Steel Dynamics Inc (STLD) 2010 Q1 法說會逐字稿

We would like to welcome everyone today to today's Steel Dynamics' first quarter 2010 earnings call.

Today's conference is being recorded.

Joining us today are Keith Busse, Chairman and Chief Executive Officer; Richard Teets, Executive Vice President, Steel Dynamics Inc., and President and Chief Operating Officer of Steel Operations; Mark Millett, Executive Vice President of Steel Dynamics Inc., and President and Chief Operating Officer of OmniSource Corporation; Gary Heasley, Executive Vice President of Steel Dynamics Inc., and President of New Millennium Building Systems, Theresa Wagler, Executive Vice President and Chief Financial Officer of Steel Dynamics Inc., and Fred Warner, Investor Relations Manager.

For opening remarks, I would now like to turn the call over to Mr.

Fred Warner.

Please go ahead, sir.

Thank you, and welcome to the Steel Dynamics, first quarter, 2010 conference call.

The call is being webcast live April 20, 2010, from Fort Wayne, Indiana.

Later today, you will be able to replay the call from our website or download the call as a podcast.

During today's call, our management will make some statements that are forward-looking.

All statements regarding anticipated future results or expectations are intended to be forward-looking statements within the meaning of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

Such statements, which by their nature are predictive and are not statements of historical fact are often preceded by such words as believe, anticipate, estimate, expect, or other conditional words.

These statements are not intended as guarantees of future performance.

We question that actual future events and results may differ materially from such forward-looking statements or projections that may be made today.

Some factors that could cause actual results to differ include general economic conditions, governmental monetary and fiscal policy, industrial production levels, changes in market supply and demand for our products, foreign imports, conditions in the credit market, the price and availability of scrap and other raw materials, equipment, performance, or failures or litigation outcomes.

You may find additional information concerning a variety of factors and risks that could cause actual results to differ materially from today's forward-looking statements.

Refer to section entitled "Forward-looking statements" and "Risk factors" on our most recent annual report on Form 10-K and our quarterly reports on Form 10-Q as well as other reports we file from time to time with the Securities & Exchange Commission.

These reports are publicly available on the SEC website, www.sec.gov, and on our website, www.steeldynamics.com.

We now have two brief announcements before proceeding to today's discussion.

First, we note that the 2010 annual meeting of Steel Dynamics, Inc.

will be held on May 20, one month from now in Fort Wayne, Indiana.

Details appear in the proxy statement that has been mailed along with our 2009 annual report to our shareholders, and on our website.

We plan a live audio webcast of the annual meeting again this year.

Secondly, I want to share an item of interest or at least an item of possible interest to some of you listening today.

Tomorrow night on the Discovery Channel, there will be a program that features one of Steel Dynamics facilities.

Last year a video crew visited the safety operations of our melt shop, at the flat roll division of Butler, Indiana, the same operation that is featured on the cover of this year's annual report.

The program is a part of the new Discovery Channel series entitled "What A Tool" that showcases large impressive machines and technology.

The half hour segment featuring Steel Dynamics, tomorrow night, highlights the electric arc furnaces at Butler.

This is an opportunity to see an EAF in operation in a way that few will see filmed in high definition with some segments in slow motion.

00 p.m.

tomorrow night, Wednesday, April 22.

Replay is scheduled for 1:00 a.m.

Now let's begin today's call with comments from our Chief Executive Officer and Chairman, Keith Busse.

Thanks, Fred.

Good morning, ladies and gentlemen.

It's a pleasure to be with you this morning, and to report on the first quarter of the year 2010.

We had an excellent quarter, simply said.

We delivered $65 million of net income in the first quarter or $0.29 a share, compared to a $27 million net income or profit in the fourth quarter or $0.12 per diluted share.

And when compared to last year, which was a loss of $88 million or $0.48 a share, that's a remarkable change.

I certainly was interested as I read the morning commentary about the description of the quarter, most of it very positive.

A couple of comments centered around a clean quarter.

I'm not sure exactly what that means, but I think it means without any garbage of any sort confusing the numbers, but nonetheless it was a good quarter.

The sales, as you noted in the press release, were at about $1.6 billion, which when you annualize that is slightly north of $6 billion, and we like to kid around a little bit.

We were an $8 billion Company that in the depth of the recession, we became a $4 billion Company, and it's nice to be coming back and heading in the right direction, north of $6 billion.

At the low point, if you look at the net sales of $815 million, we were only a $3.2 billion Company at one point in time in the first quarter of 2009 on an annualized basis.

So, the other thing I wanted to point out, is that steel shipments for the quarter were 1.4 million tons, approaching 1.5 million and when you annualize that kind of a figure, you are getting -- you are pushing towards 6 million tons.

So, again, similar story where volumes had declined below 4 million tons and are rising at a much more positive climate than we have had in some time.

Our steel shipments for the quarter were up 20% as noted.

Steel segment profit margins also as noted, came under just a little bit of pressure, as scrap costs which were up sequentially, month in and month out, December, January, February, March kind of time frame, put a little pressure on us.

Pricing almost kept up with scrap costs on a net-ton charge basis, going up $56 per ton, while pricing went up $50 a ton.

OmniSource's first metallic shipments were 1.2 million tons slightly north of that, and on an annualized basis that's approaching 5 million tons.

Not quite back at the peak were OmniSource had almost gotten to 7 million tons, we certainly have that kind of capacity and the flows are very good today, and improving, so I think we'll continue to gain on that from a volumetric perspective in the second and third quarters of this year, and we anticipate fairly decent scrap flows and -- in that segment of our business, which continues to grow and expand on a quarter-by-quarter basis.

But shipments were -- of ferrous metals, up 15% in the quarter, and non-ferrous was up 17% in the quarter.

During the quarter, the Company steel operations on a preprofit-sharing and pre-intangibles basis, produced an operating income of $138 million or about $99 per ton shipped.

I think those are very, very good numbers.

I think you'll find them to be excellent numbers when compared to our peers in the steel community.

And OmniSource benefited from increased volumes and higher scrap prices achieving an operating profit of $43 million during the quarter.

I might point out as I was reading the morning mail and all of the analysts reports that there were some folks that saw our earnings maybe coming in a little short on the steel side from their respective projections and maybe a little north on the scrap side from their projections.

We probably need to get a little bit better alignment there, because our steel earnings from an internal perspective were better than our expectations, and our -- our scrap profitability was probably just a little softer than we had contemplated, fairly close, though, to the numbers we had contemplated in the first quarter.

