Nucor Corp (NUE) 2008 Q1 法說會逐字稿

Good day, everyone. Welcome to the Nucor Corporation's first quarter 2008 earnings release conference call. As a reminder, today's call is being recorded. Later, we'll conduct a question and answer session and instructions will be provided at that time. Certain statements made in this conference call are forward-looking statements that involve risks and uncertainties. Although Nucor believes that they are based on reasonable assumptions, there could 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 expectations, sorry our predictions are listed in Nucor's SEC filing. The forward-looking statements made in this conference call speak only as of this date and Nucor does not assume any obligations to update them.

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

Thank you. Good afternoon and thank you for joining us for Nucor's Conference Call. We appreciate your interest once again in Nucor. Our team will review Nucor's first quarter 2008 performance and we will update you on our disciplined implementation of Nucor's growth strategy.

First, and most importantly, I would like to say thank you once again and job well done to all 20,000 members of Nucor 's team for delivering record first quarter earnings of $410 million. As always, you are working safe, working smart, working hard, and working together to take care of our customers. We have proven again that Nucor's most significant competitive advantage remains our employees, the right people working together as a team. Thank you, and stay safe. I also want to extend a warm welcome to the newest additions to our Nucor Family. In late February, the 1700 employees in the David J Joseph Company joined the Nucor team. As proven partners of Nucor for four decades, we are excited and proud to welcome you into Nucor, and earlier this month, we completed two acquisitions of scrap processing companies as part of our strategy for David J. Joseph, or DJJ, to be Nucor's growth platform into the scrap business. Nucor and David Joseph are excited to welcome the more than 500 employees of the Galamba Metals Group, now operating under the Advantage Metals name and also Metals Recycling Services to the Nucor family. Together, with our new teammates, we are looking forward to a very bright future of profitable growth in the scrap business, and I emphasize the term profitable growth in the scrap business. Again, welcome to all of you.

Now, here are some thoughts on our first quarter earnings report, and most importantly our exciting plans for continued growth of shareholder value. Nucor's record setting first quarter earnings were achieved in a period of dramatic escalation in the cost of raw materials, most notably scrap, but not solely scrap. Our monthly scrap usage costs increased by $66 per ton from December 2007 to March 2008, and first quarter of 2008 results included a life long inventory charge of $69 million pre-tax. At the same time, we were able to generate first quarter pre-tax profit of $101 per ton. That number was up from the fourth quarter of 2007 pre-tax profit of $98 per ton. The improvement was driven by strong volume and an increase in the metal margin spread at our steel mills. These results demonstrate the Nucor's team longstanding ability to successfully manage volatility in scrap Markets. Critical underpinnings to this success have been a healthy supply demand balance in North American steel markets and continued effective utilization of Nucor's raw material surcharge at our steel mills.

The first quarter was also our fifth consecutive year of record breaking first quarter earnings. This highlights tremendous value of Nucor's position as North Americas most diversified steel and steel products producer. With our product line diversity, Nucor's short-term performance is not tied to any one steel market. Composition of sales tons for this year's first quarter was 34% sheet, 23% bars, 12% beams, 11% plate, and 20% downstream steel products. Over the past five years, relatively better conditions in some steel markets have cushioned the effect of more adverse conditions in other markets. Our first quarter of 2008 earnings benefited from record results at our structural steel mills and improved profitability at our sheet mills. Also, a number of our other businesses generated very attractive profits during the quarter, including bars, plate , rebar fabrication and coal finished bars.

Now, let's talk about our team's ongoing focus on building Nucor's long term earnings power. We are certainly encouraged by our progress at this point. Here is some statistics that tell a story that our multi-pronged growth strategy is working and working extremely well. Our quarterly earnings in the past 10 consecutive quarters have exceeded the prior record annual earnings reached in 2000. The last cyclical peak in the U.S. economy. Our current annual earnings record set in 2006 was nearly six times greater than the prior record level achieved in 2000. And Nucor's return on equity over the past four years averaged a U.S. Steel industry leading 35%. We are encouraged by this progress. Our team is not satisfied and we are extremely excited about the growth opportunities we see in 2008 and beyond.

Two developments this past quarter are particularly exciting. When the David J. Joseph Company became part of Nucor last quarter, the best of the best in the scrap business joined the Nucor team. DJJ scrap processing assets broaden our raw material strategy and provide a partial hedge to our steel mills against scrap market volatility. And DJJ is much more than just a scrap processing company. David J. Joseph has a number of other very attractive profit centers which include broker services for scrap, alloy, pig iron and scrap substitutes, mill and industrial services and rail and logistics services. And they offer sizeable synergies to Nucor and will allow us to optimize the profitability of our steel mills along with our scrap operations. And most importantly, David J. Joseph's Management team is already at work as a growth platform for Nucor and the scrap business. As I previously mentioned, we completed earlier this month the acquisition of two scrap processing companies.

The second key growth initiative launched in the first quarter of 2008 was the signing of our memorandum of understanding with the Duferco Group for our structural steel joint venture in Europe. The 50/50 joint venture will encompass Duferco's Duferdofin subsidiary which is Italy's largest beam producer with 2007 output exceeding 900,000 metric tons. With the completion of construction later this year, and the new merchant bar mill, Duferdofin's total capacity at its three Italian mills will approach two million tons. In addition to cash, Nucor will contribute its considerable technical and commercial expertise to the joint venture. Nucor's North Americas largest producer of beams and special sections. We expect to sign a definitive agreement within the next month.

This joint venture will be Nucor's inaugural growth platform overseas. We are excited by this opportunity to partner with the beam market leader in Italy and Southern Europe. Most importantly, there's a strong cultural compatibility with our partners and the beam business is one that we understand very well. One in which we have earned very attractive profits for two decades. Along with our partners, we are looking forward to a bright future of profitable growth in the European long products market. With the Nucor's culture's focus on continual improvement and profitable growth, our team is better positioned than ever to reward our shareholders with attractive returns on the value capital invested in Nucor.

At this time, I would like to ask our CFO, Terry Lisenby, to share with you his thoughts on our results and financial

Thanks, Dan, and good afternoon to everyone. Nucor's first quarter 2008 earnings of $1.41 per diluted share were ahead of our guidance of $1.20 to $1.30. These better than expected earnings were achieved despite a LIFO inventory charge of $69 million, which was significantly higher than the estimated LIFO charge of 20 to $25 million that was Incorporated in our first quarter earnings guidance. As Dan discussed, Nucor's operating performance continues to benefit from our diversified product portfolio. Cash provided by operating activities for the first quarter was $667 million, up from $566 million for the year ago quarter. Cash totaled $734 million at the close of the first quarter, and our debt-to-capital ratio was 32%.

