Nucor Corp (NUE) 2008 Q4 法說會逐字稿

Good day, everyone. Welcome to the Nucor Corporation fourth quarter and year end of 2008 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 are forward-looking statements that involve risks and uncertainties. Although Nucor believes that 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 on 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 CEO of Nucor Corporation. Please go ahead, sir.

Good afternoon. Thank you for joining us for Nucor's conference call. We greatly appreciate your interest in Nucor. Joining me for today's call are the other members of Nucor's senior management team, Chief Financial Officer Terry Lisenby; Chief Operating Officer, John Ferriola; and Executive Vice Presidents Keith Grass; Ladd Hall; Ham Lott; Mike Parrish; Joe Rutkowski; and Joe Stratman.

After reviewing Nucor's 2008 performance and ongoing implementation of our growth strategy, we will be happy to take your questions. First and most importantly, I would like to say thank you and job extremely well done to all members of the Nucor team for delivering a record safety performance at our Nucor operations and to all 22,000 plus members of our team and family for record earnings in 2008. Also impressive was your work keeping Nucor profitable in this difficult fourth quarter. You got the job done in the most challenging economic and steel market conditions experienced in our lifetimes. We have proven again that Nucor's most significant competitive advantage remains our employees. The right people working together as a team.

I also have some good news to share with my teammates. In those years where we have had record earnings in the past, Nucor has paid an extraordinary cash bonus. These bonuses are in addition to the payments made under Nucor's profit sharing plan. I am extremely pleased and the entire team here is extremely pleased to announce an extraordinary bonus to be paid on January 30, this year. Thank you. And congratulations for making 2008 such a great year for Nucor.

2008 net income was $1,831,000,000. It is Nucor's fourth record earnings year over the past five years. In comparing 2008 results with the latest cyclical peak in the US economy in 2000 our team has delivered a sixfold increase in Nucor's cyclical peak earnings power. This level of performance has not just happened. It is not simply a result of just writing a cyclical upturn in the economy and the steel markets.

It has been driven by our team's disciplined execution of Nucor's multipronged strategy for growing long term returns on our shareholders valuable capital. This multiprong growth strategy gives Nucor tremendous flexibility and allows us to be patient and to go where the growth opportunities are at any point in time. And even though our Company's much larger today, our growth opportunities are actually much greater than we were a smaller Company pursuing a single growth strategy of greenfield steel mills and fabrication plants. As always our objective is profitable growth and not growth for growth sake.

Here again are the four prongs. First, Nucor will optimize existing operations. Second, Nucor will continue greenfield growth where we can exploit significant cost advantages from new technologies and unique marketplace opportunities. Three, Nucor will grow internationally with an emphasis on leveraging strategic partnerships and new technologies. And four, Nucor will pursue strategic acquisitions.

Over the past eight years our work has dramatically expanded and broadened our platforms for generating attractive returns. Our steel mills annual capacity has more than doubled increasing from 13 million-tons in 2000 to more than 26 million-tons today. For value added steel price businesses, have nearly tripled their annual capacity growing from 1.6 million-tons in 2000 to 4.5 million-tons today. And we have broadened our participation in the steel making value chain with our higher successful expansion into raw materials. In 2000, we had no raw material assets. Today we are well positioned with Nucor's new R&D annual capacity of 1.8 million metric tons and David J. Joseph's scrap processing capacity of 5 million-tons.

The first nine months of 2008 were very productive for Nucor in both establishing new platforms and expanding existing long term growth platforms. Since February we acquired the best of the in the scrap business with our acquisition of the David J. Joseph Company. In July, we established our international, initial international growth platform purchasing a 50% stake in a deferred Nucor beam and Long Products joint venture in Italy. In August our Harris Steel rebar fabrication acquired Ambassador Steel, expanding our rebar fabrication footprint into the Midwestern, Gulf Coast, and Southeastern regions of the United States. And Nucor's Bar Mill Group began production in the second half of 2008, at our new SBQ mill in Memphis where we are currently casting 20-inch rounds which is one of the only plants in the United States to do so.

Our growth record tells the story of our team's skill and discipline in delivering profitable growth. But even more existing is Nucor today is an unrivaled position of strength. No one welcomes economic conditions as challenging and disturbing as the current global financial crisis. But we do strongly believe this economic crisis boldly highlights the value of Nucor's long standing, conservative financial practices, and extremely strong business model.

Nucor's strengths include our strong balance sheet and cash flow, our variable cost structure, and our low cost structure. Our highly flexible production process, our position as North America's most diversified steel producer, our commitment to taking care of our customers as evidence by our strong customer satisfaction ratings. Our market leadership positions, our disciplined focus on profitable long term growth, and most importantly Nucor's employees and the Nucor culture, our confidence is won hard in the fires of experience. That experience over many years has led us to build a business model that drives us to operate during the good times the same way necessary to operate and excel in the down times.

The bedrock foundation of our business model is our culture. There's a culture based on teamwork, continued improvement and long term strategic thinking. In fact, Nucor has a long history of taking advantage of economic downturns to grow stronger and expand our long term earnings power that is worth noting that a healthy portion of the profits realized over the past five years have been generated by assets we built, acquired, and improved during the last economic downturn experienced during the 2001 to 2003 time period. These highly successful growth initiates include our entry into the plate market, our acquisition of Auburn Steel, Birmingham Steel and Trico Steel assets. We believe the current downturn will present unusually attractive growth opportunities to a Company that is in Nucor's unrivaled position of financial strength.