So the steel units, really had a very, very good quarter.

I think they'll have a good second quarter.

The Flat Roll division continues to run at capacity as does the SBQ Bar division, and our merchant operations are -- I think the last time we chatted, we were in the 60s, and now we're in the 70s.

75% arena, I believe, today, so we're feeling better about that.

Still lagging is the Structural Rail division, although up from the 25% to 30% arena, probably more appropriately into the 33% arena, and hanging in there from a bottom-line perspective is our Structural Rail division, as I said.

They have done a good job in the face of an extraordinarily soft marketplace, although they are developing new products, quarter in and quarter out, and, I think one of the significant things to note is the certification for our rail to AREMA standard strength.

Not just for rail, but for welded rail as well as you read in the press release.

I want to remind everyone, though, that from an outage perspective, we may not ship quite as many tons in the second quarter.

I know as you add quarters together, you get 31, plus 31, plus 28 in the first quarter, and that's 90 -- 90 days, and you take, 30 plus 30 plus 31 is 91, you would see the quarters as having an equivalent amount of shipping days, but I want to remind everyone that we have our spring outage in the second quarter, and that will affect the two divisions a little bit at flat rolled and SBQ because they are running at capacity.

The other divisions would be rather unaffected by an outage, because they are not running at capacity, the outage will really have no impact from that perspective.

In our ferrous resources platform, I think the exciting news is Mesabi Nugget.

And I'll try not to go in to great depth and length there, and save some of that for Mark.

But let's just say it is working very well from a process perspective and so our eyes are on that ball initially as getting the process to work well, and we're pleased to report that it is.

I think it is one of the world's first new break-through technologies in making pig iron (inaudible) converting an iron oxide to iron.

So we are starting to achieve very, very high yields, in the high 90s with that product, and although we were constrained by conveyance issues in Q1, those problems are now behind us, and the new conveyor systems, I believe you will hear are working well, and as we said in the press release, we're hoping to achieve, 12,000 metric tons of shipments in April alone, so we're moving in the right direction, although I read in one of the morning lines, that somebody said these guys will be at 60% by the end of the second quarter.

I don't think it's going to be quite that good, folks, but it is certainly moving in the right direction.

Obviously some of the early problems with conveyance systems and whatnot, which impacted and impeded our startup in Q1, also had an impact on the bottom line as well.

As I said earlier, recycling, before I move to that -- let me tell you Iron Dynamics did make a profit in the quarter.

We're very pleased about that.

It continues to work very well, although we don't think it's the technology of choice, we believe Mesabi Nugget is that new technology of choice.

But in recycling, I might remind you that our ferrous shipments -- got as low as 2.6 million tons.

Mark and I were talking about it this morning, and now we're operating at close to 5 million tons.

Certainly a significant improvement there.

I also noted when I read a lot of the releases this morning, that consensus numbers were fairly high and growing, and I would tell you that the recovery is -- is -- moving at a very modest pace.

There is a recovery going on.

I think there is increased demand in various segments of the marketplace, and we're going to enjoy the fruits of some of that, and I will stand by certainly the statement I made in here, but I think as I see those estimates for consensus today, they are probably a little bit high.

I really don't have any other remarks at this point in time, and would -- would turn it over to Dick Teets from our Steel Group, to talk about the Steel segment results.

Thank you, Keith.

Good morning, everyone.

I would first like to congratulate all of the employees for their continued effort on -- of improving safety.

Most noteworthy is the Pittsboro plant where they achieved another quarter of zero loss-time accidents, this is on top of a full year last year.

And, also Steel of West VIrginia and the techs worked a quarter without a loss time incident.

So thank you very much to everybody.

I would also like to congratulate the techs in the Roanoke teams for their continued rankings as number one in customer satisfaction surveys.

Great job for the sales and shipping teams at both of those facilities.

From a plant perspective at Butler, as Keith mentioned, we continue to break production records.

The first quarter was a quarterly record at 770,000 tons, and the shipment records of, just right at 0.750 million tons was a record.

Thank you for all of those efforts.

And actually the techs with Butler running full, the techs aren't far behind, the first quarter operated net of maintenance and scheduled and unscheduled at 86%.

The flat roll world is alive and well in our facilities.

Also part of that being driven at the techs is interest in light gauge and agricultural markets.

In Columbia City, the structural and rail continue to operate well below our capacity as noted.

The first quarter was, as Keith said, at 33%.

I am proud of the efforts at Columbia City in relationship to rail production.

Also as Keith mentioned we recently received approval and an order from a second class one railroad.

Maybe he didn't say that, but we did, and that's exciting.

For our standard AREMA rail product.

The number two Caster project is nearing completion from an installation perspective and then we'll go into cold and hot commissioning.

Interestingly, I would like to point out that we utilized our own employees to construct the Caster.

These were people that were originally hired for the operation of the number two rolling mill, and when the market fell off for the structural sections, we redeployed them.

We have successfully done that, and we've really only used contractors in critical applications -- where critical lifts, or critical welding high-voltage terminations were involved but congratulations to everyone for working very safely, and being utilized in using a skill set that really they were not hired for.

The number two medium section there will resume operations shortly as the inventories require.

This will allow for more time for rail production on the heavy section mill with all of the products, up to 14-inch sections being shifted over to the new mill.

At Pittsboro in March the melding and casting, the rolling mill and the shipping performances were all in the top 10 months historically.

Bar Finishing also set a quarterly record for throughput reflecting the interest in value-added products.

March was also the third-best month ever for sales with inventories on all parts, ours and our customers very low, our shipping was temporarily strained, but we are all focusing with our priority on on-time deliveries to all of our customers.

At Roanoke, the quarter continued to show improvements in operating utilizations, as Keith mentioned the melting casting department operated at 74% and the rolling mill was at 77%.

These rates continue in an -- in an improving trend.

Roanoke also had their maintenance outage, as Keith referred to the maintenance outages.

They had theirs in the last month of March, and the first month of April, so this should really be negligible impact in the second quarter at Roanoke .

Steel of West Virginia, the sales and earnings continue to improve with truck, trailer and truck body orders leading the way.

I think the most exciting result of this stabilization of the market is the recall of all of our employees there.

In fact, we have had to hire new workers to compensate for attrition that we have experienced.

The new straighteners in both of the rolling mills are working as expected, providing efficient production and also quality products.

Steel of West Virginia will be taking a two-week outage in June, to allow for the installation of their opacity equipment in conjunction with requirements of an air permit.

