otherwise noted. The information furnished has not been audited; however, the December 31, 2019 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited condensed consolidated financial statements included in this Item 1 should be read in conjunction with the audited consolidated financial statements and the notes thereto included in Nucor’s Annual Report on Form 10-K for the year ended December 31, 2019.

2. Inventories

Inventories consisted of approximately 40% raw materials and supplies and 60% finished and semi-finished products at October 3, 2020 (42% and 58%, respectively, at December 31, 2019). Nucor’s manufacturing process consists of a continuous, vertically integrated process from which products are sold to customers at various stages throughout the process. Since most steel products can be classified as either finished or semi-finished products, these two categories of inventory are combined.

3. Property, Plant and Equipment

Property, plant and equipment is recorded net of accumulated depreciation of $9.87 billion at October 3, 2020 ($9.42 billion at December 31, 2019).

Nucor performed an impairment assessment of its proved producing natural gas well assets in the fourth quarter of 2019. One of the main assumptions that most significantly affects the undiscounted cash flows determination used in the impairment assessment is management’s estimate of future pricing of natural gas and natural gas liquids. The pricing used in the impairment assessment was developed by management based on projected natural gas market supply and demand dynamics, in conjunction with a review of projections by market analysts. Management also makes key estimates on the expected reserve levels and on the expected lease operating costs. The impairment assessment was performed on each of Nucor’s three groups (“fields”) of wells, with each field defined by common geographic location.

As a result of the impairment assessment, Nucor recorded a non-cash impairment charge of $35.0 million relating to one field of wells in the fourth quarter of 2019. The post-impairment carrying value of this field was $11.2 million at October 3, 2020 ($12.3 million at December 31, 2019). The remaining two fields were not impaired as a result of the assessment and had a combined carrying value of $62.4 million at October 3, 2020 ($66.6 million at December 31, 2019). Changes in the natural gas industry or a prolonged low-price environment beyond what had already been assumed in the assessments could cause management to revise the natural gas and natural gas liquids price assumptions, the estimated reserves or the estimated lease operating costs. Unfavorable revisions to these assumptions or estimates could possibly result in further impairment of some or all of the fields of proved well assets.

Nucor owns a 49% leasehold interest in unproved oil and natural gas properties covering approximately 54,000 acres in the South Piceance Basin located in Colorado. Nucor is subject to forfeiture of a portion of its leasehold interest in these properties if we do not drill new wells within various contractually specified time periods. A decision to not develop a portion of these properties within the specified time periods would likely result in a partial asset impairment in the future. The carrying value of the entire leasehold interest at October 3, 2020 was $165.0 million. Nucor has full discretion on its participation in all future drilling capital investments related to the leasehold interest.


 

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Table of Contents

 

4. Goodwill and Other Intangible Assets

The change in the net carrying amount of goodwill for the nine months ended October 3, 2020 by segment was as follows (in thousands):

 

 

 

Steel Mills

 

 

Steel Products

 

 

Raw Materials

 

 

Total

 

Balance at December 31, 2019

 

$

591,986

 

 

$

879,500

 

 

$

729,577

 

 

$

2,201,063

 

Other

 

 

-

 

 

 

(821

)

 

 

-

 

 

 

(821

)

Translation

 

 

-

 

 

 

(4,454

)

 

 

-

 

 

 

(4,454

)

Balance at October 3, 2020

 

$

591,986

 

 

$

874,225

 

 

$

729,577

 

 

$

2,195,788

 

 

Nucor completed its most recent annual goodwill impairment testing during the fourth quarter of 2019 and concluded that as of such time there was no impairment of goodwill for any of its reporting units.

The assessment performed in 2019 used forward-looking projections and included expected improvements in the future cash flows of one of the Company’s reporting units, Rebar Fabrication. The fair value of this reporting unit exceeded its carrying value by approximately 56% in the most recent assessment. The reporting unit’s profitability in the first nine months of 2020 significantly increased from the first nine months of 2019. We expect the 2020 operating results of the Rebar Fabrication reporting unit will continue to improve compared to 2019. If our assessment of the relevant facts and circumstances changes, or the actual performance of this reporting unit falls short of expected results, non-cash impairment charges may be required. Total goodwill associated with the Rebar Fabrication reporting unit was $352.7 million as of October 3, 2020 ($356.6 million as of December 31, 2019). An impairment of goodwill may also lead us to record an impairment of other intangible assets. Total finite-lived intangible assets associated with the Rebar Fabrication reporting unit were $59.6 million as of October 3, 2020 ($67.2 million as of December 31, 2019). There have been no triggering events requiring an interim assessment for impairment of the Rebar Fabrication reporting unit since the most recent annual goodwill impairment testing date.

