Nucor 2013 Annual Report Download - page 30

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EARNINGS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS
Earnings before income taxes and noncontrolling interests by segment for 2013 and 2012 are as follows:
(in thousands)
Year Ended December 31, 2013 2012
Steel mills $1,156,715 $1,162,270
Steel products 82,129 (17,140)
Raw materials 13,686 55,264
Corporate/eliminations (461,407) (347,454)
Earnings before income taxes and
noncontrolling interests $ 791,123 $ 852,940
Earnings before income taxes and noncontrolling interests in the steel mills segment in 2013 decreased slightly from 2012. Gross
margin was negatively affected in 2013 by lower metal margin dollars resulting from factors discussed above. The profitability of the
steel mills segment in 2013 benefited from improved results from the NuMit and Duferdofin Nucor equity method investments as
compared to 2012. Other factors impacting the profitability of the steel mills segment in 2012 that did not occur in 2013 were the $30.0
million impairment charge related to Duferdofin Nucor and the $48.8 million of inventory-related purchase accounting adjustments related
to Skyline. Earnings before income taxes and noncontrolling interests in the steel mills segment increased significantly in the fourth quarter
of 2013 as compared to the fourth quarter of 2012 due to more favorable market conditions in our sheet mills resulting from competitor
supply disruptions that began late in the second quarter and slightly improved demand. Although conditions are slowly improving from
historically low levels, the nonresidential construction market continues to lack sustained momentum. The strongest end markets continue
to be in manufactured goods, including energy and automotive.
The steel products segment had earnings before income taxes and noncontrolling interests in 2013 as compared to a loss in 2012.
Although the average sales price and volume for the segment were lower in 2013 than 2012, profitability in our joist, cold finish and
rebar fabrication businesses improved from 2012. The largest increase in profitability was in our rebar fabrication businesses, which
experienced higher average sales prices and the effects of management initiatives that have resulted in lower costs, better selling
strategies and improved supplier relationships. The steel products segment’s 2012 results were impacted by the $17.6 million loss
on the sale of assets of Nucor Wire Products Pennsylvania, Inc. in the third quarter of 2012. In 2013, the steel products segment
experienced its first profitable year since 2008. Though the profitability of the steel products segment has improved, conditions in
the nonresidential construction markets continue to negatively impact the results of the segment.
The profitability of our raw materials segment decreased from 2012. Difficult conditions in the scrap processing industry have had a
negative impact on the profitability of the scrap processing operations of DJJ since the first quarter of 2012. During this time, excess
shredding capacity has increased competition and therefore the cost of raw materials while the selling price of scrap has decreased in 2013
as compared to 2012. Also negatively affecting profitability in the raw materials segment were the third quarter 2013 charges related to
the net $14.0 million write-down of inventory and property, plant and equipment as a result of the dome collapse at Nucor Steel Louisiana.
Nucor Steel Louisiana also had increased startup costs in 2013 as it began production in late December. An unplanned 18-day outage at
our Trinidad DRI facility in early 2013 also contributed to lower profitability for the raw materials segment in 2013 as compared to 2012.
The decrease in results in Corporate/eliminations in 2013 was primarily due to a LIFO charge of $17.4 million in 2013 as compared to a
$155.9 million LIFO credit in 2012.
NONCONTROLLING INTERESTS
Noncontrolling interests represent the income attributable to the minority interest partners of Nucor’s joint ventures, primarily
Nucor-Yamato Steel Company (NYS) of which Nucor owns 51%. The 10% increase in earnings attributable to noncontrolling interests
in 2013 over the previous year was primarily due to increased margins as a result of a shift in product mix at NYS. Under the NYS
limited partnership agreement, the minimum amount of cash to be distributed each year to the partners is the amount needed by
each partner to pay applicable U.S. federal and state income taxes.
PROVISION FOR INCOME TAXES
The effective tax rate in 2013 was 26.0% compared with 30.5% in 2012. The change in the rate between 2012 and 2013 was primarily
due to a $21.3 million out-of-period adjustment to the deferred tax balances recorded in 2013. The out-of-period item did not have a
material impact in the current or any previously reported period. Nucor has concluded U.S. federal income tax matters for years through
2009. The 2010 through 2013 tax years are open to examination by the Internal Revenue Service. The Canada Revenue Agency has
completed an audit examination for the periods 2006 to 2008 for Harris Steel Group Inc. and subsidiaries with immaterial adjustments to
the income tax returns. The tax years 2009 through 2013 remain open to examination by other major taxing jurisdictions to which Nucor is
subject (primarily Canada and other state and local jurisdictions).