Nucor holds the highest debt ratings of any North American metals and mining company awarded by Standard & Poor's and Moody's. We view Nucor's strong balance sheet as an important competitive advantage in a consolidating and cyclical industry. Our financial strength and strong cash flow generation enable Nucor to take a long term perspective in managing and growing our business. And our team is working hard to build upon Nucor's long term record of being an effective steward of our shareholders investment. Our focus on the careful allocation of capital is evidenced by our disciplined approach to organic growth projects, acquisitions, dividends, and share repurchases. Our decision-making process is very simple. We allocate capital to opportunities that offer the owners of Nucor the highest return on their investment. Capital Expenditures for the first quarter of 2008 were $226 million. Approximately two-thirds of those outlays were at our Greenfield projects, the Memphis SBQ Bar Mill, the Decatur sheet mill galvanizing facility, the Arkansas Castrip plant and the Utah building systems facility. Full year 2008 Capital Expenditures are expected to be approximately $800 million. Over $300 million of that amount is for the Greenfield projects.

On February 29, we completed the acquisition of the David J. Joseph Company for approximately $1.4 billion. This is Nucor's largest ever acquisition. We expect this acquisition to be accretive in 2008. Our team is extremely excited about the attractive long term returns that DJJ will generate for our shareholders. And in February Nucor's Board of Directors increased our base quarterly dividend to $0.32 per share from $0.30 per share. In addition, the Board approved payment of a supplemental dividend of $0.20 per share for a total dividend of $0.52 per share payable on May 9. Over the past year, Nucor's quarterly base dividend has more than tripled, from $0.10 per share to $0.32 per share. This significant boost in our base dividend reflects Nucor's success and building long term earnings power. And, it is evidence of Nucor's belief that the business cycle for steel will see both higher highs and higher lows going forward.

Our outlook for the second quarter is positive, with earnings expected to be in the range of $1.55 to $1.60 per share. We expect continued strengthen our bar beam plate and sheet businesses due to the solid global demand for steel. Overall, conditions in our downstream businesses should continue to be good, particularly for rebar fabrication, coal finish bars, steel grading and wire rod and mesh products. We also believe our upstream raw material businesses will be accretive in the second quarter. As always, Nucor will be both disciplined and opportunistic in seeking profitable growth for our shareholders. Our team has never been more excited about the opportunities ahead of us. Dan?

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

Thank you, Dan. Good afternoon to everyone. I want to congratulate our team at Nucor Building Systems Utah for those successful launch of production in the first quarter. They're off to a quick start up. March was Utah's first month of production, they produced 633 tons and 256 tons of that was produced in the last week of the month. As the backlog is strong, additional production workers will be hired in May. Utah's annual capacity is approximately 30,000 tons. With our new Utah plant now running, and last year's acquisition of the former Magnatrax metal building businesses, Nucor's buildings group has five brands, 11 plants, nationwide coverage, and a total annual capacity of about 465,000 tons. We are looking forward to a bright future in pre-engineered buildings.

Vertical integration has been a highly successful strategy to Nucor for four decades. Our ability to build market leadership positions and downstream steel products is a critical factor driving Nucor 's long term profitability. These businesses have consistently generated attractive returns on capital through the economic cycles. Importantly, downstream steel products enhanced Nucor's earnings power and growth opportunities without adding any steel making capacity that would disrupt North American steel industry's supply demand balance, and they enhance our steel mills performance by providing them with a profitable base load alike. As Nucor's steel products annual capacity has more than doubled over the past year to 4 million tons, our team is looking forward to growing the already highly attractive returns generated by these businesses. Dan?

Thank you, Ham. I'd like to ask John Ferriola and his team to update us on Nucor's fuel making Operations and our scrap, bar, beam, plate, and sheet businesses. John?

Thanks, Dan. Good afternoon. And thank you for your interest in Nucor. First quarter of 2008, total steel shipments of over 5.9 million tons are a new quarterly shipment record for Nucor. They exceeded the previous record set in the second quarter of 2006 by 56,000 and were up 5% over the prior year quarter. These record steel mill shipments result from Nucor's competitive strengths and our favorable position relative to several import trends impacting the global steel industry. I will briefly review two of these.

First, Nucor Steel Mills are taking advantage of attractive export opportunities. We benefit from having a number of our mills located on major rivers and on both coasts. Also, our purchase of a 75% interest in Nova Steel last year through the Harris Steel Acquisition has proven exceptionally timely. Our Switzerland based steel trading company, Nova Steel is already proving in valuable to our international marketing activities, and of course, our product diversity is also a major asset, enhancing our ability to earn profitable export business. First quarter of 2008 exports exceeded 500 thousand tons with particularly robust exports from our sheet, bar, and plate mills. We will continue to work to build profitable long term relationships in export markets. However, we will not grow our export business at the expense of our long term domestic customers.

My second point reiterates the comments made earlier by my single largest customer, Ham Lott and his steel products businesses. Nucor's vertical integration into downstream steel products enhances our steel mills' long term performance. They do this by providing our steel making operations with a profitable base load of volume through the economic cycle. I will emphasize that this business must be continuously earned by our mills through quality, service, and competitive pricing. That has been the case for four decades at Nucor.

For the first quarter of 2008, shipments from Nucor steel mills to inside customers was 748 thousand tons. That number is up 74% from year ago quarter's level of 431,000 tons. Nucor's steel mills look forward to a bright future of profitable growth in partnership with our valued customers at Nucor's expanding downstream businesses. Finally, our vertical integration work up stream on the raw materials side merits some comments. The addition of the David J. Joseph Company to the Nucor team is an extremely positive development for our steel mills. One that will significantly enhance their long term profitability. Recent unprecedented increases in the cost of scrap and other iron units highlight both the strategic importance of the DJJ acquisition and its timeliness. I would now like to introduce to you Nucor's newest Executive Vice President, DJ Joseph's President, Keith Grass. Keith and his team at the David J. Joseph Company have been our valued partners supporting Nucor's growth for many years. We are now extremely fortunate to have him as a member of our Senior Management Team. Keith?

Thank you, John. I speak on behalf of all my colleagues at the David J. Joseph Company. We are excited and proud to join the Nucor team. Our cultures share common passion, profitable growth, achieved by taking care of our customers. That has been proven by our highly successful partnership over the past 40 years. Looking ahead, we see even better days ahead of us as we work together as one team.