Our objective is to build Nucor an even better and more profitable Company tomorrow than it is today. As we look ahead to these opportunities, if we recognize the outlook for the US and global economies is very uncertain. None of us know the depth and duration of the downturn that began so abruptly last fall. And it is very unclear whether any of the government actions taken so far will yield any meaningful improvement in the economy and the economic activity ahead. Our hope is that our nation's leadership will begin to take aggressive action to remedy the imbalances and unhealthy practices that created the current financial crisis, quite simply the time is long overdue by about 20 years for policies in the United States that rebuild our energy independence, rebuild our infrastructure, and rebuild our balance in trade to become priority one in Washington.

We need to invest in America by creating jobs that add long term value in these critical areas of energy, infrastructure and manufacturing, a better and a stronger United States economy will be one that actually makes things. By contrast the economy of the past two decades has been one built around greed, financial manipulation in engineering, excessive leverage and short term gratification. Going forward we must also vigorously force our nation's trade law, rules based trade is a critical underpinning to global trade. These laws have been enacted to correct abuses by other countries when they distort or ignore the rules of free trade. For that reason, we applaud yesterday's decision by the US Supreme Court and the hearer of this case and its first ever decision in an antidumping case the court unanimously affirmed the US Department of Commerce's ability to prevent circumvention of our trade laws by calling the sale of goods a service.

I can assure you the Nucor team as well as the entire industry will continue to speak out strongly as the debate continues. And as always, we will closely monitor imports into the US for any evidence of countries breaking the law and dumping steel, whether in steel form or fabricated steel form. We owe this to our customers, our employees and our shareholders. We owe it to the United States of America. Our team honestly has no control over the direction of the overall economy but what we do control is still quite powerful. The applications of the Nucor culture's can-do attitude and energy level to capitalizing on our Company's competitive strengths. For that reason my confidence has never been greater that Nucor's best years are still ahead of us. I will now ask our CFO, Terry Lisenby to report on Nucor's financial position. Terry.

Thanks, Dan. Good afternoon to everyone. 2008 record net income of $1,831,000,000 exceeded our previous record of $1,757,000,000 earned in 2006 and 2008 net income increased 24% over 2007's earnings. Our 2008 diluted EPS of $5.98 were also a new record eclipsing the 2006 record of $5.68 per diluted share. 2008 diluted EPS increased 21% over 2007's $4.94 per share. The year-over-year percentage increase in earnings per share was somewhat less than the increase in net income due to the secondary stock offerings in the second quarter 2008.

Fourth quarter 2008 net income of $106 million declined dramatically from the pace established in the first nine months of this year where our quarterly earnings averaged $575 million. Fourth quarter net income also decreased 71% from year ago quarterly net income of $365 million. The abrupt reversal in all of our markets resulting from the global financial crisis is unlike anything experienced in our careers. Our fourth quarter results included a pretax charge of about $105 million for the impairment of noncurrent assets. The largest component was $85 million for the impairment of the assets of our Hismelt joint venture in Australia. The Hismelt process is a blast furnace replacement technology that has the potential to be a hot metal source for electric art furnaces. In late 2008 production at the Hismelt plant was temporarily suspended due to depressed market conditions. Given an uncertain outlook for the pig iron market and the fact that the technology is not yet fully commercialized we decided it was appropriate to recognize an impairment of these assets. The team at the Hismelt facility has made considerable progress since they began their work in 2005. For that reason we remain optimistic about the long term potential for fully commercializing hismelt technology. The joint venture expects to resume operations operations when market conditions improve.

Another item worth noting in our earnings report is a fourth quarter LIFO inventory credit of $81 million, approximately $26 million of that credit was at our 51% owned Nucor Yamato structural mill. Full-year 2008 results included a LIFO charge of $342 million of which $52 million were from Nucor Yamato. Nucor's year end 2008 LIFO reserve exceeded $900 million up from a year end 2007 LIFO reserve of less than $600 million. As Dan discussed the unprecedented turmoil in global financial markets has highlighted the value of Nucor's conservative financial policies. Our extremely strong balance sheet positions Nucor not only to weather today's economic storm but also to capitalize on attractive investment opportunities that may develop.

Consistent with our record established over many years, Nucor will continue to be both disciplined and opportunistic in pursuing profitable growth that rewards our shareholders with attractive returns. Nucor's liquidity position remains extremely strong. At the close of 2008, cash and cash equivalents exceeded $2,300,000,000. We have no outstanding commercial paper and we have no borrowings drawn on our $1.3 billion, unsecured revolving credit facility, year-end 2008 debt total led $3,275,000,000, and our debt to capital ratio was 28%. The weighted average coupon rate on our debt is less than 6%. After paying off $180 million of long term debt maturing this year, our net next debt maturity is not until 2012. Approximately $2.2 billion of our debt or two-thirds of the total matures after 2017.

