Nucor Corp (NUE) 2002 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the 2nd quarter earnings release conference call for Nucor. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star, then zero on your touch-tone phone. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Dan DiMicco, Vice Chairman, President, and CEO of Nucor Corporation. Mr. DiMicco, you may begin.

Thank you. Good afternoon and thank you for joining us today for Nucor's conference call. We will briefly review results from the 2nd quarter, and then take your questions. But first I would like to welcome and say hi to all the members of the Nucor family who are listening into this conference call on the Nucor website. The 8,400 men and women of Nucor walk and talk each and everyday as we work together, to build Nucor's position as the safest, highest-quality, lowest cost, most productive and most profitable steel and steel products company in the world. Terry Lisenby, Nucor's CFO, and our other EV.P.'s John Ferriola, Hamilton Lott, Mike Parrish and Joe Rutkowski are with me this afternoon and will be available to answer questions, as well. For those of you new to Nucor Corporation, allow me to provide a brief description of our business. We are the United States largest recycler. Recycling well over 11 million tons per year. With 2001 steel production of 12.3 million tons, Nucor's North America's largest steel producer.

Nucor has 40 operating facilities in 10 states and approximately 8,400 employees at these facilities. We are the most diversified steel producer in the United States with products that range from reinforcing bar, to motor lamination steel, to pre-engineered metal buildings. We are the nation's largest structural streel producer, the largest steel bar producer, the largest joist producer and the largest steel deck producer. Other major products include: hot-rolled, cold-rolled, and galvanized sheet steel, steel plate, cold-finished steel bars, metal buildings, fastners, [INAUDIBLE] stainless steel, and light-gauge steel framing. Our 2nd quarter earnings per share of 77 cents, includes 22 conference per share of non-recurring income from the graphite electrode anti-trust settlement received during the quarter. On an operating basis, our 2nd quarter earnings per share of 55 cents was 111.5% above the 1st quarter of 2002, and 5.7% above the first call consensus analyst estimate of 52 cents. This quarter represents the first positive year-over-year earnings comparisons since the third quarter of 2000. Nevertheless, our results continue to reflect the very difficult market conditions in many of our businesses that are impacted by the current down cycle and the non-residential construction market. However, we are encouraged to know early for a very significant evidence of improved profitability in our sheet steel business this past quarter. Substantial opportunity and earnings leverage remains ahead of us as we execute our flat roll strategy, of improvement returns by building market share, and by broadening our market portfolio with the higher value-added grades. We continue our work to build long-term earnings power in all of our businesses. As we press ahead with cost reductions quality improvements and market share gains.

Speaking of market share, Nucor once again set new records in the 2nd quarter and first half of 2002 for steel production, total steel shipments and steel shipments to outside customers. Our first half 2002 steel production of over 6.7 million tons was almost 9% year-over-year, and compares against a decline of roughly 1% in total North American steel production for the same period. We expect the second half production levels to exceed the first half, and result in over 13.4 million tons of production, which would be another record year. Our growth continues to be rooted and focused in discipline execution of our three-prong strategy for driving long-term growth in Nucor's earnings power and raising returns on capital. During the 2nd quarter, we continued our work to one, optimize existing operations. Two, implement new disruptive and lead product technologies through greenfield growth. And three, pursue acquisitions. Overall, our focus on continued improvement at our existing operations resulted in a year-over-year reduction in operating costs of $11 per ton, through the first half of 2002. We plan to remain a low-cost producer and world class competitor in all of our product lines. As one ongoing example, the [INAUDIBLE] group continues to move ahead with implementation of the $200 million capital projects program, that was announced earlier this year and is expected to be completed by 2004. Nucor's new facility in Crawfordsville, Indiana, using the cast strip technology, began operations in the 2nd quarter. Cast strip technology is designed to cast -- to directly cast strip steel from liquid.

Our initial work with the leapfrog technology is focused on carbon sheet steels. We are producing coils on a daily basis, and then ship prime coils to [INAUDIBLE] Indiana, that have been successfully processed in the steel deck. Our ability to produce strip on a routine basis, has allowed us to advance our commissioning schedule more quickly than anticipated, to a point where we can focus on productivity and product quality improvements. We are very encouraged by the rapid progress we have made, implementing the radically new disruptive technology. Closing of our transaction to acquire Trico Steel Company, LLC. for less than $120 million is expected to occur this month. The new [INAUDIBLE] was received last week. Located in Decatur, Alabama, the Trico sheet steel mill originally began operation in 1997, and has an annual capacity of approximately 1.9 million tons, increasing our sheet capacity by roughly 1/3. But Nucor Steel Decatur management team is now in place, and training of the first crew starts next week. [INAUDIBLE] modifications to increase the capacity of this facility and the quality of its products were started immediately after receiving the required air permits. We're confident that we will be producing gauges under 060 inch in thickness. We will ship coils from Decatur by year end. The addition of these assets will support our flat roll strategy to build profitable market share and broaden our sheet product portfolio to include higher quality grades. Regarding the sheet steel markets, realized prices are tracking very much in line with our expectations as outlined on our last conference call. Base pricing in August will be at a minimum of $320 per ton for hot-rolled, $400 to $410 per ton for cold-rolled and $420-$430 per ton for galvanized. While we have not yet opened our 4th quarter order books, we do expect a moderate price increase over the 3rd quarter pricing on that business. Most importantly, we continue to push up the value chain with respect to both product and customer mix.

