Nucor Corp (NUE) 2009 Q3 法說會逐字稿

Good day, and welcome to the Nucor third quarter earnings release conference call. Today's conference is being recorded.

This webcast may contain forward-looking statements as defined in section 27 A-I 1 of the Securities Act of 1933 as amended, including statements regarding, among other things, the Company's business strategy and growth strategy. Expressions that identify forward-looking statements speak only as of the date the statement is made. These forward-looking statements are based largely on this Company's expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified, and are beyond our control. Future developments and actual results could differ materially from those set forth and contemplated by or underlying the forward-looking statements. In light of these risks and uncertainties, there can be no assurances that the forward-looking information will prove to be accurate.

At this time, I would like to turn the conference over to Mr. Dan DiMicco. Please go ahead, sir.

Thank you, Karen. Good afternoon, and thank you for joining us for Nucor's conference call. We appreciate your interest in our Company. Joining me for today's call are Chief Financial Officer, Terry Lisenby, Chief Operating Officer of our Steelmaking Operations, John Ferriola, and our Executive Vice Presidents Keith Grass, Ladd Hall, Ham Lott, and Mike Parrish. Joe Stratman is joining us by phone and will be available to answer questions. Joe Rutkowski is traveling on business today and will not be available for the call or questions. Also joining us is Jim Frias, who will be succeeding Terry Lisenby as CFO when Terry retires at the end of this year.

After briefly reviewing our third quarter results, we will, as always, take your questions. First, and most importantly, as always, I want to say thank you to all members of the Nucor team for getting the job done just as they always do. Their strong commitment to safety, continued improvement, and taking care of our customers. This is a time of hardship and difficulty for everyone on our team at Nucor and steel and David J. Joseph subsidiaries.

I want to say how extremely proud I am of the way our people are responding to these unprecedented challenges, and responding with a can-do attitude as they take personal responsibility to add value to Nucor and their work is positioning this Company to come out of this downturn stronger than we entered into it. Again, thank you. Keep up the great job each and every one of you is doing for the Nucor team. We are working together safely to see that Nucor's best years are still ahead of us.

Third quarter 2009 total steel shipments and production increased by more than 40% from second quarter 2009 levels. With the flexibility of both our people and our equipment, Nucor's steel mill teams are able spoke respond quickly to our customers' needs in today's environment of tight credit and low inventories. John Ferriola will discuss further this very important point in his remarks.

The Nucor team's constant drive for continual improvement is already delivering big payoffs in costs, quality, and new product development. I am always amazed and impressed by the ingenuity of our teammates when our divisions share with me examples how they have figured out new ways to take costs out of their business and broaden our product ranges. And while many of our top competitors layoff employees in depressed markets, Nucor's teammates are still on the job, doing things to make our business better.

All of this highlights the value of Nucor's business model. During the good times we run our business so we're ready for the inevitable cyclical downturns and during the downturns, we are well positioned to take advantage of the inevitable opportunities to grow stronger. Nucor team has worked hard and worked efficiently in managing our working capital and cash flow. As part of these actions, our sheet metals have done an excellent job accelerating consumption of inventories of high cost pig irons purchased prior to the collapsing economy and raw materials pricing late last year.

While it severely penalized our earnings for the first nine months of this year, it was a good business division to accelerate the consumption. It has improved both our cash flow generation this year and our operating flexibility moving forward. Our team's talent and drive will continue to pay off for Nucor shareholders and the ongoing challenging steel market conditions. Apparent demand did increase in the third quarter due to the end of customer de-stocking. However, there's been no meaningful real improvement in end use demand. And the fourth quarter will also present the usual seasonal issues driven by the holidays and year end plant shutdowns by customers. While our fourth quarter results will benefit from significant improvements in raw material costs, our results could be negatively impacted by the potential of lower operating rates in both sheet and bar products. Customers are currently taking advantage of shortened lead times, which add to the difficulty of forecasting volumes for the quarter. We will again provide quantitative guidance in the final month of the quarter.

Consistent with the views we expressed in our last conference call, we believe real demand is in for a long, slow recovery. This outlook reflects the very serious structural imbalances that created the current economic crisis. The imbalances are excessive leverage, artificially induced consumption from the credit bubble, and mercantilistic trade abuses. Even worse, our nation's leaders, both democrats and republicans, have yet to find properly the real problem facing our economy and our nation. These structural imbalances must be fixed with pro growth policies.