We see a number of opportunities to build attractive value from Nucor shareholders. Here are two major ones: First, DJJ will be a growth platform for Nucor in the scrap processing business. That work has already begun with this month's acquisitions of the Galamba Metals Group and Metals Recycling Services and second, DJJ's portfolio businesses will provide great potential for optimization of Nucor's existing operations. As you're aware, optimization of the existing operations is Nucor's preferred growth strategy. These opportunities are wide ranging and include procurement of scrap and other steel making raw materials, logistics Management, railcar fleet services, industrial scrap marketing channels, scrap blending expertise and the tremendous intellectual capital of our people working each day in the raw materials markets. As Dan and other members of the Nucor team have noted on many occasions, DJJ is more than a scrap company. I look forward to reporting to you on our progress in coming quarters and years. John?

Thank you, Keith. Mike Parrish will now update us on Nucor's Bar Mill group.

Thanks, John, and good afternoon. Congratulations and thank you to everyone on our Bar Mill group team for delivering a strong earnings performance in the first quarter of 2008. While our results were off modestly from the record quarterly earnings achieved in last years first quarter, they represented the Bar Mill Group's second best first quarter earnings and our third best quarter ever. First quarter shipments were essentially flat with the year ago quarter extremely strong shipments. Overall demand has been steady with energy, agriculture, heavy equipment, and non-residential construction continuing to be the strongest Markets. Pricing rose to record levels in the first quarter as our raw material surcharges have been effective and enabling us to pass through higher scrap costs and maintain our metal margin spreads.

Our Bar Mill teams are doing an excellent job managing our business in today's challenging environment of dramatically raw material cost. Our Memphis Special Bar Quality, or SBQ mill project is moving towards the start up of production in the second quarter. We expect to make the first heat in may and begin casting in June. Memphis will have an estimated annual capacity of 850 thousand tons, complimenting our Mills in South Carolina and Nebraska, our Memphis mill positions Nucor to provide the most diverse, highest quality and lowest cost SBQ offering in North America. We are very encouraged by the strong level of marketplace interest. The second quarter outlook for the Bar Mill group is positive, finished product shipments should be in line with the first quarter as we enter the peak construction season. Demand is also expected to remain strong in energy, agriculture and mining sectors. We also expect imports to remain at low levels in the second quarter due to the weak dollar and strong overseas demand for Bar products and with a good balance between supply and demand, we are well positioned to address ongoing sharp increases in raw material costs.

Finally, I want to thank again all of the members of Nucor's Bar Mill team for your strong focus on safety, continued improvement in quality and cost and taking care of our customers, by working together, we will make 2008 another very profitable year for the Bar Mill Group. John?

Thanks, Mike. Ladd Hall will update us on Nucor's sheet mill group.

Thanks, John. In the first quarter, our sheet mill group profitability improved over both fourth quarter and first quarter of '07. Even more encouraging was that our profit improvement gained momentum during this year's first quarter. Lateral results benefited from both strong volume growth and a slight expansion in metal margin spreads. The key to this improved profitability has been a better supply demand balance in our sheet markets. The better balanced market has lead to a stronger order book for our sheet mills. We anticipate running full for the second quarter of '08.

On the demand side, overall end use demand in the U.S. Continues to be soft, but stable. The demand picture varies by segments. As you've already heard, the energy and heavy equipment markets remain strong. Automotive and appliance markets will likely be very weak over the balance of 2008. By contrast, global demand continues to be solid, and the sheet metal group continues to capitalize on attractive export opportunities. Our export strategy continues to be focused on building long term relationships with good international customers. Supply side tightening reflects a number of factors. Most importantly, imports are down from the disruptive level experienced in 2006. At the same time, service centers continued to manage their inventories by keeping them at reasonably low levels. In the MSCI inventory data released yesterday, lateral inventories for March were reverted three months on a seasonally adjusted basis, with absolute inventory levels down 19% year-over-year. Also, several of our competitors continued to struggle with production equipment difficulties and a final and very important development is the unprecedented volatility seen this year in the cost of iron ore, coke, scrap, energy and transportation.

Earlier this week, some of our competitors announced their first ever implementation of a raw material surcharge on flat roll business that was under fixed price contractual arrangements. The rationale was the same as ours was when we implemented Nucor's raw material surcharges in 2004. These surcharges are absolutely critical in providing steel makers the financial resources required to buy the raw materials, to produce the steel, that is demanded by our customers. We believe Nucor sheet mills are well positioned to supply our customers during this time of unprecedented volatility in global steel markets. We expect to achieve markets improve supply demand balance for a strong second quarter performance from Nucor sheet Mills.

Even more, we remain very excited by our progress implementing our long term strategies focus on taking care of our customers and our shareholders. Our team is succeeding by developing new value-added products, producing outstanding quality, providing exceptional service, and delivering products to our customers that they want at a competitive price. In February, we announced plans to construct a sheet and coil plate processing center in Mexico to better serve the growing needs of our customers in the Mexican market. This facility is expected to have an annual capacity in excess of 500 thousand tons. Value-added capabilities will include pickling, slitting, cut to length, and blanking. We expect to have our site selected by the end of this year with construction to begin after satisfactory resolution of regulatory approvals. This is an exciting growth opportunity in a market that is becoming increasingly important to our sheet mills. We're also looking forward to the fourth quarter start up of our Decatur, Alabama sheet mills new galvanizing facility. It will have an annual capacity of 500 thousand plus tons and the ability to galvanize 72 inch wide sheet. This will be Nucor's fourth galvanizing plant and will increase the sheet mill group's total galvanizing annual capacity by one-third to over 2 million tons.

Decatur's galvanizing facility expands our value-added product offerings in attractive growth regions for coated steel. Our sheet mills are also well positioned to benefit from the automotive industry's increasing demand for lighter gauge and higher strength steel. In fact our Berkeley facility recently became the first domestic steel supplier to develop, qualify, and supply a unique grade of ultra high strength steel so several global automotive manufacturers. Market observers have estimated as much as 40% of the steel used in an automobile will be advanced high strength steel or ultra high strength steel within the next five to 10 years. Finally, our team at the Crawfordsville castrip facility in Indiana continues to improve their productivity and quality. New production and shipment records were established in the first quarter. The Crawfordsville team has set an aggressive goal for full year 2008 volume but one that looks very realistic based on their impressive first quarter perform performance. We're also working and are excited about new product applications and new markets as they develop them. Nucor's second Castrip facility located in Arkansas is also on schedule to begin production in the first quarter of 2009. Label processing at this facility including backing capability will be Commissioned this month. In addition to its use of Castrip, Arkansas, the R it will also enable Nucor to expand their product offering to include jumbo column sections. The Nucor sheet mill group team is looking forward with excitement to a very successful 2008 and beyond. And we will continue to build long term value for our customers and for Nucor shareholders. John?

