Nucor 2011 Annual Report Download - page 32

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OPERATING ACTIVITIES
Nucor generated cash provided by operating activities of $1.03
billion in 2011 compared with $873.4 million in 2010, an increase
of 18%. The increase in net earnings over the prior year was offset
by changes in operating assets and liabilities of ($535.9) million in
2011 compared with ($128.9) million in 2010. The funding of working
capital increased over the prior year due to higher levels of operations
in 2011 and increases in the costs of raw materials and selling prices.
INVESTING ACTIVITIES
Our business is capital intensive; therefore, cash used in investing
activities represents capital expenditures for new facilities, the expansion
and upgrading of existing facilities, and the acquisition of other companies.
Nucor invested $440.5 million in new facilities (exclusive of acquisitions)
and expansion or upgrading of existing facilities in 2011 compared with
$345.3 million in 2010, an increase of 28%. Nucor’s capital investment
and maintenance practices give us the flexibility to reduce our current
spending on our facilities to lower levels during severely depressed market
conditions such as we experienced in recent years.
Additionally, the cash used in investing activities includes investments
in joint ventures and purchases of and proceeds from the sale of
investments. In 2010, cash used in investing activities included the acquisition of a 50% interest in NuMit LLC for $221.3 million and
the investment of funds received from the issuance of approximately $1.2 billion in long-term debt. These two investing activities account
for the majority of the decrease from 2010 to 2011.
FINANCING ACTIVITIES
Cash used in financing activities was $495.0 million in 2011 compared with cash provided by financing activities of $691.8 million
in 2010. In September 2010, Nucor issued $600.0 million of 4.125% unsecured notes due in 2022 for general corporate purposes,
including repayment of debt. In November 2010, Nucor issued $600.0 million in 30-year variable rate Gulf Opportunity Zone bonds to
partially fund the construction of the DRI facility in Louisiana.
In 2011, Nucor increased its quarterly base dividend resulting in dividends paid of $461.5 million ($457.3 million in 2010).
Although there were no repurchases in 2010 or 2011, approximately 27.2 million shares remain authorized for repurchase under the
Company’s stock repurchase program.
Our credit facility includes only one financial covenant, which is a limit of 60% on the ratio of funded debt to total capitalization. In
addition, the credit facility contains customary non-financial covenants, including a limit on Nucor’s ability to pledge the Company’s
assets and a limit on consolidations, mergers and sales of assets. Our funded debt to total capital ratio was 36% and 37% at year-end
2011 and 2010, respectively, and we were in compliance with all other covenants under our credit facility.
MARKET RISK
Nucor’s largest exposure to market risk is in our steel mills and steel products segments. Our utilization rates for the steel mills and
steel products facilities for the fourth quarter of 2011 were 71% and 55%, respectively. A significant portion of our steel and steel
products segments’ sales are in the commercial, industrial and municipal construction markets, which continue to be depressed.
Our largest single customer in 2011 represented approximately 5% of sales and consistently pays within terms. We have only a small
exposure to the U.S. automotive industry. In the raw materials segment, we are exposed to price fluctuations related to the purchase
of scrap steel and iron ore. Our exposure to market risk is mitigated by the fact that our steel mills use a significant portion of the
products of this segment.
The majority of Nucor’s tax-exempt industrial revenue bonds (IDRBs), including the Gulf Opportunity Zone bonds, have variable
interest rates that are adjusted weekly, with the rate of one IDRB adjusted annually. These IDRBs represent 24% of Nucor’s long-term
debt outstanding at December 31, 2011. The remaining 76% of Nucor’s long-term debt is at fixed rates. Future changes in interest
rates are not expected to significantly impact earnings. From time to time, Nucor makes use of interest rate swaps to manage interest
rate risk. As of December 31, 2011, there were no such contracts outstanding. Nucor’s investment practice is to invest in securities
that are highly liquid with short maturities. As a result, we do not expect changes in interest rates to have a significant impact on the
value of our investment securities.
year
500
1,000
1,500
2,000
2,500
09 10 110706
millions of dollars
CASH PROVIDED BY OPERATIONS
08