While we argue over healthcare and global warming, our short-term tax cuts and taxpayer handouts, the US economy continues to suffer and lose jobs. Since the current recession began in late 2007, job losses in the United States now total over 8 million jobs. In addition, our economy needs to be generating about 150,000 new jobs every month, just to provide enough jobs for those entering the work force after completing their education.

If you add these needed new jobs, not created to all those lost, the job creation need over the next 5 to 10 years is huge. Totaling 11 million jobs, we have a jobs creation crisis in our midst and we're not done losing jobs, and not done creating the need for new ones, so the numbers will be getting bigger over the years. Should also keep in mind this does not include the over 4 million manufacturing jobs that disappeared between 1999 and 2007. Unfortunately, we are still not done, because when you factor in part-time workers unable to find full-time jobs and discouraged workers have given up finding a job, the real unemployment rate is closer to the US Bureau of Labor statistics analysis of 17.5%, and those numbers are bigger yet. Again, these are not our numbers, but US Bureau of Labor status unemployment measure, known as U 6, as opposed to the commonly reported U 3 unemployment number of 9.8%. That 9.8% U 3 number again does not include involuntary part time workers and discouraged workers who have given up looking for work, both at record highs. You decide which unemployment measure is more accurately reflecting our true economic reality.

Better yet, ask those Americans. You can start by talking to all of the Nucor teammates who have not been laid off but are working part time today. The time is long overdue for policies in the United States to attack the real problem, jobs, jobs, and jobs. We do this by rebuilding our balance trade, rebuilding our conventional infrastructure, and rebuilding our energy infrastructure. Failure to deliver the policies that will accomplish will only give us the granddaddy of jobless recoveries, and a longer, slower, and protracted economic recovery.

Current macroeconomic and industry conditions are what they are. The Nucor team looks ahead with both great determination and great confidence in our ability to continue to be a steel industry performance leader regardless of the economic landscape. Our team will find a way to get it done, as they always have. And they currently are doing. The foundation of Nucor's business model is the adaptability and flexibility throughout the cycle, which has been proven over more than four decades. Whatever path the economy stimulus has taken in months ahead, Nucor's extremely well positioned to deliver attractive returns to our shareholders.

As you heard me say many times before, the key building blocks of our business model are both simple and powerful. They include Nucor's strong balance sheet, Nucor's highly variable and low cost structure, Nucor's diversified product portfolio, Nucor's highly flexible production process and most important of all, Nucor's highly productive people, the right people, with the can-do attitude to get it done.

At this time, I would like to ask our CFO, Terry Lisenby, to fill in some of the details. Terry?

Thanks, Dan. And good afternoon.

Nucor reported a third quarter loss of $30 million, or $0.10 per share. Our guidance issued last month was for a loss in the range of $0.15 to $0.20 per share. The third quarter results represent significant improvement from this year's second quarter loss of $133 million and the first quarter loss of $190 million. As Dan noted, we had a substantial burden from accelerated consumption of high cost iron units purchased prior to the abrupt downturn in economic activity late last year. For the third quarter, we estimate this negative impact was approximately $180 million, about $0.37 per share after tax.

For the first nine months, the negative impact was approximately $420 million, or about $0.87 per share after tax. That compares to our reported losses of $0.10 for the third quarter and $1.12 for the first nine months. By the close of the third quarter, we completed the usage of those high cost raw materials.

Pre-operating and start-up costs of new facilities have increased this year. For the third quarter, these costs were $47 million, up from $32 million in the second quarter and $30 million in the year-ago quarter. For the first nine months, they were $112 million, up from $75 million last year. In 2009, these costs primarily relate to the SBQ Bar Mill in Memphis, Tennessee, the castrip facility in Blytheville, Arkansas. The proposed iron making facility and the galvanizing line in Decatur, Alabama. These are all attractive investments that will grow Nucor's long-term earnings power.

Our success in reducing inventories line allowed Nucor to enjoy healthy cash flow in this period of very depressed economic activity. Cash provided by operating activities for the first nine months of 2009 was $958 million. During cyclical downturns, Nucor's cash flow benefits from a counter cyclical cushion provided by lower scrap and steel prices, reducing the working capital requirements of our businesses. In contrast to a year-over-year adverse swing of 2.1 billion, in net income for the first nine months, cash flow provided by operating activities declined by only $364 million over the same period.