Thanks, Ladd. Joe Stratman will report to us on Nucor's structural and plate Mills. Joe?

Thank you, John and good afternoon, everyone. I want to start by saying thank you to our plate and structural teams at Hertford county, Tuscaloosa, Berkeley county and Nucor Yamato. This team consists of approximately 1800 men and women working together every day to take care of our customers. Through their efforts, we were able to report very strong results for the first quarter of 2008. Starting with the plate business, both the Hertford county and Tuscaloosa mills achieved record quarterly production and record quarterly shipments in the first quarter. These productivity gains were achieved in robust market conditions and therefore, lead to very strong first quarter profits for the plate group. As part of our ongoing focus on continual improvement, Tuscaloosa is nearing completion of the temper mill on its cut to length line, commissioning is set for early May, and the temper mill is expected to be operating at full capacity by the end of the second quarter.

We are very excited about the product improvements and growth opportunities that the temper mill will provide our Tuscaloosa team and our plate customers. Entering the second quarter, global demand for plate remains strong, particularly robust consuming sectors include marine, wind tower, energy, construction equipment, railcar, and bridge fabrication. Plate market conditions also continue to be favorably impacted by low service center inventories and limited import offerings. With this strong global demand for plate, our mills are seeing increased export opportunities as well. Congratulations and thank you to our teams at Hertford County and Tuscaloosa for your success in getting 2008 off to an excellent start.

Turning to an update of our structural steel business, I want to also congratulate our teams at Nucor Yamato and Berkeley Beam on setting new quarterly earnings records for the structural steel group in the first quarter of 2008. Thank you very much for a job well done. Looking ahead, the beam market remains very strong in the second quarter, particularly healthy demand is seen in the power, energy, healthcare, education, and industrial sectors. Reduced imports are also contributing to a good balance between supply and demand. Backlogs on the heavier beam sections extend into the late third quarter. We continue to receive quotation requests for export business but we have elected to devote our production capacity to serve local demand. As we have mentioned before, our team at Nucor Yamato is continuing to expand our product offerings from that mill. This spring, we are introducing 44 inch deep wide flange structural shapes, becoming the first mill in the Western Hemisphere to produce sections at this depth. Nucor Yamato recently successfully completed its second trial rolling of these beams and the first production rolling is scheduled for the week of May 2. In addition, as Ladd Hall mentioned earlier, the Commissioning of the vacuum degasser at Castrip, Arkansas is the next step towards production of the 14 inch jumbo column sections at Nucor Yamato. We're excited about the attractive growth opportunities these product expansions provide for us and our customers.

Finally, I want to remind all of our team members to continue to work safely. We can never forget that safety is our number one job at Nucor. 2008 is off to a great start and we see a very bright future for the plate and structural group. John?

Thanks, Joe. I will now turn it back over to Dan.

Thanks, John. Thanks, team. As you can see, our team is focused on the future. One with our best years still ahead of us. At this time, we would be glad to take your questions.

(OPERATOR INSTRUCTIONS). We'll take our first question from Evan Burke with Morgan Stanley.

Congrats on a strong quarter.

Thank you.

I guess I'll ask you if I can pick one question here, Mike, I think you touched on it briefly, the SBQ market. You're bringing on 850 thousand tons at Memphis and Steel Dynamics is kind of right behind you with another 250 thousand tons. I was hoping you could maybe talk about which segments you expect to absorb these new tons and are you concerned at all with the slowing economy that it might be too much SBQ for the market to handle at once?

Well, first thing to understand is that the 850 thousand tons is really broken up. There's about 4 to 500 thousand tons that's going to be in finished and then the other around 350 thousand tons are going to be in semi-finished, so we don't really have a particular market that we're focused on. We're going to focus on high quality and good service and go that route.

Okay. Certainly, you're targeting some customers. It's a product that needs to be qualified for some people, not others. Are you pursuing any sort of qualification on the production at this point or when does that happen?

We are working with customers on the automotive sector, also looking in the agricultural sector and any of the forging industries as well.

Okay, great. Thanks.

We'll take our next question from Timna Tanners with UBS.

Yes, hi, good afternoon.

Good afternoon, Timna.

Thank you. Wanted to ask about the global scrap market, if you could comment first of all on the conditions that you're seeing currently there and there's an interesting article out this morning about Italian mills not being able to run because of scrap shortages and of course prices are rising globally, so I'd like to get your take on that and also if you could comment within that about your outlook and what kind of scrap forecasts you have in that outlook, thank you.

First, I'll answer part of your latter question in terms of the scrap pricing going up internationally and in most places, it's increasing to the levels that we purchased our April scrap levels at. I'm not aware at this point in time of it going up higher than those levels. We'll know more when we actually go back into the marketplace again in May. As far as our scrap forecasts go, we, John, do you have any comments on that?

Well, it's very difficult for us to predict the scrap market going forward. Our sense is that we might see, we see the two markets differently. In the prime scrap market we see continued shortage as a result of the automotive, the continued automotive difficulties and just in general manufacturing leaving the United States, so we see continued pressure in the prime scrap area. On the obsolete scrap, it's a little harder to call with Spring coming, traditionally you see flows increasing and we've had some particularly harsh weather in the Midwest that has been inhibiting the flow of obsolete scrap during the last several months. That is beginning to ease up.

Last month, there was some problems moving scrap on the river system because of the flooding situation. That has been corrected. So we see some positive indicators. On the other hand, demand for scrap worldwide is continuing and the dollar situation makes it attractive to move some scrap offshore. So it's a blend there but we expect on the prime side continued pressure. We believe that we'll see over the next several months some easing on the obsolete scrap.

Timna, I'd like to add to that, that in talking with Keith, you may want to comment on your current flow activity at the yards.

Sure, Dan. I'd like to follow-up to John's comments. I think that when you track the flows into our yards as you see Spring set in in most parts of the country you start to see increased flow of obsolete scrap into our facilities, so certainly in most recent move up in scrap prices has been a stimulus to scrap collection system and the seasonal practice as well usually kick in at this point in time, so to John's point, obsolete scrap is beginning to flow throughout the country as the weather breaks and the collection system begins to get in gear.

And if I may add one more point, I mentioned the challenging area could be prime scrap and we have a program now that we are working together with, David J. Joseph Company to go directly to some of our better value-added customers and in the sheet arena, and work with them to be able to recoup the scrap generated at those facilities. So that will help us be able to maintain the flow of prime scrap into our facilities so we can supply our customers with sheet products.

