Nucor Corp (NUE) 2008 Q2 法說會逐字稿

Good day, everyone, and welcome to the Nucor Corporation second quarter 20008 earnings release conference call. As a reminder, today's call is being recorded. Later we will conduct a question and answer session and instructions will come at that time. 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 made in this conference call 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 Mr. Dan DiMicco, Chairman, President and Chief Executive Officer of Nucor Corp. Please go ahead, sir.

Thank you. Good afternoon and thank you for joining us for Nucor's second quarter conference call. We appreciate your interest very much in Nucor. Our team will review Nucor's second quarter of 2008 performance and we will update you on our disciplined implementation of Nucor's growth strategy. Our successful execution of Nucor's multi-pronged strategy continues to deliver strong returns for our shareholders and with more attractive growth still ahead of us.

First and most importantly I would like to say thank you and job well done to all the 21,000 members of Nucor's team for delivering record second quarter earnings of $581 million a record first half earnings of $991 million. This performance also set a new quarterly earnings record for Nucor of any quarter, breaking our previous record of $522 million earned in the third quarter of 2006 by 11.3%. As always, you are working safe, you are working smart, you are working hard and you are working together to take care of our customers and I thank you. You have proven again that Nucor's most significant competitive advantage remains our people, our employees, our teammates, the right people. The right people working together as a team.

I also want to extend a warm welcome to the newest addition of our Nucor family. Earlier this month we completed the acquisition of a 50% equity steak in Duferco Nucor. We are very proud and excited to be partners with the men and women of Duferco. Together we established Duferdofin Nucor as a premier supplier of beams in southern Europe and northern Africa. Again we welcome you to the Nucor family. In reviewing our progress this quarter two very important observations stand out to me.

First, the Nucor team again generated strong earnings in a period of sharply higher raw material costs. And, second our team continues to build on our multiple platforms for growing earnings and shareholder value. The second quarter and first half of 2008 saw unprecedented escalation in cost of scrap and other iron units. From December 2007 to June 2008 our monthly scrap and scrap substitutes usage costs increased by $223 per ton. It increased by $66 per ton from December 2007 to March 2008. It then increased by another $157 per ton from March to June of this year. Additionally first half of 2008s results included a LIFO inventory charge of $283 million pretax. The $69 million in the first quarter, and $214 million in the second quarter. And over this same period of record scrap prices the Nucor team achieved higher metal margin spreads and record earnings. It bears repeating. Over the same period of record scrap prices the Nucor team achieved higher metal margin spreads and record earnings.

Our success in managing the increased cost of metallics was driven by healthy supply demand balance in the North American steel markets and continued effective utilization of Nucor's raw material surcharge at our steel mills. Also our mills have done an excellent job of capitalized our strong global steel demand with strong export sales.

Now let's talk about my second observation, our teams ongoing focus on building Nucor's long-term earnings power. Halfway through our fifth consecutive year exceptionally strong earnings and returns to our shareholders, it is clear that our multi-pronged growth strategy is paying off. While we are encouraged by this progress our team is not satisfied. In fact, we are seeing acceleration in a number of profitable growth opportunities available to us. That realization was the rationale for raising $3 billion in capital in the second quarter. Of course disciplined execution of our multi-pronged growth strategy has positioned our Company with a number of attractive growth platforms.

In the first half of 2008 we have a number of exciting success stories to share with you as we continue to build upon these platforms. Hired in February the David J. Joseph Company has already proven to be an outstanding and extremely growth platform for Nucor scrap and other upstream businesses. I congratulate the David J. Joseph teammates for their impressive earnings contribution for the second quarter. Very strong performance was posted across the board in DJJ.s practicing, brokerage, logistics and most services business. Repeat ing what I said many times before, when the David J. Joseph Company came aboard the best of the best in the scrap business joined the Nucor team. And most importantly, DJJ.s talented management team is already at work as a growth platform for Nucor in the scrap business.

In the second quarter we completed acquisitions of two scrap processing companies. Our total annual scrap processing capacity now approaches 5 million tons with more on the way. Our initial international growth platform was established this month with the confirmation of our dividend Nucor joint venture in Italy. This partnership brings together the strong management team with Nucor's technical expertise in the beam business and the ventures three Italian steel mills were strategically placed to serve growing markets for structural shapes in southern Europe, north Africa and the Middle East. With the start up later this year and the second rolling mill at the Sicilian plant Duferco Nucor has the potential to be a 2 million tons per year producer of structural steel. Working with our partners we are looking forward at a bright future of profitable growth in the European beam business.

In May, we signed a memorandum of understanding with Sidenor SA to purchase the 34% share of a proposed new joint venture for the product of long products and plate in the Balkans, Turkey, Cypress and north Africa. Sidenor is the largest steel producer in Greece. Additional steel making assets in Bulgaria and the former Yugoslavia Public of Macedonia. This (inaudible) would follow the model established with our Italian joint venture and, that is to enter into international steel production through joint ventures with culturally compatible partners where Nucor can leverage our operating know how and intellectual property. Our team sees this as just the beginning of Nucor's presence in the European market.

In May, Rex Query was promoted to the new senior management position of President of Nucor Europe an eighteen-year veteran of our Company Rex is a proven Nucor leader. We are looking forward to developing additional attractive growth opportunities in Europe. Our the downstream side of our business, Harris Steel continues to be a powerful growth platform for us in the rebar fabrication market. In June Harris reached an agreement to acquire Ambassador Steel. This acquisition will be a major step in expanding Nucor's national footprint in rebar fabrication. And building a market leadership position in rebar fabrication complements our position as North Americas largest producer of rebar. Market leadership and vertical integration into value-added steel products are critical underpinnings to Nucor's proven ability to generate attractive long-term profits.

Just one additional note on our downstream businesses, if you take a look at our steel mill and steel products divisions, the DC or division contribution for ton numbers in terms of how much operating profit per ton we are making whether it be in the steel mill or downstream are almost identical in terms of the DC per ton. Our strategy f not only growing within the steel business but down stream is providing very, very strong margins and high profitability up and down our vertical integration strategy, whether it be in scrap, steel mills or in downstream fabrication businesses. Considering both our strong profit performance and our accelerating growth opportunities, my confidence has never been greater about Nucor's ability to continue rewarding our shareholders with attractive returns. I will now ask our CFO, Terry Lisenby, to share with you his thoughts on our results and financial position. Terry?

Thanks, Dan, and good afternoon to everyone. Nucor's second quarter earnings of $1.94 per diluted share were ahead of our quarterly earnings guidance of $1.75 to $1.80. Second quarter earnings per share were also a record level exceeding the previous record of $1.70 set in the third quarter of 2006. This better than expected earnings were achieved despite a LIFO inventory charge of $214 million for the quarter. The second quarter 2008 charge exceeded our full year 2007 LIFO charge of $194 million. And at the close of the quarter Nucor's LIFO inventory reserve was $865 million. That compared to LIFO inventory reserves of $582 million at year end 2007, and $387 million at year end 2006.

Nucor's operating performance continues to benefit from our diversified product portfolio. A number of our product lines contributed strong profits in the second quarter including bars, beams, sheet, plate, DJJs scrap operations, cold finished bars, deck, building system, fasteners, grading and wire mesh. Second quarter results again highlighted the value of Nucor's position as North Americas most diversified steel producer.

Dan mentioned our capital raising work in the second quarter. In May Nucor complete ad stock offering that raised approximately $2 billion, and a debt offering that raised approximately $1 billion. This capital along with our strong balance sheet and cash flow positions Nucor to capitalize on attractive investment opportunities for our shareholders. In 2008 the opportunities to profitably invest our shareholders valuable capital have accelerated. As always Nucor will be both disciplined and opportunistic in pursuing profitable growth that rewards our shareholders with attractive returns.