Nucor's liquidity position remains extremely strong. At the close of the third quarter, cash and short-term investments totaled over $2.2 billion. Our liquidity position is enhanced by the fact we have no borrowings under our $1.3 billion unsecured revolving credit facility, which does not mature until November 2012. And we have no outstanding commercial paper.

Debt totaled $3.1 billion at the end of the third quarter for a debt to capital ratio of 29%. Our next debt maturity is not until 2012. And $2.1 billion, or 70% of Nucor's total debt matures in 2017 and beyond. Nucor shareholders continue to benefit from our work raising capital in the first half of last year. We issued $2 billion of equity and $1 billion of long-term debt on very attractive terms. It has allowed us to avoid any costly capital raising in 2009's difficult capital market conditions.

Our team is also very proud of the fact that we have maintained Nucor's strong financial position without laying off a single Nucor employee through this unprecedented downturn. I agree with the point made by Dan in his comments. This no lay-off practice over more than 40 years is a direct result of our employees' productivity and constant focus on adding value to Nucor.

Capital expenditures for the first nine months of 2009 were $316 million for full year 2009, we project capital spending of approximately $400 million. First nine months of 2009 depreciation and amortization was $422 million, and we expect about $570 million for the full year. Nucor is in a position of strength to build on our Company's long tradition of being effective stewards of our shareholders' valuable capital. My confidence has never been greater that Nucor's best years are ahead of us. The reason for my confidence is this. The Nucor team has the right people to get the job done.

Earlier this week, I announced my plans to retire from Nucor at the end of this year. After a 24-year career with Nucor and serving as CFO for the past decade, I feel that the time is right to transition to the next generation of financial leadership at Nucor. My successor will be Jim Frias, who is currently Vice President and Corporate Controller. Jim is an 18-year veteran of Nucor. He brings to the job valuable experience in financial leadership roles, both at operating divisions and here at corporate. Jim has especially demonstrated his leadership skills in Nucor's very successful capital-raising work in 2007 and 2008. Jim is ready for this job, and he'll be an excellent Chief Financial Officer.

As always, thank you for your interest in Nucor.

Thank you, Terry.

Thank you for the outstanding contributions you have made to our team over the past 24 years, even after you retire, you know you will always be a member of the Nucor family and we'll be calling on you for your advice and guidance on a regular basis. I also want to second Terry's comments about Jim. Jim is ready, capable, and looking forward to working with the rest of the team in his new capacity.

I'll now ask John Ferriola to report on our steel mill and raw material businesses. John?

Thanks, Dan. Good afternoon. Let me begin by thanking all team members at our Nucor steel Mills and David J. Joseph and NuIron raw material operations for your outstanding commitment to working safely and taking care of our customers. I'm extremely proud of the work you're doing in these very challenging market conditions.

I will again emphasize the importance of everyone staying focused on safety. Our hard work today is going to pay big dividends to Nucor in the future. We want all of our teammates to be around to enjoy the benefits of their hard work. Dan has already touched upon one of our most important achievements of the third quarter. Nucor's steel mills were able to quickly respond to the increased demand from our customers after their inventory de-stocking ended this summer. Our steel-making assets and most importantly our people are powerful, competitive advantages to taking care of our customers in a quickly changing market, one where steel buyers want to minimize their inventory levels.

The keys to this operational flexibility are our equipment and the Nucor employees who operate it. Our electric deduction process can be turned on and turned off very quickly, literally in a matter of hours. And since we have continued our long-standing no layoff practice through this downturn, our people are on the job, ready to take care of our customers' needs for high quality steel. Third quarter steel mill capacity utilization rates tell the story of Nucor's operating flexibility.

Our third quarter rate of 69% was up from 46% in the second quarter and it compared to an industry third quarter average rate of 55%. Our utilization rates were up in all products, but most dramatically, in sheet and plate. In a still very unsettled economic environment, we will continue to capitalize on our production flexibility, as well as Nucor's unmatched product diversity that provides our customers with one-stop shopping opportunities.

I also want to thank our David J. Joseph teammates for their excellent work capitalizing on the strong ferrous and non-ferrous scrap markets of the third quarter. DJJ has already been an excellent addition to the Nucor family and it will continue to provide attractive returns going forward.

Steel demand remains weak across all product groups. The increase in the overall US industry average utilization rate to the current level of about 60% is the result of customers no longer de-stocking their inventories. It is not the result of any improvement in real demand.