Timna, before I ask Joe Stratman to talk a little bit about what might be going on over in Italy we had a talk with our partners to be at Duferco on the operations over there. I would like to add a couple of general comments. Number one, as Keith has mentioned, the flows are beginning to increase as we would expect they were in obsolete scrap, and there will be a divergence between prime scrap generation and obsolete flows and accumulation and over time , historically there's been a pretty good spread between pricing between those two product groups. We would expect to see moderation going forward in scrap pricing, particularly on the obsolete grades. It's an unknown right now where the prime grades will go. As you know, we bring in a lot of pig iron and DRI for our own operations and that will help to mitigate our issues there, and most specifically, with the pig iron, we got our needs met through September, October, is that right?

And of course our DRI plant is running well and providing us with DRI for our Operations. The thing to look at, we believe for what's taking place so far this year, is that extreme winter weather, the extreme flooding that followed the winter weather which is still at this very minute affecting operations on the Mississippi River. That together with a scrap export demand that may not be a whole lot different than it was this time last year but still strong, the main impact on what's taking place here is the winter weather and how it's impacted the ability of the obsolete scrap to be collected, processed, and shipped to the mills and on the prime side, it's been the American Axle strike and how it's affected a lot of manufacturing plants at GM in the amount of materials that they're processing and hence generating the scrap from. So these things will alleviate themselves and going forward we expect to see moderation in scrap pricing. Where it goes is anybody's guess, in terms of whether it goes up again for a month or two an then down or whether it starts to moderate on the obsolete scrap sooner than the prime grades. Joe, will you touch a little bit on the first part of

Absolutely. As Dan said, we're in regular communications with our future partners in Italy updating us on business conditions and mill operations. Most recently, as recently as of this morning, actually, and the operations over there are running very well. Their backlogs are strong. Their inventories are strong, and they're running at full capacity so any inference in that article that came out this morning should not be considered to have deferred if it included it. And can I ask a one word follow-up question? And on a scale of like the Top 10 concerns you might have for your business in the near term, where are the scrap placed like if 10 were the most concern and 1 was the least concern?

The thing that helps us to mitigate that from being at the most concerned standpoint is the fact that we have a very effective surcharge mechanism that allows us to move the scrap increases through to our customers and one in which our customers have been able to utilize to move increases down to their customers. And but certainly, it would rank up there as one of the top two or three concerns that we have going forward is the volatility that's going on in the scrap markets and where it goes. There's as many positive opportunities to that as there are negative depending on how the flows go and we believe they will go in a positive way to help moderate scrap supply and demand imbalances that may have existed because of the winter weather issues, so on a scale of 1 to 10, I forget which you said, if 1 is the most concerned or least concerned and 10 is the most concerned I'd put it right at the top end of that range. Exactly where it's kind of immaterial.

Thank you.

Again, please limit yourself to one question. We'll go next to Michelle Applebaum, Applebaum Research.

Hi.

Hello, Michelle.

Have a couple, well I guess I have one question. Well, how about this? I have an accounting question.

One question with three parts, I get it.

Yeah. Can you please explain your accounting? Or can I ask a question in the appropriate way?

Okay, all right what would you like specifically young lady?

Terry, please, can you tell me about the purchase accounting in the first quarter and how that would impact the second quarter?

Well, most of the purchasing accounting, if you're talking about for DJJ I guess?

Well I'm talking about for any acquisition because you have more than DJJ.

Oh, wow. We don't have time here to go into purchase accounting in detail, but basically, --

I'm sorry, what's the financial impact?

Oh, you're asking specifically how the financial impact might be different in the second quarter versus the first quarter or the first quarter acquisitions?

Right. You had purchase accounting in the first quarter that completely offset DJJ. Next quarter you're saying that it will be accretive, but there is a financial impact like $0.01 a share, $0.02 a share?

We don't disclose it and it's not material.

What's your materiality tests on EPS? On a quarterly basis?

It's not that simple, Michelle, it's somewhat subjective but it's not material.

It's insignificant, Michelle, as far as impact on earnings in the first quarter. It's relative to the the second quarter and as far as I know , most of that purchase accounting adjustment will be handled, has been handled in the

Most of it has been?

You'll have ongoing, if you want to refer to purchase accounting as being part of the amortization and depreciation --

No, I don't want to because that's ongoing for 22 years?

Yeah, or longer in some cases.

Right. So I only want to deal with the inventory write up.

Yeah, not material.

Okay. And it won't be material next quarter?

It's basically all gone.

Okay, and then it's not significant either?

True.

Okay. Then with regard to start up expense? You have almost a million ton a year facility starting up on May something? Wondering what kind of impact that would have on the second quarter?

Probably won't be much different than the first in total pre-operating and start up cost I don't think will be much change quarter-over-quarter.

And how much was it in the first?

A little over $22 million.

That compared to about $11 million first quarter 2007.

Okay, thank you.

You're welcome.

We'll take our next question from Chris Olin with Cleveland Research.

Good afternoon.

Good afternoon, Chris.

I hear what you're saying on the strong beam demand and I guess it implies good non-residential order trends. I'm just wondering how concerned are you that we're getting to the point where you could see some cancellations of these major projects call it third quarter or are you, what's your visibility beyond the next several months?

In general, what we said on the last conference call was we felt comfortable looking out six months and we spoke for six months of this year as being a very positive environment for our products including beams and non-residential construction. We would definitely extend that out through third quarter into the fourth quarter. Joe, do you have any specific comments on that on the beam side?

Most of our visibility there or a lot of our visibility there comes from interaction with our customers and their bidding activity, and the information that we've been receiving very recently is that there have not been cancellation of projects, that project flow is still relatively strong, so as Dan said, looking out six months, we're still very comfortable that the market is strong as far as we can see.

Even potentially delays you aren't seeing that, which has been talked about I guess?

Not really. I mean there have been projects cancelled no doubt about it but while those were projects that were on drawing boards, were speculative projects, here in Charlotte, I know of at least one condo project that has now been put off but it never got started, so never any order pattern established and never got to the point of getting even close to where they would order steel so the projects that have been, that are in progress, the projects that have gotten the go ahead and had their financing and everything, all that stuff which is you're looking at the next six to nine plus months in those in terms of how it affects order entry and backlogs and steel production, those are not being impacted. It's stuff that maybe might have started to impact us 18 months down the road that we've seen canceled and so far, there have been a few of those but there's a lot of time between now and then for those things to be reinstituted.

And I would also add you really need to look past just the non-residential construction and look into what sectors that some of the structures, sectors that are very strong are really not being affected by a recession, the power sector, the energy sector, and so on, so it's not always only the commercial buildings. Thank you.