Nucor has earned the highest credit ratings awarded by Moody's and Standard & Poors, our credit default spread is the lowest among North American steel processors and one of the lowest among global steel producers. These strong credit ratings give us tremendous flexibility in growing our business, and they provide us significant cost savings in managing our business. Cash provided by operating activities for 2008 was a record $2,500,000,000 while fourth quarter earnings dropped sharply our operating cash flow for that period remained very healthy. During cyclical downturns, lower scrap and steel prices reduced the working capital requirements of our business and provide a cushion to cash flow.

Consistent with Nucor's pay for performance philosophy, cash dividends paid to our shareholders continue to grow. In December our Board increased the base quarterly dividend by 9% to $0.35 per share effective with the February 2009 payment. Growth in dividends is a result of our team's success in build Nucor's long term earnings power. Nucor's base quarterly dividend has increased more than tenfold since the beginning of 2000 and has more than tripled since the end of 2007.

Capital expenditures for 2008 were slightly over $1 billion. Last year's capital spending was increased by significant outlays for several greenfield projects. These projects were the SBQ Bar Mill in Memphis, Decatur sheet mills galvanizing facility and the Castrip plant in Arkansas. With construction of these projects substantially completed our capital spending for 2009 is expected to decline to approximately $400 million. Work also continues on our potential project to build a state of the art iron making facility in either Louisiana or an overseas location.

First quarter 2009 conditions remain as challenging as they were in the fourth quarter. The global economy is still paralyzed by the ongoing credit crunch. In addition to weakened end use demand, many customers also continued to reduce their inventories due to liquidity concerns. During mid January, American Iron and Steel Institute data showed capacity utilization for US steel producers running at just 43%. With dramatically lower production rates for both the fourth and first quarters our mills have higher cost scrap and scrap substitute inventories yet to be consumed. These iron units predominantly pig iron in our sheet metals. The purchase prior to last fall's collapse in the economy and scrap price, just as we reported in the last quarters call, there is little forward visibility on either the economy or our industry. Therefore we will not provide first quarter numerical guidance at this time. We will give an update of our businesses in March.

Today's economic and steel market conditions are without precedent in our lifetimes. At the same time we expect then to provide unprecedented opportunities to companies in a position of strength such as Nucor. Our team has never been more excited about our competitive position and our ability to continue generating attractive returns for our shareholders. Thank you for your interest in Nucor. Dan?

Thank you, Terry. I will now ask John Ferriola to report on our operations. John?

Thanks, Dan. Good afternoon. Let me begin by also thanking our team for delivering a record safety performance at our Nucor operations in 2008. Also, I would like to add my congratulations and thanks to all members of the Nucor team for their hard work keeping Nucor profitable during an extremely challenging fourth quarter. I have been in the steel industry since 1974. Never before have I seen such a rapid and sharp decline in industry volumes. Demand literally disappeared overnight when the financial crisis first unfolded.

Here are some numbers that highlight how impressive their work was keeping Nucor profitable last quarter. Nucor's steel mill utilization rate for the fourth quarter of 2008 was 48%. That was down from a utilization rate exceeding 91% for the first nine months of 2008. In fourth quarter 2008, steel shipments of 3,400,000-tons decreased 37% from the third quarter and 40% from the year ago quarter. Another challenge faced by our team in the fourth quarter was the impact of such an abrupt decline in business activities on our scrap and scrap substitute costs. Extremely low steel mill utilization rates turned what would otherwise be normal scrap inventory levels into well above average inventories. The low mill production rates slow the pace at which our mills consume higher cost iron units purchased prior to the dramatic downturn. At our sheet mills this challenge is made more difficult by the fact that the pig iron buys are made with long lead times and are purchased by the vessel.

Although our scrap, and scrap substitute inventories remain higher than desired we continue to enjoy substantial benefit from our highly variable cost structure. Our fourth quarter scrap and scrap substitutes average usage costs of $430 per ton decreased $103 per ton from the third quarter. The average cost of our fourth quarter scrap and scrap substitute purchases decreased $226 from the third quarter. I will also emphasize that other significant components of our cost structure are highly variable in nature. These include labor, energy, alloys, and other raw materials.

In addition to this excellent work, keeping our Company profitable in the fourth quarter, I have a number of other significant 2008 achievements by the Nucor team to share with you. Both our bar mill and beam mill teams achieved record earnings for the fifth consecutive year in 2008. Record earnings were also achieved in 2008 by our plate mill group, their fourth record year out of the past five years. And our heat mill group obtained record earnings in 2008 for their third record year out of the past five years. Our teammates at Nucor's downstream and raw materials businesses also had an excellent 2008. Record annual earnings were reported by our deck, coal finished bar and fastener groups.

We are also very pleased with the 2008 performances of Harris Steel and the David J. Joseph Company. In addition to providing Nucor with attractive turns and powerful growth platforms, vertical integration enhances the long term profitability of our steel mills.

The extremely strong returns on the last five years are clearly the result of our team's long term focus in executing our growth strategy. For that reason, we are very excited by the progress we made last year in expanding Nucor's diversified portfolio of growth platforms. These projects include our new special bar quality or SBQ mill in Memphis, currently in its start up phase, our Decatur sheet mills new galvanizing facility which is finishing the commissioning process and will increase Nucor's value added coated steel capacity by one-third. Our second Castrip plant which has completed construction at its site in Arkansas and will begin production this quarter. Our successful integration of DJJ and it subsequent acquisitions which has grown our annual scrap processing capacity to about 5 million tons. Harris Steels acquisition of Ambassador Steel last summer which expanded Nucor's rebar fabrication footprint in the US. Our first international platform to defer the fence, Nucor beam and long products joint venture. As you can see, our focus remains on the future and Nucor's very attractive prospects for building long term value for our shareholders. We greatly appreciate your interest in our Company. Thank you. Dan?