Looking at our balance sheet Nucor is in a position of strength to continue executing our growth strategy. Cash totaled approximately $2.8 billion, debt totaled $3.3 billion our debt to capital ratio is 28%. Nucor holds the highest credit ratings of any North American metals and mining company awarded by Standard & Poor's and Moody's. Strong credit rating gives us strategic flexibility in growing our business and significant cost savings in managing our business. Cash provided by operating activities for the first half of 2008 was $828 million, up from $738 million for the year ago first half. This year's cash flow has been impacted by the higher working capital requirements resulting from unprecedented increases in scrap cost and steel selling prices. Increased receivables and inventories reduced operating cash flow by almost $1.2 billion. This was partially offset by increased payables which provided cash of $493 million. Of course any future declines in scrap and steel plate prices would reduce our working capital requirements.

Capital expenditures for this year's first half were $502 million, over half of those out lays were at our greenfield projects, the Memphis SBQ bar mill, the Decatur sheet metals galvanizing facility, the Arkansas Castrip plants and the Utah building systems facility. Full year 2008 capital expenditures are expected to be approximately $800 million. On July 1, we completed our acquisition of 50% of the stock deferred it to Nucor for a purchase price of approximately $658 million. Our investment values to joint venture at around 6.3 times adjusted EBITDA for 2007. This is Nucor's first steel making investment overseas. We expect our initial international growth platform to generate very attractive long-term returns for our shareholders. Our outlook for the third quarter is positive with earnings expected to be in the range of 1.80 to 1.85 per diluted share. We expect continued strength in our plate, beam, bar, and sheet businesses due to strong global demand for steel, although they will continue to be challenged by high steel prices, we expect continued solid performance from our downstream businesses. We see more exciting growth and even better days ahead of us and thank you for your interest in Nucor. Dan?

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

Thank you, Dan. Good afternoon to everyone. I want to congratulate and thank all of our fabricated construction products teams for their hard work and success in managing through a challenging period of unprecedented increases in our steel costs.

Nucor produces four major fabricated construction products. They are steel joists, steel decking, preengineered metal buildings, and fabricated rebar. Each product group was profitable in both the first and second quarter's. Vertical integration has been a highly-successful strategy for Nucor for four decades, generating attractive long-term returns for Nucor shareholders. A critical factor driving this success is the fact that each Nucor steel products division is managed as and expected to be a profit center. While our downstream businesses provide Nucor's steel making operations with a profitable base load of volume through the economic cycle the mills must earn this business. They earn it through quality, service and competitive pricing.

Another key to our success in downstream steel products is our ability to build market leadership positions. To that point Harris Steel continues to be a powerful growth program for the Nucor and the rebar fabrication business. Last month Harris announced an agreement to acquire Ambassador Steel Corporation for a cash purchase price of approximately $185 million. Based in Auburn, Indiana, Ambassador is a fabricator and a distributor of rebar. In 2007 Ambassador shipped 422,000 tons of fabricated rebar and distributed another 228,000 tons. With the completion of this acquisition, Harris Steels rebar fabrication business will have more than doubled since being acquired by Nucor in March of 2007. And Ambassador does more than just significantly grow the size of our business. Ambassador expands our footprint through the Midwestern U.S., the Gulf Coast region and into the southeastern United States. The transaction is expected to close during the third quarter. We are looking forward to welcome the Ambassador team into the Nucor family. Dan.

Thank you Ham. I will now ask John Ferriola and his team to update us on Nucor's steel making operations at our scrap, bar, beam, plate, and sheet businesses. John.

Thanks, Dan, good afternoon. Thank you for your interest in Nucor. Second quarter of 2008 total steel shipments, 6.1 million tons set a new quarterly shipment record for Nucor. Shipments were up over 3% over the previous record set in this years first quarter and were up 13% in the second quarter 2007. The first half of 2008 total steel shipments of 12.1 million tons were also a record, and increased 9% from last year's first half.

In addition to strong volume our mills achieved higher metal margins. The spread between our average steel mill selling price and our average cost of metallics for the second quarter increased to $451 per ton, that's a widening of $61 per ton in the first quarter's metal margin spread of $390 per ton. Above average spread improvement was realized by our sheet metals.

As we noted on last quarters call, flat rolled market has seen a much healthier supply and demand balance in 2008. These results demonstrate the Nucor team's longstanding ability to profitably manage volatility in our key raw material and scrap. I would like to congratulate and thank the teams at all of our steel mills for once again getting the job done for our customers and our shareholders and especially getting it done safely. Nucor's raw materials surcharge has been an invaluable tool in managing the volatility of scrap pricing we have seen not just currently but on a number of occasions going back to late 2003. In fact our surcharge mechanism was first utilized in January 2004.

Over the past four and one half years every ton of steel pulled by Nucor steel mills has included a surcharge as a component of the total transaction price. This includes all of our contract business which contains either a surcharge or a scrap tie back cost. We have read with interest recent press reports discussing of our sheet market competitors who retroactively apply raw material surcharges to their existing contracts. Those news articles have further noted customer resistance to those efforts. That in turn has prompted investors to ask Nucor whether we have encountered any such issues. For us, the answer is simple. It is a nonissue. It is business as usual from the first U.S. flat rolled producer to only write contracts with either the surcharge or buyback clauses.

While speaking of raw materials we announced in May a new growth platform for our Company. Nucor has applied for a permit to build a state-of-the-art iron making facility in Louisiana. Phase I of our proposal calls for building a 3 million-ton per year greenfield flash furnace facility on the Mississippi River. Nucor Steel Louisiana would employ the latest technology for emission controls and energy-efficiency. The projects first phase would require an investment of about $2 billion. The potential second phase would build a second 3 million tons per year blast furnace for an additional investment of about $1 million.

Nucor Steel Louisiana is not a certainty, permits have to be issued and our board has to approve the selection of the site and the capital investment. While the Louisiana site the only one in the U.S. still under active consideration, we have other sites outside it's U.S. still under active consideration. Regardless of the ultimate site selected, this pig iron project will be a major step forward in implementing our raw material strategy to control 6 to 7 million tons per year of high quality scrap substance. It will build upon the success of our 2 million metric tons per year, EOR facility in Trinidad, and phase I would allow us to reduce our current open market purchases of pig iron. Even after substantially lower pig iron pricing prevailing when we first began our planning the economics for this project were very compelling. We look forward to updating you on our progress on this exciting project. I will now ask Mike Parrish, Joe Stratman, Ladd hall, and Keith Grass to update us on Nucor steel mill scrap businesses. Mike Parrish will lead off with his report on our Bar Mill Group. Mike.

Thanks, John, and good afternoon everyone. Congratulations and thank you to everyone on our Bar Mill Group team for delivering record second quarter and first half earnings. In addition to strong performance from our steel mills, record quarterly earnings were achieved by our coal finish bar, wire and fastener businesses. 2008 is our fifth consecutive year of record first half earnings for the Nucor Bar Mill Group. This growth record is driven by our team's focus on continually improving both our cost position and the value we provide to our customers.

Our shipments for the second quarter and first half of 2008 also set records. Year over year second quarter volume increased 21% and first half volume increased 9%. I am very excited to announce that our Memphis Special Bar Quality or SBQ mill had begun start up of its melt shop. On July 1, Memphis completed its first heat. And within the week we expect to begin casting and ship our first semi finished product to customers. In addition the rolling mill is scheduled to start up in the fourth quarter. Customer interest in our expanding SBQ product line is very high. And our Memphis team is eager to begin supplying our customers with a high quality product.