We'll take our next question from Mark Parr with KeyBanc Capital Markets.

Hi, thanks a lot. Good afternoon.

Good afternoon, Mark.

I have more of a strategic question. Dan, you've got a footprint in Canada with Harris and you've got a footprint in Italy and you've got a footprint in Mexico, I guess maybe footprint is kind of a big word, maybe you got a toe in the water. I'm just wondering with some of the exploratory things you're doing on the international front, looking out two to three years, where would you see the greatest growth opportunities for Nucor outside the U.S?

Well, you expand Italy to meaning the EU and where you can get to from Italy like the Middle East and northern Africa, and take a look at Mexico, this could be a very good start for us in Mexico, and we expect to have several partnerships formed in Mexico going forward, as we do in Europe, and then in the EU, to service the growing and strong infrastructural needs of the Eastern European market in the Middle East. So those two areas there would be the areas where you would expect to see our greatest international growth opportunities over the next three to five years. And as you said in Canada, we have a very strong footprint and the downstream we have more fabrication, coal finished bar businesses that Harris conducts in Canada.

Dan do you have any sense, again I hate to ask another question, but as terms of the order of magnitude, how big could international be as a part of your business in three or four years?

Well let's put it this way. We're looking at billions of dollars in investment. If not hundreds of millions of dollars of investment.

Thank you very much and congratulations on the great results.

Thank you.

We'll go next to John Flanagin with Fundamental Equity.

Dan, Schnitzer steel said in their recent phone call that they expected their sequential scrap realizations to be up like $75 per ton on a base of something like 350. Is that the kind of thing you may be facing?

In terms of our purchase price?

Yes, sir.

I don't know, Keith?

Well, obviously the Schnitzer is a coastal organization and more export oriented and if you look at pricing over the past probably three to six months the export markets tend to have been higher priced than the domestic markets so try and draw comparative between the Nucor organization the domestic and export markets is probably a little more difficult to do.

Interesting question, but I'm not sure I know how to answer it.

Dan, can you say what the current scrap capacity is for Nucor with these two additions?

We're bouncing around 5 million tons now.

Boy, that's amazing.

And growing.

Thanks a lot.

Thank you.

We'll go next to Bob Richards, Longbow Research.

Good afternoon. Thanks for taking our call.

Good afternoon. Thanks for being on it.

Yes, sir. The sequential decline in your steel products, sales price, 1361 to 1323, I presume that's more mix than anything else. Is that correct?

That's correct.

And that other column, sir, what does that encompass? The volumes there were up significantly.

Scrap isn't it?

You looking at the other?

That would be scrap.

That would be the scrap would be tied up in that column, right?

Scrap would be in that column. Building systems would be in that column, wire, fasteners, grading, what am I missing, guys? Mesh.

Okay, thank you very much and best of luck.

Thank you.

We'll go next to Alex Rackwitz with Nevsky.

Hi, good afternoon.

Good afternoon.

I actually had the same question as the previous one about the other column but I guess the other question I had which I was going to skip -- can you talk about the actual addition of sales in terms of dollar tons and EBITDA the one month consolidation of DJJ brought to your financials?

No. We would not break that out, but thanks for asking

Okay, thank you. We'll go next to Wayne Cooperman with Cobalt Capital.

Thanks. Just curious on the scrap market just wondering what your guys thoughts were and what's driving it right now and do you have any idea?

As I mentioned to an earlier question, our belief, based upon our very very strong understanding of the market out there through our David J. Joseph and through our mills interaction is that what you seen happen in the first quarter on scrap pricing is we saw a similar thing happen in the first quarter last year, and winter weather does have an impact. You couple that with continuing strong export demand, you couple that with a strike at American Axle that's impacted 11 or 12 General Motors plants, and you couple that with a downturn in automotive business in general, you start to see less product scrap being generated. The flows of obsolete scrap, the processing of it, straining of it and the like have been interrupted by winter weather and subsequent flooding in the rivers system, some cases shortage of logistical equipment to move it around, all of that has contributed to what we've seen happen in the first quarter on scrap pricing.

Do you think they will come back down the rest of the year?

We believe we will see moderation and healthy moderation throughout the course of the year but scrap prices at these levels, the obsolete, as Keith alluded to earlier the flows are increasing and wherever there's scrap out there people will find it and they will probably be looking again at the man hole covers and whatever else they can get their hands-on. It's not an enormous stream and a lot depends on what happens with the automotive sector, settling one strike and not having other strikes as to where the prime market and prime availability of scrap for manufacturers.

Thank you.

We'll go next to John Hill with Citigroup.

Yes. Thanks for your stamina on this very detailed presentation and Q & A session.

No problem, John.

Just a quick question. By one reading of the pricing and cost tables it looked like the scrap costs are coming through quite a bit faster than pricing although there is a different interpretation if we just look at the steel mills. Do you think that's true and when do you think that we should start to see some of these very high market based pricing flow through the model?

Well first off you should be looking at the steel mill when you look at prices, if you want to see a correlation between -- and the impact of that correlation between scrap pricing and steel pricing, and as far as has it been an issue we've talked about before, the timing issues when you purchase the scrap, when it's processed, when it gets to the river by railcar or what have you in your yards when you start using it, you use old stuff, new stuff, same time you raise your steel prices, these things kind of mix together and you end up getting what you get, John, do you have any comments you'd like to make? Just in addition to that the mix of our products itself impacts what type of scrap you use so that has an impact on it and selling price, so there's a multitude of variables that go into that.

But, I mean, maybe the best way we can answer your question is to tell you at this point in time we're very comfortable with the price increases that we put in place and the scrap increases that we received. And how all that will work out and hence we're guiding to a much stronger second quarter than first quarter.

Do you think it's possible in this regard to over the course of the year to regain the type of EBIT per net ton numbers we were looking at in mid 06 which were sort of up in the 140, 150 range?

Obviously those were very strong numbers and I would say anything is possible depending upon where the raw material issues go over the next six to nine months.

Very good and last one, to squeeze in there. Any sign of the infamous customer double ordering in anticipation of raw materials driven hikes such as we saw exactly one year ago today and then discovered about in the second quarter '07 call?

We have about five people shaking their heads no.

Great.

And the one thing that you need to keep in mind on steel pricing, certainly has been driven by raw material prices, but the fact that they're sticking in the marketplace is an indication of the balance globally between supply and demand both domestically in the states and around the world with our ability to export into those markets, so if you were to ask me, do I see that we have an ability to keep pricing higher, a greater opportunity to keep pricing higher going forward based upon market dynamics versus where the scrap will moderate? I'd say bid on the side of pricing for steel products. Staying at very good levels.