But they'll make accommodations through the purchase of billets from Roanoke to not be influenced in the rolling

Thank you, Dick.

I might just jump back in, before I turn attention to Mark and his report, and tell you that the -- because you always ask about the backlogs.

The backlogs continue to be in good shape at Butler.

They are steady, but they are not long.

I think there's a real different order entry pattern that emerged post recession as opposed to the order entry pattern that was pre-recession.

Where sometimes, as the world got a little crazy, backlogs would stretch out to three months.

That's just not the modus operandi in the world today, and we tend to receive a good volume of orders each and every week, replacing those that we shipped, and really don't see any change in that.

I think Dick did note, and if we didn't we should note that we completed the expansion at Butler in July of last year and they are already shipping at the 3 million ton pace, which is a real tribute to that management team's accomplishment in a difficult environment..

I usually always do offer my own personal comments on the scrap market as we go forward.

Mark and I have not compared notes, but I think the market got a little ahead of itself in the first quarter, and a lot of it was due to flows.

It was a wicked winter, and it brought flows to a standstill, and for those that needed scrap, it became a little bit more expensive than contemplated.

Probably moved a little faster than market pricing at that time was moving.

But I do believe the flows are very good today, and you are probably going to see scrap get a little softer for delivery in the month of May.

I really don't know what to tell you about June.

It could be down a little.

It could be up a little.

It could be sideways, and during the July time frame, we normally do experience tightness, and see prices go up, but the expectation currently is that the market will move south for delivery in May.

A lot of you who worry about that from a pricing perspective, I think it -- I wouldn't necessarily even conclude it's going to have an impact on merchant shapes, let alone flat roll.

I think there is a -- not necessarily a disconnect, but probably going to be no correlation between where flat roll pricing goes or ends up or what is temporarily happening in the scrap universe.

So with that I'll turn it over to Mark.

Thanks, Keith.

Good morning, everybody.

As has already been suggested, increasing steel mill utilization through the quarter, created relatively strong demand and progressively higher monthly shipping volumes for OmniSource.

Total ferrous shipments were 1.2 million gross tons, up 15% over the last quarter.

42% of our OmniSource shipments went to our O-SDI mills -- about 520,000 gross tons .

And that's roughly 46% of the (inaudible).

Early in the quarter, cold weather hampered retrieval efforts creating a tight supply environment pushing higher prices.

It gave the scrap community including ourselves an opportunity to liquidate low-price scrap accumulated in the November/December time frame.

In February, strong order books in the flat rolled arena pressured prime scraps of light, the market becoming somewhat disconnected as prime pricing went up $20, $25, while shredded and obsolete grades remained essentially flat, to down 10 as bar mill interest was pretty flat along with export interest was somewhat stagnant.

However, March ended stronger, prime pricing pushing up from $30 to $60, $65 gross ton -- to approximately $470 a gross ton for prime grades.

Our non-ferrous operations showed a similar improvement.

Volumes climbed to 238 million tons up around 17% over last quarter.

After retrieving in February, copper pricing advanced on perceived improvement in both the US and global economies recovering.

Strong Chinese import activity, the most influential, probably hedge-fund activity, and the weak dollar.

There still seems to be a disconnect between pricing and supply/demand fundamentals in that particular metal.

Aluminum remained strong throughout the quarter.

Continued focus on cost control as volumes have returned, coupled with margin expansion from the appreciating markets, drove an operating profit as Keith mentioned of about $43 million prior to the amortization of intangibles for the metals recycling team.

I think that's a pretty strong, favorable performance relative to what we might see from our peers..

The immediate markets, again, we didn't trade notes, but Keith and I are in the same -- of the same opinion.

Immediate markets do appear to be softening.

Inbound flows have strengthened dramatically increased by the improved weather and higher pricing..

Transportation difficulties leading to temporary inventory shortfalls have diminished.

And both the domestic and export demand appears to be flat.

The recycling platform will thus not have the same advantage of expanding margins in the near term, and earnings expectations of metals recycling should therefore be, I think somewhat tempered for Q2.

Ferrous resources, relative to our iron resource initiatives Iron Dynamics continues to provide an important part of the Butler IND.

We transferred about 58,500 tons of liquid pig iron and HBI over to the sheet mill (inaudible - highly accented language).

In addition to a positive financial contribution to the quarter by the Iron Dynamics team, the liquid iron allows significant productivity and cost-control enhancements to the melting operation at Butler.

Furthermore it has reduced our dependence on the expenses and appreciating import pig iron market.

In Minnesota, in Mesabi Nugget, the startup and commissioning of the Mesabi Nugget plant has been progressing well, as Keith mentioned, we shipped about 7,000 -- 7,200 metric tons during the quarter since our mid-January first round.

During the last call, it was noted that the principal conveyance systems transferring iron concentrate, pulverized coal, fluxes, and other process materials between the core components of the plant were of such poor design and such poor fabrication that the plant could only function a few hours at a time.

In March these systems were replaced and are now functioning without issue.

In April, month to date, the plant has been operating at about 40 to 45% availability.

A phenomenal operating performance for this stage of commissioning of the pioneering technology.

As is typical, though, with commissioning of new processes, and large complicated equipment, when one bottleneck is cleared another hurdle appears.

Currently the product cooler is constraining throughput to about 50% of eventual capacity.

An additional drive system is on order and will be installed during this quarter.

No fundamental issue, just a hurdle to jump over.

Relative to the process itself, the specific Nugget qualities are expected, but a fair amount of fines generation has been experienced.

Excessive fines are being created during Greenville storage and transfer and handling by inconsistent Greenville chemistry and Hart's reaction.

The fines generation effectively reduces the process yield and hence increases material consumption per ton of Nuggets produced.

Similar issues were experiences during the pilot plant operation and will be resolved through process optimization but are increasing operating costs for the time being.

As a result of the conveyant equipment replacement along with additional material consumption related to the [fines] generation, the plant's operating loss for the quarter exceeded our initial estimate.

The impact of the Company being a pre-tax effect of about $11 million.

With continued improvement in operating rates and process yields, the facility should continued to ramp up with a projected throughput approaching 30,000 metric tons for the second quarter.

Obviously with a caveat that we are still in a commissioning phase and unforseen difficulties can still crop up.

I would just like to take a moment to take -- to acknowledge and personally thank the Mesabi Nugget team along with our employees from Columbia City and Iron Dynamics that went up there temporarily to help with startup.

For anyone that has experienced the construction and start up crush of this magnitude knows the sacrifices they and their families are making, and the hard work and perseverance that is required to be successful .