Thank you, John. At this time I'd like to open the phone line for questions.

(Operator Instructions)

We've got a couple minutes before the US Steel call.

We will take our first question from Michelle Applebaum with Michelle Applebaum Research.

I guess we're being silly now.

There's nobody at the other end of the line I guess I can be as silly as I want.

Ten seconds, okay. Give them a chance. They have to put a list together.

Hello, Michelle.

What.

I said hello, Michelle.

Hello, Dan.

What's up?

Okay. Talk to me about, you had all of this stuff going on. You grew this Company from nothing to where were you 14 million-tons when you took the job, 12 million-tons?

Our team took over in 2000 and we were somewhere around 11, a little over 11 million-tons of shipments I think.

Okay. So you are the largest American steel company today which is quite astounding since you had a market cap of $300 million when I started my job. So, okay. So you did it by building exam then you did it by buying and then you have been building a little bit. I want you to explain to me how, okay, the world has changed. It is awful, we know that. But how does that impact your growth opportunities in both of those arena and I want to give us a chance to, to contemplate what this Company will look like in five years? The change though, Dan.

well, it is difficult to look out five years and say what this Company is going to look like.

Drop that part, drop that part.

Okay.

Talk about the process.

When asked that question in 2000, you would have gotten the same response I just gave you because in 2000 while we had a strategy, we had no idea that would take us to the successful heights that our team has achieved in the last eight years. What I can tell you based upon proven track record, and our strong financial position as we enter this crisis of all crises for our economy both here and around the world. We are in a very strong financial position to be able to weather the, whatever storm is in front of us, to do it while maintaining our no lay off practice. And to be in the position to take advantage of whatever opportunities might occur in the marketplace with respect to acquisitions or quite possibly building greenfield operations at much lower could use than they could have been build just six to nine months ago. So what we do know is that the opportunities will come. We have, our team has already sat down and, and looked at what might be out there. We have $2 billion worth of acquisitions we were ready to execute on, when the bottom fell out with the Lehman bankruptcy back in September that we have put on hold. Those opportunities are still in front of us. We still have conversations going on with all, pretty much all the parties involved back then. And so we have more opportunity in front of us than we have had in some time. Some of it is still unknown. We are in no rush. As we stated in our conference call notes we are going to be patient. Things will reveal themselves to us as time goes on. I'm not in a position to talk about where, when, how or what. We know that they will happen just as they have happened before and we are in a great position to take advantage of them and we will be consistent with our strategic growth strategy in the past. That will not change. Where we will grow over the next five years is the same areas we have grown over the last eight years including offshore and joint ventures of one type or another.

I'm not asking the question the right way, but that was a great answer, but it wasn't quite what I was looking for. You were starting to go there.

I will give you one more shot to ask the question and then we will move on to the next question. Apologize for not answering the question you are asking.

I didn't ask it well.

Okay, ask it well.

In terms of -- you mentioned you could build more cheaply, okay. You had something on its way. Are there opportunities to renegotiate the costs of -- are there opportunities for longer term raw material contracts and then on the M&A, that kind of thing and then on the M&A side, there are, there has been all of this activity from foreign owners here who we read about having severe bank problems at home. So what is going to happen. Are some of these things that might have been interesting to you a few years ago but you had your discipline on prices and valuations, do you think they can come back? Do they have another shot?

Well, listen. There's two parts to that question. In terms of anything that we have discussed about building, there certainly will be opportunities and we are currently taking advantage of those opportunities as we speak on our big iron project in Louisiana or overseas. As we -- as you know we are still waiting on the permit to be finalized. It is well along. It is actually in the EPA's hands as we speak, we should be hearing shortly on that. But the situation as it has changed has enabled us to go back in and to renegotiate and re-evaluate all phases of the project. We have done that quite a bit. We are still continuing to do that and we are finding that we have been able to reduce the costs of the project significantly and I won't comment on how significantly.

As far as the acquisition opportunities go, not talking about the ones that we have been looking at, but just what might happen I am not going to speculate really Michelle as to who might unwind something or not. Certainly there's a possibility that companies have gotten themselves overextended whether that be here or outside the United States and those opportunities depending on how severe things continue throughout the next year or two we may find opportunities not too different from '01, '02, and '03, there may be companies that have a change of strategy because of the dramatic decline in the global economic activity that we have seen to date. Again, depending on how long that continues and what severity it continues which are all unknowns at this time. So, we have not limited ourselves as to what might happen, we are looking at a host of things, but I will not get into the specifics of what we are looking at. But thank you for your questions.

Thank you for your answer. I guess I will have to wait and see.

Next question, exactly.

Our next question is from Kuni Chen with Banc of America.

Dan, if you were President of the United States. I am just kidding. A question on industry consolidation as well. I mean obviously during the last down cycle, there were a lot of distressed assets changing hands. I mean is it your view that we would need to kind of wait things out for the next couple of quarters to see balance sheets deteriorate or see companies sort of change gears with their strategy before there's more consolidation, just want to get a sense as to whether you think there are willing sellers in this environment or if we have to wait longer to see more distressed assets changing hands.

