Nucor 2015 Annual Report Download - page 34

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32
GROSS MARGIN
In 2014, Nucor recorded gross margins of $1.91 billion (9%) compared to $1.41 billion (7%) in 2013. The year-over-year dollar
and gross margin percentage increases were primarily the result of the 3% increase in the average sales price per ton and 7%
increase in tons shipped to outside customers, along with the following factors:
• In the steel mills segment, the average scrap and scrap substitute cost per ton used increased 1% from $376 in 2013 to
$381 in 2014; however, metal margins also increased for our sheet, bar, structural and plate products from 2013.
• The average scrap and scrap substitute cost per ton in ending inventory within our steel mills segment at December 31, 2014
decreased 11% as compared to December 31, 2013. As a result, Nucor recorded a LIFO credit of $57.3 million in 2014 (a LIFO
charge of $17.4 million in 2013).
• Nucor’s 2014 gross margins were negatively impacted by $8.9 million in inventory-related purchase accounting adjustments
associated with our acquisition of Nucor Steel Gallatin in the fourth quarter of 2014 (none in 2013).
• Total steel mill energy costs increased approximately $2 per ton from 2013 to 2014 primarily due to higher unit costs for natural
gas and electricity.
• Gross margins in the steel products segment increased significantly in 2014 compared to 2013 due in large part to the improving
conditions in the nonresidential construction markets. Our joist, deck, rebar, cold finish and building systems operations all
experienced margin improvement in 2014 compared to 2013.
• Our Nucor Steel Louisiana DRI facility, which began operations in December 2013, experienced significant operational losses in
the first three quarters of 2014 primarily due to yield loss, which in our experience is not unusual in the early stage of production.
An equipment failure related to the process gas heater occurred in the fourth quarter of 2014. There were no injuries, no
environmental impact and no damage to any other part of the facility as a result of this incident. Production operations were
suspended for the remainder of 2014 after the equipment failure as the necessary repairs and adjustments were being made,
leading to further losses in the fourth quarter of 2014.
• Gross margins related to DJJ’s scrap processing and brokerage operations increased in 2014 compared to 2013. The brokerage
group benefited from stronger domestic scrap sales and gross margins for the scrap processing group improved during 2014
compared to 2013.
MARKETING, ADMINISTRATIVE AND OTHER EXPENSES
Profit sharing costs increased from 2013 to 2014. In 2014, profit sharing costs consisted of $110.1 million of contributions, including
the Company’s matching contribution, made to the Company’s Profit Sharing and Retirement Savings Plan for qualified employees
($71.7 million in 2013). Stock-based compensation included in marketing, administrative and other expenses decreased 4% to $21.9
million in 2014 compared with $22.9 million in 2013 and includes costs associated with vesting of stock awards granted in prior years.
EQUITY EARNINGS OF UNCONSOLIDATED AFFILIATES
Equity method investment earnings, including amortization expense, were $13.5 million in 2014 and $9.3 million in 2013. The
increase in equity method investment earnings from 2014 to 2013 is primarily due to greater equity method earnings at NuMit
and a decrease in losses at Duferdofin Nucor.
IMPAIRMENTS AND LOSSES ON ASSETS
In 2014, Nucor recorded $25.4 million of impairments and losses on assets primarily related to a $9.0 million charge on
the disposal of assets and a $12.5 million charge related to the partial write-down of assets, both in the steel mills segment.
During the third quarter of 2013, one of three iron ore storage domes collapsed at Nucor Steel Louisiana. Nucor recorded
a partial write-down of property, plant and equipment and inventories at the facility, resulting in a $14.0 million net charge
(see Note 7 to the Consolidated Financial Statements).