I commend each and every

Thank you, Mark, and I'm sure that job was even more difficult in a harsh Minnesota winter environment.

Minus 30 degrees -- performance earlier in the year, yes.

Before I get to Gary, I didn't comment a lot about fabrication in the body of my report, but I don't think a lot has changed in terms of the world in which Gary and his team live today.

They're doing an excellent job.

I do believe, though, that our losses will be narrowed in the second quarter somewhat, but we will not return to profitability until later in the year, hopefully.

Gary?

I think that's right, Keith.

Thank you.

Non-residential construction activity continues to be weak and is likely to continue to be weak for some time to come, as everyone knows.

For Joist & Deck industry-wide bookings remain at low levels historically, but January and February bookings were flat with 2009, which supports our belief that we are at or near the bottom of the level of demand for Joist & Deck.

We are beginning to see the benefits of the exit of a major competitor with the Joist & Deck markets, and we're seeing that in the form of quote activity that has increased and we are seeing that in terms of improved backlog as well.

And based on steel pricing and other factors, selling values are creeping up as well, so we're seeing some very positive momentum in some key areas.

Our Joist & Deck sales teams are working very, very hard to increase share which is difficult to do in a weak market and on that mission for sometime, and I think that long term they are going to hit some of their goals, and we will see a greater market share.

We have been establishing new customer relationships they are going to be important new lines as we move forward.

We have spent a lot of time on that, and we continue to monitor costs closely in order to lay the groundwork to return to profitability.

So overall, I think the outlook is positive in spite of very, very weak markets.

The cost reduction efforts that the New Millennium team has made will continue to benefit them as we recover, and the exit of this major competitor is very positive for New Millennium.

As Keith said we expect to narrow our losses in Q2, as we see more volume and better pricing via impact results and move from the order book to the shop floor.

Thanks, Keith.

Thank you, Gary.

Theresa?

Good morning, everyone.

During the first quarter we opportunistically accessed the high-yield market and we strengthened our liquidity position and our longer term view capital structure.

On March 11, we issued $350 million of tender nonqualified senior notes at seven and five-eighths.

They are due in 2020, we used the net proceeds to repay all outstanding amounts under our revolving credit facility, and at the end of the quarter, our cash on hand was $226 million and we had availability on the revolver of $846 million.

Since the end of the year, we have increased our liquidity from just over $690 million to $1.1 billion.

In addition to adding the flexibility of increased liquidity and historically advantageous long-term pricing, the tender notes also allowed for greater flexibility, within our debt maturity time horizon as it ladders out nicely with our existing maturities occurring in years beginning 2012 through 2016.

During the quarter, net debt decreased $33 million and our leverage ratio continued to improve at total debt to EBITDA was 4.1 times versus 5.5 times at the end of the year.

And our interest coverage ratio improved from 2.6 to 3.8 times.

Cash flows from operations were $73 million as working capital required additional funding during the quarter, primarily reflecting increased finished goods and selling values, not volumes at our mills recycling and steel operations and most notably in our flat roll products.

We currently anticipate a further draw on cash flows related to working capital movement throughout the third quarter with a normal seasonal trend of decreased working capital needs in the fourth quarter At the end of the year, we had a $137 million state and federal income tax receivable.

During the first quarter, we received just over $14 million of those funds in state income tax refunds, and we continue to expect to receive a large portion of the remaining $125 million in the second quarter, or at worst-case scenario, beginning of the third quarter.

Our effective tax rate before minority interest was 35.2% which was lower than anticipated during the last conference call, due to the recognition of state income tax benefits.

This impacted the quarter by about $0.01.

We currently estimate our full-year effective tax rate to be approximately 37%.

This would mean that second quarter effective rate would need to be around 37.5%.

Capital investments during the quarter, totaled $31 million, of which a little over half was related to the Minnesota project.

Depreciation during the quarter was $43 million, and capitalized interest related to these projects was $3.5 million.

Capitalized interest is actually about half of what it was during the fourth quarter of 2009.

We expect that trend to continue and the capitalized interest to decrease further, as our capital projects currently under construction are completed.

Our estimated 2010 full-year capital investments remain at an amount at less than $150 million, again a very low rate as compared to historic levels.

Our philosophy remains disciplined, these plans only include those items with compelling and fairly quick returns or those impacting environmental and safety issues.

As we proceed through 2010 if market and demand levels warrant and liquidity remains strong, we would increase the number of authorized projects.

Currently over half of the planned projects reside within our steel operations.

The outlook related to 2010 depreciation and amortization remains between $55 million and $60 million per quarter.

At March 31, we had 216.4 million shares of common stock outstanding.

16.4 million shares related to convertible notes outstanding, and 6.1 million of outstanding stock options.

For the second quarter, given our current dilution expectations, we would expect diluted shares to be in the range of 235 million to 235.5 million shares And then for some of you that like to have some volume information, I will give a breakdown of the flat rolled shipments during the quarter.

We had hot rolled shipments of 354,000 tons.

Pickle and oil shipments of 90,000.

Cold roll at 50,000.

Hot roll galvanized at 104,000.

Cold roll galvanized at 65,000.

Painted products at 65,000 and Galvalume at 21,000 for a total of 749,000 tons.

In addition, I'm not sure that either Dick or Keith mentioned it, but we had rail shipments of just under 4,000 tons during the quarter.

To conclude, I would just like to make a note on the supplemental page of the earnings release that you would have seen.

We made a change due to the way that we internally discuss, and actually discuss externally, volumes related to our iron making projects.

We've changed our Iron Dynamics and our Mesabi Nugget tons to be in metric tons, and we have changed all metals recycling ferrous tons to being gross tons.

So you may have seen a change in that.

Keith?

Thank you.

One of the only other things to doubt there when -- statistically was Theresa's reporting hot rolled shipments.

That used to make up half or better of our total flat rolled shipments and today it's under 40%, which is really a good thing in a lot of ways because we make more money off of value added products, obviously.

Good report.

Thank you all.

Lacy, we're ready for the Q&A component of the conference call, sir.

Thank you very much, Mr.

Busse (Operator Instructions).

We'll take our first question from Kuni Chen with Banc of America Merrill Lynch.

Hi, good morning, Keith and everybody.

Good morning, Kuni.

Just to start off.

Maybe you guys went through it a bit quickly, so perhaps I missed it.

Can you just quantify the outages for 2Q in flat roll and SBQ.