Along those lines, we recently were awarded business with several new automotive customers, including Honda. In May, we signed a definitive agreement to purchase substantially all the assets of Birmingham Steel Corporation, for $615 million in cash, which includes approximately $120 million in receivables and inventory. Primary assets to be included in the purchase are four operating mills that have combined annual capacity of roughly 2 million tons. Birmingham filed for chapter 11 bankruptcy, pursuant to a pre-arranged plan in early June. As Birmingham moves through the bankruptcy process, we are making good progress on implementing our transition plans. Closing expected to occur late in the 4th quarter of this year. This is dependent upon approval of the Delaware Bankruptcy Court, and necessary regulatory rulings, and we are confident that this will occur. In June, we announced that Nucor has entered into an agreement to purchase substantially all the assets of Quali-Tech Steel, LLC. for $37 million in cash. Located in [INAUDIBLE] Indiana, the Quali-Tech special bar quality mill facility originally began operations in 1998, and has annual capacity of 500,000 tons. The agreement is subject to satisfactory resolution of due diligence, regulatory approvals, tax matters and utility equipment and other contracts. This acquisition, together with our current special bar quality operations at our mill in Nebraska and other mills in Auburn, New York, North and South Carolina, are three co-finished bar operations and fastners in Indiana will form the foundation of our growth as the major, special bar quality producer in North America. Finally, Nucor's involvement in the trade issue is also a critical part of our efforts, to support the long-term success of our steel-making operations. President Bush's [INAUDIBLE] remedy -- excuse me -- continues to draw significant attention in both the press and financial markets. Relative to both exclusions filed for by overseas producers and the controversial nature of these tariffs.

Having met last week with senior members of the Bush administration, we continue to believe that the President intends to push ahead with this politically courageous decision to seek to restore free and fair trade to the global steel markets. At the same time we will remain diligent in working with the administration to see that the remedy decision is not abused or undermined by foreign producers or steel-trading companies. Moreover, we continue to work with the Congress to see that our countries antiquated trade laws are revamped so that they are more effective with quicker response times and with barriers in place to prevent product and country switching. Features that are entirely compliant and consistent with the [INAUDIBLE] rules. Longer term, our view remains that the best way to resolve the global steel industry's structural problems in the United States to help negotiate with other steel producing countries worldwide, reductions and steel compacity, and the elimination of government subsidies that keep inefficient mills operating. The Nucor can-do attitude and energy level remains focused on seeing that free trade means all producers and all countries play by the rules. As you can see, Nucor remains busy pursuing a number of initiatives, all focused on helping us deliver our earnings and shareholder value growth objectives. We intend to build upon a Nucor tradition as a successful, cyclical growth company. This is why we believe Nucor's best years are still ahead of us. Terry Lisenby will now review the results of the 2nd quarter. Terry?

Good afternoon, thanks, Dan. Sales for the 2nd quarter of 2002 were 1,142,000,000. An increase of nearly 6% over the 2nd quarter, 2001 level, an an increase of 11% on the 1st quarter of this year. Total steel shipments of 3,393,000 tons in the second quarter, 2002, set a new quarterly record and we're up about 7% year-over-year. Total steel shipments of 6,665,000 tons for the first half of the year also established a new six-month record, an increase of 8% over the year-earlier period. However, 2nd quarter 2002 steel joist productions of 116,000 tons, was down 17% from last year's 2nd quarter. First half 2002 steel joist productions of 210,000 tons, was down 21% from the 265,000 tons of steel joists produced in 2001's first half. Our average sales price for steel and steel products was essentially flat year-over-year, increasing one dollar per ton, from $333 per ton in the 2nd quarter of 2001, to $334 per ton in the 2nd quarter of 2002. However, the composite average sales price per ton increased 6%, or $18 per ton, quarter-over-quarter. This improvement was largely driven by higher flat-roll pricing with quarter-over-quarter selling prices increases of 13% in sheet, and 11% in plate.