End use markets remain very soft. While the Cash for Clunkers program did create a temporary spur in automotive demand, it is already apparent that heavily indebted consumers are, again, staying away from the automotive show rooms and the impact on infrastructure spending on the US government's economic stimulus package has been nonexistent. I will repeat what I said on our last call back in July. Our expectation is for no significant improvement in end use demand over the balance of this year. Our view remains the same today. However, on a positive note, service and inventories remain at relatively low levels. Months of supply for all products were 2.3 in September.

Nucor steel mill and raw material teams are not sitting back, waiting for a better economy. Our focus remains on outperforming our competitors with superior quality, service, and delivery. For Nucor, downturns do not create challenges. For Nucor, downturns create opportunities. We have a number of exciting projects under way to continue Nucor's proven track record coming out of downturns stronger than we entered them. We are continuing to grow our earnings power for the years ahead.

Here are some quick updates on just a few of the projects. Our new galvanizing facility at our Decatur, Alabama sheet metal began production in the third quarter and it's off to an excellent start. In fact, customers have told us as the surface quality of the initial output has far exceeded their expectations, by the end of November, our Decatur team will have successfully produced to the full width and gauge of the equipment capability. Congratulations, Team Decatur, and thank you.

Commissioning has begun on our second castrip production facility, which is located at our Nucor mill in Arkansas. Our castrip Arkansas team, supported by the castrip Indiana team, did an outstanding job of completing this project on time and on budget. They have had a great start-up and expect to have product available for customers by the end of this year. In November, we will begin commissioning our Arizona wire rod and bar mill. With an investment of just $50 million and an annual production capacity of 500,000 tons, this is a very attractive asset that will allow us to better serve our wire rod and rebar customers in the southwestern US markets. When there is sufficient recovery in market demand, our team will be ready to roll in every sense of that word.

We continue to grow our international footprint. Exports represented about 11% of our steel mill shipments in the first nine months of 2009. Nucor is uniquely positioned among US steel producers to capitalize on attractive export opportunities. Over 60% of Nucor's steel production capacity is on deep water. In the third quarter, we opened a sales office in Rio de Janeiro to serve the important markets of Brazil and South America. In the fourth quarter, we will open our first international sales office in the Middle East, located in Dubai. This office will complement our existing international sales offices in Europe, Mexico and Brazil. We will continue to grow our international sales and trading platforms.

In conclusion, we are very excited about the opportunities we see ahead to grow our long-term earnings power in Nucor's steel making and raw material businesses, and as always, we appreciate your interest in our Company. Thank you. Dan?

Thank you, John. I would now ask Ham Lott to update us on Nucor's fabricated construction products businesses. Ham?

Thanks, Dan. Good afternoon. Demand remains extremely week for fabricated construction products through the first nine months of 2009. Compared with the year-ago period, steel joist production decreased 50%. Steel deck sales declined 40%. Metal building volumes fell 53%. Fabricated rebar tonnage did increase 11%, but this was due to the volume contributed by the ambassador steel fabrication plants acquired by Harris Steel in August of 2008.

Nucor has over four decades of experience in managing through down cycles and fabricated construction products markets. Our people take advantage of the downturns to grow stronger and that is exactly where our energy is focused in the current economic turmoil. I want to say thank you and keep up the good work to all of our team members at Harris Steel, Nucon steel, Nucor Buildings Group, Berko, and Volcraft. Dan?

Thank you, Ham. I would like to second a thank you to those teams. At this point in time, we are done with our presentation and would now be happy to take your questions.

(Operator Instructions). We'll take our first question from Kuni Chen from Banc of America-Merrill Lynch.

Good afternoon, everybody.

Good afternoon, Kuni.

Just to start off on the question on the utilization rate and the sustainability there. Three months ago, you had seen utilization at the mid-50% range, and you said at the time you didn't see a lot of upside from there. Certainly the way you ran in the quarter suggested that there was meaningful upside. So perhaps you're a bit too conservative last quarter, but do you worry at this point that you have overshot the market a bit? Obviously there's some downside here in the fourth quarter, but do you look at the 70% as sort of a steady state utilization as you look into 2010.