Due to lower than expected operating results and anticipated changes to the Grating reporting unit’s business strategy and structure, the Company determined a triggering event occurred in the third quarter of 2019 and performed an impairment assessment. The fair value of the Grating reporting unit exceeded its carrying value by approximately 17% in that assessment. If our assessment of the relevant facts and circumstances changes, or the actual performance of this reporting unit falls short of expected results, non-cash impairment charges may be required. Total goodwill associated with the Grating reporting unit was $36.6 million as of October 3, 2020 ($36.8 million as of December 31, 2019).

Intangible assets with estimated useful lives of five to 22 years are amortized on a straight-line or accelerated basis and were comprised of the following as of October 3, 2020 and December 31, 2019 (in thousands):

 

 

 

October 3, 2020

 

 

December 31, 2019

 

 

 

Gross Amount

 

 

Accumulated

Amortization

 

 

Gross Amount

 

 

Accumulated

Amortization

 

Customer relationships

 

$

1,412,323

 

 

$

821,029

 

 

$

1,412,954

 

 

$

767,532

 

Trademarks and trade names

 

 

162,062

 

 

 

98,110

 

 

 

162,183

 

 

 

92,258

 

Other

 

 

63,822

 

 

 

40,510

 

 

 

63,807

 

 

 

36,968

 

 

 

$

1,638,207

 

 

$

959,649

 

 

$

1,638,944

 

 

$

896,758

 

 

Intangible asset amortization expense in the third quarter of 2020 and 2019 was $20.7 million and $22.0 million, respectively, and was $62.9 million and $64.7 million in the first nine months of 2020 and 2019, respectively. Annual amortization expense is estimated to be $83.5 million in 2020; $82.3 million in 2021; $80.7 million in 2022; $80.0 million in 2023; and $79.2 million in 2024.

5. Equity Investments

The carrying value of our equity investments in domestic and foreign companies was $521.2 million at October 3, 2020 ($793.2 million at December 31, 2019) and is recorded in other assets in the condensed consolidated balance sheets.

NuMit

Nucor owns a 50% economic and voting interest in NuMit LLC (“NuMit”). NuMit owns 100% of the equity interest in Steel Technologies LLC, an operator of 26 sheet processing facilities located throughout the United States, Canada and

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Mexico. Nucor accounts for its investment in NuMit (on a one-month lag basis) under the equity method, as control and risk of loss are shared equally between the members of NuMit. Nucor’s investment in NuMit was $322.5 million at October 3, 2020 ($319.8 million at December 31, 2019). Nucor received distributions of $2.0 million and $27.4 million from NuMit during the first nine months of 2020 and 2019, respectively.

Duferdofin Nucor

Nucor owns a 50% economic and voting interest in Duferdofin Nucor S.r.l. (“Duferdofin Nucor”), an Italian steel manufacturer, and accounts for its investment (on a one-month lag basis) under the equity method, as control and risk of loss are shared equally between the members of Duferdofin Nucor.

Nucor’s investment in Duferdofin Nucor was $0.1 million at October 3, 2020 ($263.0 million at December 31, 2019). Nucor’s 50% share of the total net assets of Duferdofin Nucor was $128.6 million at October 3, 2020, resulting in a negative basis difference of $128.5 million. This was due to the $261.6 million impairment charge taken against the Company’s investment in Duferdofin Nucor in the first nine months of 2020 as discussed below, offset by the step-up to fair value of certain assets and liabilities attributable to Duferdofin Nucor, as well as the identification of goodwill ($86.5 million at December 31, 2019) and finite-lived intangible assets. This basis difference prior to the impairment charge, excluding the portion attributable to goodwill, was being amortized based on the remaining estimated useful lives of the various underlying net assets, as appropriate, through the first quarter of 2020. Beginning with the second quarter of 2020, the negative basis difference began amortizing based on the remaining estimated useful lives of the various underlying net assets, as appropriate. Amortization associated with the negative basis in the third quarter of 2020 was income of $1.9 million, compared to an expense of $2.2 million in the third quarter of 2019, associated with the fair value step-up. Net amortization was $1.6 million of income in the first nine months of 2020, and $6.7 million of expense in the first nine months 2019.     