Third quarter outlook for the Bar Mill Group remains positive. Strength in the nonresidential, energy, and agriculture markets will continue to offset the ongoing weakness in the residential and automotive sectors. Shipments in margins should be comparable to the second quarter as we see steady demand, low imports and favorable export opportunity. Finally, I want to thank again our Bar Mill teammates for their strong commitment to working safely as they continue to excel at taking care of our customers and our shareholders. I will now turn it over to my colleague Joe Stratman for his report on our plate and structural mills. Joe?

Thank you, Mike, and good afternoon, everyone. I want to begin today by saying thank you to our plate and structural teams at Hertford County, Tuscaloosa, Berkeley County and Nucor Yamato. Through their excellent work taking care of our customers, our plate and structural mills were able to report very strong profits for the second quarter and first half of 2008.

Starting with the plate business, both the Hertford County and Tuscaloosa mills set new first half production and shipment records along with these productivity gains, our plate group reported higher earnings for the second quarter and first half of 2008 compared to year ago periods. Continual improvement remains a focus at our plate mills. A major achievement this quarter was Tuscaloosas successful commissioning of the new temper mill on their cut to length line. The improved product quality off this line provides our plate team greater flexibility to manage product mix between the Hertford and Tuscaloosa mills, thereby allowing each mill to concentrate on the products it runs most efficiently. This is just another example of how Nucor is optimizing our existing facilities and thereby executing on one of our key growth strategies.

As we enter the third quarter global demand for plate remains very healthy. Our order books are full. Our order entry rates are stronger than last year. Particularly robust consuming sectors include energy, transportation, infrastructure, and construction equipment. Plate market conditions also continue to be favorably impacted by low service center inventories, limited import offerings and continued strong export opportunities. Again, I want to congratulate and thank our teams at Hertford County and Tuscaloosa for your excellent results and achievements in the first half of 2008.

Turning to an update of our structural business I want to congratulate our teams at Nucor Yamato and Berkeley on setting new quarterly and first half earnings records for the structural steel group. The Nucor Yamato team also set monthly records for melting, rolling and shipping tonnages i the month of June and our Berkeley beam mill set new monthly production records in the month of May. Thank you to both teams for your record-setting performances. We also continued to expand Nucor's product offerings with Nucor Yamato becoming the first mill in the Western Hemisphere to produce 44-inch wide flange structural shapes. These beams are of particular interest to the highway bridge market. The product launch is off to a great start with Nucor Y. first commercial run of these beams which was in May being completely sold out.

In addition, we successfully commissioned the Castrip Arkansas vacuum tank degasser in April of 2008. This equipment not only is required for our Castrip product but also provides synergies to Nucor Yamato's production of jumbo beams. We expect our first commercial production to occur in the fourth quarter rolling cycle with some product coming to market this summer. Looking ahead the beam market remains very strong in the third quarter with order entry rates and backlogs ahead of last year at this time. Energy and infrastructure projects continue to drive the robust market condition. Reduced imports are also contributes to go a good balance between supply and demands. With extremely healthy international demand for beams, we also continue to receive export quotation requests from such areas as Mexico, Canada and Central and South America.

In closing, I want to remind all of my teammates of our most important priority and that is to work safely. 2008 is off to a record-setting start and we continue to see very bright future for the plate and structural groups. I'll now turn it over to my teammate Ladd Hall for his report on our sheet metal group. Ladd?

Thanks, Joe. Good afternoon. The second quarter our Sheet Mill Group's profits continued to improve compared to the first quarter this year and last year's second quarter. I too wants to congratulate and thank our teams at Crawfordsville, Hickman, Berkeley and Decatur on these results. Our team was very encouraged by the strong performance in a period of sky rocketing prime scrap costs. Our own share surcharge and share buyback agreements continue to be invaluable tools in managing these costs. As John mentioned in his comments we have been utilizing them since the beginning of '04. We feel that they are also an important aspect in improving the transparency of pricing for our customers. Both our metal margin spreads and our volumes benefit from a better supply/demand balance in the U.S. libel market so far this year. Second quarter sheet metal group shipments increased over 12% versus last year's second quarter.

In addition to strong demand from our customers in the energy and ag markets we continued to pursue profitable export opportunities. As I mentioned on last quarter's call our export strategy is focused on building long-term relationships with (inaudible) international customers. For the third quarter continued sharp increases in the product of prime scrap grades will be a challenge but that is a challenge our sheet metal teams have successfully addressed on a number of occasions over the past four and a half years. Worthy of note also is that our Castrip facility in Indiana was profitable every month in the second quarter. This is a great accomplishment and we have high expectations of this continuing in the future. Congratulations to the entire Castrip team.

I also want to mention what a great job our new iron team is doing at our DRI plant in Trinidad. After an extended shut down in May where we made some major improvements at the plant we are up and producing DRI at record levels. Using higher percentages of DRI at our sheet and plate plant have held (inaudible) and improve our quality. We are excited to see that our new iron team continues to excel and find new and better ways to get more quality tons out and to expect that to continue.

On the demand side overall end use demand in the U.S. continues to be stable. The demand picture varies by segment. The sheet metal group is very fortunate to have a strong presence in the energy, (inaudible) tube, ag and heavy equipment market. With most of our mills on the water we are extremely well-positioned to capitalize on attractive export business. On the supply side imports remain low. In looking ahead press reports indicate that a number of blast furnace and maintenance outages are scheduled for the second half of the year in the United States. Building on our first half results our team is looking forward to another successful year in 2008. Even better we continue to work hard on a number of exciting projects that will substantially increase our long-term earning power. These include Decaturs new galvanized line that starts up the fourth of this year, our second Castrip facility in Arkansas that will start up next year, our planned Mexican expansion and our new pig iron venture.

Our team is succeeding by keeping safety as our number one priority, developing new value-added products, producing outstanding quality, providing exceptional service and delivering on time to our customers the products they want at a competitive price. I will now turn the time over to Keith Grass our EVP of DJJ. Keith?

Thank you, Ladd. The David J. Joseph organization generated exceptionally strong profits in the second quarter. Our team was very pleased to perform at this level during our first full quarter as a member of the Nucor family and I want to thank the DJJ and Nucor teams for their excellent integration work over the past quarter. Those teams are now working together to explore the numerous opportunities in front of us. This is just the beginning of Nucor's profitable growth in the scrap business as we work together as one team.

Both our scrap processing and brokerage operations benefited from this years historic rise in pricing in extremely active markets. Margins reached record levels at our processing facilities as we were able to capture a significant portion of the market increase. Volume was also up as the higher prices stimulated obsolete flows into our plant particularly into our shredding facilities. Both the domestic and export markets were very active and although we are primarily a domestic focused organization, we do participate in the export market out of Tampa and Houston. Non-Ferrous pricing also remains at highs, a significant benefit to us facing the amount of non-ferrous metals we generate through our shredding facilities.

In summary, it was a record breaking quarter for our scrap business. It's important to remember that DJJ is not just a scrap Company. We have a number of other highly attractive profit centers. Our rail and logistics services businesses posted strong results for the quarter. DJJ owns the largest rail car fleet in North America dedicated to transporting scrap with both vigorous demand for our services and excellent turn time on our fleet our transportation related assets offer strong returns for us.

Most importantly as Dan noted in his comments DJJ will be a growth platform for Nucor in the scrap business. That work began in the second quarter with our acquisitions of Galamba Metals Group and Metals Recycling Services, these purchases bring Nucor's total annual scrap processing capacity to approximately 5 million tons. The integration of these companies into DJJ is going well. We continue to evaluate numerous other potential acquisitions of scrap processing companies that have expressed an interest in becoming part of DJJ and Nucor. At the same time we are also exploring greenfield expansions into some very interesting market regions. I look forward to reporting to you on our progress in coming quarters. I will now turn it back to John Ferriola.

