Nucor Corp (NUE) 2006 Q4 法說會逐字稿

Good day, everyone, and welcome to the Nucor Corporation fourth quarter of 2006 earnings release conference call. [OPERATOR INSTRUCTIONS] Certain statements made in this conference call are forward-looking statements that involve risks and uncertainties. Although Nucor believes they are based on reasonable assumptions, there can be no assurance that future events will not affect their accuracy. Some of the important factors that may cause actual results to differ from our predictions are listed in Nucor's SEC filings. The forward-looking statements in this conference can speak only as of this date, and Nucor does not assume any obligation to update them.

For opening remarks and introductions, I would like to turn the call over to your host, Mr.Dan DiMicco, Chairman, President and Chief Executive Officer of Nucor. Please go ahead, sir.

Thank you. Good afternoon, and thank you for joining us for Nucor's conference call. We appreciate your interest in our Company. Our team will share with you our thoughts on Nucor's fourth quarter of the 2006 performance and provide an update on our implementation of Nucor's strategic plan for growing shareholder value. I will lead off with an overview. Following my remarks, Nucor's Executive Vice Presidents, Terry Lisenby, Ham Lott, Mike Parrish, John Ferriola, and Joe Rutkowski will provide you with additional details on our performance and our growth plans. I would like to say thank you and job well done to all the members of the Nucor team for delivering a third consecutive annual earnings record in 2006. As always, we are working safe, working hard, and working together to take care of our customers. I will repeat what I have said many times. Nucor's most significant competitive advantage remains our employees, the right people working together as a team.

I also extend a warm welcome to the newest addition to our Nucor family, the men and women of Verco Manufacturing Company. We are proud to have you join the Nucor team. With your impressive 40-year record of success, we are excited about the profitable growth you are bringing to Nucor, as we expand the reach of our steel decking business to the western United States.

As I study our performance from 2006 and our plans for 2007 and beyond, two points stand out to me. First, the Nucor team has built a strong growth record. We have proven that we know how to drive long-term growth and Nucor's earnings power, and raise returns on our shareholders' valuable capital. Second, tremendous growth opportunities are still ahead for the Nucor team. With the Nucor culture's focused on profitable growth and continual improvement, we are extremely well positioned to continue our disciplined execution of Nucor's strategic plan. Quite simply, Nucor's best years are still ahead of us.

As to my first point regarding our growth, let's review some numbers that highlight our success in expanding Nucor's platform for generating earnings. At the last peak in the economic and steel market cycles of 2000, Nucor generated what was then record net income of $311 million, and earnings per share of $0.95. Our new record profitability, set in 2006, net income of $1.8 billion and earnings per share of $5.68, was more than 5.5 times greater than the 2000 level. As our third consecutive record-breaking year, 2006 net income of $1.8 billion was up 34% from 2005 net income of $1.3 billion and was up 57% from 2004 net income of $1.1 billion. Nucor's return on stockholders' equity performance continues strong, to be strong evidence of our commitment to profitable growth and being effective stewards of the shareholder dollar. Our ROE exceeded 38% for 2006 and has averaged 37% over the past three years. And these returns are up strongly from the 14% ROE we achieved in 2000. And, it's important to understand the growth of Nucor's earnings power is derived from a diversified product portfolio. We are North America's most diversified steel producer.

Here's the composition of Nucor sales funds in 2006; 38% sheet, 29% bars, 15% beams, 11% plate, and 7% downstream steel products. With our product line diversity, Nucor's short-term performance is not tied to any one market. There were a number of economic and steel markets cycles. [inaudible] better positioned in some markets have cushioned the impact of more severe conditions in other markets. Our ability to set a third consecutive earnings record in 2006 proved, again, the value of our product diversity. Many of our customers experienced earnings declines in 2005 and then recovered in 2006. For Nucor, our earnings in bars, beams plate and downstream products have allowed us to grow through the volatility in the flat-roll markets. And I should also note that this product line diversity goes a long way to explain why our Company has been profitable every year and every quarter since 1966.

Over this same 2000 to /2006 time period, Nucor steel shipments more than doubled from 11 million tons in 2000 to more than 22 million tons in 2006. And our finished steel production capacity has climbed from approximately 13 million tons in 2000 to more than 25 million tons today. This growth was fueled by both our acquisitions and our ongoing work to optimize existing operations. Our acquisitions added rated mill steel capacity of six million-tons, and the Nucor team's passion for continuing improvement generated additional growth in annual capacity of six million tons, including productivity gains in both the steel mills we built and the steel mills we acquired. Our growth strategy has also expanded our participation in attractive downstream steel products businesses. Our value-added steel products brought a valuable baseload of volume for our steel mills.

With the 2005 purchase of our Wisconsin cold finished bar plant, Nucor became the largest U.S. producer of cold finished bars. Our acquisition of Verco Manufacturing Company has enhanced our [marketed] leadership in the steel decking market. And our pending acquisition of Harris Steel Group will establish Nucor as one of the largest fabricators of rebar in North America. It will also grow our cold finished bar market leadership position and bring us greater geographic reach into Canada. The Nucor team's success in expanding our platform for generating earnings is easy to explain, and is driven by our disciplined execution of the growth strategy that we began implementing in 2000. Over the past six years, you have heard us many times set forth the four prongs of our growth strategy. They remain the same. The strategy works. Here again are the four prongs.

One, Nucor will optimize existing operations and keep them globally competitive. Two, Nucor will continue greenfield growth, where we can capitalize on significant cost advantages from new technologies and unique market niches. Three, Nucor will pursue strategic acquisitions. And four, Nucor will grow globally through joint ventures that leverage new technologies and other joint venture partnerships. Our multi-prong growth strategy, along with our unrivaled financial strength, gives Nucor tremendous flexibility. Even though our Company is much bigger today, our growth opportunities are much greater than when we were a smaller Company pursuing only one growth strategy, greenfield plant construction. At the same time, our multi-prong strategy allowed us to be patient and to grow where the growth opportunities are at any point in time.

This all goes to my second point, Nucor's exciting growth prospects. Our team knows how to grow long-term shareholder value, and here's a quick review of recently announced growth projects that we are working on in 2000. The EVPs will fill in more details on these projects in their comments.. Nucor's Bar Mill group is building a 850,000 ton annual capacity special bar quality mill in Memphis, Tennessee. This project is an exciting opportunity to capitalize on significantly better cost structure compared to key competitors in the [inaudible] market, both domestic and foreign. Nucor's Sheet Metal group will start construction of our second [inaudible] production facility and will be located at [Nucoria] Model Steel in Blytheville, Arkansas, and have annual capacity of about 500,000 tons. Ecological innovation remains a major competitive strength of Nucor, and will continue to drive our success in the years ahead.