They are about four-day outages Kuni at both operating units at SBQ and flat roll, and will impact to some degree the shipping volume in the quarter, not to a great degree.

You have comparable number of days in each quarter, but from our perspective, the outage occurring right in the heart of a shipping week, and production week, you might see a little less volume coming out of flat role and SBQ, although they are continuing to achieve great things, in the SBQ bar division today.

And their backlogs are in excellent shape, so maybe they can make up a little ground.

I was just trying to point out for those that model things, the volume could be slightly less than Q1, but it's not because of market conditions.

Okay.

So four days for both.

We can make up ground in the other units, (inaudible) operating at full capacity.

Got you And as far as SBQ goes, and the strength, we're seeing in that market, can you just comment on what you are seeing as far as underlying demands versus inventory restocking?

I will tell you that it is both of them that we have noticed.

Offroad construction, equipment suppliers, OEMs, have continued to order.

Some of them a little bit pre-emptively, the scrap level prices are rising, but those are more in the inventory adjustments that we see.

I will tell you it is a mixed bag.

So it's a general, overall, steady improvement.

Okay.

And then just lastly, and I'll turn it back over, I guess with the amount of cash that's on the balance sheet right now, and kind of a -- kind of continued capital spending outlook, are there any other thoughts for deploying that cash?

Kuni, we talked earlier in looking at different options, and one of those I think I mentioned we might be able to some additional projects during the year that we wouldn't have done otherwise.

but addition to that we're constantly looking at our capital structure as well.

To see what might be done with existing facilities, et cetera.

We're still looking, Kuni, at possibly another flat-rolled effort, as we commented on earlier, but there's really nothing new to report there right now.

Okay.

Very good.

Thanks.

Thank you.

Thank you very much.

We'll take our next question from Brett Levy with Jefferies & Company.

Please go ahead.

I'm sorry, our next person in queue is Mark Parr with KeyBanc Capital Markets.

Okay Thanks very much.

Good morning.

Good morning.

Keith, I had a couple of questions, points of clarification.

You had said that you didn't see scrap coming down as having an impact on pricing in the second quarter.

Was that referring to the hot roll business?

Yes, Mark.

Or flat roll?

Usually, some of the -- for the operations that work with surcharges, it may or may not impact them.

I think that is too early of a call, but my comments are directed more at flat roll, where all input costs have risen sharply and are rising, and market conditions are healthier and any backward momentum in scrap related to flows, and the winter, and pricing getting ahead of itself, may not, in my opinion, have an impact on flat roll -- probably will not have an impact on flat roll pricing.

Okay.

So the fact that it might back up in May, will probably have very little to do with pricing -- the pricing environment in the flat roll community, as I see it anyway.

Okay.

How much for Steel Dynamics for Butler, how much of your mix are on CRU 90-day contracts?

And what is that number looking like for the second quarter versus the first quarter?

Well, I can't tell you an exact percentage need less to say it's one of a number of tools that we use from a pricing perspective.

And so, I don't know, Keith do you have a --

Just in general, could you make a comment about the index pricing, that you have on the books, and how much of an impact that will have on the second quarter?

Well -- Some of that is averaged over time, where one month drops off and another is added and you are looking at averages.

There's all kinds of programs that we engage in out there, and it's pretty difficult for us to access them, but if scrap backed up for one month on an overall impact it may be very modest on value-added in terms of an index number.

Okay.

All right.

Again, I'm just -- do you think -- I mean, I'm just trying to get into a discussion about,the demand for flat roll, definitely is healthier -- demand for flat roll,

Yes.

-- than some of the other areas, so I'm just trying to get into a little bit of your thought process around why you would think pricing is not going to come back, if scrap comes back --

I didn't say that relative to (inaudible) I can't prepredict that it will or won't in structural.

There's been a little strengthening in that area..

If scrap comes down it may index backwards for those products and it will be a benefit.

We don't carry any -- our inventories are very short there.

Right.

And therefore, any of that benefit would almost be immediate.

So I don't think it has a significant bottom-line effect to us, when you are operating at 33%.

Oh, right.

And I can't prepredict what is going to happen on smaller (inaudible) shapes, but I don't think it is going to have much impact at all, backing up on flat roll pricing.

Right.

On the bars, also, Mark, again, there was a slight increase in scrap, and no price increase (inaudible) is the name of the game right now *inaudible) and in construction world.

Okay.

Just to get back to flat rolled, how much of your order book at Butler is on some sort of a formula pricing mechanism?

I don't have that at my fingertips, Mark.

Dick doesn't either, obviously.

All right.

He is shaking his head.

Okay.

And just one last question if I could.

Keith you had made a comment, you thought consensus was perhaps a little bit high, were you referring to the second quarter or the full year in that process?

Second quarter, not the full year necessarily.

I saw some comments at $0.45, and $0.40, and I think that's getting a little out there personally.

Okay.

All right.

All right.

Congratulations on a great quarter.

Thank you very much for the color.

Appreciate it.

Thank you.

We'll take our next question from Brett Levy with Jefferies & Company.

Thanks for the heads up that I was in the batter's box for starters.

Keith, great quarter.

Got to wonder, in terms of the Southern Sheet Mill, I think you said Southeast, you said sheet, I don't know if you have said hot roll only.

I don't know if you said sort of a size.

A million tons or more.

Whether there would be any finishing associated with it.

Can you talk about any size, location, product orientation, thoughts that you have about the Southern Sheet Mill?

We would decline to comment on it.

It would not be a 3 million ton effort.

It would be closer to 1.6 million, to 1.8.

million And obviously all of the output initially would be hot rolled, but we would have a cold roll presence at that facility, but that mill could probably sell cold roll products.

It could sell into the coating markets we already are engaged in..

So it could like source the text and that sort of thing?

It's possible.

I mean, US Steel does a good job.

The Russians do a good job out of Sparrow's Point at providing product.

But that mill is supplied by many others as well, by all of their product in one place, and it can certainly supplant some of that.

And the second question, you guys guided to better gathering activity at OmniSource.

in 2Q and 3Q and you had slightly weaker pricing in May.

As you look at it all in, do you think on an operating income basis, do you think OmniSource is directionally up or down from 1Q to 2Q.

It is probably in my opinion, fairly flat.

Okay.

Thanks very much, guys.

Yes.

Our next question is from Timna Tanners from UBS.

Hi, good morning.

Good morning.

One follow-up on the flat role segment.

And interesting you comment about lead time being pretty short.

What do you think it's going to take for those to extent?