Joist index prices remain severely depressed, with year-over-year selling price declines of 23% for joists and 16% for deck. Excluding the Electro's anti-trust settlement income, earnings before federal income taxes were $20 per ton for the 2nd quarter of 2002. Compared to $10 per ton in the 1st quarter of 2002, and $17 per ton in the year ago quarter. Again, excluding the electro settlement income, net earnings for the 2nd quarter of 2002 were 55 cents per share. Comparing favorably against both net earnings of 43 cents per share for the 2nd quarter of 2001, and 26 cents per share for the 1st quarter of 2002. Reflecting the initial recovery of pricing and some products, our gross margin improved to 9.2% in the 2nd quarter of 2002, from 6.9% in the 1st quarter of this year. Nearly even with the year-ago quarterly gross margins of 9.3%. The average cost of scrap increased $11 per ton quarter-over-quarter, and $5 per ton year-over-year, to $107 per ton for the 2nd quarter of 2002. Capital expenditures were $77 million for the first six months of 2002, and we project full year '02 capital spending of about $180 million. Depreciation expense for the first six months was $152 million, and we project about $305 million for the full year. Cash and short-term investments totaled $536 million at the end of the quarter, compared to $456 million at the end of the 1st quarter and $462 million at the end of 2001. Approximately $188 million of the June 2002 cash and short term investment position is held by [INAUDIBLE] company, 51% of which belongs to Nucor. Minority interests distributions through the first half of 2002 have totaled $133 million. Long-term debt at the close of the 2nd quarter was $458.6 million, less than 16% of total capital. Nucor's long practice conservative financial and accounting practices, we report our results and our financial position in plain language and in an easy-to-understand format. We do not report pro forma earnings results.

The earnings are simply the earnings as determined using conservative applications of GAAP. We have a simple capital structure with no off-balance sheet financing arrangements. We will continue these traditions and maintain our strong balance sheet. Importantly, our position of financial strength allows us to take a long-term perspective in running our business and to capitalizing on opportunities as they present themselves. Reviewing the numbers for 13 weeks ended June 30, 2002, compared to the year-ago period, for structural steel, production was up 16%. Shipments up 12%. Net orders up 9%. And backlog down 5%. For steel bars, production was up 4%. Shipments up 2%. Net orders up 10%. And backlog up 22%. For sheet steel, production was up 6%. Shipments up 2%. Net orders down 2% and backlog up 46%. For steel joist, production was down 17%, quotes down 1%, net orders up 8% and backlog down 7%. For steel deck, production was down 13%, quotes up 15%. Net orders up 24% and backlog up 3%. For coal finished steel, production was up 19%. Outside shipments up 8%. Net orders up 48%. And backlog up 37%.

Structural steel average pricing declined $11 per ton in the 2nd quarter from the first quarter, but was up $16 per ton year-over-year. Pricing in the structural market is likely to erode modestly over the balance of this year, reflecting both soft, non-residential construction activity and capacity additions in this market. Steel joist average selling prices in the 2nd quarter were down $43 per ton from the 1st quarter of this year, and then dropped $82 a ton from year-ago levels. Recent order activity levels in our joist and deck businesses suggest that we may be at the bottom of the non-residential construction site. Bar selling prices increased by $9 per ton from the 2nd quarter to the 1st quarter, but are down $5 per ton year-over-year. Demand is improving somewhat in this market and further price increases in the second half of this year are certainly possible. Sheet sale pricing increased by $35 per ton in the 2nd quarter over the first. Sheet sale average selling prices should show additional significant increase in the 3rd quarter, due to previously announced price hikes that are effective in both July and August. At the end of the 3rd quarter, our hot band pricing will still be under, and our cold-roll and galvanizing pricing will still be significantly under the prevailing price levels prior to the import surges of 2000. Flight prices increased by $27 per ton in the 2nd quarter over the first quarter. Further price increases should be realized in the second half of this year. Our North Carolina flight mill, in less than two years, has captured a significant and attractive market share position in the North American discreet plate market. We would now be glad to take your questions.

Thank you. If you have a question at this time, please press the 1 key on your touch-tone telephone. If your question has been answered, or you wish to remove yourself from the queue, please press the pound key. Our first question comes from Peter Marcus of WSD.

It's [INAUDIBLE] of World Steel Dynamics. I'd like to ask a few questions, please, on cast strip. Can you tell us, Dan, what you're finding out about the surface quality? How thin and wide you've been rolling? How long the production runs have been? And, perhaps, how soon you can be at your capacity? And if your operating costs at that point could be close to your other flat-rolling mills?

John -- I think John Ferriola will answer these questions, Peter. I'm not sure we got them all down, but --

We'll try it!

That was a mouthful.

It was!

Overall I will say that things are progressing extremely well. I will let John answer the specific points.

Thank you.

We've been casting .070 inches and 50 inches in width. And we've been producing only as [INAUDIBLE] product. The surface quality, in particular, the edge quality, is better than we expected. I'm very encouraged by that. I guess another question was how long were the runs? We have been targeting single-heat runs,which is about 120 tons. We've been doing that on a routine basis. This morning we did our first two heat sequence, and that went off very well, also. In terms of future plans, we are going to be commissioning the -- the reducing mill this month. We intend to put that into operations so we can begin to ship reduced product and -- and August we're targeting to start our stainless production. So --

When you said .070, that's inches?

Yes.