Well, Kuni, all along what we've said is that with respect to demand in the marketplace, the apparent demand will continue to meet real demand as we work through this year and customers work down inventories to what they found is acceptable levels in these tight credit markets and with the economic slowdown that we are all facing. So as far as where the utilization rates ended up at any point in time, we knew that they would be improving. We did not -- in all honesty, anticipate they would be improving particularly in some products to levels we saw in the third quarter and we were pleased with that and our team was able to respond to that. And as far as going forward, what we've stated in our press release and in our conference call notes really should be taken to heart, because in the fourth quarter, typically you have issues with the holidays and with seasonal shutdowns at many of our customers' facilities. Of course with the economic conditions being what they are, those could be extended or compounded in terms of how many days are actually taken in shutdown.

In addition to that, we have, do not believe that real demand, as John had mentioned and I talked about earlier, has really improved much since the end of last year. And we don't see things in the economy from a flat roll standpoint or long product standpoint, whether we're talking automotive, construction, housing, non-resident construction, oil country goods or what have you. We don't see that there's a real uptick in the demand there, and a lot will depend on how our customer is approached the year end and their inventories and what they want to be carrying on their books and their order entry rates, as to whether or not they continue to order at real demand levels or back off. There is a tremendous amount of uncertainty with respect to the fact that lead times at all Mills are very short.

And the customers, because of the credit crunch, because of their own cash considerations and, again, the slowdown in the economy, which has not picked up, despite what a lot of people like to talk about in the press and maybe on Wall Street, the segment of the economy that we serve, which is the real core of the economy, is not improving, so what, what we are looking at is a situation where that uncertainty could translate into less volume coming in, lower capacity utilization in the fourth quarter, but it's just -- it's just not something we can forecast because of the short lead times that our customers are taking advantage of. And are smart to take advantage of, exactly the way we would be running those businesses if we were in our shoes. So that all compounds the situation.

We do have a significant drop-off in raw material costs that we will see in the fourth quarter, but how much benefit we get from that will depend on what the actual volumes are. So, when you see the $180 million number that we talked about for third quarter and second quarter with respect to the pig iron additional costs associated with the higher pig iron consumption, that would only be a similar number if we produced and shipped the same number of tons or greater in the fourth quarter as we did in the third quarter. So you have to take the volume factor into account there. The potential for a slowing in order entry activity because of the situations of customers year end will find themselves in and the seasonal shutdowns, so we're cautious about that. We're not going to get out front on this thing and we will update everybody when we get to the later part of this quarter to give you a more quantitative sense for where things are at.

We certainly at this point in time are feeling better about the profitability in fourth quarter, but we know that there's still a lot of uncertainty and opportunity for there to be some production in capacity utilization. Whether it's at peak for any period of time or just a short-term peak due to fourth quarter concerns remain to be seen and we'll know more about that when we get into next year.

Great, and then just as a quick follow-up and then I'll turn it over, can you give us some sense on the backlog across your different product lines, just trying to get a sense as to your visibility to the quarter at this point. Thanks.

Our backlogs have improved throughout the year, but, again, because of the customers taking advantage of the shorter lead times, you know, the backlog is not enough to say we would be running at any certain level for the entire quarter. Next question, please?

We'll take our next question from Brian Yu with Citi.

Great, thanks.

Good afternoon, Brian.

Good afternoon. Dan, with regards to pricing and flat rolled segment, it wasn't quite at the level, the quote, unquote, increase that the spot markets would suggest. Can you comment if this is just merely a lag effect, or is there something else going on?

Well, certainly there's a lag effect involved. If you went month by month through the quarter, you would see the pricing move up significantly throughout the quarter. But at the same time, what has been a very well published in the press is that there is a definite softening on flat rolled pricing in the marketplace as we speak. Where it goes from here is anybody's guess. So depending on how far things soften with respect to pricing, it's not just here, by the way. If you read the press, you find out that that's occurring globally. So we may experience, have experienced a peak in pricing at the end of the third quarter and beginning of the fourth quarter when it comes to flat rolled, whether hot rolled, cold rolled or galvanized.

Would you expect prices, your realize price on a sheet side to be higher in the fourth quarter?

Because --

Okay.

Because of what I just explained, I think it would be foolish for us to give that kind of forecast.

Sure.

As with spot pricing, it will be what it's going to be and we'll be competitive in the marketplace.

Okay, and then just a follow-up question, and this might be a better one for John. Throughout the year and all three of our segments, milled products and raw materials been posting losses. Is there any one of them that have yet to turn a profit in the third quarter?

Not all of our segments have been in the red. And in particular, our bar product segment has been profitable all year and several of our raw material segments have been profitable, and our rebar fabrication segments have been profitable. And our structural beam at both of our operations have been profitable.