Nucor;s Sheet Metal group will construct a 500,000 ton annual capacity steel galvanizing facility at our sheet mill in Decatur, Alabama. This will be Nucor's fourth galvanizing facility. Our Sheet Metal group team continues its very successful focus on providing value-added products and services to value-appreciative customers. Nucor Building Systems is building a metal building system facility in Utah with an annual capacity of 45,000 tons. The Utah facility positions Nucor with a nationwide network of four plants to continue our profitable growth in this value-added business. Nucor acquired Verco Manufacturing in November of 2006, as we've already mentioned. But Verco and Nucor now has a national reach to provide U.S. non-residential construction markets with a complete package of joist and deck products. This acquisition is already providing us excellent returns, with more growth ahead.

Nucor's proceeding with a tender offer for all the shares of Harris Steel Group. Placing a value of more than $1 billion on the equity of Harris Steel, this will be our largest acquisition ever. Most importantly, Harris Steel Group will be a powerful growth platform for Nucor in an extremely attractive downstream business, rebar fabrication. It also will provide us growth opportunities in cold finished bars, grating and steel trading and distribution. Our [Nuiron] team is doing an excellent job starting up operations at Nucor's BRI plant in Trinidad. This facility will be an extremely valuable asset supporting our growth in value-added sheet and special bar quality markets.

Another crucial part of our work to optimize operations and deliver value to our shareholders is Nucor's very proactive role in the fight for real free trade. Real free trade is rules-based trade and it is trade where all countries abide by these mutually agreed-upon trade rules or laws. The future of American manufacturing, our economy and a standard of living for all Americans demands that our nation's trade laws be enforced. Countries that clearly violate those laws and abuse our markets must face the consequences of their illegal conduct. [Asset] government subsidies, currency manipulation, and abuse of the environment are no way a part of free trade. Free trade occurs on a level playing field, and is driven by true comparative advantage. Nucor thrives on such an environment. Onward success is determined by being efficient, being an innovator and technology leader, and doing the best job of taking care of our customers. My confidence has never been greater that Nucor's best years are still ahead of us. My reasoning is straightforward and based on the facts. The Nucor team is proven -- has a proven ability to deliver profitable growth, and our team today presented with more growth opportunities than ever before in the history of our Company. Quite simply, you see our team's journey of one of climbing a mountain with no peak, where Nucor continues to generate higher highs and higher lows through the economic and steel market cycles.

Our EVP team will provide you with additional information of our 2006 results and our growth initiatives. I will now ask Terry Lisenby to discuss our financial position and our work building long-term value for Nucor shareholders. Terry?

Thanks, Dan,and good afternoon. Nucor's fourth quarter of 2006 earnings of $1.35 per diluted share increased 24% over year-ago quarterly EPS of $1.09 and were ahead of our quarterly earnings guidance range of $1.05 to $1.15. Several factors were responsible for our better than expected fourth quarter performance.

First, steel shipments declined only 11% from third quarter levels. In our December 12th press release, we estimated there would be a quarter-over-quarter shipment decline of 12% to 15%. Second, our steel mill metal margin was better than expected, declining by only $10 per ton from the third quarter. A $14 per ton decline in average scrap and scrap substitutes usage costs cushioned the impact of a $24 per ton decline in steel mill selling prices. Third, with the declining scrap prices in late 2006, we realized a higher-than-expected LIFO credit of $39.6 million in the fourth quarter. $9.6 million of of that LIFO credit was at our 51% on Nucor Yamato structural steel mill. And fourth, our earnings benefited from lower energy cost. Total energy cost decreased by $6 per ton from the fourth quarter of 2005 to the fourth quarter of 2006.

Earnings before income taxes were $129 per ton, for both the fourth quarter and full year of 2006, up from $108 per ton for last year's fourth quarter and a $104 per ton for full-year 2005. Nucor's effective tax rate was 33.7% from the fourth quarter, and 34.8% for the full year of 2006. Our cash provided by operating activities for 2006 was a record $2.3 billion. Over the past three years, Nucor has generated cash from operations exceeding $5.4 billion. Cash and short-term investments were $2.2 billion at year-end 2006. Also at the close of last year, our total debt was $922 million, and our debt-to-capital ratio was 15%. Nucor holds the highest debt ratings of of any North American metals and mining company, awarded by moody's and Standard & Poor's. We view Nucor's strong balance sheet as an important competitive advantage in the consolidating and cyclical industry.

The Nucor team is working hard to build upon our Company's long-term record of being an effective steward of our shareholders' investment. Our ongoing focus on the careful allocation of Nucor's shareholders valuable capital is evidenced by our disciplined approach to organic growth, projects, acquisitions, supplemental cash dividends, and share repurchases. Quite simply, we allocate capital to the opportunities that offer our shareholders the highest return on their investment. In 2006, capital expenditures were $338 million. For 2007, we project capital expenditures of approximately $940 million. About $500 million of the 2007 capital spending is allocated to our greenfield projects; the Memphis SBQ mill, the Arkansas [catch] strip plant, the Decatur mills galvanizing facility, and the Utah Building Systems plant. And Nucor continues to invest capital in the our core operations to keep them state-of-the-art and globally competitive.

Nucor completed two acquisitions in 2006. In May we purchased Connecticut Steel for $44 million. Nucor Steel Connecticut brings attractive new downstream product offerings in the rebar and wire mesh markets. And in November, we purchased the Verco Manufacturing Company for $180 million. This acquisition expands our leadership position in the steel decking market. Nucor paid cash dividends of $578 million to shareholders in 2006, nearly triple 2005 payments of $210 million, and a more than nine-fold increase from 2003 payments of $62 million. The upcoming February, 2007, payment will be our eighth consecutive quarter supplemental dividends. Supplemental dividends are consistent with Nucor's pay-for-performance philosophy. During 2006, Nucor repurchased 11.7 million shares of its common stock at a cost of $599 million, or about $51 per share. Combined with the cash dividends paid, Nucor returned nearly $1.2 billion of capital to its shareholders in 2006. Since reactivating our share purchase program in the second quarter of 2005, we have repurchased 22.8 million shares at a cost of $890 million or about $39 per share. Approximately 14.1 million shares remain authorized for repurchase.

