Nucor Corporation (NUE) Q1 2011 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to the Nucor Corporation First Quarter 2011 Earnings Call. [Operator Instructions]. Certain statements made during this conference call will be forward-looking statements that involve risks and uncertainties. The words we expect, believe, anticipate and variations of such words and similar expressions are intended to identify those forward-looking statements, which are based on management's current expectations and information that is currently available. Although Nucor believes they are based on reasonable assumptions, there can be no assurance that future events will not affect their accuracy. For more information about the risks and uncertainties relating to these forward-looking statements may be found in Nucor's latest 10-K and subsequently filed 10-Qs, which are available on the SEC's and Nucor's website. The forward-looking statements made in this conference call speak only as of this date, and Nucor does not assume any obligation to update them either as a result of new information, future events or otherwise. And now for opening remarks and introductions, I would like to turn the call over to Mr. Dan DiMicco, Chairman and Chief Executive Officer of Nucor Corporation. Please go ahead, sir.

Thank you, Robert. Good afternoon. This is Dan DiMicco, Nucor's Chairman and Chief Executive Officer. Thank you for joining us for our conference call today. As always, we value your interest in Nucor. With me for today's call are the other members of Nucor's senior management team: Our President and Chief Operating Officer, John Ferriola; Chief Financial Officer, Jim Frias; and our Executive Vice Presidents, Jim Darsey, over our Bar Products group; Keith Grass over our Scrap Raw Materials Group; Ladd Hall over our Flat-Rolled Group; Ham Lott over our Downstream Fabricated Products; and Joe Stratman over Business Development and our Plate and Beam Operations. First and most importantly, the senior management team wants to thank everyone on our team at Nucor and our Harris Steel and David J. Joseph operations for working safely and working together in an economic environment that, while improving, remains extremely challenging. And it remains our belief that the economic recovery is likely to continue on an uneven path. But here's the really important point to understand and remember in analyzing Nucor. Our company is emerging from the Great Recession stronger than we entered into it. We have taken advantage of opportunities provided by the most recent economic downturn to grow our earnings power going forward. This growth in sustainable earnings is a direct result of the talent and dedications, the can-do attitude of the Nucor team and what it brings to work each and every day. While we are encouraged by our first quarter performance and the second quarter outlook, the real returns still are ahead of us. When a robust, sustainable economic recovery inevitably returns, our teams' efforts will pay big dividends to all members of the Nucor family, particularly the people who own Nucor, our shareholders. As you have probably heard us discuss, our goal is to generate higher highs of each successive peak in the economic and steel market cycles and higher lows. Again, thank you to all the 20,500 men and women of the Nucor team. And most importantly, continue to work safely. I will now ask our Chief Financial Officer, Jim Frias, to discuss our first quarter results and financial position. Following Jim's comments, President and COO, John Ferriola, will report on our operations and computation of our growth initiatives. And then I'll wrap up our remarks before we take your questions. Jim?