As of October 3, 2020, Nucor had outstanding notes receivable of €35.0 million ($41.0 million) from Duferdofin Nucor (€35.0 million, or $39.3 million, as of December 31, 2019). The notes receivable bear interest at a rate that resets annually on September 30 to the 12-month Euro Interbank Offered Rate plus 0.75% per year. The maturity date of the principal amounts is January 31, 2022. As of October 3, 2020 and December 31, 2019, the notes receivable were classified in other assets in the condensed consolidated balance sheets. These notes were fully reserved in connection with the $261.6 million impairment charge taken against the Company’s investment in Duferdofin Nucor in the first nine months of 2020.

Nucor has issued a guarantee for its ownership percentage (50%) of Duferdofin Nucor’s borrowings under Facility A of a Structured Trade Finance Facilities Agreement (“Facility A”). The fair value of the guarantee is immaterial. In April 2018, Duferdofin Nucor amended and extended Facility A to mature on April 16, 2021. The maximum amount Duferdofin Nucor could borrow under Facility A was €160.0 million ($187.5 million) at October 3, 2020. As of October 3, 2020, there was €132.0 million ($154.7 million) outstanding under that facility (€147.0 million, or $164.9 million, as of December 31, 2019). If Duferdofin Nucor fails to pay when due any amounts for which it is obligated under Facility A, Nucor could be required to pay 50% of such amounts pursuant to and in accordance with the terms of its guarantee. Any indebtedness of Duferdofin Nucor to Nucor is effectively subordinated to the indebtedness of Duferdofin Nucor under Facility A. Nucor has not recorded any liability associated with this guarantee.

On October 2, 2020, Nucor entered into an agreement (the “Duferdofin Agreement”) to transfer its 50% economic and voting interest in Duferdofin Nucor to the owner of the remaining 50% interest. The closing of the transaction is subject to Duferdofin Nucor renegotiating the borrowings currently under Facility A, Nucor’s relief under the guarantee and other customary closing conditions, including regulatory consents. The closing of the transaction is expected to occur during the fourth quarter of 2020.  Nucor is continuing to evaluate the impact of the transaction contemplated by the Duferdofin Agreement on the financial statements, which will include foreign currency losses currently included in accumulated other comprehensive loss as outlined in Footnote 14 and other impacts.

Nucor-JFE

Nucor owns a 50% economic and voting interest in Nucor-JFE Steel Mexico, S. de R.L. de C.V. (“Nucor-JFE”), a 50-50 joint venture with JFE Steel Corporation of Japan, to build and operate a galvanized sheet steel plant in central Mexico. After delays caused by the COVID-19 pandemic, Nucor JFE is expected to begin commissioning in November of this year. Nucor accounts for its investment in Nucor-JFE (on a one-month lag basis) under the equity method, as control and risk of loss are shared equally between the members of Nucor-JFE. Nucor’s investment in Nucor-JFE was $150.3 million at October 3, 2020 ($163.2 million at December 31, 2019).

On January 16, 2019, Nucor entered into an agreement to guarantee a percentage, equal to its ownership percentage (50%), of Nucor-JFE’s borrowings under the General Financing Agreement and Promissory Note (the “JFE Facility”). The fair value of the guarantee is immaterial. Nucor’s guarantee expires on April 30, 2021. The maximum amount Nucor-JFE could borrow under the JFE Facility was $65.0 million as of October 3, 2020. The JFE Facility is uncommitted. As of October 3, 2020, there was $45.0 million outstanding under the JFE Facility (none as of December 31, 2019). If Nucor-JFE fails to pay when due any amounts for which it is obligated under the JFE Facility, Nucor could be required to pay 50% of such

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amounts pursuant to and in accordance with the terms of its guarantee. Nucor has not recorded any liability associated with this guarantee.