Well, we have said publicly several times that in this type of environment where things change so rapidly. They change literally overnight and they changed not a little bit but they changed almost catastrophically in terms of one minute you're running at basically 100% of capacity, the next minute your industry is running at 40% of capacity with very little transition. It takes a while for people to if they're going to find themselves in a difficult position, it will take some time because the industry basically entered into this period after four to five good years. In some cases great years, and so we don't believe there's going to be any immediate opportunities and whether opportunities develop at all that we might not have been looking at before will depend on how long this continues and how deep it goes.

Our current view on the economy can be pretty much summed up by the fact that we did not give any real guidance numerically for the first quarter. Visibility is very limited and there is anybody that is out there speculating as to how 2009 is going to end up is kidding themselves let alone other people. There's way too much uncertainty out there. The financial crisis has to be revolved. The banking crisis has to be resolved. That's the President and administration's number one responsibility. Number 2 through 20 is creating more jobs, it is that simple and that difficult. There's a lot of work that needs to be done there. None of that is going to happen overnight. So we are looking at a long term period of malice in the economy both here and globally. There may be periods where there are improving conditions, we don't doubt that. And we are hopeful to see some of that in the first quarter. But it is -- there's just too much uncertainty to speculate about who is going to become available and when, our basic philosophy is time will have to pass.

That's why we said in our prepared comments about being patient throughout this economic downturn however long it lasts and it will take time for those opportunities to pop up if they pop up and we believe there will be opportunities. Certainly we had plenty on our plate which is still there before this collapse in the financial crisis impacted the economies of the world including ours.

Okay. One quick follow-up if I may. Just on the scrap market, obviously people look at scrap as a leading indicator of steel prices, but clearly we are not in a normal environment. So just given the low utilization rates that we are seeing in the industry, is there an ability in your view to pass on any increases in scrap, just want to get your sense on that as we go through the next couple of quarters?

I -- we are not going be speculating on pricing of moves on scrap for steel but I will say this, if there's demand enough to drive up the price of scrap, there will be demand enough to drive up the price of steel. You can do with that as you wish, and you can also flat reverse that. Thank you for your questions.

Our next question comes from Timna Tanners with UBS.

Hi, good afternoon.

Afternoon, Timna.

I wanted to ask you something I asked earlier of another Company, I'm really curious on your philosophy and how you think of ramping up capacity, and if you could just tell us roughly what you think your break even capacity utilization is?

As far as ramping up capacity or ability to ramp up our philosophy has always been and one of the reasons that we have a no lay off practice is that the electric arc furnace technology and the raw material base for that technology allows us to basically turn on the switch and produce an additional ton of steel at any time that the orders require. So we basically, we have really the ultimate flexibility and by maintaining our work force in our plants working on reduced work weeks, yes, but working and being ready to make an additional time when the order comes in, we believe that we have the ultimate opportunity to ramp up literally instantaneously on an order by order basis and so as demand improves we will be able to ramp up to meet that demand and currently we are running at or above the industry average for capacity utilization. So there's lots of room for us to add additional production as there is across the industry. As far as commenting on what our break even analysis is, I am not going get into commenting about that because there are so many moving targets on that whether it be LIFO or one time charges or what have you. As you can see the extremely low utilization rates for the fourth quarter we remain profitable and we expect that to continue.

Okay. Great. If I can follow-up and you could talk a little more about what you are seeing in terms of end markets for demand that will be really interesting. I don't want to open a big can of worms but clearly, if you could talk a little bit about what you are seeing on the infrastructure side and what you expect there?

Well, the can of worms was opened by the financial communities collapse, and by the things that got us to that point in time over the last 20 years. So, you don't have to worry about opening up a can of worms, they're crawling all over the place. As far as the market conditions go, market conditions are lousy everywhere, on every product line, and how they have improved going forward is going to depend on how the economy reacts to whatever money is available and the way of credit going forward for people to run their businesses and for consumers to consume and for construction of all types to take off again. Certainly the industry is happy to see that the economists of the world both in Washington and elsewhere believe that infrastructure build is one of the best ways to create jobs now and over the next couple of years because it is certainly going be needed over the next several years not just over the next six months. That obviously be l be good for steel and all other construction materials. It will be good for chemical industry, it will be good for the cement industry. It will be good for the transportation and it will be good for everything and it will be an investment in the long term health and standard living of our country. We are happy to see that's part of the package. We certainly would like to see it be twice as big as it is from the standpoint of creating jobs, and dealing with the sub par infrastructure that has been allowed to deteriorate over the last 30 years. Once improvements take place and the markets that are all being impacted severely by the complete disappearance of any significant demand and business activity. Anything that happens there we expect the stimulus package will benefit all, pretty much all product lines that we produce, but there is none out there today that are standing out and saying, we don't have a problem, they're all having a problem.

Thank you.

Our next question comes from Chris Olin with Cleveland Research.

Yes, I just wanted to do a little bit of a follow-up on this stimulus issue. Have you tried modeling or given any thought to how much the current numbers thrown around would equate to in terms of steel demand or what if we broke it down to highway spending of $30 billion equals blank amount of rebar, is there anything you can help us in terms of that way to look at it?