Thank you.

Slightly under two millimeters.

Okay. Thank you.

Our next question comes from Wayne Atwell of Morgan Stanley.

Thank you. I had a couple quick questions. Can you tell us if you had any start-up costs in the 2nd quarter, and if you had a lifo charge?

We did had a lifo charge in the 2nd quarter of $5.7 million. Pre-operating and start-up it dropped off quite a bit. 2nd quarter, just under $9 million, $8.9 million.

Is that primarily a plate?

No, actually that's primarily cast strip and [INAUDIBLE], New York.

And lifo for the first half is -- was only in the 2nd quarter, so you didn't have any in the 1st quarter?

We had some in the 2nd quarter year to date's $11 million even.

$11 million year to date.

Right.

And how much plate did you ship?

In the quarter?

Right.

In the quarter we shipped say 238,000 tons.

And how much year to date?

Year to date we're at --

437.

Yeah. 437.

Thank you.

Wayne, one clarification on start-up costs, we no longer characterize -- categorize our Nucor building systems or the Nucor Herbert plate mill in the start of cost category. However, neither of those operations are profitable at present.

Okay, great, thank you.

Our next question comes from azo -- Aldo Mazzaferro of Goldman Sachs.

Hi, Dan.

Hi Aldo!

Just a quick one on the plate mill, now that it's no longer categorized in start-up, how many people should we add in terms of head count to our cost assumptions now...now that you brought it in on a commercial basis. How many people working at the plate mill, would you say?

Aldo, this is Joe, we just started up our fourth crew a couple of weeks ago. And I'll tell you the truth, I don't know how many people that is, but I guess we're in the neighborhood of 340 folks.

Okay. So that, so that might have added about a quarter of those?

Actually, I'm being told that we 309 people there, but I think that's going to increase this month. So -- I don't know that -- I don't know what you had in your model.

Well, I -- yeah, I had it down in start-up. So I just just trying to move it up into regular cost of sales now.

Yeah, I'd say we will end up with around 340 folks.

Okay. And Dan, can I ask you a question on pricing? I know you've been honoring commitments to customers that you made previously, and, you know, if you look at the index of sheet pricing and, you know, published by purchasing magazine, on a year-to-year basis, the hot-rolled's up by 40%, and galvanized and cold-rolled are up between 25 and 30. You're pricing year-to-year on sheet is up around 10. Is that a reflection of your loyalty to your customer base, or would you have another explanation of why you're lagging in the market a little?

It is a -- it's a statement to our commitment to honor our contracts and we have been honoring our contracts and we will continue to do that. I will point out that we expect that to improve as those contracts come to an end. Obviously every quarter there are certain contracts that do end and we renegotiate those contracts. So we're expecting the renegotiated pricing to improve.

The other thing I would add to that, Aldo; that depending upon the particular division, some of our divisions have considerably more contract business than others, talking flat-rolled. And one of our divisions that has a significantly less-seen price increase is similar to where other people have been reporting, and we have a second one that's somewhere in between. Then, we have a third one, it's about 70% contract business that stood us very well during the low pricing times, but is coming up for renegotiation in the next quarter.

Okay, so, Dan, will you be able to give us a ballpark estimate of what you expect sheet prices to do quarter-to-quarter for the 3rd quarter?

We expect they will go up significantly. As we mentioned already, the 2nd quarter price increases were up $35 a ton on average, quarter-over-quarter. And we expect -- I'm not going to give you a number, although some people do, I don't think it's appropriate to, but I will say it will be up significantly 3rd quarter over 2nd quarter.

All right. Thank you.

Our next question comes from Mark Parr of McDonald Investments.

Hey, guys.

Hello, Mark.

Yeah, I had just a follow-up question to Aldo's commentary on sheet pricing. What would you expect potential for plate pricing in the 3rd quarter or the second half compared to what you had in the 2nd quarter?

We think it will improve but I -- I -- I would say we would -- we would hope to realize between 20 and $30.

Okay. Terrific. Also, just a follow-up on the conversion cost complement, Dan, that you made. You said that your cost of production is down $11 year to date, and I'm assuming that's just pure conversion costs and I was just wondering if you might talk a little bit about some of the major piece that's worked to make that happen. And, by the way, congratulation ease the cost reduction initiatives.

There's a number of things that have contributed year-over-year on that...that $11 a ton. Certainly, improvement in yield and quality of our product and lessening the amount of secondary. Also, there's been an improvement, as you know, on the natural gas side, year-over-year, which is benefited to us. And productivity enhancements at our plants have further lowered the cost of production. To contribute to that. And we have a lot more in the works that are going to significantly add to our cost reductions going forward.

Okay, just one -- thanks for that. One last question, do you have a timeline for when you expect Quali-Tech to restart?

As we've mentioned in the past, Mark, we have yet to receive the permitting on that. We anticipate that's gonna be somewhere between 7 and 9 months from now and, so, it certainly will not be starting up before then. We will not be doing any major work at that site before we get the permitting down. But, I will let Mike Parrish give you a little bit more information on that.