Mike, Joe, Ladd, Keith, thank you for your update. We expect continued very strong performance of Nucor's steel mill and scrap businesses in the third quarter. Dan?

Thanks, John. I've been a member of the Nucor team since 1982. I have never been more excited that than I m today about our Company's opportunities for profitable growth. Nucor's best years are still ahead of us. We thank you for your interest in Nucor and at this time we would be delighted to take your questions.

(OPERATOR INSTRUCTIONS) David Gagliano, with Credit Suisse.

I just have a couple questions to clarify the outlook for Q3. What's the LIFO charge embedded in your third quarter target?

$142 million.

That's consistent with what we saw in Q2, correct?

Well, it's the same rate as year to date through the second quarter.

Okay. Fine. And then if scrap prices were to stay flat for the rest of the quarter would that LIFO charge be too high or too low?

That would be about right actually if they stayed flat for the rest of the quarter.

Fair enough. Just a quick clarification question on the, the other volumes, volumes in the other business. Obviously jumped way up in the third quarter and presumably that's from the acquisitions. Is that a reasonable run rate moving forward or is there anything there that we should be thinking about in terms of variability moving forward on the other line?

Actually I think you we won't be disappointed if they weren't better.

Thanks.

Just a clarification, the second quarter LIFO was considerably larger than what we are forecasting for third quarter. That was to get us even for year to date but it was over 2--.

It was 214.

214 million.

Got it.

Next question, Tony Rizzuto with Dahlman Rose Company.

Thank you very much, good afternoon gentlemen. How you doing, Dan? On the plate market looking at the results, obviously very positive when we see what's going on globally but it seems as if your volumes, your plate shipments were down a little bit sequentially if I look at the numbers correctly. It's quite possible I may have gone over that too quickly but the volumes look to be down 6%. I was wondering if you could just help me square that with the comments that were made?

Quarter to quarter the volumes would have been down slightly due to shutdowns that occurred in the second quarter that we did not have in the first quarter.

If you go back, Tony, excuse me, and take a look at '07 and '06 and '05 you would see the same relative difference, first quarter shipments higher than second quarter for the same reason.

All right, gentlemen. Then if we could just take a look at, it seems like you've got a very good mix in the nonresidential construction but if you could just help me to understand a little bit better so we can respond to investors better about if you break that out, I know you've got a lot of different markets you serve but if you could break it out from infrastructure including power, markets including road, bridge, ship building if we could just break it out a little bit more from the more conventional nonresidential market that would be kind of commercial buildings related?

Well, we don't really track it the way that we would be able to answer your question. We can tell you qualitatively which markets are stronger than the others. guys, have at it.

The comment I would add, Dan, is that's a little bit of a moving target because we look at the markets and our products can go into a number of different industries and we move them around according to them demands. For example, right now anything associated with energy is very strong so a lot more of our products were put into the energy market. So it's hard to give a definitive break out because of the moving targets depending upon demand out there in the market.

All right, John.

And also I'll say that any of our product that go to the nonresidential construction market that go through distribution channels will oftentimes we will not have a firsthand knowledge of what end product they end up in, whether it's bridges or high-rise, institutional, industrial, et cetera.

What percentage approximately would go into those markets through service centers? We've seen inventories under pretty good control obviously but is there any percentage guidance that you could give me on that?

The, of our structural beam market I would suggest that the, it's in the area of 35 to 40% of our product that goes through distribution.

I would concur with that. On the bar side we are about 30 to 35% if it goes through distribution.

Okay. All right, guys. Thank you very much.

You're welcome, Tommy.

We'll take our next question from Barry Vogel with Barry Vogel Associates.

Congratulations, gentlemen.

Hello, Barry, I thought you were retired.

I can't retire because -- I just can't.

You are in North Carolina now, right.

Right now I'm in Cape Cod.

Oh, that's right, it's that time of year.

Yes, that time of year. Dan and your crew, I just wanted to tell you that I've been following you guys for a long time. Notwithstanding the worldwide trends that have given you the ability to have the kind of volume you've had and the kind of profit, but on a strategic basis I must admit everything you are doing seems brilliant to me and I usually don't tell you that on the call because I don't want it to go to your head, Dan.

Believe me being in the steel business, Barry, keeps you humble.

Terry, I have a question for you on your scrap business. I recollect but I'm not sure that the scrap business is on FIFO; is that correct.

That's correct.

Can you give us an idea of how much of your operating profits in the quarter was due from your, was from your scrap business?

No.

Because, it could be important because the scrap market was so strong and you are on FIFO, it could be that it had a lot to do with your increase in profits. Can you tell us--?

I'm sorry, it certainly had an impact and we'll have, in the Q we'll have segment data that will help you a little bit with that. I don't have it frankly don't have it today.

Do you know what the accretion was because of your scrap acquisitions in the quarter.

I do not.

Okay.

Relative relative contribution looking at all the profits from all the operations, while the profits were very strong, not only historically but even from the month earlier and the month earlier in this historic time I would tell you, Barry, that it's not where you are thinking you are going with that question. It's not having that big an influence of and by itself.

Okay. And, Terry, can you tell us what your D&A estimate is for the year?

I'm sorry.

Your depreciation and amortization for the year?

Depreciation for the year is 490 is our estimate.

That's D&A. You mentioned each person that spoke about steel to a person mentioned exports. Last year when you talked about the export market you were only talking about long products. Again that's a generalization. And I think you told us at the end of last year that you shipped about 2 million tons into the export market. Is that correct?

Yes.

And when you say export--?

It will be the same case this year although we have turned away a lot of business.

Because you don't have the capacity?

Because we want to make sure that we would take care of our domestic customers.

That makes a lot of sense. Any way, thank you very much.

Barry, before you go I just want to qualify my statement earlier about DJJs contribution. It's a relative thing, it's not out of proportion with how well the rest of our business lines are doing. So I mean you just have to basically say that the entire ship went up together on a very even keel and very strongly.

Barry, there's one other thing to remember, the inner Company profit gets eliminated so the DJJ profit that flows that would have normally come from their sells to Nucor goes away on a consolidated basis.

We'll go next to John Hill with Citi.

Thank you and congratulations on a strong result and also for shedding light on some numbers that are really moving around a lot.

You're welcome and thank you.

Dan, I was wondering if we could revisit your comments about EBIT per ton. Obviously a very central metric, $118 in the quarter. To some eyes that might be pretty muted given the biggest rally in scrap -- sorry, in steel in recent memory. But this does as I understand it also include a fair bit of brokerage scrap in that other category at quite low level profitability. If we were to back that out that suggests that on an apples-to-apples basis this EBIT per ton is probably closer to 135 or $140 which would be creeping up back towards the Company's all time records and also be commensurate with the strong earnings result. Can you help us put in context how we should read the EBIT per ton numbers and characterize the strength or weakness of the business?

Anyone want to jump in here, before I say something, feel free? I think we wouldn't disagree with your argument. In terms of the absolute numbers and how they might turn out, I don't have those handy in front of us. I don't think anybody has really worked through those numbers. If they have they certainly haven't shown them to me yet but I would not argue with the basic premise and magnitude of your comment.

Great. Thanks. And then just as a follow-up, it seems like this press release for the first time notes some softness in the downstream, the building systems, et cetera, and it's obviously something that has felt like it was on the horizon for awhile. What's really changed in the business, the order book, order entry, et cetera? We can guess but I was still wondering if you could shed some light on what the statement was there.

Well, the major part of that statement I think and, Ham, correct me if I'm wrong on this, has to do with the fact that our downstream businesses have to pass along the significant steel price increases that they have been awarded by the sister companies and divisions. So how effectively those price increases are passed along will determine a lot about how profitable they are going to be. And Ham, I don't know do you want to add to that?