Our press release this morning reported our expectation of continued solid earnings in the first quarter. Demand and margins should remain healthy. We have recently announced price increases for many of our products, and excess inventory levels at service centers and OEMs continue to decline. We expect inventories to be at a more normal level by the end of the current quarter, but this will depend on a continued decrease in imports from 2006's record levels. Rising scrap prices are the other significant risk factor. In addition to a possible LIFO inventory charge, scrap costs could increase across of our product's selling prices. Nucor will continue its practice of providing numerical guidance near the midpoint of the interval between earnings reports. Our team has never been more excited about the opportunities to profitably grow Nucor's business and continue delivering attractive returns to our shareholders. Dan?

Thank you, Terry. Ham Lott will now update us on Nucor's downstream steel products businesses. Ham?

Thanks, Dan. Good afternoon. First of all, I want to expend sp -- extend special congratulation to our Metal Building Systems group for their record-setting performance in 2006. Our Indiana, South Carolina, and Texas divisions together had set new records in safety, tonnages and financial contributions. Congratulations to all who were involved in making these records possible.

2006 was another strong year for Nucor steel products businesses. Nucor's strategy of building market leadership in downstream industries has consistently generated attractive returns through the economic cycle. As Dan observed in his remarks, these businesses provide a profitable baseload of volume for Nucor's steel mills. Vertical integration has been a highly-successful strategy for Nucor for almost 40 years. In 2007, our team is moving ahead with several exciting growth initiatives for our steel products. We completed the acquisition of the assets of Verco Manufacturing Company on November 1, 2006. Verco produces steel floor and roof decking at three locations in the western United States. With its impressive record of success over more than four decades, Verco significantly enhances Nucor's market leadership in steel decking. This acquisition positions Nucor with a national reach in providing U.S. non-residential construction markets with a complete package of joist and deck products. The integration of the Verco team into the Nucor family has gone extremely well, and work is under way to coordinate sales efforts between Verco and our Vulcraft divisions.

In addition to our new national reach with deck we see exciting growth opportunities with expanded distribution of Verco's unique products that include the sheer trans system and the punch lock tool. These innovative products are valued by customers to their ability to economically meet sheer design requirements in seismic area. I am pleased to report that our team at Verco delivered very impressive profits during their first two months as members of the Nucor family. We look forward to a bright future of growth in 2007 and beyond with the addition of Verco to Nucor steel businesses.

Brigham City, Utah, was selected as the location for our fourth metal systems building plant. With the addition of this facility's annual capacity of approximately 45,000 tons, Nucor Building Systems will have a combined annual capacity of more than 180,000 tons. Nucor Building Systems Utah also gives us a national presence, as we execute our strategy to grow profitable market share in this industry. NBS Utah has begun putting in place its management team and site preparation is under way. We expect construction to begin this spring. Operations are scheduled to start up the first quarter of 2008.

Earlier this month, Nucor announced an agreement to make a tender offer for all the shares of Harris Steel Group. This will be Nucor's largest acquisition ever, as our offer places a value of slightly more than $1 billion on the equity of Harris Steel. Completion of the acquisition will occur upon satisfactory resolution of regulatory approvals, both in Canada and the United States. We expect to close this transaction by the end of the current quarter. Harris Steel acquisition is an extremely exciting opportunity for Nucor. It will be a major step forward in advancing our vertical integration strategy. Nucor is North America's largest producer of rebar. With the acquisition of Harris Steel, Nucor will become the third-largest rebar fabricator in North America.

Most importantly, Harris Steel will be a valuable growth platform for Nucor. Under Nucor's ownership, Harris Steel will be able to accelerate implementation of its highly-successful growth strategy in rebar fabrication with both acquisitions and greenfield plants. In addition to rebar fabrication, Harris Steel's other business units will provide Nucor attractive vertical integration growth opportunities. Their laurel steel unit will expand Nucor's market leadership in cold finished bars. We also see attractive downstream growth opportunities offered by Harris Steel's metal gratings, steel distribution, and steel trading operations. With our offer to purchase of Harris Steel, we are once again -- we are once again practicing our disciplined and proven approach to acquisitions. We're buying a great business at a fair price. That is, a price where we expect to earn attractive long-term returns on our shareholder's valuable cap.

And we are buying a business we understand; rebar and value-added steel products. Most important of all, we are bringing aboard a culture that shares the Nucor team's passion for taking care of customers, continual improvement and profitable growth. I should note that we have been partners for three years with Harris Steel in their U.S. rebar fabrication. This has given Nucor the opportunity to study and to admire Harris Steel's people and their winning business model of providing their customers with a high margin of fabrication solution.

Dan?

Thank you, Ham. John Ferriola will update us on our sheet, plate and structural steel businesses. John?

Thanks, Dan, and good afternoon. Nucor's Sheet Metal group had an excellent year in 2006, achieving extremely strong profit growth over 2005. I want to congratulate and thank our teams at all four Nucor's sheet mills; Alabama, Arkansas, Indiana, and South Carolina. In fact, both our Alabama and Arkansas mills generated record earnings in 2006. And a very special recognition goes to our Decatur team for going over five million man-hours, or four years, without a lost time accident. As I have shared with you many times before, our success is being driven by Nucor's teams' relentless focus on providing value-added products and services to value-appreciative customers. We build value for our shareholders by providing value to our customers in three critical areas; quality, service, and be delivery. Particularly exciting to me is the fact that we have many more opportunities ahead of us, as we grow our value-added capabilities to better serve our customers. For 2006, our team did an outstanding job of both capitalizing on an improved sheet market conditions for the first nine months of the year and managing through the weaker fourth quarter of last year.

Fourth quarter was impacted by record levels of imports in 2006 and a resulting high service center inventories. Nucor's Sheet Metal group fourth quarter 2006 shipments declined 15% from third quarter of 2006 and 7% from 2005's fourth quarter, Nucor was not interested in chasing steel prices lower during this inventory correction. Our team seeks to maximize profitability and returns to our shareholders by pacing our supply to match customers' demand. Although our production discipline during the fourth quarter adversely impacted our results for that quarter, it provided a more stable pricing environment during the period we were negotiating our 2007 contracts. These contracts provide good margins for Nucor and a secure supply of steel for our customers. This approach is consistent with Nucor's long-standing focus on long-term profitability.

I am very pleased to report that 60% of our available sheet mill capacity for 2007 is now under contract. This strong contract position is similar to the level of contracts we had at the start of 2006. Our contracts are legally enforceable in grievance, and while they allow limited volume variances in recognition of reasonable fluctuations in our customers' production levels, they insure a solid base load for our sheet mills. Further, each contract carries either a scrap surcharge or a scrap buyback in provides equivalent economic value. I should emphasize that contracts are particularly important in driving stability in the always-challenging sheet business. Nucor continues to utilize contracts as an extremely important tool for building value both for our customers and for our shareholders.

