Nucor 2013 Annual Report Download - page 29

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MARKETING, ADMINISTRATIVE AND OTHER EXPENSES
A major component of marketing, administrative and other expenses is profit sharing and other incentive compensation costs. These
costs, which are based upon and fluctuate with Nucor’s financial performance, decreased from 2012 to 2013. In 2013, profit sharing
costs consisted of $71.7 million of contributions, including the Company’s matching contribution, made to the Company’s Profit
Sharing and Retirement Savings Plan for qualified employees ($77.7 million in 2012). Other bonus costs also fluctuate based on
Nucor’s achievement of certain financial performance goals, including comparisons of Nucor’s financial performance to peers in the
steel industry and other companies. Stock-based compensation included in marketing, administrative and other expenses decreased
by 8% to $22.9 million in 2013 compared with $25.0 million in 2012 and includes costs associated with vesting of stock awards
granted in prior years.
Of the $27.0 million increase in marketing, administrative and other expenses in 2013 as compared to 2012, $15.3 million was due
to the inclusion of Skyline’s results for the entire 2013 year as compared to only being included after its June 2012 acquisition date
during 2012. Additionally, in the third quarter of 2013, a storage dome collapsed at Nucor Steel Louisiana in St. James Parish. As a
result, Nucor recorded a partial write-down of assets at the facility, including $7.0 million of inventory and $21.0 million of property,
plant and equipment, offset by a $14.0 million insurance receivable that was based on management’s estimate of probable insurance
recoveries. Included in marketing, administrative and other expenses in 2012 was a $17.6 million loss on the sale of the assets of
Nucor Wire Products Pennsylvania, Inc.
EQUITY IN (EARNINGS) LOSSES OF UNCONSOLIDATED AFFILIATES
Nucor recorded equity method investment earnings of $9.3 million in 2013 compared with losses of $13.3 million in 2012. The
equity method investment results included amortization expense and other purchase accounting adjustments. The improvement
in the equity method investment results in 2013 from 2012 is primarily due to greater equity method earnings at NuMit, a decrease
in losses at Duferdofin Nucor and earnings at Hunter Ridge (acquired in November 2012). Equity in earnings of unconsolidated
affiliates was $6.6 million in the fourth quarter of 2013 compared to losses of $4.2 million in the fourth quarter of 2012 and
earnings of $2.3 million in the third quarter of 2013. The improvement in equity method earnings in the fourth quarter of 2013 from
the fourth quarter of last year is mainly due to an increase in equity method earnings at NuMit as well as a decrease in losses at
Duferdofin Nucor. The improvement in equity method earnings in the fourth quarter of 2013 from the previous quarter is primarily
due to a decrease in losses at Duferdofin Nucor.
IMPAIRMENT OF NON-CURRENT ASSETS
In 2013, Nucor incurred no charges for impairment of non-current assets compared to $30.0 million in 2012. In the second quarter of
2012, Nucor recorded a $30.0 million impairment charge related to its equity method investment in Duferdofin Nucor (see Note 10 to
the Consolidated Financial Statements).
INTEREST EXPENSE (INCOME)
Net interest expense is detailed below:
(in thousands)
Year Ended December 31, 2013 2012
Interest expense $151,986 $173,503
Interest income (5,091) (11,128)
Interest expense, net $146,895 $162,375
The 12% decrease in gross interest expense from 2012 is primarily attributable to a 6% decrease in average debt outstanding and a
2% decrease in the average interest rate. In 2013, Nucor issued $1.0 billion of new notes at a lower weighted average interest rate than
the $900.0 million of debt that matured between the fourth quarter of 2012 and the second quarter of 2013. Gross interest income
decreased 54% due to a 50% decrease in average investments and a 45% decrease in the average interest rate on investments.