Nucor 2015 Annual Report Download - page 36

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PROVISION FOR INCOME TAXES
The effective tax rate in 2014 was 32.3% compared with 26.0% in 2013. The increase in the rate between 2013 and 2014 was
primarily due to a $21.3 million favorable non-cash out-of-period adjustment to deferred tax balances in 2013 compared to a
$13.2 million favorable non-cash out-of-period adjustment to tax balances in 2014, and the change in the relative proportions of
net earnings attributable to noncontrolling interests and the foreign rate differential to total pre-tax earnings between the periods.
NET EARNINGS AND RETURN ON EQUITY
Nucor reported net earnings of $713.9 million, or $2.22 per diluted share, in 2014 compared to net earnings of $488.0 million,
or $1.52 per diluted share, in 2013. Net earnings attributable to Nucor stockholders as a percentage of net sales were 3% in both
2014 and 2013. Return on average stockholders’ equity was 9% and 6% in 2014 and 2013, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Nucor’s cash and cash equivalents and short-term investments position nearly doubled, increasing from $1.12 billion at the end
of 2014 to $2.04 billion at the end of 2015. Approximately $360.6 million and $156.1 million of the cash and cash equivalents
position at December 31, 2015 and December 31, 2014, respectively, was held by our majority-owned joint ventures. Cash
flows provided by operating activities provide us with a significant source of liquidity. When needed, we have external short-term
financing sources available, including the issuance of commercial paper and borrowings under our bank credit facilities. We also
issue long-term debt from time to time.
Nucor has a $1.5 billion revolving credit facility that matures in August 2018 and was undrawn at December 31, 2015. We believe
our financial strength is a key strategic advantage among domestic steel producers, particularly during recessionary business
cycles. We carry the highest credit ratings of any metals and mining company headquartered in North America, with an A- rating
from Standard and Poor’s and a Baa1 rating from Moody’s. Our credit ratings are dependent, however, upon a number of factors,
both qualitative and quantitative, and are subject to change at any time. The disclosure of our credit ratings is made in order to
enhance investors’ understanding of our sources of liquidity and the impact of our credit ratings on our cost of funds.
Based upon these factors, we expect to continue to have adequate access to the capital markets at a reasonable cost of funds
for liquidity purposes when needed. This was evidenced when, during the fourth quarter of 2014, we issued approximately $300
million of commercial paper to partially fund the acquisition of Gallatin Steel Company. That commercial paper borrowing was
extinguished during the first quarter of 2015, and no commercial paper was outstanding at the end of 2015. The next significant
debt maturity is not until December 2017.
Selected Measures of Liquidity and Capital Resources
(dollars in thousands)
December 31, 2015 2014
Cash and cash equivalents $1,939,469 $1,024,144
Short-term investments 100,000 100,000
Working capital 4,369,207 4,344,112
Current ratio 4.2 3.1
The current ratio was 4.2 at year end 2015 compared with 3.1 at year end 2014. The current ratio was positively impacted by an
82% increase from 2014 in cash and cash equivalents and short-term investments. The increase in cash and cash equivalents
and short-term investments was primarily due to the robust $2.16 billion of cash generated by operating activities during 2015.
This increase in cash and cash equivalents was partially offset by cash used for capital expenditures, dividends and the decrease
in short-term debt which was mainly the repayment of commercial paper used to fund the 2014 acquisition of Nucor Steel Gallatin.
The current ratio also benefited from a 43% decrease in accounts payable as compared to year end 2014, which was mainly
attributable to the dramatic decrease in scrap and iron ore prices during 2015. The value of scrap and scrap substitutes on
hand decreased by 25% from year end 2014.