As Dan mentioned, we are growing our value-added sheet capacity with our plans to construct a galvanizing facility at our Decatur sheet mill. It will have an annual capacity of 500,000 tons and the ability to galvanize 72-inch-wide sheet. This will be Nucor's fourth galvanizing facility and will increase Nucor' total galvanizing annual capacity by one-third, up to a total of two million tons. Construction is set to begin during the current quarter, and we expect production to start in mid 2008. Our proprietary caster technology is an extremely valuable growth driver for Nucor. At our Crawfordsville, Indiana, caster facility, 2006 production and shipments increased more than 30% over 2005 levels. Our Crawfordsville team continues to enjoy success with contract business, while realizing improvements in surface quality and product consistency. We will begin construction of our second caster paint at Nucoria Model Steel in Arkansas within the next few weeks. Production start-up is expected in the fall of of 2008.

We expect 2007 to be another strong year for Nucor's Sheet Metal group. With the exception of automotive and residential construction markets, end use demand is solid. And with import arrivals starting to decline, we look for the inventory destocking our service centers to be completed during the current quarter. There is one certainty for 2007. Our sheet mill teams will continue to build attractive long-term value for our customers and our shareholders. Congratulations and thank you to our teams at Hereford County and Tuscaloosa plate mills for their record annual earnings in 2006. Well done, team. Two out of two is quite an achievement.

Our Tuscaloosa team provided us a powerful example of the fact that Nucor's greatest asset is our people, and the culture that they live, breathe, and nurture every day. In delivering their record-breaking profit performance, Nucor Steel Tuscaloosa shipped over one million tons in 2006. That is 48% greater than their best year prior to joining the Nucor family in 2004, and they did it without expending any significant capital. Better yet, I am convinced that this is just the start of of what they can accomplish. Our Tuscaloosa's team's years are still ahead of them.

Looking out to 2007, end use demand for plate remains healthy, in the U.S. and globally. The strength is broad-based, including heavy machinery, barges, railcars, wind towers and construction equipment. At the same time, we have seen an orderly reduction in inventories are the service centers, whose inventories were inflated by record plate imports in 2006. While plate pricing has remained steady to this point, we believe the pricing environment is improving rapidly. Nucor's plate mills are looking forward to continued success in 2007. Congratulations and thank you to our teams at Nucor Yamato steel and Berkeley beam mills for their record annual earnings in 2006. And more importantly, they did it safely. In fact, Nucor Yamato had a record safety year in 2006. Well done. Thank you and please keep it going.

The structural steel market strengthened throughout 2006m and the strengthening have continued into the first quarter of 2007. We are fully booked through the current quarter and into April. Demand is particularly strong for the larger [wide-flange] beams, sizes in which Nucor Yamoto is the only domestic producer. International beam pricing is generally higher than domestic pricing. In a tight global market for structural steel, we are working hard to take care of our customers' needs and demand for steel. To that goal, we have [remained] on control order entry for beams through the first quarter of 2007. Nucor Structural Steel group is looking forward to another successful year in 2007. Demand is strong across all three market segments we serve; nonresidential construction, energy, and pilings. Current forecasts for growth this year in the non-residential and energy sectors would indicate that 2007 construction activity will exceed that of the record year of 2000.

You have heard us say over and over that Nucor strategy is to provide value-added products and services to our value-appreciative customers by delivering high-quality steel on time with excellent customer service. One measure of how well we have done that is the Jacobson 2006 steel customer satisfaction reports that we have just received. Nucor's sheet, plate, and beam consistently rank at the top of the surveys in overall satisfaction. More importantly, these survey results are validated by our customers rewarding us with increased business year after year. A Nucor sheet, plate, and structural mill team is encouraged, by but not satisfied with these results. In 2007, we are focusing on continual improvement and striving to bring even greater value to our value-appreciative customers. Thank you for your interest in Nucor.

Thanks, John. Mike Parrish has some comments for us on Nucor's Bar Mill group. Mike?

Thanks, Dan, and good afternoon. Congratulations and thank you to everyone on our Bar Mill group team for their record earnings performance in 2006. I am also proud of our team's ability to manage through the softer market conditions experienced in last year's fourth quarter. Record 2006 bar imports, primarily of rebar, resulted in an inventory build with our distribution customers. As this excess inventory was being worked off late last year, our Bar Mill teams kept their focus on profitability and on pacing our production to match our customers' demand. Although our fourth quarter bar shipments declined nearly 3% from the year-ago period, our profitability remained very strong. In fact, quarterly profits actually increased from year-ago levels. At the same time, we were able to complete in the fourth quarter a number of maintenance projects that have our mills primed and ready for the approaching seasonal upturn in construction markets. Nucor's Bar Mill has now set earnings records for three consecutive years, and these results are the initial payoff from our team's hard work. Over the past six years, we have completed a number of highly successful acquisitions, we have implemented capital projects to optimize existing operations, and we have intensified our drive to improve both our cost position and the value we provide through our customers. Even better, we are continuing to build upon a powerful growth platform.

Our Memphis special bar quality or SBQ mill project, is moving ahead very well. This facility will have an estimated annual capacity of 850,000 tons. Complementing our mills in South Carolina and Nebraska, the Memphis mill will position Nucor to provide the most diverse, highest quality and lowest cost SBQ product offering in North America. This is an exciting opportunity to capitalize on a significantly better cost structure compared to key competitors in the SBQ market, both domestic and foreign. As we reported to you on last quarter's call, our capital costs for this project are being dramatically reduced by utilizing the good assets we already have on the ground at the Memphis site. Equipment orders for Memphis have been placed, construction is under way and start-up is expected to begin in the first quarter of 2008. Overall, we are very optimistic about the 2007 outlook for bar markets and we expect another year of solid profitability from the Bar Mill group. Dan?

Thank you, Mike. Joe Rutkowski will now update us on our implementation of Nucor's raw material strategy. Joe?

Thank you, Dan. Good afternoon to everyone. We have some very good news to report, and that is the Nuiron Trinidad is up and running, and running very, very well. As you may recall, we located to Trinidad the American iron reduction facility that we acquired in late 2004. Our direct reduced iron plant in Trinidad started production on December the 30th. In its second week of production, Nuiron completed a five-day performance test, with average production exceeding 220 tons per hour, [inaudible] metalization, and dri containing more than 2% carbon. And last Sunday, Nuiron shipped out the first vessel, about 35,000 tons of dri headed for the river system and our mill in Hickman, Arkansas. With annual capacity of two million tons, Nuiron is by far our largest project currently under way and implementing our strategy to control six to seven million tons per year of high-quality scrap substitutes. Our Trinidad dri facility benefits from a cost-competitive supply of natural gas, as well as favorable logistics for receiving iron ore and for shipping dri to the United States. Nuiron is an extremely valuable asset supporting Nucor's plans for growing our presence in higher-quality sheet and SBQ markets. I'd like to thank all the members of the construction and production teams of Nuiron and everyone else around our divisions who helped us for making this project an outstanding achievement. Thank you.

