Leases

12 Months Ended

Dec. 31, 2023

6. Leases

We lease certain equipment, office space and land. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet.

Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or sometimes more. The exercise of lease renewal options is at our sole discretion and we consider these options in determining the lease term used to establish our right-of-use assets and lease liabilities. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or a purchase option reasonably certain of exercise.

We determine that a contract contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In evaluating whether we have the right to control the use of an identified asset, we assess whether or not we have the right to control the use of the identified asset and to obtain substantially all of the economic benefit from the use of the identified asset.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

Certain of our lease agreements include payments that adjust periodically for consumption of goods provided by the right-of-use asset in excess of contractually determined minimum amounts and for inflation. These variable lease payments are not significant. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Supplemental statement of earnings information related to our leases is as follows (in thousands):


		Year Ended December 31,
	Statement of Earnings Classification	2023		2022		2021
Operating lease cost	Cost of products sold	$	26,750	$	23,666	$	21,503
Operating lease cost	Marketing, administrative and other expenses		3,199		3,239		2,989
Total operating lease cost		$	29,949	$	26,905	$	24,492
Finance lease cost:
Amortization of leased assets	Cost of products sold	$	19,171	$	19,113	$	13,513
Interest on lease liabilities	Interest expense, net		11,964		12,229		10,670
Total finance lease cost		$	31,135	$	31,342	$	24,183
Total lease cost		$	61,084	$	58,247	$	48,675

Supplemental cash flow information related to our leases is as follows (in thousands):


	Year Ended December 31,
	2023		2022		2021
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	30,230	$	26,518	$	27,310
Operating cash flows from finance leases	$	11,964	$	12,229	$	10,670
Financing cash flows from finance leases	$	16,840	$	16,008	$	11,425
Non-cash investing and financing activities:
Additions to right-of-use assets obtained from
Operating lease liabilities	$	26,955	$	33,924	$	19,711
Finance lease liabilities	$	16,473	$	27,030	$	99,535

Supplemental balance sheet information related to our leases is as follows (in thousands):


		December 31,
	Balance Sheet Classification	2023		2022
Assets:
Operating lease	Other assets	$	102,878	$	101,499
Finance lease	Property, plant and equipment, net		166,780		169,076
Total leased		$	269,658	$	270,575
Liabilities:
Current operating	Accrued expenses and other current liabilities	$	25,405	$	23,621
Current finance	Current portion of long-term debt and finance lease obligations		14,102		18,582
Non-current operating	Deferred credits and other liabilities		81,673		81,455
Non-current finance	Long-term debt and finance lease obligations due after one year		174,787		169,804
Total leased		$	295,967	$	293,462

Weighted-average remaining lease term and discount rate for our leases are as follows:


	December 31, 2023
Weighted-average remaining lease term - operating leases	7.7 Years
Weighted-average remaining lease term - finance leases	14.3 Years
Weighted-average discount rate - operating leases		4.0	%
Weighted-average discount rate - finance leases		11.7	%

The reason for the substantial weighted-average discount rate – finance leases, of 11.7%, is due to Nucor’s past accounting for the respective finance leases under the former accounting guidance for capital leases. Pursuant to the former lease accounting guidance, the recognition of a capital lease asset and associated capital lease liability could not exceed the fair market value of the leased asset at the lease commencement. Accordingly, the incremental borrowing rate was adjusted upward so that the present value of the minimum lease payments would equal the fair value of the asset.

Maturities of lease liabilities by year for our leases were as follows as of December 31, 2023 (in thousands):


	Operating Leases			Finance Leases
Maturities of lease liabilities, year ending December 31,
2024	$	29,014		$	24,890
2025		22,032			22,391
2026		18,240			20,456
2027		13,569			19,860
2028		11,334			20,059
Thereafter		33,717			160,729
Total lease payments	$	127,906		$	268,385
Less imputed interest		(20,828	)		(79,496	)
Present value of lease liabilities	$	107,078		$	188,889