Nucor 2015 Annual Report Download - page 37

35
The current ratio was negatively impacted by large decreases in working capital, including decreases in accounts receivable,
inventories and other current assets. Accounts receivable decreased by 33% from 2014 due primarily to the 31% decrease in
net sales in the fourth quarter of 2015 compared with the prior year fourth quarter. This decrease is the result of an 18%
decrease in average sales price per ton and a 16% decrease in outside shipments in the fourth quarter of 2015 as compared
with the fourth quarter of 2014. In addition, inventories decreased by 22% from 2014 due to a 4% decrease in tons on hand and
the sharp decline in scrap and scrap substitute pricing. We also experienced a 63% decrease in other current assets, mainly
due to the reclassification of deferred tax balances included within other current assets to deferred credits and other liabilities in
connection with our early adoption of new accounting guidance requiring all deferred tax assets and liabilities to be classified as
non-current on the balance sheet.
In 2015, total accounts receivable turned approximately every five weeks and inventories turned approximately every nine weeks. These
ratios compare with accounts receivable turnover of every five weeks and inventory turnover of approximately every seven weeks in
2014. The 2015 inventory turnover calculation was negatively impacted by year end 2014 inventory balances, which were significantly
higher than those balances at the end of 2015 due to the rapid decrease in raw materials costs, lower shipment volumes and decreased
production in 2015.
Funds provided by operations, cash and cash equivalents, short-term investments and new borrowings under existing credit
facilities are expected to be adequate to meet future capital expenditure and working capital requirements for existing operations
for at least the next 24 months.
We have a simple capital structure with no off-balance sheet arrangements or relationships with unconsolidated special purpose
entities that we believe could have a material impact on our financial condition or liquidity.
CAPITAL ALLOCATION STRATEGY
Nucor’s strong cash and cash equivalents and short-term investments position provides many opportunities for prudent deployment
of our capital. We have three approaches to allocating our capital. Nucor’s highest capital allocation priority is to reinvest those funds
in order to profitably grow our business through capital projects at our existing operations, greenfield expansion or acquisitions.
Our second objective is to provide our shareholders with a robust return of capital through a strong base dividend reflective of our
earnings. The company’s third capital allocation objective is to strategically repurchase stock when our cash position is strong and
our stock is attractively priced. In September 2015, Nucor’s Board of Directors authorized the repurchase of up to $900 million of
the Company’s common stock. For the first time since 2008, Nucor repurchased approximately 1.7 million shares of stock for $66.5
million in December 2015.
OPERATING ACTIVITIES
Cash provided by operating activities was $2.16 billion, an increase of 61%
compared with cash provided by operating activities of $1.34 billion in 2014.
The primary reason for the change is increased cash generated from changes
in operating assets and liabilities of $743.0 million in 2015 compared with cash
used by changes in operating assets and liabilities of ($400.2) million in 2014.
The funding of working capital decreased from the prior year period due mainly
to decreases in accounts receivable, inventories and federal income taxes,
partially offset by an increase in cash used to fund accounts payable and salaries,
wages and related accruals. Decreased average sales prices per ton and outside
shipments from the prior year led to the decrease in accounts receivable, while
the decline in scrap and scrap substitute pricing from year end 2014 caused
the decrease in inventories. Federal income tax payments have decreased due
to Nucor’s decreased profitability. The increase in cash used to fund accounts
payable is due to the timing of payments. The increase in cash used for salaries,
wages and related accruals is primarily attributable to the payout of accrued
profit sharing and other incentive compensation costs in the first quarter of 2015.
This payout was based upon Nucor’s financial performance in 2014, which had
improved significantly over the prior year period. The increase in cash generated
from changes in operating assets and liabilities was partially offset by decreased
net earnings in 2015 from prior year levels.
year
400
800
1,200
1,600
2,400
2,000
12 13 1410
millions of dollars
CASH PROVIDED BY OPERATIONS
11 15