Great perspective. Thank you.

We'll take our next question from Joseph Wyman with Joseph C Wyman & Co.

Hello.

Hi, Joe.

Hi, how are you?

Good, how are you doing?

Good, thank you, quite all right I have a question about LIFO. Now that you have relative to your steel production, I guess a much improved or much increased scrap inventory, in addition to that you also have to work with much higher prices for your pallets on those tons of iron, are you now going to be sort of stuck with a permanent step up in LIFO charges?

Terry do you want to take a shot at that?

I don't think so, Joe. I think it's just going to depend on what pricing does.

Of your scrap inventory, off the purchases of the scrap company, has no influence on this?

Well DJJ is not on LIFO.

Oh, I see.

And remember, their inventory turns pretty quickly, so I'm not sure even if there were there would be a huge impact to LIFO for DJJ because their inventory turns so rapidly. Remember a lot of their business is brokerage.

Okay.

So no, I don't think there's any permanent impact. I mean as inventories go up in value, the LIFO dollar amount will likely continue to increase, but the absolute reserve, but that's been a trend as long as I've been here.

I guess if we think that we're never going to see a $100 a ton scrap again and we're not going to see 3 or $400 steel pricing again I guess you could say there's going to be a permanent LIFO account established. So I don't know if that helps answer your question, Joe.

Yes, it does. Relative to the raw material dollars, what is the status of the Australian and that eventually also creates another bounce in prices of the iron ore that you have to buy. Well, all I could tell you is that if this CEO has a way we would be building already in the United States but I've been convinced we should continue to go forward with our measured development in technology and work through some of the operating issues to a greater extent and go and Joe can give you an update on where that has happened and in answer to your question is yes it will have an impact but I'm not sure exactly what it would be in relation to a question you're asking

Well just in respect to the technology, Joe, and the status, all new technologies are extremely challenging and I guess a couple of points. Fundamentally, the technology works. The metallurgy that was tried and was predicted shows up in the vessel, it does produce what it's expected to produce, it consumes what it's expected to consume. The chemistries are what they're expected to be. The real issues are two, one is consistency and the second one is sustainability. And what I mean by that is in consistency, can we run for periods of time at particular rates, and especially high rates, and from sustainability, can we run for long periods of time, and we have a number of issues that keep us from doing either one of those. The two biggest are the iron ore pre-heater which is a mechanical device which has given us a number of issues on both consistency and sustainability and the second one is in the vessel itself on the refractory life and whether or not that's a mechanical issue or a thermodynamic mechanical issue or a fluid dynamic chemical issue, we're not quite sure yet because you can't see in that vessel when it's operating but we are just having a lot of issues with refractory failures where and things along those lines. So you don't know what you don't know until you start, until you run and so every time we get up and running we learn more, but it's just another challenging new technology and it's still got a ways to go.

Thank you, Joe.

Yes.

We'll go next to Aldo Mazzaferro with Goldman Sachs.

Hi, thanks, Dan.

Hi, Aldo.

Hi. On the DJJ strategy that you are following, I was wondering over the next couple of years, how integrated do you want to make that collection in processing side of Joseph relative to its 20 million tons I think you mentioned you had 5 million today or is that including other raw materials too?

That's 5 million, approximately 5 million tons of scrap processing capacity and actual production.

Great.

And as far as if you're asking how big do we want to get?

Yeah. Out of the 20 million or so that they handle would you like to ultimately see 18 million be collected and processed by then?

What we said last time is that our strategy is to become a market leader in this business, just as we are and as a strategy for all of the other products that we're in and choose to be in, and I would say that that philosophy will carry through here as well and I can't, I won't go into the details of the exact strategy that we do have. Suffice it to say it will be significantly larger than where we are today. Exactly where it ends up, we don't have a target on that just yet.

Great.

Keith do you want to add anything?

I guess along those lines, Aldo, I'd say if you look at the Joseph Company portfolio it's really two different types of businesses. I think the 20 million tons you're alluding to is primarily our brokerage and trading type activities where we procure materials for the Nucor organization and others and the second component of it is really the scrap processing business. So I think those two components make up DJJ and when you talk about the work integration, I think you'll see continued building up of our service side of the business with the brokerage and services procurement logistics and obviously on the other side of the business, it continued as I mentioned earlier, continued growth of the scrap processing platform. Where it makes sense, when it makes sense at the time it makes sense is probably the best way to describe that.

I see. So the 5 million is in addition to the 20 million brokerage?

Oh, it's probably a little blending there. If you look at our production capacity, it's closing in on 5 million tons. If you look at our brokerage volumes I think we put out during the publication, it was in the range of 20 million tons. Now if I start to give a break down between the two in how much goes further probably have an issue with Mr. DiMicco here.

Obviously Aldo, some of those process tons comes Nucor.

Right.

But they wouldn't be --

Okay, I was just wondering if David Joseph allows you to have lower supplies at the mills and I wonder if you could tell us maybe if you have a strategy that might keep your weeks of supply on hand of scrap lower now given that you kind of own the supply chain.

Well, I mean, if you're implying that they would carry the inventory as opposed to the mills it's kind of six on one half a dozen of the other. If you're implying I'll let Mr. Ferriola take a shot.

The comment I would make is we're working together to better manage the inventories and the flow of scrap, period, through the Joseph yards and our yards in combination. So it will have an impact on the level of inventories we actually have on the ground. Better we get at that and that's where some of the synergies come in.

I was hoping you could tell us if you're thinking your supplies are too high or too low at the Mills right now.

Well, see if the price of scrap is going down hard or too high and the scrap price is going up, they' re too low.

Okay, thanks, Dan.

We'll take our next question, it's a follow-up from Evan Kurtz with Morgan Stanley.

Great. Thanks for giving me another chance. Just a question on your realizations. You were at the 660 a ton for sheet in this quarter and if you go back, you're generally I think maybe with the exception until now above the spot price for hot rolled coil which make sense given that you're selling more higher value products than just HRC. I'm just trying to get a handle on the timing here why this happened this quarter. I guess it's mostly timing and would you expect that the normalized in the second quarter going forward?

In terms, are you asking that the increase of --

Just the timing of the increases the way they're coming in. It seems like they were actually lagging the crude spot index at this point and that's something that's never really happened before.

Well you're looking at price the average for the quarter.

Right.

So at the end of the quarter, spot is basically spot, so if you're looking at a spot number it's not an average for the quarter.

I'm looking at an average number, through the quarter.

I'm not sure how to answer that the question. Try it again.