Thank you.

We'll move now to David Lipschitz of CLSA.

Thank you. Good afternoon, everyone.

Good afternoon.

Question to you on service center. Some of the service center has said you shouldn't lower prices because there's no real demand.

Oh, talking about one particular--

Yes.

Talking about one, not some, but go ahead.

I was just wondering what you thought of those comments and how do you react to that?

Well, I think I just commented and reacted at the same time. I think we do what the market tells us to do. I think we do what our customers tell us to do. And that's how we price our product and if we had some kind of control over what was going on, we certainly would be pricing things differently. The roller coaster ride on flat roll products over the last several years has been quite exceptional, quite interesting.

And just a follow-up, separate issue, the pricing in your downstream products obviously is lower, while upstream was higher. Can you comment on the margins for the downstream? Are you worried that, as some of the hot rolled has gone higher that you're getting squeezed on the downside? Downstream side?

The biggest issue facing our downstream construction markets is just the massive slowdown in non-residential construction that's taken place. So it's a volume issue more than anything. And that, unfortunately, is not going to change for some time.

Okay, thank you.

We'll move now to Sal Tharani from Goldman Sachs.

Good afternoon.

Good afternoon, Sal.

First off, Terry, congratulations, good luck, and all the best for your retirement and Jim, congratulations and I look forward to working with you.

Thank you.

Dan, I just wanted to ask you two questions. First, trying to understand the sales pattern of the steel mills, if I look at the third quarter so far announced earnings, the volume has significantly improved second to third quarter for you and your competitors. But if I look at the service centers, the inventories have not been building at all. And service center shipments actually were up only 5% during the quarter. Has something changed that you are reaching out more to the end users, or you are getting more demand directly from the end users? Shipment volumes significantly improved?

No, I think the end users have actually behaved very similarly to the service centers, had their inventory issues and certainly there was an uptick in, for the automotive segment with the Cash for Clunkers that was very short-term, but the reason why everybody's volumes went up is because the customer base, including service centers, started to order at the real demand levels as opposed to inventory adjusted apparent demand levels. And that's pretty much where the customer base including service centers are today and until real demand shows any measurable improvement, that's probably where they are going to stay.

Okay, and my second question is you're opening offices in export for international markets. Is there a long-term opportunity you are seeing for export? Are you developing that part of the business? And would you mind letting us know what your export volumes are over the last nine months and also in the third quarter?

I'll let John address the last part. We did mention some of that in our notes, Sal. But for several years now, we have stated that we believe that the US will be structurally a better exporting market going forward than it has been in the past because of the inevitable weakening of the US dollar, because of the significant trade and budget imbalances and the amount of debt that we owe to the world and those things have just gotten worse, not better. So we believe that we'll be in a position to be able to export a significant part of our business and have it be a growth market for us that will ebb and flow with obviously international market conditions and the amount of oversupply that exists in China in particular, but we have entered into the trading business and we have -- we plan to see that as a growth market for us going forward. John, would you like to comment?

In the third quarter, we exited about 12.5% of our total shipments. That number year to date is just about 10.5%, and we do see it as an ongoing strategic opportunity. As Dan mentioned, the value of the dollar, continuing to decrease and also the location of our mills, on the water, in the southern location of those mills gives us great opportunity to export product into Mexico, South America, and we see those as growing markets that we have a long-term opportunity to exploit.

Sal, with our presence in Italy, we have taken advantage of and planned to grow that advantage in terms of packaging product that's produced at our Ferdisan operation, Nucor Ferdisan joint ventures, packaged products that they don't make with products that we do, size, ranges, where they don't overlap and what have you to be able to supply projects throughout the Mediterranean area, the Middle East, and eastern Europe. So, you know, it will parlay into that. And with any future growth that we -- opportunities that we initiate internationally from a steel-making standpoint.

Great, thank you very much.

We'll move now to Timna Tanners with UBS.

Yes, hi.

Good afternoon, Timna.

Good afternoon. Wanted to ask for a breakout, please on, your utilization and export by product.

No, we're not going to do that. But thanks for asking.

Okay. Can you suffice to give us a direction in terms of, like, flat roll versus long products as opposed to utilization improvement more in the flat rolls?

Well, as John mentioned, he mentioned that both flat rolled and plates saw strong increases in capacity utilization during the quarter over the previous quarter. Bar utilization has actually been good all throughout, relatively good.