Okay. Thank you.

Well, I'd -- basically what Dan said, we have -- have to wait for the permit and we are going to, you know, start looking at hiring some folks and getting that going here in the next couple of months as far as getting people on board. But, it's going to take some time before we get everything going. Probably -- we're looking at more in the middle of next year.

Okay. Terrific. Thank you. Congratulations on a great quarter! I look forward to more good news here in the second half.

Thank you, Mark.

Our next question comes from John Tumazoes of Prudential Securities.

Congratulations on the great results, and particularly the [INAUDIBLE] settlement.

As you know, that's part of good management team to be able to do things like that. So... Terry Lisenby and company did a great job for us.

How much did we expect scrap costs to escalate in the current period?

In the next quarter?

Right.

I could probably ask six people in the room and get six different answers, John! Our actual thoughts on scrap pricing is going to be more side ways to slightly up than -- and not up significantly. Although I know other people reported they expect it to go up in double digits. We don't see that right now.

So, despite the escalation and some of the quotations we would read in the American Metal Market, your experience buying pig iron and buying scrap in your areas that are obviously -- obviously -- [INAUDIBLE] Arkansas is a lot different than Pittsburgh and Chicago, but your experience is very different than what we're reading in the papers.

We have a very broad scrap and raw materials purchasing effort that -- that brings materials in from all over the United States and also the world, and I think that you would agree, John, that if you looked at pricing, scrap prices at the end of the 1st quarter, you might have expected our numbers to be more than up $11 year-over-year -- or excuse me, what was that, 2nd quarter over 1st quarter?

Right.

And $5 year-over-year. And our scrap purchasing team has done a very good job of keeping that under control.

And there are, you know, certainly there's some export interest continuing, moving scrap offshore, but there is still a lot of scrap resources and iron unit replacement resources available to us, and we don't see the double-digit increases that other people are projecting. As I look at the tonage data for the 2nd quarter, the sheet production was 1602. The shipments were 1482. And the orders were 1352. Were you, and the orders seemed to trail off a little bit in June. Were you basically not taking orders in June in preparation for opening up the order book for the 4th quarter?

I will let John Ferriola answer that question.

The answer is that we did stop taking orders. We limited the orders that we were taking. We did not stop entirely. We did that to allow our production to catch up with our backlog, so that we would be completely caught up by the end of the 3rd quarter.

And -- and, in fact, the backlog fell 350,000 tons in the June month, but it is still very large. It's -- it looks like it is four months of production.

I think it is 1.7 million tons, currently. Is that right? Almost 2 million. Almost 2 million tons.

We like to say that we're not overbooked, we're underproduced, and we can rectify the situation.

Are there particular mills in your system where the backlog is bigger or demand is greater or is the southeastern economy better than the Arkansas economy or any variations like that? Or maintenance scheduling issues to contribute to it?

Actually not, John. The demand has been even in all of our mills, and has been extremely strong in all of our mills.

Thank you.

Our next question comes from Mark Rogensinger of Merrill Lynch.

Good afternoon, gentlemen.

Good afternoon.

Just one additional question on the cash flow. Terry, if you can give us the minority interest line on -- because you gave us the other two in terms of you calling them [INAUDIBLE]

In terms of the cash?

The cash [INAUDIBLE] you gave us, and the contribution you gave us. Can we have the minority insert line?

For the quarter it was $24.5 million.

Thank you very much. In terms of the markets now, I see, as you've pointed out, your joist and deck shipments seem to be picking up, or stabilizing at lower levels. I see the pricing is still under pressure. Any thoughts on what the pricing...what that equation pricing against volume is likely to do in the second half of the year.

Hamilton will address that question.

Pricing is increasing in the deck business. [INAUDIBLE], you have a season cyclical -- volumes, you have a season cyclical every year, we're in the height of the construction season, so, we certainly expect the volumes to be larger in the third and fourth quarter than they were in the first half.

Okay, thanks a lot.

Our next question comes from Dan Rolling of Merrill Lynch.

Congratulations on a good quarter, gentlemen.

Thank you, Dan.

Two simple accounting questions. One, and a standard one I'm asking these days, what impact would have options had on your income for the first half if you had expensed them like coca-cola's proposing they're going to do?

Dan, I don't know for the first half. I know for last year it would have been a little -- for the whole year it would have been a little less than 5 cents a share.

Okay.

Our grant rate is extremely low. We granted last year, in terms of a grant weight to weighted average outstanding, at .6%. So, our option program is small when compared to most.

You should do something about that.

Well, I don't know. These days -- that might be a positive, not a negative!

Write to the board! [ laughter ]

Are there thoughts of changing how you expense that? Or would you consider expensing it?

We've considered it. It is not material for us is really the big reason -- the big reason it's never been an issue.

Okay.