Thanks, Joe. Before we start our Q&A session, I have some thoughts to share with you after listening to our EVP reports. When I look at Nucor in 2007, I see a Company generating its strongest growth ever, and I see Nucor continuing to expand its growth platform with its proven strategy. In fact, I can confidently assert that Nucor is better positioned and better equipped to grow profitability than at any other time in our Company's history. At the same time, I see a global steel industry that, with the notable exception of China, has undergone dramatic rationalization and has a more profit-driven discipline thatn ever before in my 38 plus years in the industry. And we're also witnessing acquisition activity in the industry that suggests strategic buyers see a better future for the global steel business. What I don't understand is how growth company of Nucor's quality can command a PE multiple of only ten. I think it's time for a serious revaluation of the PE's in this industry, and Nucor in particular.

At this time, I'd be delighted to take your questions.

Thank you very much. [OPERATOR INSTRUCTIONS] And our first question today will come from Michelle Appelbaum from Michelle Appelbaum Research. Your line is open. Please go ahead.

Hi. Congrat --

Hello.

Congratulation on a great quarter.

Thank you.

And how are you feeling?

Good.

Good.

Feeling good, every day is better than the day before.

That's terrific. I wanted to ask if you wouldn't mind explaining LIFO again to me. What came out different than where you thought on December 12th?

Well, the credit was, we didn't anticipate or forecast the decrease in scrap purchase costs the way it did in the fourth quarter, so the credit was larger than we had forecast.

LIFO calculation takes into account not only scrap but all our other inventories, as well. We were forecasting incorrectly, but the way strap was moving at the time they charged to LIFO for the quarter, and we ended up with a almost a $40 million credit.

Okay.

At the end year, those things can be a little complicated, particularly when you take into account all the inventories, not just scrap. But the bottom line is we missed that. We missed it big-time. And we missed, we missed it in the right direction.

Right. Okay, great. Thank you.

And our next question today will come from Banc of America Securities Kuni Chen. Your line is open. Please go ahead.

Hi, good afternoon, everyone.

Good afternoon.

Just hoping you could give me a view of some of the backlogs across the different divisions? I think you guys mentioned where you're backlogs are at in structural, but if you could address sheet, bars and plate, that would be great.

Overall, our backlogs are very similar to this time last year, and that's a positive sign for 2007.

Okay. Just a quick follow-up if I may. Just on LIFO, for the first quarter I guess you were expecting a charge, so with scrap down sequentially in the fourth quarter -- and that resulted in about a $40 million credit -- if let's say scrap is up $20 in the first quarter then what does that get you as far as a LIFO charge?

There's really no way to accurately forecast, because like Dan said, there are other things in there besides scrap. But we are forecasting a charge for the first quarter.

It'll obviously depend upon how much scrap actually moves and how much of that higher-priced scrap actually makes its way from the purchase point into our inventories. And that can be a hit and miss situation depending upon freight issued, international freight issues, as well as domestic. But we do anticipate that there will be a charge. And we will come out with our guidance two-thirds of the way through this quarter, and hopefully we'll have a better handle on it than we did have last quarter.

Okay. Thank you. Good luck.

Thank you.

We will now hear from John Hill from Citigroup for our next question. Go ahead, sir.

Great. Congrats on the performance and it's always nice to see the company advancing on so many different front fronts.

Thank you, John.

You're welcome. I was just wondering if we could revisit sheet for a moment. Obviously margins were maintained there very well. Scrap and pricing moving in opposite directions, same amount and should we look for some margin compression there for a little while? How long might that persist and where do you see capacity utilization in the sheet group?

I will let Mr.Ferriola take a shot at that.

I think, as I mentioned in the opening comments, the first quarter is going to be a little bit challenging, but we expect since all of our market sectors are strong to recover quickly. We think that the destocking will end of the first quarter, and we expect second quarter to be strong with pricing recovering. Third quarter stronger yet. So we might see some margin compression early in the year, but we anticipate recovering very quickly and having a very strong year in 2007.

John, one of the things that obviously will help us with that in the first quarter is an excellent job that our sheet metal group has done in getting contract business. We're 60% for the year. I'm not sure if we're more than that for the first quarter or not, but I think we are. And those margins are already locked in, they already have scrap adjustment clauses in them. So that will act to help our margin performance in first quarter quite significantly.

Actually, Dan, we're about 70% contracted in the first quarter.

All right, great. Thank you.

And moving on we'll now hear from Longbow Research's [inaudible] for the next question. Please go ahead.

Hello, and good afternoon. Congratulations on a good quarter.

Good afternoon. Who's this?

This is [Luke Fulta].

Hi, Luke.

Hi. I guess I'm just trying to get a handle on what the total overall effect on melt costs the dri plant in Trinidad will have?

Well, obviously it depends on what the scrap prices are in the marketplace. Joe, do you want to speak to that at all?

We don't give cost information out, but it's very safe to say at today's scrap cost, it will help us very well.

Okay.

And can I add a comment to that?

Sure, John.

I think there's going some additional value just to the fact that the product will be consistent. Our mills will get used to using it, we'll know how to adjust and tweak our furnaces to that same product month after month, and that's going to be a tremendous help for us mills.

The other thing I might add -- Joe's pointed this out in communications numerous times to us here in Charlotte, the iron contact, is extremely high in the DRI, and the carbon contact is well over 2%. Both of those chemical issues in the dri act to help the overall performance and efficiency of the melting process quite significantly.

As well as the yield.

Okay. Thank you very much. Can you talk a little bit about the contract mix for other products besides the sheet group?

In general, we're not heavy in contract business outside of the sheet group. We have some in the plate business, we have a fair amount in the SBQ bar business. Mike, do you have anything you want to add to that.

Not really. I think we're -- on the SBQ we might be in the 15%, 20% range of contracts.

John, plate, beams, really no contract business there?

No, really very -- almost none in beams and some in plate. It's probably in the neighborhood of 15%, also.

Okay. Great. Thank you.

You're welcome.

And Aldo Mazzaferro from Goldman Sachs has our next question. Please go ahead, sir. Your line is open

Hi, Dan, how are you?