I read someplace where $1 billion in infrastructure spending equates to the creation of about 35,000 jobs. In terms of the amount of steel it depends on the type of infrastructure and as a one time engineer and scientists whose job it was to solve problems of all types you have to have the facts before you can begin to solve problems like the one you are asking me to comment on in terms of how much steel there might be in there. Well, the problem is we haven't been given the facts. Until the facts actually come out and Congress and the administration do whatever it is they're going to do, speculation is just that, speculation. And so I prefer not to get into that. But to say that $60 billion of infrastructure spend and an $825 billion spending package is completely insufficient to deal with the issues that we face as a country would be a gross understatement. And many, many experts believe it needs to be double that and double that for the next three or four years not just for the next 12 months.

I mean -- do you even have a sense of, I know this is kind of going back to the question but is this like a 10 million-tons of impact, 30 million tons, have you even been trying to look at any way in that point of view?

We haven't wasted our time with that, Chris because from our standpoint, we don't even know what's going to happen yet. And as you well know there's still a lot of discussion taking place amongst the various members of the Congress and at the administration as to what this thing is actually going to end up looking like, so there's no point in trying to figure that out now. Maybe some folks at the American Iron or the AISI or the American Institute of Steel Construction AISC or the CRSI groups could give you some better clarity on that, some rule of thumb but we don't really have that, follow that or use it in our analysis. So sorry can't help you on that.

Fair enough. Take care.

Our next question comes from Wayne Cooperman with Cobalt Capital. Go ahead.

You got my question already. Thanks a lot.

Thanks, Wayne.

Our next question comes from Tony Rizzuto with Dahlman Rose.

Thanks very much. Hi, Dan and team.

Afternoon, Tony.

Good afternoon, Dan. It has been sobering to see the capacity utilization rate further decline in the early weeks of this year. I'm wondering, are you sensing that end use demand is continuing to erode or is this more related to voluntary destocking due to credit issues?

I will take a shot at that, Tony. We think that, certainly over the last quarter there has been some erosion of end use demand but we see the bigger issue in the inventories and the destocking of the inventories, both in the service centers and frankly in the end users themselves both in their raw material inventories and in their finished product inventories. So we are watching those closely. We feel that once we get through the destocking issue that we will see an uptick in demand.

Thanks, John. Following that up when you guys survey your customer base, are you seeing rising credit issues out there, the counterparty risks or how do you size that up? I know it is all over the place in tears of your diverse customer base, but can you size that up for us?

Well, clearly we are watching it very, very carefully, okay. We see actually Tony more of a focus on cash conservation, people are paying attention to cash and that is what is leading to some of the inventory destocking. But we are watching the credit issue and frankly, speaking for Nucor we have not seen a major issue as a result of that.

Okay. And then one final question, if -- everybody is trying to seek out the best way, the early indicators. I think in the past you guys have maybe said that the deck and joist business was always a sign to keep an eye on as maybe things might be recovering somewhat but where would you guide us to to look at in terms of where you might see steel demand recover first?

Ham, did you have a comment on that.

Yes. Tony, I would say that joist and deck are trailing economic indicator not a leading economic indicator.

Okay.

On the construction side you might see metal buildings more of a leading economic indicator.

Okay. All right. Thank you very much.

You're welcome, Tony.

Our next question comes from Michael Gambardella with JPMorgan.

Hey, Dan, good afternoon.

Afternoon, Mike.

I'd like to know what you're thinking about your share repurchase program now?

We start with some levity and we end with some levity, do we?

I saw you did buy back, it looked like you bought back some shares in the quarter.

We didn't do--.

How did you know the stock price was going to go up?

We haven't bought any stock back in the quarter, Mike. I don't know where you saw that.

No, I thought I saw the share count going down and I saw something on the cash flow statement as well looked like a share buy back. There's no shares bought back in the quarter.

No, there were none bought back in the quarter. We got people here--. The third quarter the settlements.

Settlement in the fourth quarter so it tripped over to the very beginning of the fourth quarter.

Oh, okay.

But we did not make any purchases, we don't have any planned intentionally in the fourth quarter. They were just a carry-over from what was done at the end of the third quarter.

Seriously, when you look at potential acquisitions in this marketplace and you have a policy of not doing high style deals is it hard to get a deal done without doing a hostile deal in this environment given how much valuations have gone down on at least publicly traded companies?

Well, I would say at this point in time it is too early to speculate about that kind of thing. Here again, Mike we believe that if there are companies that are going to be interested in forming partnerships or some folks interested in selling their businesses, whether it be on the scrap side or the steel side or downstream finished products side these things are going to take more time to work their way through the system. And so I wouldn't want to speculate as to hostile, we don't typically do hostile deals, our preference is not to. We have had opportunities to do hostile deals. We haven't done them in the past. I don't see us doing them in the future. We believe that conditions if they continue like this in our overall economy, and we believe there's lots of reasons to belief that is going to be the case that there will be things that come to our attention from people who would like to partner with Nucor. We have seen that before. We have seen it over the last eight years. We saw it in the bad times, we saw it in the good times. And we know we will see that again. So, we will just take it as they come.

And last question, I mean we've seen destocking going on for about four months now since the Lehman bankruptcy and other problems. How much longer can destocking go on?