In fact, if you look cumulative from 1995, when the standard was last changed, through 2001, cumulative for all those years, I think it's like 17 cents a share.

Okay.

So, it...you know, if we did in any given year it sort of a non-event.

Okay, that's good to know. And second, this may be a little more difficult. If you broke out all of your income, operating income or net income, your choice, from all your equity investments or minority investments, how would your income breakdown down?

I don't know off-hand.

Is it something you can get back to me on?

Well, the only -- the only one that is significant in there is Nucor [INAUDIBLE].

Okay.

All the rest of it would be insignificant. I mean really insignificant.

Okay.

And you know Nucor [INAUDIBLE]

Yep, yep, got that one. Thank you.

Sure.

Our next question comes from Allen Winestein of Morgan Stanley.

Hi, how are you?

Fine Allen, yourself?

Good, just a quick question. How much under the market price did Trico cost? And what would it cost if you were to purchase--do it yourself? To build it yourself?

It was -- I think it was built at an expense originally of over $450 million. So, it, you know, you could speculate that it might be a little bit more expensive today, or a little bit less dependent on how hungry the equipment suppliers are. It would be in that neck of the woods, as we mentioned in our presentation previously, we're paying under $129 million for the assets at the Trico.

Okay. Thank you.

Our next question comes from Chris Olan of Midwest Research.

Good afternoon, guys.

Hello, Chris.

There is a..still a substantial number of 201 exemptions yet to be reviewed by the Commerce department. Do you have any thought on...I guess in terms of tonage how much would likely circumvent the barrier? The number 13 million tons is thrown around, about 1 million tons exempted to date. How high could this number get?

Well, we had a meeting with top administration officials and cabinet members a week ago Monday in Washington. And we came out of that meeting very, very positive with a lot of reinforcement that the remedy would not be gutted. So, to speculate on exactly how many tons, additional might be exempted, I don't think it will be many, and based upon what we with told, it will not be at a level that would cause deterioration to the remedy going forward. As I think you know, we've talked before about this, really the 201 pairs at this point in time have had a minimal impact on pricing ,and the marketplace has really been driven by a drop-off in supply, both domestic and particular. But also imports that have been tied to trade cases, not to 201 tariffs.

Thanks.

Our next question comes from Charles Bradford of Bradford Research.

I've got a question for Terry in regard to tax rates. It looks like your 2nd quarter rate if I exclude the non-recurring gain was only 31%. What do you think your rates will be for the rest of the year?

Why would you exclude the gain? We included it in the tax calculation?

I just took out the after-tax and pre-tax, to get a figure for your operating results.

No. We use the same rate on both.

Okay. -- what -- okay. What do you think --

Yeah, going forward for the rest of the year is not going to change. The rate was applied to pre-tax income. Not -- not either separately.

Okay. Thank you.

Sure.

Our next question comes from Joe Inny of World Steel Dynamics.

Hello, gentlemen. How are you all doing?

Fine, yourself.

Good, thank you. Just have a quick follow up on Trico, I believe you said you'll be shipping by the end of the year? About how much tonage and if you could project out next year if all things continue to go well? What kind of shipment to you expect down at Trico?

It's really too early to say for this year, but we would expect to ship some product out of Trico-out of Decatur facility this year. We don't expect to begin shipping until December, so, it will be a minimal amount. As far as next year goes, we have a ramp-up schedule. I think we will probably reach 7-800,000 tons next year.

Ok...All right. Thank you very much.

Our next question is a follow-up from Aldo Mazzaferro of Goldman Sachs.

Thanks for the follow-up. Dan, on two categories, I was just wondering about your comments on volume. In the -- in the flat-rolled sheet area I was surprised it didn't change much from 1st quarter to 2nd. And I'm wondering if you can talk about you know, whether you might have had inventory shipments in the first quarter or what your -- you know, what would you subscribe the flatness to, when it seems like the market ramped up quite a bit in the 2nd quarter. The other question is really kind of an [INAUDIBLE] question-- I was a little surprised with the strength in the structural steel on the shipments in the 2nd quarter versus the first. I was wondering if you can comment on that?

As far as structural steel goes, what I think you're referring to the beam business?

Yeah.

We -- we were able to effectively maintain market presence due to selective pricing moves with respect to imports and were able to maintain our volumes very nicely. And we expect that we will be able to do so throughout the rest of the year, subject to how quickly [INAUDIBLE] ramps up at their mill. As far as the flat roll, end of things, John, do you want to speak to what the actual shipment increases were?

Talking about year-over-year, or 2nd quarter over 1st quarter?

I was talking 2nd quarter to 1st quarter, you know, which is actually just a touch down, actually. 1st quarter to 2nd, I should say.

Yes it was down a little bit in the 2nd quarter. I think some of it would have been shipments in the 1nd quarter produced at the end of the last year. We had some inventory shipments that shipped out in the 1st quarter. That's pretty typical at the end of the year and beginning of January. Other than that there was really no unique...