Good, Aldo. Yourself?

Fine, just fine. I wanted to ask two questions about your view in the marketplace. First of all, I'm wondering if you think the scrap market is tighter than you expected at this point? And secondly, I'm wondering whether you're doing any exporting of steel at this time?

The scrap market is definitely stronger than we thought it would be, and a lot of that has to do with international demand. Of course that's a good sign overall, for the health of -- and demand in the marketplace, both international and domestically. As far as your second question, could you repeat that?

All right. I was just wondering if you were taking the opportunity to export material, given the relative pricing globally?

John, will you take a shot at that?

Surely. As you mentioned -- as you just mentioned, pricing worldwide is a little bit better than it is domestically today. And although we have not made any shipments yet, we are involved in several opportunities that we're negotiating right now. So we see that as an opportunity in the first quarter.

So, John, have you changed the operating run rates at your sheet mills in the last several weeks or so?

Have we changed our --

Are we running at a greater percent --

Oh, absolutely. Our production rate over the fourth quarter is much higher. We're just about full.

So you're running much higher now than you did in the fourth quarter?

Yes.

Just about fully, he said.

And finally, Dan, I wonder, could you tell us -- the Harris acquisition was your biggest acquisition. I think it was also one of your highest-priced, based on trailings, so I assume you have some very good synergy opportunity. I wonder if you could maybe helps us describe -- or describe for us a little bit of what you see in the synergys and maybe you could mention whether Harris is a -- or is a big customer or a little customer of Nucor? And also, could you just remind us what you have in Kingman, Arizona, right now? Is there still an idle mill there that --

Aldo, I'm losing track of all your questions. [LAUGHTER]

It's just three.

I don't know, there might be more than that. Then we have to move on to the next set of questions, okay, Aldo?

Yes.

First off, the Harris acquisition, as we mentioned in our talking points, is a very fairly priced acquisition. It is a higher value than most of what we bought in the early 2000's, which were really very unique distressed opportunities. It's a very strong company with a very strong market position in Canada and the west coast. We've been partners with them for three years. That partnership has exceeded our expectations. When we went into it and put our business plan together and is looked at our returns, they far exceeded those returns. We anticipate the same will happen here. And it'll be a very profitable acquisition at the purchase price that we're paying. It'll allow us to -- they have a very aggressive growth strategy, which I am not in a position to share with you. Just in general that they have had a very aggressive one. They continue to have very a aggressive one. With our support, they're going to be able to move faster than they ever have in the past.

And keep in mind that what we're looking at here is not just rebar operations. They are a good customer of ours through -- in Canada and in western Canada, in particular. And -- through the joint venture that we have with them in rebar fabrication on the west coast. But this is also a situation where we've bought a significant additional amount of cold finish capacity in products that we do not currently make today, and sizes that we don't, really adds to our product mix in cold finish. The two other manufacturing operations allow us opportunities to grow those businesses very profitably. And the trading business that Harris and our Nucor only [inaudible] 75% of is a very unique opportunity for us to learn about some things that we have not really focused on in the past. So, this -- we have tremendous expectations for where this is going to take us and we're not worried about it returning far in excess of what we budgeted in the acquisition price. As far as kingman goes, it's sitting there. It could be started up probably in -- what do you think, Mike? How long would it take to start that up if we wanted to start it up?

Probably eight, nine months.

Nine months?

Yes.

And it would -- probably if we started it up would run with a [refurnace], no melt shop, [billets] would be coming from our other operations in Texas and Seattle, and possibly on the international market, as well, where buy America's not necessary. And it would be operated as a -- at the rate of 350,000 tons a year, thereabouts. And so, it sits there in very good condition. We have to cannibalized the melt shop. We have no intention of running it with a melt shop because of the extremely high electricity cost in the area.

Right.

Thank you, Aldo.

Thank you very much, Dan.

Next question.

Our next question will come from Bradford Research's Charles Bradford. Your line is open, please go ahead, sir.

Good afternoon. On the last conference call, you mentioned that CVRD was planning to sell down their ownership of [Faragusa Caracarjos] to 49% from 78%. Whatever happened?

First off, Chuck, we didn't mention anything like that on our conference call. You probably picked that up at the rumor mill out in the world, but we certainly didn't talk about that. And currently are still partners with them. The plant is operating at capacity. We're continuing to receive pig iron from it. And our partners and I are evaluating exactly what the future will be there. And at this point in time I -- pretty much like I said last time, we're not in a position to comment about rumors in the marketplace.

If they were to sell their ownership, would you still be obligated to take the output?

I wouldn't call it obligated. We'll have the opportunity to and we certainly would like to.

Thank you.

And moving on, we will now hear from Michael Gambardella from JPMorgan for our next question. Please --

Hello, Michael. Hey, Dan. How are you? Fine, yourself?

Good, good, congratulations on getting the Company this far and positioning so well.

Thank you.

I got a question on the [cas] strip process. I'm kind of surprised you haven't announced anything yet on licensing the technology and getting some money for that outside of the U.S.?

Yes, so are we. [LAUGHTER] We have been and we still are in several conversations, serious conversations, product being evaluated, visits being made to the cas strip plant in Indiana on numerous occasions. There have been some issues with the potential partners that are internal to their companies that have prevented them from moving forward. And John, do you want to speak to any more to that?

No, I think we are -- as you said we've got several opportunities that we're wor -- several people that we're working with, and I expect it to be successful. Just a question of timing, as you said. Probably our best candidate had some internal company issues that prohibited them from moving forward.

Is your preference on this to take just a a fee in cash or licensing the technology or to take -- or to get some type of minority equity stake in the facility overseas?

Mike, all of those are possibilities but our preference, as we stated a couple of times, is a partnership. Not one where we are majority partner, but where we are a minority partner, somewhere in the neighborhood of 49%, similar, again, to the reversal of neighborhood of 49%, similar again to the reversal of the new [Cortiamato] joint venture. And do that with the right people internationally, which has been part of the issue with not moving forward up to this point in time. But it is a partnership that we're looking for and have the opportunities for in several conversations, and I look forward, John, to us having an announcement to make on that.

Are most of the considerations that you're looking greenfield facilities or are they integrating it into existing facility?

Both. Joe -- Joe Rutkowski would like to make --

Yes, Mike, let me make one comment. Quite frankly, I'm speaking now both from Nucor and cas strip perspective, if we had wanted to, we could have sold licenses by now. We're taking a very disciplined approach. We are partners of Blue Scope and IHI and we have -- we have particular criteria that we believe are very important for the first few cas strip licenses. There are people who would buy one from us today. They don't necessarily have the entrepreneurial spirit that we think they should have. They don't necessarily have the [skill] making experience we think they should have, and we are in no way interested any of the partners in just selling something for the sake of selling. We're interested in making sure it's successful.

