Nucor 2011 Annual Report Download - page 29

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Net sales to external customers in the steel mills segment increased 52% due to a 31% increase in tons sold to outside customers
and a 16% increase in the average sales price per ton from $593 in 2009 to $689 in 2010. Total production levels at the steel mills
increased 30% due to significant increases in outside shipments as well as in tons supplied to Nucor’s downstream businesses.
Tonnage data for the steel products segment was as follows:
(in thousands)
Year Ended December 31, 2010 2009 % Change
Joist production 276 264 5%
Deck sales 306 310 -1%
Cold finished sales 462 330 40%
Fabricated concrete reinforcing steel sales 981 954 3%
Net sales to external customers in the steel products segment increased 5% from 2009 due to a 12% increase in tons sold to
outside customers partially offset by a 5% decrease in the average sales price per ton from $1,263 to $1,194.
Sales for the raw materials segment increased 68% from 2009 primarily due to increased prices. Approximately 88% of outside
sales in the raw materials segment in 2010 were from brokerage operations of DJJ and approximately 12% of the outside sales
were from the scrap processing facilities (80% and 19%, respectively, in 2009).
The “All other” category includes Nucor’s steel trading businesses. The year-over-year increases in sales are due to increases in
both volume and price.
GROSS MARGIN
In 2010, Nucor recorded gross margins of $843.7 million (5%) compared with $154.4 million (1%) in 2009. The year-over-year
dollar and gross margin increases were the result of the 25% increase in total shipments to outside customers and the 13%
increase in average selling price per ton. Additionally, gross margins were impacted by the following factors:
฀• ฀ In the steel mills segment, the average scrap and scrap substitute cost per ton used increased 16% from $303 in 2009
to $351 in 2010; however, metal margin dollars also increased. The results of the first nine months of 2009 include a
substantially greater burden than 2010 from the accelerated consumption of high-cost pig iron inventories, primarily at
our sheet mills. These inventories were purchased prior to the collapse of both the economy and scrap/pig iron pricing in
the fourth quarter of 2008. The consumption of the high-cost pig iron inventories was completed by the close of the third
quarter of 2009 but had a negative impact of approximately $420 million on the 2009 gross margin.
฀• The average scrap and scrap substitute cost per ton in ending inventory within our steel mills segment at December 31, 2010
increased 32% as compared with December 31, 2009. At December 31, 2010, the tons on hand of inventory held at locations
that value inventory using the LIFO method of accounting decreased from December 31, 2009, causing a liquidation of LIFO
inventory layers in 2010. However, the increases in costs that we experienced more than offset the reduction in tons, and the net
result was a LIFO charge of $164.0 million in 2010 (a LIFO credit of $466.9 million in 2009). The increase in cost per ton was
driven by increases in the demand for steel and the related raw materials, while the decrease in tons on hand resulted from the
Company’s working capital management efforts.
฀• Pre-operating and start-up costs of new facilities increased to $174.8 million in 2010, compared with $160.0 million in 2009. In
2010, these costs primarily related to the Memphis SBQ mill and the Decatur galvanizing line. In 2009, these costs primarily
related to the start-up of the SBQ mill, the construction and start-up of the galvanizing line, the Louisiana ironmaking facility and
the Castrip project in Blytheville, Arkansas.
• Total energy costs decreased $3 per ton from 2009 to 2010 due primarily to increased utilization rates across all product lines.
MARKETING, ADMINISTRATIVE AND OTHER EXPENSES
Total freight costs increased 10% from 2009 to 2010, while unit freight costs increased only 4%. Higher fuel costs were partially
offset by efficiencies created by increased shipments. Profit sharing costs more than doubled from 2009 to 2010 because of our return
to profitability after a net loss in 2009. In 2010, profit sharing costs primarily consisted of $22.1 million of contributions made to the
Company’s Profit Sharing and Retirement Savings Plan for qualified employees (including the Company’s matching contribution).
In 2009, profit sharing costs primarily consisted of $9.6 million of matching contributions. Stock-based compensation included in
marketing, administrative and other expenses decreased 19% to $15.8 million in 2010 compared with $19.5 million in 2009.