I didn't say lead times ever were short, Timna

Just flat?

I think in the integrated steel community, lead times would be further out than they would be with the mini mill such as our Butler works.

I'm just saying the order entry patterns with everybody not wanting to get carried away, afraid of run-away freight trains, with pricing and whatnot, and not wanting to over inventory, in a recovery of the economy, yet not a real healthy economic environment yet-- an improving one, , I don't think you are going to see people inventory heavily.

I think their inventories are probably going to have to grow shipments are up, and service center inventories are -- because of the shipping volume rising, the days in inventory are less, and I -- and I think that that bodes well for continuing volume being delivered to the flat rolled universe out there, us included, naturally, but I just don't think you are going to see people engage in returning to the levels of inventory they were prior to the collapse, and I think they are more willing with availability at facilities like ours, to engage us on a let's say a 45-day basis, rather than a 90-day basis.

I do think you'll probably find order entry in the integrated universe, where it takes a little longer to work through the system, could be out two months from where we are today.

We're not seeing a real change at all.

Very positive order-entry flow.

We're just not building the great backlog.

I can't sit here and tell you we're through June.

We're into May kind of thing.

The orders come in very, very steady every week, and The orders come in very, very steady every week, and we deliver on a very

Go ahead.

Timna, I might add that everything to what Keith has mentioned is that as we filled up, once we became full on the hot side -- on the hot mill side, then that choked off any expansion of value-added orders that we could take.

because they were already committed to other orders.

Now as the mindset and the reality sets in that we're full, now we're start to see a little bit building of a backlog, because it's a value-added process, because we're not sold out on our main lines.

And there are some little bit of, inclings as a text, as I said.

as those value-added processes become -- the customers recognize that we're full.

That will extend those types of products a little bit longer in our backlog.

Okay.

So is the potential for improved mix going forward?

Is that what you're saying?

It will be a greater presence of painted products, and a little bit of galvanized that will show up in our shipments, as we expand down the road here.

We're full on the hot side, but anything that might have been an order for a painted product, was consumed, let's say in a hot-band sale, or in a pickle and oil sale and therefore, the steel wasn't available to have the whole value-added applied to it.

But that will push those types of orders, those customers will recognize they have got to come in a little earlier now.

So, my follow up question is really -- how did you see more of the integrated capacity be start.

How do you think that might change, both your shipments and your mix going forward on the flat roll side?

I think the economy is moving forward a little faster than was contemplated.

It is still going to be a very slow and arduous process-- that climb back up the hill.

But I think it is going a little better.

So as demand continues to improve and some of that volume enters the marketplace, hopefully it will be absorbed by an improving economy.

Right now, I'm not worried that we've over engaged supply That doesn't mean two months from now, I'll feel the same way.

Okay.

Great.

Thanks very much.

Thank you very much.

(Operator instructions).

We'll take our next question.

Michelle Applebaum SMI.

Welcome

Hi.

Good morning.

Real nice quarter, and -- but I had a question, I thought I heard you say that consensus was too high, Keith.

Were you talking about the June number?

$0.37?

Or were you talking about the fiscal year, December 10th number of 131?

I think the second half of the year is going to continue to improve.

We haven't -- not having the backlogs that we used to have, where you model precisely for the quarter -- we haven't engaged that process fully yet, but when I start to see $0.40 and $0.45 numbers out there, I think it's getting a little ahead of itself.

(Inaudible) already wrapped in the $0.37 consensus , but I would say let's all work with baby steps.

I think that -- you know, $0.40, I think

For the second quarter?

Right.

Okay.

And in this market nobody is asking you to forecast beyond next week, much less for the rest of the year.

I just wanted to clarify what you were referring to.

My second question is on Omni.

It sounded to me like Mark said you were a little more hedged.

Mark, I thought you said it would not be a repeat.

Can you guys -- am I hearing -- I hearing that correctly?

And by the way, wow performance in the quarter.

I think my words were tempered , Michelle, and I guess just different in personalities between Keith and I on the (inaudible) on Keith,

You stand back, and he's optimistic, so I know how to -- I just want to -- I know how to take both of you, but I just -- I just -- so you are --

I think from my personal perspective in this industry, as I think I said the last -- the last earnings call, to look forward more than three, four, five days seems to be -- it's just crazy.

Things can change dramatically.

Right now, the market is softening.

Nice to see a slight contraction in margins as opposed to the expanding margins that we saw in the first quarter.

Who knows what June may bring, don't know.

But volumes are going to be up.

So it's hard do really forecast it, Michelle.

Okay.

And then you said something about another flat-rolled mill.

We said something about it last time.

There's really nothing new to report.

Okay.

No thoughts about -- you know, you had talked for a long time about Texas or West Coast -- Texas was a while ago, then West Coast.

Texas I think --

I never talked about Texas.

Okay.

And West Coast was a long time ago.

Okay.

Texas may have been the early '90s, so -- (inaudible) world pipe, I think is what I recollect.

We're still engineering a meter mouse trap and we'll have more to report later.

When you say "Better mouse trip," are you talking about a traditional mill or something that could be more of the micro mill style?

If any mills have become traditional, let's just say it would be an improvement of the traditional mill then.

Likely to be something with smaller capacity, smaller footprint is what I would suspect?

Yes.

Okay.

Could it be half the volume of a traditional Steel Dynamics, Inc.

mill?

There you go.

I know.

It's still 20--year-old technology, but it's still new technology.

I think you said it carefully, correctly.

So something that could be half the size, you are saying?

Yes.

Okay.

Or smaller?

I didn't say smaller --

I'm sorry this is very -- I get into the technology -- this kind of stuff, so it's very exciting to hear you talking a little bit about something that is that new, it wouldn't be a SDI technology?

I assume it's purchased technology, right?

We're looking at improvements upon the existing purchasable technology.

I think SDI engineering and thought process will have an impact on a more perfect tool.

You wouldn't have to answer this question, but would the technology be from a domestic or foreign source.

No comment.

Okay.

Please don't judge me for asking.

Great.

That's exciting.

That's very exciting.

Okay.

Thank.

And nice quarter, and subdued outlook is great, and whatever you are doing, just keep it up.

Thank you.

Thank you.

We'll take our next question from [Saf Aroni] from Goldman Sachs.

Welcome.

Good morning, guys

Good morning.

Hi, how are you.

If I look at the tempered comment from Mark Millett on scrap, does it help you more in terms of on a consolidated basis when scrap goes down on (inaudible) than the scrap or do you think it's one-to-one offset?