So, would you say the flat-roll division shipped pretty close to its capacity in the 2nd quarter?

I think we were fairly close to our capacity in the 2nd quarter. [INAUDIBLE] was down a little bit.

And then, Dan, on your answer on the structurals, it sounds like the market improved and you maintained share?

I wouldn't say the market improved. That's not what I was saying. Saying that we maintained our market share and did not lose market share to competition, whether domestic or foreign, and we're were able to maintain shipping levels and production levels. But the market is weak and you can look at our backlog, it is not -- it is good, but not strong.

Yeah. But your shipments did go up about 35,000 tons, from 1st to 2nd?

Well, I mean 35,000 tons is -- is less than half a week of shipments. So, it is...

All right, thanks, Dan.

Our next question is from Jeff Rosenkrants of Delaware Bay Company.

Good afternoon. Thank you. Relative to the Birmingham acquisition, I wondered if you might be able to lay out in a little bit more detail the timetable towards your tentative late '04 -- late Q4 closing both on the regulatory and bankruptcy process? And maybe where you are in the -- in the [INAUDIBLE] filing process?

This is Joe Rutkowski. You know, the -- the bankruptcy process, which we're -- we are really not part of, appears to be going, I guess -- I wouldn't say -- I mean obviously as anyone would have expected, it goes through their process, you have -- the normal requests and the normal schedules that were set forth. At this point, I believe the court has -- is -- is trying to get basically the plan confirmed by sometime in mid-September. So, closing -- if that were to occur would be sometime after that. That's where we're kind of getting the 4th quarter timeframe from. As far as -- I will let Mike Parrish talk about any transitional issues, as far as Hard Scott Rudino, we're into -- you know, we've alone having excellent conversations with the department of justice, we have through this whole process, we've been meeting with them almost on a weekly basis trying to get them every bit of information we want. We're into the second round already and we're trying to confirm the information that they are really, truly looking for. We're assembling the information and, you know, things appear to be going pretty well, quite frankly.

Okay. Thank you. And it also appears as if there's some type of mechanism where the ultimate purchase price might be either lower or higher, is there any clarity around that at this point?

It really doesn't get any higher actually. The only way it kind of goes lower, if there's any true material change, we would have, which we don't anticipate, we're in touch with Birmingham on a daily basis, the only other issue is the working capital and we have a certain number in there for working capital with some brackets around it. So, we know they're managing that well. So, at this point in time it looks like that number is pretty darn firm.

Great, thanks very much. I appreciate it.

Uh-huh.

Our next question comes from Adam Graff of Bear Stearns.

Congratulations on a good quarter. I was just hoping of the 1.4 million tons of sheet product that you guys shipped, if you could give a break out for hot-rolled, cold-rolled and galvanized in volumes?

We never -- we've never broken out products further than the overall groupings.

Well, you have in prior years and I know some of of your competitors have recently broken that out.

Well, we're not responsible for what they do and I don't remember us breaking out sheet further than just sheet. We always broken it out by major product categories.

Uh-huh.

At the present time, we have no plans to change from that practice.

All right. Thank you.

Our next question comes from Barry Vogel of Barry Vogel and Associates.

Good afternoon, gentlemen.

Good afternoon, Barry.

Congratulations on a great job.

Thank you.

Small questions, Dan, when do you expect to close the Quality-Tech acquisition?

Actually the actual closure of that originally was going to be based upon when the permitting process was complete. It may take place sooner than that. We're not at liberty to share exactly the date at the present time. It is something that's subject to some fluctuation. On the outside it would be when the permit is issued. Chances are it will happen significantly before that. That's all I can say at the present time, Barry.

Okay. And Terry, do you have any idea what your plan is for capital expenditures next year, and appreciation and amortization next year?

Not yet. We will finalize Cap-X plans for next year a little later in the year. We typically don't do that until 3rd quarter.

Okay, thanks a lot.

Thanks, Barry.

Thank you.

Our next question is a follow-up from Wayne Atwell of Morgan Stanley.

Thank you. I wonder if you could give us a little guidance on 3rd quarter, total volume, pricing, I guess you've told us about scrap, start-up and maybe you could comment on the streets, I think a 69-cent estimate.

That's interesting question, Barry -- or Wayne, we've been debating ourselves whether we want to offer any guidance on earnings going forward anymore. It's -- so, what we have decided to do at the present time is to talk in terms of expectations without putting hard numbers on pricing or earnings per share or what have you, and as far as 3rd quarter goes, our expectations are strongly positive for the quarter. 3rd quarter over 2nd quarter and continuing to improve throughout the year. Particularly with respect to our flat-roll businesses, our plate business and actually our bar business, as well. We see some positive signs there, as well. So, it will be improving performance into the 3rd and 4th quarters and other than that we've decided not to put any specifics out there, Wayne.

Now, I realize you don't want to give numbers, maybe if we could just try to pin you down more with adjectives.