Okay, and then given the discussion of how Nucor has navigated past downturns, what kind of signals will you be watching for to get more confident on your visibility for any non-residential construction improvement?

Well, obviously there's indexes out there that everybody follows, whether it be the architectural index or the Dodge reports, and the like. It's basically, you will see those things turn positive before we start to see the actual order entries improve in those areas, just because of the engineering work that needs to take place on those projects and the lead times for that. That's why the architectural index is a good leading indicator of the direction of the non-residential construction markets.

Okay, and anything from stimulus that you're expecting to see from what your conversations tell you?

Well, stimulus, our so-called stimulus have been extremely disappointing from the standpoint of steel consumption and infrastructure work and whatever has been Bailey hooked in the press has really been of insignificant nature and our customers will second and third that.

Thanks.

You're welcome.

We'll move now to Eliot Glazer with Pequot Capital.

Gentlemen, can you give us any details on Q3 volume in flat roll, as far as any kind of benefit that you received from the Cash for Clunkers? And I'm assuming in the absence of that program that flat rolled will be down comparably in the fourth quarter, is that true?

Well, if you look at the published numbers for Cash for Clunkers, about 700,000 units.

Right.

You figure those were smaller cars as opposed to larger vehicles or the normal mix of vehicles, which tend to be larger, you're looking at somewhere around 1500 pounds of car in the normal mix, maybe obviously a little less than that because of the smaller cars. So it -- on a scrap side, when the dealers finally got their money out of the governments, there was a pretty hefty push of cars in a very short period of time off the dealers' lots to get rid of them. I think Keith would verify that. In terms of the actual orders for steel tied to an increase in production, I'll let Mr. Ferriola talk to that.

Only about 10% of our sheet product goes into automotive. So the impact that we would be expecting from the automotive decrease after Cash for Clunkers would be minimal to our sheet operations.

It was also minimal on the auto as well, right, John?

Yes.

Probably the biggest place we saw an impact was on scrap flowing to the yards. Probably created a little bit of congestion at the yard sites. Is that right, Keith?

A little bit -- particularly in the self-serve auto parts. Fair amount of inflow, 60 to 90-day window.

Thanks.

Thanks a lot.

You're welcome.

Our next question comes from Luke Folta from Longbow Research.

Good afternoon, guys.

Good afternoon, Luke.

Just a couple questions. First, with the sequential increases in beam products and rebar fab, do you think, is that seasonality, share gains, can you give us a feel for what's happening there?

Well, as Ham mentioned, the rebar fab, the increase there is really due to the acquisition of Ambassador that closed in August and that rebar fabrication business started to be added into what we already had in place with the Harrison and Barker acquisitions, so it was through the acquisition that we saw that 11% uptick and as far as the beam business goes, Joe, do you want to speak to that?

Yes, sure. I think it's both, Luke. I think it's seasonal and I also think we have improved market share on the beam side.

Okay.

Thank you, Joe.

And then secondly, you had said startup costs about $47 million in the third quarter. Are you going to see more of that in the fourth quarter?

Yes. Yes, we will.

Fairly comparable amount?

Should be, should be down a little bit because I think Decatur is well on its way through the startup phase and -- I'm not sure Caster will be down or up. We started production, but still a start-up phase in that for a while and Memphis is still going through their startup and approval process and we will be bringing into that a new area, the Hereford County Clayton mill with our hat treat lines being constructed and what the time line is on that.

Due to the commission in the fourth quarter 2010.

Right. So it may be comparable. Could be down a little bit. Jim, do you have any comments on that?

Well, we just had a charge that went through a little bit unusual worth $12 million, so I think that those will net to a small increase for that reason.

Right.

Okay. If I could just ask one more question regarding just, you know, with your longer-term outlook for a pretty slow recovery, can you give us a feel for where the pig iron facility falls on your priority list? Is that something that could be delayed, you know, couple years out at this point?

Well, all of our strategic growth initiatives that were put on hold about a year ago because of the economic collapse and financial crisis, things are proceeding in terms of conversations and what have you still with all of the parties that we talked with then, including with respect to this project. We're still working on getting our permit. We have not gotten the permit yet. There's been some minor litigation that has been filed. We're working through that as we speak. So, we're also sitting here wondering exactly what's going to happen with our enlightened Congress with respect to global warming legislation and what, if any, carbon costs might be associated with the project that might cause us to reevaluate the returns that we would get from that. But what I can tell you is that we will be continuing to grow our low residual iron production capabilities and big iron project is still in that mix, as well as could be the future DRI opportunities in addition to what we already have in Trinidad.