Well, with shorter inventories, I don't know that it matters all that dramatically to tell you the truth.

There will be some positive impact early in the quarter, because obviously the steel divisions have that scrap in hand that they will be consuming in May, and if it comes in the door in May at a down number, that will impact June.

It's too soon to tell what June is going to look like, so I can't tell you, what will happen from there, but -- but at any rate, I think steel can benefit.

I think the scrap side of the plan could be impacted from some degree, but I think volumes are growing, and any margin lessening could be, I think, positively dealt with through volume improvement.

Okay.

On the scrap side, Mark, can you -- I mean, you have On the scrap side, Mark, can you -- I mean, you have been on the scrap for more than a year now.

Do scrap companies or processors look at the pig iron or (inaudible) coal prices?

Because that has been traditionally the sort of substitute?

And if -- if these global (inaudible) quarterly invest -- invest a product then it will be probably (inaudible) third quarter based on (inaudible) spot market price we are seeing.

Will that prevent scrap price to really drop the prices too much if that were to happen?

I don't think the -- they react quite that way.

Although as with any commodity, traders will scratch at any -- any particular notion of an up market or down market.

I think generally, higher commodity prices -- concentrate pig iron pricing will tend to support the market, and will tend to support pricing both on scrap and on -- on the sheet mail side of our business.

Okay.

And last question, Mark, on the Mesabi Nugget.

You mentioned two bottlenecks besides the conveyor system, which you have resolved.

One is the cooling system, I believe you said, you have ordered some new equipment.

Can you give us an idea of when that will be in place.

And the other was a problem that you said you also had in the pilot project, which I believe you said it produces too much (inaudible).

Is that -- and what can be done to resolve that or how impactful that problem is?

The-- the equipment bottleneck the cooler, we hope to have an additional drive system within the next six to eight weeks, but it certainly will be in this quarter.

And it's constraining through-put, I would suggest when we are running, it's constrained it to about 50 -- maybe 50 - 60% of our eventual capacity.

So it is having a market -- a marked impact to (inaudible).

The finest generation, again, it's -- as Keith suggested earlier, in any commissioning of the -- sort of technology like this, first and foremost focuses to get the thing up and running.

There's volume, obviously is a critical component of the cost structure and the pricing, and then as you do that, you tinker with the optimization of the -- the technology itself.

And that's just where we are.

We're adjusting chemistries, and the ways in which we're making the green balls and we're hammering the green balls, and I have no doubt that we will solve that.

It is not something you are going to solve within two or three days.

It's going to be through the quarter.

We're slowly reducing the finest generation and hence, the yield of the process will continue to improve, I do believe, through the quarter.

My --

Go ahead.

I'm sorry.

My challenge to Mark, Sal, would be if you are constrained to 50 to 60% because of the cooler, that you need to have better availability.

Let's get our up time up to 90 and we'll make more progress.

That has not changed in 20 years?

Are these two mutually exclusive problems?

It means you can work on the one while the other one you are waiting for the equipment?

Oh, absolutely.

Okay.

We're working on the process every single day.

Okay.

Thank you very much.

Next we would like to welcome Tony Rizzuto with Dahlman Rose Co

Thank you very much.

Hi, everyone.

I just had a couple of questions.

The first one is just a follow-up on Mesabi Nugget again.

Do you guys anticipate that you will be operating at effective capacity, or close to effective capacity as you move into 2011?

I think in 2011 we -- we will get there.

Probably, mid-2011.

Okay.

The last -- with any process like this, the last 20%, is -- takes a lot of effort, and some time.

The -- the learning curve is a lot steeper at the present time.

Thanks, Mark.

And the other -- the other question -- just a follow-up on the demand that you are seeing on the flat rolled side, and obviously, coming into this year, the end of destocking and automotive, and energy markets and service centers, continue to maintain very low inventories, but are you seeing any broadening out right now of that demand?

Is it getting better?

And will it broaden out into other areas?

What can you tell us about the real physical demand for flat rolled right now?

I guess all I'd say is-- and needless to say, automakers reported sales up a little over 15% first quarter over the 2009 numbers.

Sure.

(Inaudible) residential housing,the starts were below, so they -- offset, they were down 10 to 15%, but with commercial construction being light and so forth, we seem to pick up a little bit more in appliances.

Consumers tend to lead the way, in this kind of recovery, with construction in residential and then commercial following (inaudible).

So I guess it comes down -- I think it was asked earlier by another person maybe by Timna are you concerned -- how concerned are you, that we are having restarts now by the integrated later this year?

We have slabs that will be coming into this country, and being processed in Alabama.

How do you see all of this playing out?

I know the visibility is very short right now?

But what thoughts do you have about that?

Are we possibly running up the risk here of seeing capacity just go up too quickly in the industry as a whole.

We run that risk, Tony, I think that's what we said before.

Yes..

Right now, we don't believe that supply is an issue.

I said two or three months from now, I may feel differently about it.

But we would all like to see demand start to push north of, 100 million tons, that makes us all feel a lot better.

Right.

Because it would be a lot better balance.

I can tell you one thing, from a -- just looking at it, in a micro menu-type view, I just bought into an automotive dealership.

A General Motor's dealership, and it's not a small one.

It's a fair-sized dealership.

In the top 150 in the country, I think, for GM type products.

And right now we just can't get enough product.

We can sell all of the product we can get.

The new Buick Lacrosse, the Enclaves, the new CTS Cadillac, we just can't get product.

So, we're begging for product, the clients are begging for product .

So they haven't caught

All right.

That's very encouraging.

Thanks, Keith.

Thank you, Mr.

Rizzuto.

With Mr.

Chairman, with three questions in queue, we would like to welcome Chuck Bradford with Affiliated Research Group.

Good morning.

Good morning.

Hi.

I'm assuming you are not buying much pig iron these days, but I also assume that you get pretty good intelligence as to where the price would be if you were taking pig iron up from, let's say Brazil to Butler.

How would that compare using today's pricing, to what you expect Mesabi Nugget to be able to deliver to Butler, let's say, the second half of next year?

Second half of next year?

Assuming you are at capacity, midyear?

I'm talking about Butler's cost then, compared to pig iron today.

Well, Mark is looking at his forward-looking operating data.

Because today's costs at Mesabi Nugget are obviously above where you would be on a more steady state basis.

That's absolutely right, and you won't get there even out there the year, so it's a good question.

Right now, (inaudible), delivery (inaudible) and then up to Butler would be north of $500, so -- if scrap backs up at all, scrap becomes obviously the better buy.