Yes, we face a double-edged sword in the second quarter. Number one like Dan was saying, we've obviously seen record price increases in steel as I said and we don't have the ability to cover our backlogs with inventory. So we are always trying in these times just like in 2004, we are certainly attempting to very aggressively get our prices up because we know the higher steel prices are going to flow to us. That's number one.

Frankly, the other half of those statements is just the slow down in bidding and the general pessimism that we are starting to see from AIA statistics and also architects, engineers, contractors, fabricators, you can just feel the storm clouds gathering on the nonres construction markets. So we've got both of them. We have the high steel prices coming at us and we have got the market.

To add to that, there are some, if you take a look at certain businesses we may have some of that issue. And other businesses like the frames in metal buildings things are still on the uptick and still positive and with the integration of growth to our Magnatrax operations we see growing profitability there and when Ham mentions the nonres what he is really referring to is not the overall nonres market but that part of the market that's really impacted by the housing downturn which would involve the low rise, strip malls, shopping centers, a lot of places where some joist material would be going but overall take a look at our downstream business for fasteners, for cold finished bars, for deck, for grating, for metal buildings the biggest issue they are going to have is going to be getting price increases through in a timely fashion.

Got it. Great perspective. Thank you.

You're welcome.

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

Hey, gentlemen, good afternoon.

Good afternoon, Mark, I hear you want to go visit in one of our mills?

Well, I'm going to be in Italy with my mother-in-law so I'm looking for all kinds of excuses.

She might be listening to this.

Well, you caught me on that, if you can help me out, though, I'd appreciate it. Yes, I had a couple of questions, I'm looking, one of the things I always do over the course of a conference call is that I look at the way the market is treating your stock and it seems like the market is becoming, becoming more concerned as opposed to less concerned. And I was kind of wondering, I was going to try to see, Dan, if you had any comments? We've been talking about this nonres situation for a long time. It doesn't really seem to be having an impact yet.

People like Worthington have been talking about the light side of the nonres market being weak for sometime. I'm just wondering though if you can, is there anything really different that you are seeing, scrap is up, I mean the prime side of the scrap maybe that hurts the flat roll side a little bit, maybe not. I'm wondering what you can do to offset that perhaps. I'm really kind of curious, what's really different? Is there anything different in the outlook than what you have been seeing over the last three, four months?

Well, one of the things that again has always helped us, Mark, and I'll keep coming back to this and I think our long-term shareholders fully appreciate this, I know you do, but I'll repeat it, is the diversity of our product mix and that diversity has been expanded now into the raw material sector whether it be with our DRI plant which is a huge hedge, 2 million tons against prime scrap pricing, the profitability of the extremely profitable operations of David J. Joseph and, we -- that diversity of product mix and the strong profitability and the DJJ operation have gone a long way to help us deal with whatever issues we might have on flat roll and, of course, I know our long products in play, the majority of the players are all scrap based. So we continue to enjoy very strong margins.

As Ladd mentioned the margins on flat roll have increased year over year, quarter over quarter. We shipped record tons and -- sometimes I wonder, people, we tend to be conservative in the way that we look at things for good reason. We've been surprised negatively before. The world has been surprised negatively before. And so when we give our guidance, for instance, year after year after year, quarter after quarter after quarter we do our best to give our best estimate but we don't take risks and don't do stupid things with our forecasts and then we give an update. Even with the update sometimes we get surprised ourselves because of the amount of shipments that can take place in like a five-week month when all of a sudden the rail cars and the trucks show up and we've got a business sitting there ready to go out the door and now we have got the cars to do it. Our employees they just get it done and they get it done big time. And it has an impact all across the Company in every division and we end up with very strong numbers. Our forecast for third quarter.

I hope people are not mistaking the fact that the our guidance forecast is 1.80 to 1.85. And saying, well, that's the same forecast that I had in second quarter. The reality is you take a look at the absolute earnings, we are forecasting a third quarter that will be a record quarter. It will not only be a record third quarter, it will be a record quarter of any quarter ever in the history of the Company.

Right.

So we certainly are not down beat in the way that we are looking at third quarter but I certainly have sense today that for whatever reason, people have their own reasons out there and what they do from one day for the next, go up $5 one day, go down $5 the next day, it's absolutely silly when we've demonstrated time and time again our successful improving performance, continuing record performance, we are on a record pace again this year significantly greater than our past record pace and there should be nothing in our press release or in our guidance that tells anybody that we are thinking that third quarter is going to be anything less than a record. How much of a record? We will all learn as we go along. Right now I think that's pretty optimistic.

Well, that's kind of what I thought but just wanted to make sure I was getting it from the horses mouth so to speak. I really appreciate your response there. Just one other point of clarification if I could, in your third quarter can you give us any color on where you think metal spreads will be relative to the second? Then I will pass it on. Thanks again very much and congratulations.

Thank you. Thank you very much, Mark. In terms of metal spreads, we have raised prices, just made recent announcements on bar, on plate, on beams, we are up $65 a ton on beams and bars, we're up $100 a ton on plates, we have not made an announcement on sheet but that will be coming out here probably the early part of next week on Monday. So certainly the direction on pricing is not flat, it's not down, it's up and with the global demand for our products the way it's been and the lack of imports we are just in that direct, as I said before, many times, we are in a direct opposite condition than we were at in 1999 and 2000 where we had great demands and lousy profits because the world was flooding our shores with excess steel. Today we have just the opposite of that. And demand is good globally. Raw material prices as a result have gone up and we have been able to have pricing power and we see that continuing into the third quarter. So I fully expect margins will expand in many cases and where volumes end up we will know at the end of the quarter but that's why we are forecasting another record quarter for third quarter. John, you have anything you would like to add?

Sure. I just want to make a comment on the first part of the question to make sure. There's a good point made about the negative test in the question and I would like to mention some of the positives that we see. World demand, these were within our various updates. World demand continues to be very, very strong. Well imports house the supply side of the equation, consolidation continues in our industry. Just recently (inaudible - audio difficulties) picked up (inaudible) and WCI, (inaudible) and Sparrow's Point, to further consolidate the sheet market and consolidation has led to a better supply and demand balance and it will continue to as consolidation continues to grow.

Exports, because of the strong world market, demand in the market and because we spent the last year positioning ourselves in a great opportunity to take advantage of those opportunities as they come along. There's a lot of positives out there.

Metal to support volume.

Metal to support volume.

Downstream you see commercial metals continuing to consolidate rebar fabrication along with Nucor. And internationally you see more consolidation going on. And, listen, this energy issue is not going to go away. It's -- the time is right for leadership in Washington to take bold measures to take advantage of all, all of the energy opportunities available to us drilling out on the outer Continental shelf, opening that up, not just saying and yelling about, well, you got all these leases already, and you are not doing anything. That's a bunch of horse manure. We need to open that up, drill that up in the (inaudible) area, but do it responsibly and it can be done. And off our Coast and we need to be doing the tar sands and we need to be doing, building more power plants of all types so that we can transition to a carbon free environment 20, 30 years down the road but we need the power and the energy to get there and we just don't need to be held hostage anymore and the end result of this is we are going to see a huge infrastructural boom in this country and in NAFTA and it's not going to slow down other places in the would.

We haven't seen that yet. We've seen the beginnings of it but we are very, very bullish about what's going to happen with respect to energy of all types, alternative energies, the windmill business is huge. We need all of that. We need to have a massive effort like the Apollo program to go out there and use all of the alternative forms, develop them to the point where they are doing enough, carrying enough of a load that we can move them away from the areas that we are most concerned about, carbon based fuels and maybe carbon based fuels will be cleaner to use by developing new technologies and the monies that are developed need to go into those areas to continue to further develop those. And we need to have a rational approach because the majority of Americans, 76% of Americans want that to happen.