It can go on as long as real demand says that they need to. If -- I think there's one point I will make about the inventory numbers that came out for December, you have to be a little careful because our customers pretty much shut down December 15. There wasn't as many shipping days in December as people have used in their calculations and that's one thing you may want to think about and take a look at.

Yes.

But it is all dependent on what our customers business is, what our customers customers are buying from, what the real demand is. And if that continues to go down you will continue to see destocking. We believe that things have gotten to the point where we are going to see people reordering going forward through the first quarter but to what levels is still anybody's guess.

All right, Dan. Thanks for the comments on the share buy back.

All right. Take care, Mike.

Our next question comes from Bob Richard with Longbow Research.

Good afternoon. Thanks for taking our call.

Good afternoon.

The $42 million inventory write down can you provide a break down by product type of that?

No, I'm not really sure where it was. It was in some of our non-LIFO divisions.

Our FIFO divisions.

Yes.

Mostly downstream businesses, probably rebar fabrication would be a good place to find quite a bit of it.

The additional $20 million of impairment losses where would those be over and above those for Hismelt?

They were mostly smaller things sort of a smattering of different projects. None of them were of any significance that would require breaking out a reporting of them, they're all, there were several within the $20 million total category.

Okay. Appreciate it. One quick follow-up. The large LIFO credit, I think you said half of it Dan was Nucor Yamato. Can we read into that that your assumed carrying value at the end of the quarter was less than what your expectations were?

No. It was -- a large part of it was quantity related as much as anything else.

That would lead to your volumes were less than what you expected at the end of the quarter; right?

Right.

Absolutely.

Steel Dynamics talked this morning of weakness in the structural market. That LIFO credit in your structural business would seem to imply the opposite; right? Or can we read that into that?

No, I don't think you can read that.

If I have got this right what I heard people just say in answer to your question was that the LIFO credit had to do with more volume issues than with--.

Unless you are speculating that we, we shipped more and therefore our ending inventories are lower, but we had lower scrap inventories. We had lower (inaudible) inventories. We had lower inventories in a lot of these.

Okay. I appreciate that. So, in closing could you maybe give some relative strength to the B market compared to the other ones?

They all suck. I know that's a highly technical term, but they're all in bad shape. Joe, you want to give any--?

That was as colorful as I could do, Dan. That's a very good assessment of it.

That helps quite a bit. Thanks, guys. Great quarter.

I will say that as is always the history flat rolled is always in worse shape than the long product side of the business. And that's no different today than it has been for the last 30 years.

Okay. Thank you.

Next question.

Our next question comes from Sal Tharani with Goldman Sachs.

Good afternoon, Dan.

Good afternoon.

Dan, you obviously are going to give guidance at the end of the quarter which you always have done for the past few quarters and also in the past.

Give additional guidance but whether it will be numerical guidance is another matter, Sal. But yes, we will give additional guidance based upon how the quarter has developed.

Okay. In the process you did mention that there's a possibility of a marginally better earnings than the fourth quarter based on what you are seeing the order rate or the costs between scrap and steel. But just wanted to see when you talk about margin can you talk about on the numbers after we adjust for the two impairment charges or the impairment charges you took in the inventory write down or is it on top of the reported numbers?

It is looking at the quarter net of LIFO, net of write downs, net of inventory adjustments. It is the net of all of those.

Got you. And Terry have you done any calculations on what kind of LIFO projections you would take in the year or would you give that at the time of the next quarter earning?

We will do it at the update, we were about 0 for forever on our LIFO projections.

We will give our best assessment. As you will recall in our last update we gave an assessment that we would have a charge for the fourth quarter. Obviously that did not materialize. It depends on several factors including not just the value of the inventory, but how much inventory which will depend upon how much business is actually generated in terms of production and shipments and what have you. It is a moving target throughout the quarter, and the difficulty in the fourth quarter was just how quickly things dropped off in the quarter and forecasting where things were going to end up. It was impossible and we are not looking really at a materially better situation in the first quarter in terms of visibility. So we will give our best estimates at the update.

It is funny we all had, I think everybody in the Street had a LIFO credit and then you came with the charge, you were turned around and now everybody has bad credit. But that's fine.

That's just life, Sal. I don't know about you but everything I have done hasn't always turned out the way I thought it would.

That's okay. It is better this way. The last question is the industrialization rate we see deported by AISI. If you compare to where you guys run it, what do you think of those numbers? You mention that inventory numbers you have to be careful when you look at and make sure ASI utilizing numbers you think are numbers which should be trusted or you think there is some adjustment needed in those also?

I think the numbers are always good as those reported provide the information, but I do believe people are reporting accurately and I believe those numbers are about as accurate as is possible. And so I would not dispute those numbers based upon, not only what ASI is putting out but what you have read in the press about what people are doing.

Thank you very much.

You're welcome, Sal.

Our next question comes from Peter Marcus with World Steel Dynamics.

Hi, Dan. It is Becky.

Hello, Becky. I was going to say hello Peter but you are definitely not Peter.

Can you talk a little bit about the Decatur galvanized line, the ramp up, given this market which is obviously difficult, is the outlook for the auto builds in the southeast different than from Detroit? And then also the Memphis ramp up given the environment?

I think the outlook for RO is equally poor. North, south, east, west, that's not just confined to the United States or North America. So but John, do you want to comment at all about the Decatur, galvanizing?