That's a very good point, Joe. Mike, in the first one in particular, but the first one or two international partners that we that we've gone up with need to be home runs. They need to be successes, otherwise we jeopardize the long-term strategy here on the cas strip technology internationally, and so we've been pretty picky. The right partners are out there. We just need to get through to conclusion on them.

Great. Thanks a lot, Dan.

Thanks, Mike.

[OPERATOR INSTRUCTIONS] We will now hear from CIBC World Market's Michael Williamson for our next question. Please go ahead.

Hello, Mike.

Thank you. Another question on Harris Steel. I recall that they import a decent amount of rebar and cold finished bar. Can you give us what proportion that is, and how do you think Nucor might change that going forward?

It wouldn't be appropriate for us, particularly when a deal hasn't closed, to be giving out information like that. They do -- you're absolutely right, they do import rebar and they do import particularly leaded grades of cold finish material. We would not stop doing that. We do not make leaded steels in our steel making operations. And our history with our downstream operations is to let them run their businesses profitably. We do expect them to be talking in partnership with our steel making operations. But at the end of the day, it's two groups coming together to do what's best for Nucor and for their operations. So the Harris team will have the flexibility to run their businesses in the most profitable way possible.

Would there be any opportunity for Nucor to get into the production of leaded-based bar products?

No, we have no desire to get into the production of leaded based in this country and have no plans to do it internationally.

And just one more quick question. When you talk about inventories, if I look at the MSCI data, bar products actually look like they're in good shape, structural's plate is a little high but coming down. Would you say that most of your concerns are primarily in the sheet market?

Yes. Absolutely. That was the -- the first nine months of last year were very strong in sheet. They deteriorated because of the very high levels of [inaudible] product. And all our products those are the ones we have the greatest concern over.

It was a very positive sign, though, that service center shipments in January were much, much stronger than anticipated. That coupled with the input declining, we see it coming in the right direction.

Thank you.

And we'll hear from Mike Barr from KeyBanc for the next question. Your line is open, please go ahead.

Good. Thanks very much. Hey, Dan.

Mark, how you doing, buddy?

Good. How are you?

Didn't know you changed your name to Mike, but that's all right. [LAUGHTER]

That happens quite often, actually. I'm not really sure why, anyway. John, I had another question that kind of follows onto your comment. I'm not sure if you misspoke or not, but I think I heard you say that January service center shipments were very strong. I was just wondering if you were in any position to give us some guidance on overall shipments by product category for the first quarter?

You mean from service centers there's different products. Well, structural is very, very strong. Plate was good. And frankly, I spend a lot of my time visiting customer. Customers are reporting to us since their demand is so strong as we visit with our service customers, they're telling us that their shipments were much higher in January than they anticipated. Much stronger.

Is there anything that can you attribute that to?

I think, as I said, demand remains strong, okay? End users are busy. Imports are down. I think people look forward and as end customers are looking into March, a traditionally strong month for us and for their businesses, so I think those are all factors that are leading into it.

Is there an opportunity on a consolidated basis for Nucor to have up shipments 1Q versus 4Q?

Yes, there's a possibility, sure.

I mean -- I realize I stated that very poorly. Could you give us a more -- [LAUGHTER]

You know, Mark, we're always very optimistic folks. Conservative, but optimistic. So when you ask me if there's a possibility, there certainly is a possibility. As John's already mentioned, plate and beams are very strong still. Bars are doing well. And sheet business, we're 70% contract for the first quarter. So, I'd say there's every possibility for that to be the case. How much? We're not going to get into putting numbers on it, Mark.

Yes, it's a little early yet, but --

Just a little. [LAUGHTER]

Yes, but the momentum is good. I appreciate that. Congratulations on all the great progress, Dan. You guys are doing an awesome job.

Thank you, mark. Thanks for your support.

We will now hear from Debra Fine from Fine Capital for our next question. Your line is open, ma'am. Please go ahead.

Hi, Dan. Congratulation on the quarter.

Thank you.

On -- another follow-up question on Harris. You said in the press release that it significantly advances your downstream opportunities. And I'm wondering if that means that you're going to wait to integrate the Harris acquisition more fully before you look at other downstream opportunities, or if other downstream opportunities present themselves, you'll still move forward? And I have a separate question on China.

We absolutely will move forward on other opportunities as they present themselves or come to fruition. We will not hold back on the downstream strategy to integrate Harris. Harris is a very well run company. As you know we're keeping it as a separate -- a company that will be under the Nucor umbrella. And they're not going to skip a beat and we're not going to skip a beat in our downstream strategy.

Okay, great. And if you could give us an update on China on where you see their efforts to rationalize capacity?

Listen, most of the global steel industry -- not just the United States, not just Nucor -- are very hopeful that they will make significant strides in rationalizing and recognize their position as a -- a country that has built major excess capacity even with their very strong growth. And recognize that they are heavily subsidized and government-owned in most cases and that they should be responsible players in a world market, and not thumb their noses at the trade laws that they agreed to to get access to the world markets. We're all very hopeful of that. So far, we have not seen that behavior come to fruition. As you know, the imports from China have been extreme in the latter part of last year in flat roll products. They've been extreme in the wire [inaudible] and tubular products for more than a year. And we're hopeful that they will modify the behavior. If they don't, we certainly are moving forward rapidly to deal with them in a legal recourse in Washington and at the World Trade Organization. And so aer countries -- so is [VU] and Japan came out today and mentioned that they would be in line to do the same thing if the U.S. [inaudible] did that, because they don't want that services coming in their direction, either.

Thank you.

Thank you, Debra.

And Credit Suisse has a question from David Gagliano. Please go ahead.

Thanks very much. I just have a couple of clarification questions. First, on the LIFO charge that swung to a $40 million credit, you mentioned that you were expecting a charge originally. What was the absolute number that was within the expectations, when you originally got it in December?

I don't remember the -- it wasn't a huge charge that we were expecting in the fourth quarter, but I don't remember specifically what it was. A slight charge.

A few million dollars. A couple million?

All right. Fair enough. And then just on the -- just to follow-up on the inventory commentary, obviously you mentioned you expect inventories to be back to more normal levels by the end of the quarter. I was wondering if you could expand a bit on some of the drivers there, the under the assumptions that go into that? Obviously your order books are a good indicator on the demand side. I'm just wondering if you give us a sense, what are you expecting for production utilization rates, things like that? And to the extent that you can, what sort of magnitude of decline do we need to see in imports? Obviously they're coming down, but they're still pretty high.