Go ahead, Mark.

Are you there?

Yes, I'm here.

I believe it -- it should put us into a -- into positive territory.

I think your question is aimed at how positive is it going to be Next year we are -- well -- we're obviously not mine our own material, so we are at the (inaudible) of the market, depending on where iron concentrate costs goes up.

This year, 80, 90%.

That could impact our cost structure by about $75, and coal is creeping up for another $25, but $100, better push production costs to -- $425 or thereabouts, and you have a market today of, 540-ish, 560 and trending up.

Does the 525 include freight to Butler?

The -- the 425?

No, the 525 to 540.

That's Nolan.

But you talked about Mesabi Nugget.

Yes

Being up -- I thought you said 425.

He was just giving you an estimate of a cost structure out there in time, which could be 400 to $425, because the rising input costs until such time as we get to our own mining efforts.

Okay.

That went down sharply at that point in time.

That was going to be the next question.

Just what would it be once you have the mines up in and what is the current status of the permitting?

Well, again, I don't think the cost structure is dramatically different than what we have advertised in the past with -- if you transfer con straight at cost from the mine, you are in that 325, 350 number.

The permit itself -- we just received the response from the MPCA on our EIS study, environmental impact study, that we provided to them end of last year, and to be honest, we're still interpreting those results.

They ask a lot of questions, and it takes quite -- quite a lot of time to delve into exactly what the impact is going to be to us.

But, again, we're still hopeful to get a permit, end of this year, and even into first quarter of next year.

Net effect is once you get all of this done, there is still a good possibility of more than 100 million -- sorry, $100 a ton savings.

There is.

Okay.

Thank you.

We'll take our next question from John Tumaxos with John Tumazos Very Independent Research.

Welcome .

Good morning.

Could you describe the important customer categories driving the strong engineered bar orders?

Clearly engineered bar is tailored for an application and a little less subject to inventory bubbles than commodity steel grades, and secondly, could you talk about the volumes that are your ambition for the iron ore mining.

Some of the -- you may or may not be aware of it, the two charge companies in Minnesota that are mined do not disclose iron ore grade.

And some of their grades, I understand from field geologists are as low as 13%, and there actually could be a fine opportunity to develop newer deposits that are less depleted and better.

So I'm very interested in your mining.

John, this is Keith.

I think on SBQ, you are seeing strength in offroad.

You are seeing strength in heavy equipment.

Strength from forgers, mortar entry from forgers is up.

(inaudible) bar guides

Order entries are up, driven by, again, offroad, and driven by heavy construction, probably.

Also driven by the fact that we have earned our spurs or earned our wings.

You don't enter this business, day one with the confidence in the market.

You have to prove yourself to the market, and prove that you can make all of the different grades that the other players that you complete against can make.

And I think we have done that, and done it well, and I think our product is being very, very well received, so I would tell you we're gaining market share as well.

It's not just offroad, and it's not just heavy equipment.

As well as the energy has had a slight rebound and included in energy is our offshore shipments of (inaudible) chain to Brazil.

Those have also shown improvements.

Thank you.

And John, could you just clarify your second question --

So what are your ambitions about iron ore mining?

You are presumably going to mine enough to feed Mesabi Nugget.

Yes.

Yes.

But I was expressing, I guess, doubts of my own about the quality of some of the existing aged historic iron ore mines, and the potential that you could -- have a -- a fresh deposit that's a lot better than some of the historic deposits.

I.e.

,

With success of the technology, we would want to support future batteries, and future sales of the finished product with the ore content rather than sell it to others.

So there is no ambition to a minor per se.

Per se.

We obviously look at the mine and just concentrate the ore for use at Mesabi Nugget.

Obviously, the product of -- of favor from the range -- actually it's pellets, for the back spots, so that is an additional set that we wouldn't want to necessarily enter into.

Thank you.

Thanks, John.

Please go ahead, sir.

Thank you.

I'm done.

Okay.

Thank you very much, sir.

We'll take our next question from Mark Liinamaa with Morgan Stanley.

Hi, all.

Just quickly back to scrap.

OmniSource on a stand-alone basis had a pretty nice operating profit.

I believe it was $43 million.

Mark or Keith, can you comment on when you see that as being relative to normal?

How much upside in terms of volume we could see on a normal run rate basis?

Thanks?

Well, obviously we're not back to 7 million tons, volume metrically.

We're just short of 5 million.

So there's room to multiply whatever margins we're going to enjoy by more tons, and obviously in a less cyclical and common environment, I think stabilized margins, and perhaps grow them to some degree from where we are.

I think I said before, I believe we can (inaudible) operating income numbers in the 200 range, in stable markets where the volume is approaching 7 million tons, kind of thing.

Great.

Thanks.

Our next question is from Brian Yu with Citi.

Welcome Brian.

Thank you.

Keith going back to your earlier comment about scrap, is there a difference in your view between what is likely to happen in the prompt versus the obsolete market in terms of the price decline?

I think the flows of both are probably going to be up and I think they will both be impacted as they have been, as you went up the hill, they are both be impacted to some degree.

If you travel down the hill, slightly, I don't think it will be one or the other.

Okay.

And then following up on Chuck's question earlier about, concentrate costs at Mesabi Nugget, does the change into quarry versus an annual pricing system impact your existing commitments?

I think in the past you said you had various agreements with (inaudible) some tailings processings?

That strengthens our resolve literally to get our mining operation going, because we don't want to enjoy any sort of indexed increase throughout time.

We have hedged some of our bets here in 2010.

A little in 2011, but we're going to have some exposure down the road.

So the sooner we can get the mining operations going, certainly the better off we're going to be.

Is there some percentage or concentrate purchases there that's exposed to the Seabourne settlement or is it all expose?

It's not all.

A certain amount is though.

All right.

Thank you.

Thank you.

And Mr.

Chairman, as there appears to be no more questions at this time, I would like to turn the conference back over to you, sir.

Thank you, Lacy let me just wrap it up by thanking all of our employees who have really endured a long, tough, hard pull through a very bad economic time.

They hung in there, and you all have done a great job, and we're starting to see some real positive results, and from a compensation perspective, I certainly hope you are starting to see some real positive results as well.

Thank you, ladies and gentlemen, for your -- for your perseverance and prereference.

And thank you, ladies and gentlemen, for being interested in our Company.

Bye now.

Ladies and gentlemen, that does conclude the Steel Dynamics first quarter 2010 earnings conference call.

We thank you for your participation.