Thanks, Dan, and good afternoon. First quarter 2011 earnings of $0.50 per diluted share were substantial improvement over both fourth quarter 2010 loss of $0.04 per share and the year-ago first quarter earnings of $0.10 per share. Our results benefited from volume gains and expanding metal margins at our steel mills, as well as a solid contribution from our David J. Joseph Co.'s Raw Materials businesses. On the negative side, our downstream fabricated construction products continue to face very challenging markets in the first quarter. The first quarter metal margin expansion at our steel mills demonstrated, again, the long established historical experience of arising scrap prices leading after a short lag to higher metal margins. Metal margins for the month of March 2011 was at the highest level attained since 2008. Steel mill shipments were 5.2 million tons, an increase of 14% from the fourth quarter. All product groups realized volume growth, but the strongest gains occurring at our sheet and beam mills. Sheet mill shipments increased 23%, and beam shipments increased 21% over the fourth quarter. Nucor's first quarter steel mill utilization rate reached 79.6%. That was a significant improvement from our fourth quarter rate of 68.2%. It also compared favorably to the U.S. steel industry's first quarter utilization rate of 73.6%. With Nucor's highly flexible production capability and unrivaled product diversity, our teams were well positioned to capitalize on improved demand in the first quarter. In the first quarter, Nucor recorded a LIFO inventory charge of $31 million. That was an increase from LIFO charges of $23 million in the fourth quarter and $24 million in the year-ago first quarter. The first quarter effective tax rate measured as a percentage of earnings before income taxes and noncontrolling interests was 32%. However, after moving profits for noncontrolling interests, the effective tax rate increases to 34.8%. First quarter results included $28 million of pre-operating and startup of costs. Those costs declined for more than $50 million in the prior year first quarter and $39 million in the fourth quarter of 2010. We are pleased to report that our Memphis SBQ mill and our Kingman, Arizona wire rod called rebar mill achieved profitability in the first quarter. Nucor's financial strength allows us to invest in attractive growth opportunities through the economic cycle. We view pre-operating and startup costs as investments to grow our long-term earnings power. That has been our company's strategy over many previous cycles. For example, Nucor's most recent cyclical peak earnings of almost $6 per share in 2008 carried sizable contributions from the startup projects undertaken during the 2001 to 2003 downturn. We are now looking forward to growing profit contributions from our investments made just prior to and during the current downturn. At the close of the first quarter, cash and short-term investments totaled $2.3 billion. In addition to that total, there is $577 million of restricted cash held on our balance sheet. We received this restricted cash from tax-exempt bonds issued last year to finance the significant portion of its $750 million DRI plant we are building in Louisiana. Further to Nucor's strong liquidity, our $1.3 billion unsecured revolving credit facility is undrawn and does not mature until November 2012. We have no commercial paper outstanding. Long-term debt totaled $4.3 billion at the end of the first quarter. Moody's has reported that our debt-to-capital ratio will be viewed on a net debt basis for any cash balances over $1.2 billion. Using that methodology, our net debt-to-capital ratio is 30%. That calculation excludes the restricted cash. Nucor's strong balance sheet and business model were recognized in a report Standard & Poor's issued on April 15. The report, entitled U.S. and Canadian Metals and Mining Companies, Strongness to Weakness, ranked Nucor #1 for credit rating and credit outlook among the universe of 61 companies. It is worth noting that Nucor was the only metals and mining company in the group that S&P awarded a strong business risk profile due to its assessment of our competitive position and financial performance relative to our peers. In 2011, we will continue to allocate capital to investments that build our long-term earnings power and provide attractive returns to our shareholders. We project 2011 capital spending of approximately $500 million. Included in that total are about $70 million of spending for our Louisiana DRI plant and about $60 million for our natural gas working interest drilling program. Examples of other growth projects underway are: A new quality assurance line at our Nebraska SBQ mill, that can be gassers at both our Arkansas sheet mill and our North Carolina plate mill; melt shop transform upgrades and related electoral system upgrades at our Utah Bar Mill; and non-ferrous rotation projects at David J. Joseph's recycling operations. Our outlook for the second quarter is positive. We ended the quarter with strong momentum, as utilization rates, metal margins and profitability improved from the beginning to the end of the first quarter. Although there have been signs of weakness in some market segments, our belief remains that end market usage continues to experience gradual improvement and real demand. Markets for downstream fabricated construction products remain very challenging. Overall, we expect second quarter results to be an improvement over the first quarter. However, we do caution against overly optimistic expectations for the second quarter. Nucor will again follow our practice of providing quantitative guidance around the middle and final month of the quarter. We remain very optimistic about Nucor's long-term prospects for continuing our improving earnings trend. Our business model is built around adaptability, allowing our company to leverage its position of strength throughout the economic and steel market cycles. The Nucor team is working hard and working very effectively to build attractive and sustainable value for our shareholders. We are driven, and settle for nothing less. Thank you for your interest in Nucor. Dan?

Thank you, Jim. I'll now ask John Ferriola to report on Nucor's operations. John?

