Nucor 2011 Annual Report Download - page 33

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32
Nucor also uses derivative financial instruments from time to time to partially manage its exposure to price risk related to natural
gas purchases used in the production process as well as scrap, copper and aluminum purchased for resale to its customers. In
addition, Nucor uses forward foreign exchange contracts from time to time to hedge cash flows associated with certain assets and
liabilities, firm commitments and anticipated transactions. Nucor generally does not enter into derivative instruments for any purpose
other than hedging the cash flows associated with specific volumes of commodities that will be purchased and processed in future
periods and hedging the exposures related to changes in the fair value of outstanding fixed rate debt instruments and foreign currency
transactions. Nucor recognizes all derivative instruments in the consolidated balance sheets at fair value. The Company is exposed
to foreign currency risk through its operations in Canada, Europe, Trinidad and Australia. We periodically use derivative contracts to
mitigate the risk of currency fluctuations.
CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS
The following table sets forth our contractual obligations and other commercial commitments as of December 31, 2011 for the
periods presented:
(in thousands)
Payments Due By Period
Contractual Obligations Total 2012 2013 - 2014 2015 - 2016 2017 and thereafter
Long-term debt $ 4,280,200 $ 650,000 $ 253,300 $ 16,300 $3,360,600
Estimated interest on long-term debt(1) 1,817,559 170,825 268,739 263,313 1,114,682
Operating leases 84,618 23,754 31,612 15,806 13,446
Raw material purchase commitments(2) 6,814,363 1,458,362 2,015,172 2,114,035 1,226,794
Utility purchase commitments(2) 981,823 207,685 178,362 106,734 489,042
Other unconditional purchase obligations(3) 943,404 407,083 227,804 236,194 72,323
Other long-term obligations(4) 337,203 162,986 52,952 12,271 108,994
Total contractual obligations $15,259,170 $3,080,695 $3,027,941 $2,764,653 $6,385,881
(1) Interest is estimated using applicable rates at December 31, 2011 for Nucor’s outstanding fixed and variable rate debt.
(2) Nucor enters into contracts for the purchase of scrap and scrap substitutes, iron ore, electricity, natural gas and other raw materials and related
services. These contracts include multi-year commitments and minimum annual purchase requirements and are valued at prices in effect on
December 31, 2011, or according to the contract language. These contracts are part of normal operations and are reflected in historical operating
cash flow trends. We do not believe such commitments will adversely affect our liquidity position.
(3) Purchase obligations include commitments for capital expenditures on operating machinery and equipment and payments related to the working
interest natural gas drilling program.
(4) Other long-term obligations include amounts associated with Nucor’s early-retiree medical benefits, management compensation and guarantees.
Note: In addition to the amounts shown in the table above, $80.9 million of unrecognized tax benefits have been recorded as liabilities, and we are
uncertain as to if or when such amounts may be settled. Related to these unrecognized tax benefits, we have also recorded a liability for potential
penalties and interest of $34.3 million at December 31, 2011.
DIVIDENDS
Nucor has increased its base cash dividend every year since it began paying dividends in 1973. Nucor paid dividends of $1.45
per share in 2011 compared with $1.44 per share in 2010. In December 2011, the board of directors increased the base quarterly
dividend to $0.365 per share. The base quarterly dividend has more than tripled since the end of 2007. In February 2012, the board
of directors declared Nucor’s 156th consecutive quarterly cash dividend of $0.365 per share payable on May 11, 2012 to stockholders
of record on March 30, 2012.
OUTLOOK
In 2012, we expect to see a continued, albeit slow, growth in sales and earnings. This expected growth will occur in a U.S. economy
burdened by a challenging regulatory and overall business environment. Uncertainties in Europe’s financial sector will almost certainly
affect both global and domestic growth in 2012. Utilization rates, which improved slightly during 2011, have continued at a similar pace
in early 2012 and we expect the trend to continue as we progress through the first quarter. In addition, recent price increases for all
steel mill products are expected to have a positive impact on earnings in the first quarter. This positive trend in earnings is expected to
continue as we head into the second quarter. We are therefore cautiously optimistic regarding first half volume, pricing and profitability.
We believe several end-use markets, such as automotive, heavy equipment, energy and general manufacturing, are experiencing some
real demand improvement that will continue throughout 2012. However, the effect of this improvement in demand on our operating