This excerpt taken from the NUE 10-Q filed Aug 7, 2007.
This excerpt taken from the NUE 10-Q filed May 8, 2007.
This excerpt taken from the NUE 10-Q filed Nov 3, 2006.
This excerpt taken from the NUE 10-Q filed Aug 7, 2006.
This excerpt taken from the NUE 10-Q filed May 4, 2006.
This excerpt taken from the NUE 10-K filed Mar 7, 2006.
Many of the factors that affect our business and operations involve risk and uncertainty. The factors described below are some of the risks that could materially negatively affect our business, financial condition and results of operations.
Our industry is cyclical and prolonged economic declines could have a material adverse effect on our business.
Demand for most of our products is cyclical in nature and sensitive to general economic conditions. Our business supports cyclical industries such as the construction, energy, appliance and automotive industries. As a result, downturns in the United States economy or any of these industries could materially adversely affect our results of operations and cash flows. Because steel producers generally have high fixed costs, reduced volumes result in operating inefficiencies. Over the five-year period ended December 31, 2005, our net earnings have varied from a high of $1.31 billion in 2005 to a low of $62.8 million in 2003. Future economic downturns or a prolonged stagnant economy could materially adversely affect our business, results of operations, financial condition and cash flows.
Overcapacity in the steel industry could increase the level of steel imports which may negatively affect our business, results of operations and cash flows.
Global steel-making capacity exceeds global consumption of steel products. This excess capacity results in manufacturers in certain countries exporting significant amounts of steel at prices below their cost of production. These imports, which are also affected by demand in the domestic market, international currency conversion rates and domestic and international government actions, can result in downward pressure on steel prices, which could materially adversely affect our business, results of operations, financial condition and cash flows.
Overcapacity in China, the worlds largest producer and consumer of steel, has the potential to cause steel dumping in U.S. markets. A significant decrease in Chinas rate of economic expansion could reduce demand for steel products in that country, resulting in China increasing steel exports.
The results of our operations are sensitive to volatility in steel prices and changes in the cost of raw materials, particularly scrap steel.
We rely to a substantial extent on outside vendors to supply us with raw materials that are critical to the manufacture of our products. We acquire our primary raw material, steel scrap, from numerous sources throughout the country. Although we believe that the supply of scrap is adequate to operate our facilities, purchase prices of these critical raw materials are subject to volatility. At any given time, we may be unable to obtain an adequate supply of these critical raw materials with price and other terms acceptable to us.
If our suppliers increase the price of our critical raw materials, we may not have alternative sources of supply. In addition, to the extent that we have quoted prices to our customers and accepted customer orders for our products prior to purchasing necessary raw materials, we may be unable to raise the price of our products to cover all or part of the increased cost of the raw materials, although we have successfully used a raw material surcharge in the steel mills segment since 2004. If we are unable to obtain adequate and timely deliveries of our required raw materials, we may be unable to timely manufacture sufficient quantities of our products. This could cause us to lose sales, incur additional costs, delay new product introductions and suffer harm to our reputation.
Changes in the availability and cost of electricity and natural gas are subject to volatile market conditions that could adversely affect our business.
Our steel mills are large consumers of electricity and natural gas. We rely upon third parties for our supply of energy resources consumed in the manufacture of our products. The prices for and availability of electricity, natural gas, oil and other energy resources are subject to volatile market conditions. These market conditions often are affected by weather, political and economic factors beyond our control. Disruptions in the supply of our energy resources could temporarily impair our ability to manufacture our products for our customers. Increases in our energy costs could materially adversely affect our business, results of operations, financial condition and cash flows.
We plan to continue to implement acquisition strategies and may encounter difficulties in integrating these businesses.
We plan to continue to seek attractive opportunities to acquire businesses, enter into joint ventures and make other investments that are complementary to our existing strengths. Realization of the anticipated benefits of acquisitions or other transactions will depend on our ability to integrate these transactions with our operations and to cooperate with our strategic partners. Our business, results of operations, financial condition and cash flows could be materially and adversely affected if we are unable to successfully integrate these businesses.
In addition, we may enter into joint ventures or acquisitions located outside the U.S., which may be adversely affected by foreign currency fluctuations, changes in economic conditions and changes in local government regulations and policies.
Some of our competitors who have emerged from bankruptcy have lowered their operating costs, which could negatively impact our competitive position.
Over the past few years, many domestic steel companies have sought protection under Chapter 11 of the United States Bankruptcy Code and have continued to operate. Some have reduced prices to maintain volumes and cash flows and obtained concessions from their labor unions and suppliers. In some cases, they have even expanded and modernized while in bankruptcy. Upon emergence from bankruptcy, these companies, or new entities that purchase their facilities through the bankruptcy process, may be relieved of certain environmental, retiree and other obligations. Additionally, some of our competitors may grow by acquiring less expensive capacity out of bankruptcy. As a result, they may be able to operate with lower costs, a primary competitive factor in the steel industry, which could negatively affect our competitive position.
Competition from other materials may materially adversely affect our business.
In many applications, steel competes with other materials, such as aluminum, cement, composites, glass, plastic and wood. Increased use of these materials in substitution for steel products could materially adversely affect prices and demand for our steel products.
Our operations are subject to business interruptions and casualty losses.
The steel-making business is subject to numerous inherent risks, particularly unplanned events such as explosions, fires, other accidents, inclement weather and transportation interruptions. While our insurance coverage could offset losses relating to some of those types of events, our results of operations and cash flows could be adversely impacted to the extent any such losses are not covered by our insurance.
Our business requires substantial capital investment and maintenance expenditures, and our capital resources may not be adequate to provide for all of our cash requirements.
Our operations are capital intensive. For the five-year period ended December 31, 2005, our total capital expenditures, excluding acquisitions, were approximately $1.34 billion. Our business also requires substantial expenditures for routine maintenance. Although we expect requirements for our business needs, including the funding of capital expenditures, debt service for financings and any contingencies to be financed by internally generated funds or from borrowings under our $700.0 million unsecured revolving credit facility, we cannot assure you that this will be the case. Any future significant acquisitions could require additional financing from external sources.
Environmental compliance and remediation could result in substantially increased costs and materially adversely impact our competitive position.
Our operations are subject to numerous federal, state and local laws and regulations relating to protection of the environment, and we, accordingly, make provision for the estimated costs of compliance. These laws are evolving and becoming increasingly stringent, resulting in inherent uncertainties in these estimates.
We have agreed to a comprehensive consent decree with the United States Environmental Protection Agency and certain states in order to resolve alleged past environmental violations. Under the terms of the consent decree, we are conducting tests at some of our facilities, performing corrective action where necessary, and piloting certain pollution control technologies. The accrued environmental costs include the expenses that we expect to incur as a result of the consent decree.
We believe our competitors are subject to similar environmental laws and regulations. The specific impact on each competitor may vary, however, depending upon a number of factors, including the age and location of operating facilities, production processes (such as a mini-mill versus an integrated producer) and the specific products and services it provides. To the extent that competitors, particularly foreign steel producers and manufacturers of competitive products, are not required to incur equivalent costs, our competitive position could be materially adversely impacted.
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