Thanks, Dan. Good afternoon. Let me begin by thanking all of our raw materials, steelmaking and steel product teammates for your outstanding commitment to working safely and taking care of Nucor's customers. We are extremely proud of the work that you are doing to take advantage of opportunities for profitable and sustainable growth for Nucor. Thank you, and please keep it going. Turning to the first quarter. Our teammates made substantial progress in continuing to grow Nucor's earning power. Here are some current examples of where our teams are building for a stronger Nucor in today's slow growth and uncertain economy. Our Hertford County, North Carolina plate mills new heat treat line completed trials and began accepting orders in February. It's going extremely well with both volume and rate development exceeding our plan. In fact, our Hertford County team is running the heat treat facility at full capacity, a production volume that we did not expect to achieve until the fourth quarter of this year. Most importantly, customer feedback on the quality and the performance of our heat-treated plate has been excellent and true to Nucor's focus on continual improvement. The team at Hertford County is continuing to develop new, higher value grades. Great job team Hertford County. Thank you. This investment improves Nucor's profitability as it allows Hertford County to grow into higher margin products where higher strength, abrasion resistance and greater toughness are required. And it also allows us to shift and improve the product mix allocation between our 2 plate mills and 4 sheet mills to improve margins at those facilities. For example, in the first quarter, our Tuscaloosa, Alabama plate mill began producing as rolled discrete carbon plate products. And volume out of Decatur, Alabama and Arkansas sheet mills benefited from Tuscaloosa shifting some of its hot rolled coil production to them. The bottom line, our expanding Ohio margin plate product portfolio, while at the same time optimizing capacity utilization at our plate and sheet mills, results in higher earnings power from both our plate and our sheet mill groups. And further expansion plans are in the works for the Hertford County heat treat operations. I also have good news to share from another major product -- project that started up during the current downturn: our special bar quality or SBQ mill in Memphis. Our Memphis team is rapidly completing the qualification process with many of our customers and, as a result, continues building volume. In March, they set another record for shipments of rolled finished goods. Even better, they delivered their first quarter of profits since start-up. Our Memphis team has turned a major corner and their future is very bright. The Memphis mill more than doubles our capacity to serve the SBQ markets while also expanding our product range into the highly attractive 3-inch to 10-inch large diameter segment. Nucor will now be able to supply SBQ products from 7/32 of an inch to 10 inches in diameter, which allows us to offer our customers the most diverse SBQ product range in North America. Memphis is currently producing engineered steel bars for applications, such as camshafts, crankshafts, spindles and rain gears to use in the heavy truck and automotive markets. And other attractive markets currently being served include energy, heavy equipment and agriculture. Reflecting the Nucor culture's drive for continual improvement and profitable growth, there is more to come in our SBQ business. Nucor Steel Nebraska is on schedule for the third quarter 2011 start-up of a new downstream processing line that provides attractive growth opportunities in even higher quality SBQ products than they currently offer. Additionally, our Darlington, South Carolina bar mill is enjoying success with their implementation of fully submerged and shrouded casting practices. The resulting improvements in product quality are allowing our Darlington team to grow their margins as they expand their presence in higher quality SBQ applications. I will close my report with our thoughts on current market conditions. The market environment for our Fabricated Construction Products businesses continues to be extremely challenged. And we expect it to remain so over the foreseeable future. Nevertheless, there is still good news to report. Our teammates in those businesses are doing an excellent job of working safely, gaining market share in many product lines, and staying focused on continuous improvement. On the steelmaking side, the recovery continues to be slow and uneven between the industrial and energy sectors and the residential and nonresidential construction sectors. Steel buyers have shown more caution as market pricing escalated during the first quarter. At the same time, supply in the sheet market has increased with recent blast furnace restarts in addition to greater import offerings. On the other hand, service center inventories through March remained at relatively low levels. And we continue to see evidence of improvement in real demand in several markets important to Nucor. These include energy, heavy equipment, agriculture, truck trailers and bridge building markets. While nonresidential construction activity remains weak, the bottom in that important market appears to be behind us. Whatever direction the economy takes in coming months and quarters, the Nucor team will outperform in taking care of all of our customers. That includes our shareholders, our teammates, and the people who buy and use our products. And here are some of the reasons we will outperform: Nucor's low and highly flexible production costs; our great customer service; Nucor's diversified product portfolio; and most importantly, our people, driven by the can-do attitude and their high energy level. Thank you for your interest in Nucor. Dan?