The two main drivers are the demand in the marketplace, which you've already indicated, and the import situation continuing to show downward movement. And we ran imports and in this country last year at a record pace over 45 million tons. Proportionately flat roll was the most greater percentage of the increase and the records were even higher with respect to flat rolled. They have to come down significantly. Not 5% or 10%. 20%, 30+%, and that's what we're looking for. And that's the -- as we've stated several times and we stated in our press release, that's the risk to the scenario of the inventories continuing to drop through the quarter to get back to a normal balance. If that doesn't happen, then second quarter we'll be talking about different things. But right now it appear that that will happen, but things can change in a hurry. There is a lag time between when import offers will start to show that they dropped off and when they -- and when people start actually not taking foreign orders because of the shipment times. So we look, as you will be looking, at the data as it comes in. But right now, things look pretty solid for the first quarter with respect to demand and customer activity. We'll just have to see how that that develops throughout the quarter.

Okay, great. Then just among the U.S. producers if we start to see utilization rates -- or if we continue to see utilization rates pick up here, what level of reduced production across the U.S. do you think we need to have in order to bring the inventory situation back into balance?

I'm not going to get into speculating to what levels. All I can tell you is that if people are matching their production to their orders, as they did in the fourth quarter, then that discipline will carry very positive ramifications for the industry, not just here but around the world. And -- but I have no insights as to how that will play out.

Okay. Fair enough. Thanks.

Thank you.

And we'll now move onto Deutsche Bank's Dave Martin for our next question. Please go ahead.

Hello, Dave.

First of all, often this time of year we hear about profit sharing and we see a bit of a tick-up in SG&A in the fourth quarter, which I don't think we saw this quarter. Can you comment on that?

Profit sharing was up significantly because of record year. Terry?

We probably did a better job during the year of getting it in the right quarters, but --

Okay. I know, for example, last fourth quarter there was an increase. Just looking sequentially went down about $20 million on the SG&A line, not knowing exactly where all that shows up?

A good chunk of the profit sharing is in SG&A.

Yes, okay. That's fine. And then secondly, John, on your comments about the order book being 70% full for the first quarter, I would interpret that to mean that January and February order books are full and March's is pretty wide open at this point. Is that the right way to think about it or not?

Dave, I have to correct you on that. We did not say order books were 70% full. We said that we had 70% of our tonnage tied up in contracts for the first quarter. We did not comment on how much we have already accepted it from the spot market.

And I'll point out that we did just open our March -- the month of March just over the past weekend, so we really haven't had any opportunity to do much in the spot market in March.

The other thing that we mentioned is John said currently our sheet metals are running at or near capacity.

Okay. Thanks.

You're welcome.

And we will now hear from UBS's Timna Tanners for our next question. Please go ahead.

Hi, sorry this is P.T. Luther in for Timna Tanners.

I was going to say, Pete, I heard something exciting was going on with Timna, and it didn't have anything to do with being on this call.

That could have had something to do with it. [LAUGHTER] Kind of a busy day here.

Yes.

Most of our questions have been addressed. I think one of them was just regarding SG&A and the drop we saw in the fourth quarter. What -- if you could give some color on what caused that?

Well, as Terry just mentioned the major --

Oh, I'm sorry. Was it just asked? I must have missed it.

Yes.

Okay. These are questions we had -- I'll look back on this transcript. And the other question we had --

We can repeat it.

It's pretty much consistent as a percent of sales. I'm not --

Yes, percentage of sales is consistent. It was down about $18 million sequentially on absolute basis is all we were looking at.

Hey, I don't know specifically. Some of it could be in profit sharing allocation, but --

Okay. Okay. That's all. Thanks very much.

Okay. GIve our best to Timna.

We will, thanks.

And we will now hear from Aug RIchard from FTN Midwest. Please go ahead.

Good afternoon, sirs.

Good afternoon.

With the [Tisen] plant probably more of a possibility now with the [defasco] situation seemingly resolved and with [Severcore] possibly starting melt shop in this fall or later this year, do you see a scrap shortage in the southern region and do you see a need to maybe control more of your scrap than you have now?

Well, first off, we've had a strategy since pre-2000 and we emphasized in 2000 to get six to seven million tons of our own controlled scrap substitute -- high-quality scrap substitute under our own control in production. And as Joe mentioned, the dri plant is up and running, and running at capacity and maybe even a little bit better. And so that will certainly continue with other projects we have going on to get to that six to seven million tons. As far as a shortage of scrap, I don't think so. We're not in a shortage situation and it'll principally be a matter of price and what get export and what doesn't. Will it be greater demand domestically with those operations? I'm not sure with what kind of melt Tisen's going to build. My understanding, it's not an electric furnace shop. It's a blast furnace-type operation. Or just a [sly] rerolling, excuse me. And as far as Severcore goes, they are electric furnace based and they will put an additional demand on the scrap, not just in the southeast. We pulled -- our mills in the southeast pull scrap from all around the country and from offshore, as a matter of fact.

Okay. Fair enough. And just a quick question. Tisen, I believe, is going to have an electric for stainless down in the southern. That scrap wouldn't compete with what you guys use, right?

No.

Okay. Thank you very much.

You're welcome.

And at this time we have one question remaining in the queue and that's a follow-up question from Aldo Mazzaferro from Goldman Sachs. Go ahead.

Yes, Dan, if I can just stick one more in, the -- [LAUGHTER]

If it's just one more, Aldo, you got it.

Maybe two. I heard -- there was a trade press report that you raise hot rolled [inaudible] price and I was just wondering, is that effective for March or for April?

I think it's March. John?

That is effective for March.

So you got it into March, okay. And then, Dan, I just wanted to close by asking you, since your final comment was you thought PE should be higher, how high should it be and where do you -- what can you do about it?

Historically, Nucor has had a growth PE in the mid teens and high 20s. So I certainly believe that what the growth that we've demonstrated and with the way the industry's down, and particularly if China becomes more responsible producer, that that's where we should be.

Great. Well, thanks, Dan, and congratulations on all the progress.

Thank you, Aldo.

It's tremendous.

And at this time, there are no -- there are no additional time for further questions. I would like to turn the call back to our speakers today for any additional or closing remarks.

Thank you very much. Thank you all for the excellent questions, and for the congratulatory remarks. And again, thank you to the entire Nucor team -- 12,000 strong -- our partners, our customers for a great year and hopefully it will be another great year in 2007. Thank you.

Thank you, everyone, for your participation. That does conclude today's conference. Everyone have a great day.