One of these days one of our leaders in Washington are going to wake up and take advantage of what people want and talk to them the way President Reagan used to and get this dam done and we will all benefit from it and we will all benefit from it and it's not that far down the road. And if there's any politician out there that thinks the American people are not going to stand up and say enough is enough they are kidding themselves. We're very bullish on what's going on in the world. There will be short term ups and downs but overall we are very bullish on the next 20 to 30 years.

Okay. Dan, thanks again.

You bet, Mark.

We'll take our next question from Bob Richard with Longbow Research.

Good afternoon and thanks for taking our call. It seems like your realized sheet price might have been a little bit behind market spot pricing. Am I interpreting that right, are you in agreement with that? And if so--?

I don't think so, we will give you an answer here in a second. Repeat your question for us.

It just seems to me that your realized sheet price fellows, was just a little bit behind market spot pricing. Would you agree with that statement? Is there some catch up here available in next quarter? It just seems that your realized sheet price $872.

Are you talking about for the second quarter?

Yes, sir.

Yes, remember now some of the pricing you are looking at I think is third quarter pricing, make sure you are not comparing third quarter price increase announcement with price realization that were achieved the second quarter plus this also includes contract business, okay, which is not just a spot number. And we have about 40% contract.

About 40% contract.

Right. And while we get the surcharge 100% on our contract business even if you scrap swaps or through direct surcharge application the base price doesn't change and so those contract numbers -- while the margins will be as good as they are on spot today and sometimes better, the absolute price will be lower than spot so that's diluting down that number. Does that help to answer your question?

Yes, sir, it's just we have an internal benchmark here that compares your realized sheet to what the spot market prices are and it just seems they fell a little bit behind here this quarter but I can take that up with Greg off-line. Just a follow-up--?

Keep in mind that it's a mix of spot and contract in this price that you see in front of you.

Understood. Thanks for that. In Italy, are they melt long enough over there at all to build a Castrip or? Is that a possibility over there?

Do they have enough excess melt to use Castrip in Italy is the question?

Yes, sir.

At this time, no. But we are in the process and I understand that it's well underway to expand to metaling capacity by about 40%.

Right.

So whether we use the Castrip in association with that additional tonnage or we build an operation from scratch with the burners to do Castrip both of those are possibilities. Is that correct, John.

That's correct. We have a lot of growth opportunities in Italy with the joint venture and we are exploring a lot of different possibilities on how to best execute on the growth that's available to us and it certainly could be, it will be growth in the hot metal and where we put that hot metal in terms of downstream products is still something we will continue to discuss.

That's including Castrip.

I appreciate that color and great quarter.

Thank you.

We will take our next question from [Evan Kurtz] with Morgan Stanley.

Hi, good afternoon, gentlemen.

Good afternoon.

A question on global supply, we've been hearing a little bit recently how the growth in global supply has been constrained in part because of length of time it takes to build new steel facilities. From equipment lead time to lack of engineering resources and labor. Now that you guys are kind of I assume have done a lot of of the preliminary research on the Louisiana project just kind of wondering what you are seeing along those lines and kind of how that compares to when you built your last blast furnace back in, it was about five years ago, [Feragusa]?

Oh, these mini glass furnaces in Brazil. That was, project in Brazil was not under our control to begin with. That was done through the majority owner, CVRV now known as Valley. And we had people down here supporting the construction and the start up and the operating but they really controlled that and they were smaller furnaces and I don't think there was much of an issue with respect to equipment and based upon our analysis and progress on the Louisiana project, I have not been made aware any things that are going to delay the project via equipment. But if anybody wants to jump in here and confirm that or not please be free to. Joe?

Yes. First of all we've been in the process of working on this project for about nine months or ten months now. And immediately recognize particular critical path equipment issues and tried to get ahead of those. For instance, one of the biggest critical paths that we'll have is in the power plant and the turbines and we did see that the delivery times and lead times for that type of equipment were way out. And we actually found an alternative and have already purchased some used turbine equipment at a much substantial discount to new that will help our budget. So we've tried on anything that we see or we have seen out there that would be a critical path item we tried to get ahead of it.

We went out and did a little searching and found some very good barely used turbines and two of them, well, we got two of them for, let's see -- what we paid for one would have been about one-eighth the cost of a one that we were being quoted and we got two of them for that price. We did, like one-sixteenth the cost when you look at it from that standpoint. That's typical Nucor people going out and doing Nucor things and not being satisfied to hear that it's going to take forever to get a steam turbine and we found two that were being reconditioned and will work great for a long time.

Sounds like a good deal. If you had embarked on this project a couple of years ago would you think that you could have done something like this not just Nucor but anybody who is trying to build a blast furnace now could have done the project in a much shorter period of time or have things changed?

The only place that things would have happened in a shorter period of time would potentially have been China and only if you bought something basically off the shelf of the Chinese Wal-Mart store. Other than that if you wanted to design your own equipment and you wanted to use the normal high quality, let's say manufacturers and engineers then it would have been no different because they already were working on all the projects in China anyhow two years ago.

Thank you.

If anything we might be getting to the point in time where we will see less of an issue from this point forward than we would two years ago. Next question, please.

We will go next to Timna Tanners with UBS.

Thank you. Just wanted to as two questions really, one was on the export side. You talk about your export opportunity and obviously you are very well-positioned geographically. But exports has been kind of flat year over year, what would make that change? Is there a structural reason that hasn't changed or is it more if the domestic market were weak, to weaken that you might increase your exports? And then secondly, wanted to ask about the inventory is up a bit more than usual this time this last quarter, if you could please explain. Thanks.

Okay, Timna, thanks for the questions. On the first question we could have done significantly more export, probably 50% more export than we have. But we opted not to, to make sure that we took care of our domestic customers. We have been turning away business throughout the first six months of this year and that's why the numbers are flat with last year's. Still over 10% of our production is going to export I think somewhere around 12% or something like that, but I just -- okay, 8%. I got my numbers wrong, now I'm told 9%. We will get it write here yet, in a second, Tim on the order of 8 to 10% over the last two years. The only thing that was restricting us from taking advantage of more and doing instead of 1 million tons a year or doing 1.5 million tons a year or even more than that was our own guidelines that said be sure you are in a position to take care of your domestic customers and then take advantage of the international market for where you felt like you still had room in your schedules with our improved productivity and our record-setting paces. And also we've turned some things down because we want to make sure that we are building relationships for the long-term and not just taking advantage of a once every ten years opportunity to export steel, we want to develop relationships that people are going to keep coming back to us to be their supplier for year after year after year after year and well into the future. The second part of the question I'm not sure I got that, Timna, if you would please repeat it.

Absolutely. On the inventory just observing that back seat number rose significantly, I think on a days basis it went from 54 to 47 in the first quarter, is that the FIFO impact, what might that be attributed to?

A big portion of it is the DJJ increase and, of course, the rest of it is for the most part is just the increase in scrap levels.

Keep in mind, Timna, DJJ sales to Nucor will be eliminated so when you look at the churn rates the churn rate technically does flow down because inventories now from the time that they gather at the yard until we ship it as a finished steel product.

Does that make sense.

Yes. Just wanted to make sure, a lot of people were asking me if it was finished and I thought it was scrap but I just wanted to be sure.

It has got nothing to do with the slow down in business which is probably where that question is coming from.

Yes, definitely. Just to clarify on the exports then, if there were to be a significant slow down in nonres you do have the capacity to adjust exports that you choose to, is that fair?

On a moments notice.