All right, thanks a lot.

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

Thanks very much.

Good afternoon, Mark.

Hi, Dan. Hey, I just wanted to wish Terry the best. He's definitely been a tremendous steward of the financial resources of your Company and good luck to Jim.

Amen.

And that's -- sorry to see you go, Terry, but everyone, everyone's got those last 15 or 20 hunting trips on their agenda they got to fill out.

You're right, thanks. Hunting more from the back of a boat or a yacht as the case may be.

All right. I was curious--

Do you have a question for him?

Yes, okay, how about a question? Can you give us any color on where you might see the SG&A line come in for the fourth quarter? I know there's -- I think there is a fair amount of profit sharing built into that number, and I was just kind of wondering how we might want to think about modeling it.

Well, are you talking about versus last year?

Or just versus the third quarter, yes.

Well, there hasn't been any profit sharing built into any quarter this year or bonus payments really to speak of for the executive teams. So I don't think that -- versus fourth quarter, you'll see a significant lower SG&A, but versus --

Mark, I would say probably similar to quarter three.

All right, that's good. I know when you came out with your third quarter guidance, I mean I think you gave -- you provided two numbers. Again, I apologize if I missed this, but did you quantify the magnitude of the pig iron run through in the third quarter when you finally got--

Yes, we did.

Okay.

Yes, we did, it was a number that was reported in today's press release.

All right.

We did quantify that because it was virtually identical to the second quarter.

Okay. One other question, just a last question, if I could. I was wondering, John, if you might be able to help us to quantify the difference between domestic and export pricing and, what sort of -- I know the dollar's been weak. I'm just curious what sort of opportunities you're seeing for 2009 and how you would view the profitability of that business relative to the domestic operations.

Well, clearly it goes on a product by product basis, so there's a little bit of differences. In general, to date this year, the export pricing has been just about similar to domestic pricing.

Okay. That would be what, an FOB price?

Yes.

All right. Terrific. Thanks a lot and look forward to better quarters ahead for you guys.

Thank you, Mark.

Can't be all that bad.

Bad enough, I'm afraid. Thank you.

All right, thank you.

Our last question will be a follow-up from Sal Tharani from Goldman Sachs.

Thank you.

Yes, Sal.

Dan, couple of things. First, are you taking any major downtime in the fourth quarter?

Nothing out of the ordinary. All of our down time will be dependent upon obviously order entry, what our customers do in terms of their down times or their ordering patterns, but we have nothing out of the ordinary planned in terms of taking additional time down at year end. We remain open for business.

Okay.

We have all of our facilities in tip-top shape, okay. And if we have the orders, we will run.

Okay, great. And lastly, then, I don't know if you have any view on the scrap prices over the next couple of months. We saw scrap coming down this month, people are talking coming down next month. I don't understand if your scrap costs for fourth quarter were lower directionally than the third quarter?

Yes, because of the fact that we'll be consuming the normal levels of pig iron compared to what we have been consuming abnormally high levels over the last two and a half, three quarters. As far as scrap pricing goes, I'll let Mr. Grass give you some input on that, if you want to get a little closer to the mic over here, slide that down towards him.

Yes, just a couple of quick comments. We've seen pricing move down in October and that was as a result of certainly reduced domestic demand and also a falloff in the export demand. So export market had driven a lot of the scrap market most of this year until the domestic business kicked in early this quarter. Starting to see a drop-off. I imagine that's going to continue around the 30 days or so.

Thanks.

Thank you, Keith. John, anything you would like to add to that? Sal, any other questions?

No, thank you very much.

All right, thank you.

That concludes the question and answer session today. I would like to turn the call back over to Mr. DiMicco.

Thank you. Appreciate it, Karen. I would like to close with this observation. The work we did in 2001 to 2003 cyclical downturn enabled Nucor to achieve record earnings in four out of the following five years and near record earnings in the fifth year. And the work the Nucor team is doing today is laying the foundation for future record years to come. That's why our best years are still ahead of us and I want to thank you again, every member of our executive team here, throughout the Company, and every teammate for doing their job well and doing it safely and for being at the ready to produce as much steel as our customers are willing to place orders with us. And we thank our customers for their business and wish everybody a more profitable 2010. Thank you.

Ladies and gentlemen, that does conclude today's conference. We thank you for your participation.