Nucor-JFE has other credit facilities that Nucor has agreed to guarantee. The principal amount subject to guarantee by Nucor for these other credit facilities was $25.0 million as of October 3, 2020 ($25.0 million as of December 31, 2019). The fair value of the guarantees is immaterial. If Nucor-JFE fails to pay when due any amounts for which it is obligated under the other credit facilities, Nucor could be required to pay such amounts pursuant to and in accordance with the terms of its guarantees. Nucor has not recorded any liability associated with these guarantees.

All Equity Investments

Nucor reviews its equity investments for impairment if and when circumstances indicate that a decline in fair value below their carrying amounts may have occurred. Nucor determined that a triggering event occurred in the first quarter of 2020 with respect to its equity method investment in Duferdofin Nucor due to adverse developments in the joint venture’s commercial outlook, which were and continue to be exacerbated by the COVID-19 pandemic, all of which have negatively impacted the joint venture’s strategic direction. After completing its impairment assessment, Nucor determined that the carrying amount exceeded its estimated fair value and the impairment condition was considered to be other than temporary. Therefore, Nucor recorded a $250.0 million impairment charge in the first quarter of 2020, a $5.0 million impairment charge in the second quarter of 2020, and a $6.6 million impairment charge in the third quarter of 2020 against its investment in Duferdofin Nucor. Any additional capital contributions, if necessary, that Nucor makes to Duferdofin Nucor will likely be subject to impairment. Additionally, in the first quarter of 2020 the Company fully reserved its €35.0 million ($41.0 million) outstanding note receivable from Duferdofin Nucor due to an assessment of the likelihood of collection in light of these adverse developments and its effective subordination to Facility A. These charges are included in losses on assets in the condensed consolidated statements of earnings. The assumptions that most significantly affect the fair value determination include projected cash flows and the discount rate. The Company-specific inputs for measuring fair value are considered “Level 3” or unobservable inputs that are not corroborated by market data under applicable fair value authoritative guidance, as quoted market prices are not available.

It is reasonably possible that material deviation of future performance from the estimates used in our most recent valuation could result in further impairment of our investment in Duferdofin Nucor and affect any potential liability associated with the Company’s guarantee of the indebtedness of Duferdofin Nucor as discussed above.

6. Current Liabilities

Book overdrafts, included in accounts payable in the condensed consolidated balance sheets, were $115.2 million at October 3, 2020 ($116.4 million at December 31, 2019). Dividends payable, included in accrued expenses and other current liabilities in the condensed consolidated balance sheets, were $123.0 million at October 3, 2020 ($122.9 million at December 31, 2019). Accrued vacation and holiday pay, included in salaries, wages and related accruals in the condensed consolidated balance sheets, were $121.8 million at October 3, 2020 ($106.2 million at December 31, 2019).

7. Fair Value Measurements

The following table summarizes information regarding Nucor’s financial assets and financial liabilities that were measured at fair value as of October 3, 2020 and December 31, 2019 (in thousands). Nucor does not have any non-financial assets or non-financial liabilities that are measured at fair value on a recurring basis.

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Fair Value Measurements at Reporting Date Using

 

Description

 

Carrying

Amount in

Condensed

Consolidated

Balance

Sheets

 

 

Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

As of October 3, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

2,539,777

 

 

$

2,539,777

 

 

$

-

 

 

$

-

 

Short-term investments

 

 

412,401

 

 

 

412,401

 

 

 

-

 

 

 

-

 

Restricted cash and cash equivalents

 

 

131,623

 

 

 

131,623

 

 

 

 

 

 

 

 

 

Total assets

 

$

3,083,801

 

 

$

3,083,801

 

 

$

-

 

 

$

-

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts

 

$

(6,577

)

 

$

-

 

 

$

(6,577

)

 

$

-

 

As of December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

1,229,000

 

 

$

1,229,000

 

 

$

-

 

 

$

-

 

Short-term investments

 

 

300,040

 

 

 

300,040

 

 

 

-

 

 

 

-

 

Total assets

 

$

1,529,040

 

 

$

1,529,040

 

 

$

-

 

 

$

-

 

Li