Thank you.

Thank you.

We will go next to Michael Wiltamuth with CIBC World Markets.

Hello Michael.

Thank you, hello. Can you just comment back on the export business which markets are I guess the best, I guess best market regions right now?

Well, Mexico is strong, Canada for us is strong. And outside of NAFTA, Central America, South America and Latin America in general are strong markets for us.

Would you say that you are getting stronger, kind of just stable or any other color there?

Could you repeat that?

Which markets would you say are getting stronger, which ones are stable and which one might be softening a bit as far as the export markets?

I don't see any one that's softening. The ones that are growing for us, strengthening for us, Central America, South America. Mexico, we are doing very well in Mexico.

Also exporting into Europe.

We do export into Europe.

We export into the Middle East. Mediterranean.

Africa, that whole region.

Thanks and just one more question if you could give us a sense on your order book backlog, number of weeks in your flat roll business and your bar business?

What I will say about our backlogs are in all cases our backlogs are stronger this year at this point in time than they were last year.

Okay. Thank you.

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

Hi, Dan.

Hi, Aldo.

Can you talk a little bit about the scrap market, the prime grades in pig iron being around almost 900 or so and the shredded grades around 600? What kind of a blends can you use in your flat roll mills today? Does it need to be 50/50 prime versus shred or can you do more shred?

I'll try and take that one a little bit. There's not a set amount. We are doing a lot of work with our DJJ friends where we are making active spreads better to shred we are lowering our copper levels on the lower material. We're using more percentagewise as a spread than we ever have. As Dan mentioned before, we have a higher percentage of DRI going into though because of our productivity in Trinidad. We are pretty flexibility at our flat rolled mills today and what we can do and how we can use it.

What Ladd just mentioned was that on a prime grade which would include Bush Lang, which would include number one bundles which would include pig iron and DRI the range of that total amount of those together that we would use, depends by the type of steel we are going to make but it might range from what, Ladd, 30 to 50%.

A little higher, about 40 to 60, probably.

That's if you include all the pig iron and DRI along with the prime grades of scrap, just the prime grades alone somewhere between 20 and 30%.

So you can keep your average cost of scrap a little bit below the midpoint of those two numbers I would say, in terms of the index prices we see?

Absolutely. Especially with the bending programs that we are working with with our DJJ partners and the DRI coming in from Trinidad, you bet.

I just want to ask two other questions, Dan, first one on the guidance that you are giving for the quarter, would it be fair to say that being a conservative guider as you mentioned that you are taking the high scrap across the market today, and the LIFO charge that you expect and working those in but possibly not working in those price increases that you've been implementing as you go through the quarter?

That's not really the way the guys work up the forecasts. They try and take the best guesstimates on all of the factors involved including where we think scrap prices might go, timing on the price realizations, timing on the scrap, increases the actual flow through to the usage point which is where it affects our cost and I guess we really ended up sand-bagging on this second quarter, not intentionally, believe me.

Yes, I know.

But things kept getting stronger as we went through the quarter and shipments kept getting better and production was running well and prices were increasing. When you have a dynamic situation where both your raw material prices and your steel prices are going up, actually targeting how that margin is going to move sometimes, most times it's pretty difficult for us. I'm sure there's folks who can do a better job of it but I'm confident we come up with a range, a forecast and we intend to adopt a conservative view of where we'll end up and certainly not from our original forecast to where we ended up at 1.94. That was a very pleasant surprise and as we've already said in our forecast for the third quarter we are basically forecasting another record quarter.

Great. Then on a different topic, too, the $3 billion of capital that you raised, Dan, I think people are obviously wondering a little bit about the uses and I can see that big project in Louisiana possibly using quite a bit of it longer term. I'm just wondering kind of a two-part question, will you be able to detail a little bit for us what the timing and the implementation of that cash would be and secondly would possibly, I know in the past you've been a repurchaser of your shares when the price gets right. Would some of that cash possibly be used for a repurchase of shares?

Well, it would be kind of silly for us to be issuing shares and repurchasing shares.

Different prices, though.

All in a relatively short period of time. I know what you mean when you say look at the price, but we didn't do this to arbitrage or hedge or play games in the marketplaces with our stock or take advantage of losing our stock. We did this because we know what's in front of us in the way of opportunities. And the exact timing as to when those will fall into place is, we have some ideas on it, sometimes they get delayed a little bit, sometimes they get sped up a little bit. And all I can tell you is that we have more opportunities than we took advantage of in the market to get additional capital for. And one day you are going to hear about another deal the size of a David Joseph. Or Harris. Or Duferco. And maybe something bigger than those. Maybe a bunch of little ones are going to fall into place here.

All I can tell you is our guys are just going in ten different directions at once with the number of opportunities going very slowly, very cautiously, very deliberately. To do it the way we've always done it. But now, that money is going to be used principally for acquisitions and growth of the company and as Terry has mentioned some of it's being used to deal with the higher cost of raw materials and our cash flows and what have you. So, but the majority of it is for growing the Company profitably the way we've been doing the last eight years.

Okay. Just finally for Terry, Terry, did you say depreciation for the year would be 490?

490.

That would imply lower numbers then, the second half than the first?

We are 231 through the first half in depreciation. Now there's another 70 million or so in amortization for the year.

Oh, okay. Sorry. I was grouping them together. Okay. Thanks.

We will take our next question from Michael Gambardella with JPMorgan.

Hello, Michael.

Hey, Dan, how are you? I kind of had the same question for you that Aldo just asked but my question is, look, we know you're very bullish on the outlook for your Company and for the steel industry and one of your customers, one of the biggest service center in the U.S. had their call this morning and it was also, painted a very bullish outlook for the domestic steel markets.

Okay.

I know you just issued equity at $74 -- I think it was $74. But you have almost $3 billion in cash sitting there. You could have a pretty sizeable return. And kind of no matter what you say on this call or no matter what I say to clients, if there is a move in people to sell your stock and it seems to be pretty strong with stock down 12, 15% while you're talking, don't you think it would be prudent to use some of the cash to buy back shares in these, what maybe you consider or I consider an illogical move?

Even if we were considering that I wouldn't talk about it.

I know but there must be some price on the stock that you would say, okay, we'll take some of the cash on our balance sheet and we'd look at it as a very strong return and it's not, no one is going to say you're arbitraging the market by issuing equity and all of a sudden your price falls 25% and you buy some back.

Remember some of that cash has already been deployed so that was a quarter end number. We are down from that because we've done the Italian joint venture and also some of that cash is in (inaudible). I don't think it's as easy as looking at the cash on the balance sheet like Dan said you're not aware of the opportunities we've got in front of us. We didn't raise the capital to buy shares back.

You make a reasonable point Michael. Is there some point at which we would consider doing that? In the past we've always said that buying shares back would be something that we would do when we didn't have the opportunity to grow the Company with things in front of us and there was a period there where we had plenty of cash and things seemed to have bogged down a little bit and so we did buy a fair amount of share backed, stock back and things have changed a little bit and we've got a lot of great opportunities in front of us. If for some strange reason we weren't able to execute on those we would look for the best use of our cash. That's really all I want to say about that at this time.

Okay. And then, Dan, could maybe talk about what were some of the reasons why the second quarter was so much ahead of your revised positive guidance recently?

I think we talked about it in the press release, it's pretty basic things. Our margins were better than we anticipated. The shipments were better than we anticipated. And we are not a small Company so it adds up in a hurry. We were very pleasantly surprised by how well our scrap assets contributed to the Company. And it's really the first full quarter that they've been part of the family and so we are looking at, they are probably looking at being very conservative in their forecasts and we are being a little conservative and as we learn exactly what the potential is for contribution, we have been very pleasantly surprised and a lot of our downstream businesses did extremely well in getting their prices passed through and it all added up.

