In late December, Nucor (NYSE: NUE) CEO Dan DiMicco agreed to do a one-hour online chat with Fool.com readers. As we hit "go" on the chat, the fire alarms started ringing at Fool HQ ... causing a full evacuation of our offices while the fire department checked it out. (It was a false alarm, thankfully.)
As a result, we collected the questions asked of Dan during the time the chat was opened, as well as those sent via email to [email protected]. A lightly edited Part 1 of the Q&A, covering questions specific to Nucor and its business, is compiled below. Look for Part 2 tomorrow, in which DiMicco talks about the steel industry, competitors, and his outlook for the economy.
Question: In your last conference call you said that this quarter may well be the toughest for Nucor. Have you seen any improvement in your revenue projections or any increasing customer demand, or is it still looking very weak?
Dan DiMicco: Please tune in to our quarterly conference call on Jan. 27 (webcast live at 2 p.m. ET on www.nucor.com) -- we will give our usual full report/update on our business conditions and outlook.
Question: What are Nucor's goals with regard to its balance sheet right now? Are you comfortable with current levels of cash, receivables, inventories, debt, or trying to move them in a certain direction? They have varied quite a bit with the economic upheaval over the last few years.
DiMicco: Actually, we have strengthened our already strong balance sheet during this period of economic distress. For example, we took advantage of the unusually low interest rates in the fall of 2010 to issue 12-year unsecured debt at a coupon rate of just 4.125%. That money will be available to pay off debt maturing in 2012 and 2013. Also last fall, we also issued attractive tax-exempt Gulf Opportunity Zone Bonds to fund our Louisiana raw materials growth project. Conservative -- and opportunistic -- financial practices are another key part of Nucor's culture. As has been the case throughout Nucor's history, our financial strength allows our company to take advantage of opportunities provided during economic downturns.
Question: What is the status of your proposed plant in Louisiana?
DiMicco: We should receive our environmental permit at a meeting in Louisiana in mid-January, and preparations are under way for the start of construction.
Question (from The Corporate Library's Nell Minow, via Twitter): "Ask $NUE CEO why they are consistently top of our list on exec comp. Why does no one else seem to follow your example?"
DiMicco: Nucor's executive pay practices are part of the overall pay-for-performance philosophy used throughout our company and used since our beginning days. Pay for performance is an integral part of the Nucor culture. To us, pay for performance is simply common sense and good business practices. And, we don't understand why other companies don't operate this way.
Question: Nucor was facing bankruptcy back in the 1960s. How did Nucor go from near bankruptcy to being one the leading steelmakers in North America today?
DiMicco: When our founder Ken Iverson became CEO of Nuclear Corporation of America in 1965, it was a poorly managed conglomerate lacking any focus. Ken got rid of the poor businesses that were dragging the company down, repaired the balance sheet, and began growing the good business -- steel joists. From there, we grew into America's largest (and most profitable) steel producer by building our unique culture around Nucor's core values. These include -- long-term thinking, innovation, pay for performance, teamwork, continual improvement, taking care of our customers -- teammates, shareholders, buyers/users of our products, and never accepting the "it can't be done" mentality.
Question: What, if any, influence did the stimulus package have on Nucor's business?
DiMicco: It had very little impact, as less than 10% of it was directed to projects that build long-term value (i.e., infrastructure) for our nation. And the little that went to infrastructure remains unspent because the States don't have the matching funds!!!!!!
Question: Nucor has a unique corporate culture. The company does not have special privileges and perks for executives and has a management philosophy called "pain sharing." 2009 was the first time Nucor didn't report an annual profit. And yet despite the slowing economy, Nucor didn't lay off any workers. What does "pain sharing" look like in concrete terms?
Dan DiMicco: As we refer to it as share the pain and share the gain, it works for us throughout the business cycle. For 2009, the CEO's total compensation at Nucor (reported in our proxy statement) decreased by almost one-half (down 43%) from 2008 and almost 80% over the last several years. I think the experience seen at most other Fortune 500 companies has been where the CEO keeps his pay package unchanged or higher while the company cuts loose 5% or 10% of its workers (or what they called their greatest assets during the good times). That tells the story pretty bluntly. Yes, everyone in our operations see less income in tough times, but they still all have a job and are working to build for the good times -- and they share record earnings in good times. Our profit sharing averaged over 20,000+ per employee during the 2004-2008 period plus we paid out extraordinary bonuses of $3,000/ year/ teammate during the same period that our management teams saw record earnings.