I guess it's a matter of timing. You have sales that you apply a surcharge to that generally happens a month after --

That's correct.

You see where the scrap prices go so that would cause a delay on that end, but then at the same time you have lead time issues on your shipments, so you're usually selling at prices you aren't going to realize for a couple of months, and there's some back and fourth on that, and that could put you either ahead or behind on kind of the crude spot price, and it seems at this point we've fallen a little bit farther behind. I just want to maybe get some clarity on the timing of surcharges, when we see certain announcements in the market, when are they actually hitting your books? Does that make any sense?

Well, as you correctly identified, when we institute the surcharge, it's for the month following the month that we purchased the scrap in. So the sales pricing will go up and it's not one month afterwards. It's two months afterwards, so that's what you need to look at. Now contract business goes up immediately the first of the following month the surcharges will go up, but on spot we're usually out a month beyond that so say we look at January, scrap prices go up on our buy in January. Contract pricing will go up February 1, but we're already booked on spot so we will be booked for February on spots, we won't see the spot increase go into effect until March, okay? So that may help you understand why you aren't seeing it go up as fast, and there are a host of other things like the mix and what product is going out of the plants, is it more towards the pipe guys, more towards the value-added guys, construction Markets, and that mix will change from month to month and throughout the year.

Yeah, I guess what I'm getting at is the rise in scrap was so sharp this quarter compared to some of the other quarters and the surcharge was up sharply. So it actually is farther behind the spot index and then we have April scrap prices up --

I don't know what you're referring to so I'm not going to continue to go down the road to answer your question because I don't know that I agree with you. What spot index you're talking about we don't have that information in front of us so I don't know the spot index out there that you keep referring to. But in general, there's a lag between the time at which scrap prices go up and those scrap price surcharges go into place and we start to ship product at those higher pricing levels. Of course at the same time, we've got inventories of lower price scrap in our operations so the issue is really the margins and how they're behaving and those margins during the course of the quarter actually expand.

Okay, I'll move on to something else. Just one other question on NU-IRON. Now with scrap going up with as much as it's gone up, I'm sure at this point your costs at NU-IRON are significantly lagging those of certainly high quality scrap steel. Now since the scrap surcharge is based on market scrap prices, does this mean that we should see a higher degree of margin expansion than we have before you had NU-IRON as scrap prices climb?

Keep in mind that in general answer to that would be yes, okay? Generally the answer, all of the things being equal, we have NU-IRON in there, today and didn't have it two years ago, the answer to your question is yes. Now you got to get into the relative amount of that and the relative amount of how it affects the margins based upon it being 1.8 million tons or 2 million tons of DRI in our overall product mix.

Right.

John?

And of course the cost of the material coming out of Trinidad is also rising as the iron ore price has increased also.

Right, right, but certainly less than scrap for that particular application. Well are you currently running at the 2 million ton turn rate? I know you mentioned on the call that you were potentially going to ramp Trinidad to possibly 2.4 million tons but what do we stand now and what's the timing on that?

We'll make this be your last question.

Okay.

And that is all that work is in process and exactly when it goes into place, I don't think I have a comment on that but it's kind of an ongoing continual improvement program adding more equipment there and handling equipment storage equipment and dryers or whatever, so that's an ongoing process. Will it be in place a year from now? Probably. How long between then and a year? I'm not going to be able to forecast that to you at this point in time and yeah, we are currently running at the capacity rate of the facility.

Okay, great. Thank you so much.

You're welcome.

We have a follow-up question, this is our final question, from Michelle Applebaum with Applebaum Research.

Okay.

Hello again, Michelle.

Is there an inverse correlation between the amount of time a questioner gets and the quality of the question?

Well I'm not going to comment on that.

Yeah, don't. You hinted at the scrap volatility being a positive opportunity as well as a negative and you threw that out there so I wanted to catch it since you threw it. What did you mean by that?

Well, it's actually pretty straightforward. If you believe that you have an opportunity to have your pricing for your finished product stay more stable than the pricing for scrap and that pricing for scrap should moderate based upon what caused the scrap prices to go up as we talked about here then you should see an environment where finished pricing is stable and scrap pricing is moderating and market --

Got it.

Just for the record, there's no bad question. I might give a lousy answer but we'll take all questions.

Okay, the next question I have is you also opened the door on Mexico, you said you might form partnerships there?

Yes, as we've said all along, our international approach is to form partnerships. So Mexico would be included in that.

What kind of partnerships?

Who we'll partner with and what kind of partnerships we're not going to get into. You'll know about them when they happen.

Might there be mills around?

Michelle? It wouldn't be appropriate for me to give you what our strategy is in Mexico other than what we've already announced, but as far as Mexico goes, a lot of our customers are there. The business is growing there, the Mexican market is growing , and we see Mexico as being a long term low cost manufacturer and it's right next door, so we don't limit ourselves to exactly what opportunities you might take advantage

Can I ask a follow-up on exports?

This is the third part of the last question.

I only got one the first time.

This is it.

Okay. On the export sales, you've come out and said you're kind of committed to this business, so should we still expect to see the 10% you were talking about at the beginning of the year? And does that impact margin?

Well, let's see. That's two parts of the last question. But in general, we're going to, we're committed to being the import market or export market because we believe that structurally the dollar is going to remain at a weaker level than the strong levels that we saw during the 90s and we believe that U.S. manufacturers given a level playing field both here and overseas which we believe we are a lot getting than we have been in the past, we'll be able to compete internationally for business overseas for let's just put it in terms of at least a decade, it's not a six-month event, it's not a one or two year event. The reasons why the dollar is weak and the reasons why the world is growing are much more fundamentally long term than that. As far as what our margins are, we're not going to get into what our margins are and how they're being affected except we wouldn't be surprised if we weren't making a very good profit on it, and with the domestic profitability, and we said we would be committed to that business, but we're not going to be committed to it at the expense of our domestic customers in terms of them being able to get steel from us. Pricing is another matter. Pricing is going to be what the market dictates just like it is for the raw materials we buy. John do you have any comments?

No. Other than we'll continue to focus on the value-added long term relationships on the export business with sweet deals always strong margin business.

Okay, well, thank you all for your questions. Thank you all for your interest in Nucor. Our team has put together another record quarter. We are not done by a long shot. The opportunities are ahead of us are significant, exciting, and many, and we elected to you on a lot of those, some we won't but at the end of the day Nucor's best years are certainly in front of us and they're at one year after another offers increasing opportunities for new records and new growth to our Company and growth to our shareholders capital. Thank you all very much.

This does conclude today's conference call. We appreciate your participation. You may disconnect at this time.