We will finish the commissioning of that line and then we will take a look at the market and we will operate the galvanizing line as the market dictates.

Hello. Any other questions?

Our next question comes from Mark Parr with Keybanc Capital Markets.

Hey, Dan.

Hi, Mark.

Just wondering--?

When was it I was up there at that conference you had?

Pardon me.

When was your conference?

September.

September.

Yes, that's right.

--buddy.

It was September 10, and boy things sure changed in a hurry, didn't they. We are doing it again this year so you are welcome to come back, do a repeat.

If there's any connection there, I might not want to come.

But at least the invitation is open.

Thank you, Mark.

Can you giver us any color on what you think the February scrap auction might look like and also can you talk about how long it might take you to work through excess scrap inventories assuming that the production really doesn't change much over the next couple of months?

Well, we are not going to speculate on where we see scrap for the February buys unless Keith has something he'd like to throw on the table.

Keith never has an opinion about anything. You know that.

He's a smart man.

I'm talking about Keith Grass. I don't know what Keith you are talking about. I got a feeling I know now. Keith you have anything you would like to--?

Dan, you sort of summed it up very well before, scrap is a demand driven commodity and right now we are not seeing, you need to see some sustained demand for steel before you see something dramatic in steel or scrap pricing. We have seen some divergence between export and domestic but we will still be able to buy the raw material we are requiring at levels discounted to the export type of environment.

Okay.

Heading into spring.

I just have one other follow-up if I can. I know it is getting kind of late because we are past the hour, but could you comment I mean I know you played a role I think in some of the preliminary planning of the transition and some of the planning that the Obama team was looking at as far as infrastructure and just their recovery plan. At this point, how receptive do you think they are to people like yourself coming in and encouraging the sort of investment you think is really helpful, would be helpful for the economy?

Well, haven't got that phone call from the President yet to actually ask me to come in and confer with him or -- what we have had people both from Nucor and the industry in talking with his transition team. My personal role, Mark, occurred through the Department of Commerce Manufacturing Council.

Okay.

Where a group of 15 of us representing domestic based manufacturers from around the country, all different sizes and shapes and types of business put together a recommendation to the Secretary of Commerce as part of a transition document to the next Secretary of Commerce and the Obama transition team, and to be honest with you, I don't know -- I know that the document was put together, I know that it was submitted and so it is there available to them and at this point in time there is no secretary of commerce been appointed yet. But I do believe that information has been available to the transition team.

Okay. Terrific. Thanks. Congratulations on it is a (expletive) of a quarter given the environment that we are in. Good job.

(Expletive) is probably an appropriate terminology. Thank you, Mark.

Our last question comes from Michelle Applebaum with Michelle Applebaum Research.

Hello, Michelle.

Hi.

What's up? Hello.

Yes, I'm here.

Okay.

Sorry.

No we got--.

Trying--?

Some kind of lag here between when you talk and I talk. What was your question, Michelle?

On China. Steel prices are up 20% since October, I know in October we were all saying okay this is just kind of a blip, and they're going to restart and it is going to go away, but it is January up 20% since October, (inaudible) Steel is announcing big price increases for March. China is half of the global market right now. We are 10% of the global market right now. Last year steel prices rose 70, 80, 90% from January to September and apparently we were in a recession. I wasn't sure. I thought so. So tell me this. What do you think can can happen if China really is maybe going to start seeing some benefit of their spending and steel demand starts to pick up there again?

Well, certainly if steel demand gets back to where it was in China that will be a very good sign for the global steel industry including our industry here because that means less stay on steel be coming into the United States from China. But if you take a look at what's going on in China I know that they have cut back a lot of production. They certainly are more controlled economy than the United States is as we are very open in all respects as is demonstrated by the amount of steel that does come in from offshore, at any given time. And so it is a little bit difficult to judge exactly what's taking place over there until we start seeing people bringing back a lot of that capacity that was taken off there which--.

Drawing, sorry.

And pricing continue to go up even in that environment of bringing on more capacity here. I don't want to speculate as to what the, that current increase that you have been talking about, what those increases might infer for the global economy at this point in time because right now it is everything that we see says there's nothing significantly changed.

Okay. So it could, you are saying it still could be a blip. You don't want to call the game yet. It is too early.

As I said when you start to see them bringing back all of the capacity that they shut down that they plan on bringing back I am sure there will be some and hopefully some that they won't bring back because of the pollution of energy consumption or what have you. But until we actually see that and prices going up both, I think that we are kidding ourselves of expecting any significant trend at this point.

Okay. I will watch it carefully.

Thank you.

Thanks.

Thank you all for your questions. I think that was the last one.

There are no further questions.

Okay. At this point in time I would like to make a comment to those still listening. Is that okay? Hello.

You are still live.

Okay. Thank you. Again I just want to thank all of our teammates throughout Nucor and David Joseph and Harris Steel for another great year, challenge our people to stay safe in these difficult environments to continue on that record safety performance and for it to spread throughout all of the operations tied to Nucor and I know every member of our team will spend the special bonus wisely, carefully, save it, invest it and take care of priority number one which is you and your families. Thank you all for a great year and dealing with the difficult times we are in.

This concludes today's conference call. Thank you for joining us and have a wonderful day.