Adjectives? Some more. A little more. Some more! [ laughter ]

Wayne, you wanted a little guidance, that's what you got!

Well, you're sure good to your word! Maybe I'd like a little more than that! 3rd quarter volume, I assume shipments will be up just a little bit?

Yeah. We will -- flat-roll-wise, up -- up a little bit. Plate-wise, it should be up. Bar-wise, will be up. Might even hazard to put Ham on the spot to see what he thinks about the joist and deck shipments compared to the 2nd quarter.

And scrap, it sounds like the [INAUDIBLE] quarter maybe $5 to $8?

No, just -- I wasted a couple of bucks we're looking at and Ham just mentioned as far as joists and deck go, we see shipment volumes increasing there, as well. And -- so, as far as the structural shapes go, the beam side of the business, it's a little uncertain to be speculating. It will be probably similar to what it was in the 2nd quarter. Again, depending upon not so much imports, but how SGI ramps up the production.

It sounds like start-up costs down a little bit?

Yeah.

Well, it depends really on the Nucor Decatur, what our ramp-up schedule is there. It could actually...it could go up a little bit.

When do you -- you're talking Trico, right?

Yes, we call it Nucor Decatur.

Oh, I'm sorry.

Wayne, also we will be doing some of the...part of that $200 million capital expenditures on bars, we will influence start-up costs at the Texas plant and possibly our Nebraska plant. So, it's -- it's a -- right now it's a little uncertain exactly how significantly different it will be, it may be up a little bit.

If terms of closing on Nucor Decatur that, could be in a few weeks, you think?

Yes.

And pricing that, sounds like it could be up 15 to $25 a ton on average across-the-board. [ laughter ]

Nice try! [ laughter ]

We feel very good about the pricing increasing in the 3rd quarter, you talking about overall, our product lines.

Yeah, across-the-board on what you produced.

We feel good about...pricing increasing on all of our product lines going forward.

Okay. Are you willing to give us any more guidance?

No -- at some point in time we just have to let the numbers be the numbers, you know, and go off of that. And, you know, quarters are not that far apart and the 3rd quarter results are only 3 months away and, you know, everybody will know exactly what we did then and we anticipate it being a positive quarter.

Great, thanks. And just lastly, when do you think you will open up your 4th quarter order book?

The flat roll sheet products?

Right.

John?

Sometime in August.

Great. Thanks so much.

Okay, Wayne.

Our next question comes from Tom Abrams of Dreyfuss.

Dan, Terry, as you point out and as you have in the past, your accounting has always been straight forward, conservative, pristine, I mean just beyond reproach, so if anybody could be one of the first management's to certify their past financial statements, I think it would be you guys. That would be a good headline to see tomorrow! Or will you wait til the "q" to come out in early August?

Well, you have to certify to this "q", so it would be hard to do it prior to that. And to respond to your comment, yeah, we don't have any concerns submitting that certification.

I kind of get a feel for when the market gonna see everybody start certifying. Certainly you could certify past and then certify again the current "q".

That's true.

But that's -- Sounds like more and more people aren't going to do that. They're going wait for the "q".

Certainly, as Terry said, we have no problems signing off on that and, you know, we -- as far as we're concerned, we've been signing off regularly every year on these issues, with the strong conservative financial practices that we have, it's never given either one of us cause for a sleepless night, and it won't going forward, either.

I think most of the people are in that position and I'm just hoping that when the markets start seeing people submit those certifications that confidence gets rebuilt.

We certainly have plans to do that.

Sooner's better than later. Alright, thanks a lot.

Okay.

Our final question is a follow-up question from John Tumazoes of Prudential Securities.

Just looking at your million and a half tons or so per quarter of sheet sales, and perhaps a $30 a ton price hike, that product class would seem to carry about a $45 million increment to pre-tax income?

Based upon the numbers you just put out, yes, but it doesn't mean we agree that those will be the numbers.

You indicated a $320 hot-roll price in your introductory remarks.

Base price, yes, you know, with extras it will be higher than that.

And I was estimating that in the 2nd quarter you realized 288, so, that would imply at least a $30 hike; is that in the ballpark?

Well, as of August 1st, those prices will be in place. Obviously they will not have been in place for the entire quarter.

What's, now, refresh me, Dan, what's the July price?

The July price is -- will be up 20 to $300. August, another increase of $20, base price in hot-band.

Oh, it sounds like a steam roller.

Like we said, we're optimistic about the next quarter and the 4th quarter into next year. We're very positive about the direction things are going. Very positive.

Super. Congratulations on all the acquisitions.

Thank you.

I'm not showing any further questions at this time. Please proceed with any closing remarks.

Well, I just want to thank, again, all of our employees and look forward to welcoming all of the Birmingham employees into Nucor. As we complete that process going through the end of the year. And we're very excited about our future and we're all working very hard to deliver the return to our share holders as they deserve. Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect. Everyone have a great day.