I'm not going, I hope I'm not in a position where I have to apologize for the fact that we did extremely well. Maybe I will apologize for not being a good fortune teller. If it was up to me we wouldn't be giving any forecasts period to satisfy short term whims of some investors. We've always said we are in this for the long-term. We are going to make the right decisions for the long-term and the earnings will take care of itself. What I would hope people would do but I can't force them to do is they would look at the continued track record, excellent track record year after year, quarter after quarter, yes, everybody is doing better but if you take a look at who's making the best use of the good times you are going to be pretty hard pressed to find anybody that's doing a better job of it than Nucor. Year in year out, good years and bad years and I believe the right shareholders will reward us for that and if the stock is down as much as you say it is I wouldn't argue whether it's an excellent buying opportunity.

Thanks a lot, Dan.

Thanks, Michael.

We'll go next to Wayne Atwell with Pontis Capital Management.

Thank you and congratulations on a great quarter. Pardon?

Hello stranger.

How you doing.

Fine, Wayne, how are you?

Great quarter and congratulations on a great strategy you've been pursuing for many years. You're becoming a fairly meaningful share of the U.S. market and obviously there's a number of opportunities but one would assume that with the U.S. such a small percentage of the world bordering on maybe 8 or 10% that you would really have to go overseas. Obviously you've started that but in five or ten years could you have a business as large offshore as you do onshore because it seems like you are really going to have to go offshore to continue to grow at the rate that you have in the past.

Well, wayne, in general I wouldn't fully disagree with you. I think that we will have a much more sizeable footprint internationally ten years from now than we have today. And will we be as big as we are today from a steel making standpoint? Could be, could be. That would be a lot of successful opportunities that we will have executed on. It certainly could be about half of where we are today. That should be a nonissue in terms what have we are looking at. But I would disagree with you quite a bit that there aren't opportunities within NAFTA for considerable growth yet and if you have to look at that from the standpoint of all the business units that we -- the businesses that we are in and basically a vertical path. And there's more room for us to grow our steel business? Yes. But there's significantly more room for us to grow both upstream and downstream.

So I think going forward the growth within NAFTA will be more weighted towards the upstream and the downstream. But there will also be growth within the steel making because as I said on the road show that we had for the equity, I believe that the U.S. will be -- steel industry will be able to take advantage of export opportunities for a decade if not more because we have got very, very, very fundamental problems with our debt, with our trade deficit, dollar is going to not be where it was in the '90s, it's going to be considerably weaker, I don't consider it a weak currency historically it's not but it's going to be significantly weaker than we saw in the '90s. That will put us in an export opportunity both for our customers and ourselves directly. I believe globally the world is going to be churning up a lot of steel with ups and downs, but more often than not chewing up a lot of steel so that will keep imports to a relative minimum here by historical standards and so all the dynamics are going to be for to us grow our steel making operations here in North America and our up and down stream and to grow internationally. Yes, as Mike said a minute ago we are very bullish.

The one, you seem to have gradually over the years gotten into one market after the other and quite successfully. The one area you haven't gone into in a big way is energy, obviously you're in plate which is used in transmission pipe and such but any thoughts on -- based on the demand for China and India over the next 20 years there is going to be a phenomenal demand for energy, any thoughts on stepping up to that area and putting a few more resources to work in that market?

That's always an area for to us look at for growth. I think it's well known that we participated in a couple of auctions, have been involved with companies that were very strongly into the energy area, we walked away because they got too damn expensive and one of the them was recently resold in part. But that's certainly an area for growth for the Company yes.

Well, listen, keep up the great work.

Thank you, Wayne, good to here from you.

A follow-up question from Tony Rizzuto.

Thanks very much. Yes, Dan, I guess my follow-up was just to really echo the thoughts of Mike and Aldo. Just again with the stock being hurt so much and certainly we agree with you in terms of the strategy that you guys are implementing. We do think it's the correct strategy but there are exceptional occasions when obviously you have got to look at returns and how they stack up against one another and that was the only point I wanted to make is also to mention I think investors would feel reassured to see you stand behind your stock.

I guess you can probably say that about the entire market these days, Tony?

Well, that's true to an extent but certainly with the prospects that you have and certainly the consistent earnings growth that you've had over a long period of time there are times when I think some folks that maybe get into your story don't really understand the story correctly and that's unfortunate.

It is and it's beyond me that they don't and it's beyond me that it takes -- I'm nowhere near a rocket scientist but just look at what the history has been and the history, not for 25 years ago, but the last five years, the last eight years and I believe that they will respond. I think things today Tony are rough across the market. I think there's a very bear sentiment all around. I think people are trying to make money through panic or creating panic or taking advantage of it or what have you and companies need to make sure they continue doing the right things for the long-term benefit of the shareholders and not knee jerk to the short term privations that happen out there. Maybe even though it seems rather severe at the time.

Otherwise we don't function in a way that we are growing our Company successfully for the long-term because we are just jumping up and down with the trends that are not what I would call based upon fundamentals and that's a bad way to run a business. I certainly do take note of what you are saying, what the three of you have said. I certainly see that there is wisdom in what you are saying. But at the same time we need to do what's going to be right for the long-term health of our Company, our shareholders, and our employees. And some day it may be buyback stock. We certainly did plenty of it in the not too distant past. And, but other than that, we'll just have to see how things go. But thanks for your input and your advice.

All right, Dan, well, listen, I fully understand what you are trying to build.

Well, we're not trying to build it, Tony, we are doing it.

I know you are.

There's that old saying but that great philosopher, Yoda, do or do not, there is no try.

And I also understand the issues that can happen to companies that don't think about the long term from my own personal experience. But I appreciate--.

We won't go there Tony.

We are not going to go there.

Thank you very much for your questions. Last question.

We will take our final question from Debra Fine with Fine Capital.

Congratulations, you and your team on the great quarter. I'm going to echo as a last point what Tony and Aldo and Mike have said and if you are not going to be buying back your stock, are you concerned that given where the valuation of the Company is now with the stock down another 14%, I don't know what the current price is, that you are making yourself vulnerable while you go out and spend the money on projects that might not generate the 50 to 75% return that you could be generating right now buying back your own stock? I'm serious.

I know you're serious. I was going to discuss that. That's a hell of a last question to end on. I wouldn't change my comments from what I already have spoken. We are a Public Company. Anything can happen but we believe we have a great track record. We believe we have got a great track record. We believe that we will offer our shareholder a greater return as Nucor than as anything else and why people are doing what they are doing today when we have a quarter where that's on top of another record quarter and we are running a record year and for five years, or eight years people having singing the doom for as much as steel makers, scrap based steel makers versus the integrated guys and here we are still at the top of the heap, still making extremely good returns, industry leading returns, still having record quarter after record quarter, record year after record year and, go figure.

Well, perhaps instead of throwing up your hands and saying, I don't understand why the market reacts and has a lot of panic taking advantage of it might be extremely prudent.

As I said to the previous three other folks, Debra, that' reasonable advice and input and we appreciate it and whatever we do going forward rest assured we will be doing it to maximize the return to Nucor, whether it's buying Nucor stock or buying other companies to help us to continue to grow our platform profitably.

Thank you.

Thank you, Debra.

There are no further questions at this time. I would like to turn the conference over to Mr. DiMicco for any additional or closing remarks.

I would like to thank once again everybody for their interest in Nucor, their questions, and I would like to again thank our team which is a growing team for knocking the ball out of the park again and I look forward to them doing it again in the third quarter. And for the rest of the year. Thank you all very much.

Ladies and gentlemen that does conclude today's conference. We appreciate your participation. You may disconnect at this time.