Thank you, John. Our message here is very clear. Nucor is extremely well positioned to deliver higher highs, cyclical earnings power, once a stable economic recovery arrives. That is exactly what we are talking about when we say growing stronger during the downturns. And here are some of the investments made since the previous cyclical peak in 2008 that will help drive us to higher highs in earnings: An increase of more than 10% in our bar mill group's annual production capacity with the addition of the Memphis and Kingman mills; an increase of 33% in our sheet mill group's value-added coater steel annual capacity with the addition of the Decatur galvanizing facility; an increase of 30% in the David J. Joseph Co. scrap processing annual capacity in addition to the opportunity to realize earnings through our full up cycle on DJJ's original capacity of 3.5 million tons; an increase of more than 50% in Harris Steel's rebar fabrication annual capacity; in addition to the opportunity to realize earnings through a full up cycle, the Harris Steel's original capacity of 1 million tons; the opportunity to realize earnings to a full up cycle in our Extended Metals Building businesses, which more than tripled in size at 465,000 tons of annual capacity with the Magnatrax acquisition and the Utah greenfield plant; our 50% interest in southern Europe's largest beam producer, Duferdofin-Nucor, and its recently expanded beam and bar annual capacity that now totals approximately 1.8 million tons; our 50% interest in NuMit and our Steel Technology Sheet Steel Processing businesses with 24 processing facilities in the United States, Canada and Mexico and more on the way; our North Carolina plate mill's heat treat facility; and Canada's other product line expansions at our bar, beam, sheet and plate mills; and our Nucor Steel Louisiana directly reduced higher facility's first module currently under construction that will more than double our DRI annual production capacity to 4.5 million tons. The plans are more to come at our 4,000-acre site on the Mississippi River. From 2007 to our expected 2011 capital spending plans, we have invested more than $6 billion of capital, including both capital expenditures and acquisitions. That is a lot of capital that Nucor shareholders will get paid for through attractive returns in the next up cycle. Our confidence has never been greater, and Nucor's best is yet to come. Our team thanks you very much for your interest in Nucor. We value your interest and support. And we would now be happy to take your questions.

[Operator Instructions] We'll take our first question from Chris Olin of Cleveland Research.

Looking at the beam growth number as they were pretty impressive during the quarter, I was wondering if you had a feel for how much of the growth had been related to rebuilding versus consumption growth, rebuilding the inventory versus consumption growth. Do you get the sense that maybe we're in the initial stages of recovery driving that market?

In general, the increase in our shipments and production in the Beam business has to do with different product mixes that we were producing, which were in greater demand than previous quarters. John, do you want to add to that?

Yes, Chris. I'd say it really kind of breaks down in terms of -- I'd say the majority of it probably comes from service center restocking. But as Dan said, our product diversity has helped us a great deal here. We saw some -- a lot of growth in some markets that we service out of our structural plants that aren't in the construction markets, such as the truck trailer markets, the container chassis markets, things like that. And the other thing I would add is, we did introduce 2 new piling sections out of Nucor-Yamato, a 16-inch piling and an 18-inch, which are the largest H pilings produced in North America. And the target there is to go after the concrete piling market, and we've seen some success in that area here starting up in the first quarter.

Okay. And then second question real quick. I'm not sure if you provided guidance earlier in your discussions, but can you give me a feel for what you're thinking on scrap costs going forward? And I guess I'm wondering, how much the impact or the issues in Japan will have in terms of the impact on the scrap market in North America?

Keith, why don't you give us your thoughts on that?

Well, in terms of the impact of Japan, I would say that it probably impacted the market in greater ways but nothing significant enough to sort of move the needle in either the ferrous or the nonferrous types of markets. If the question is about related to the scrap market domestically over the next 30 to 45 days, we would see sort of a downward bias, or downward trend, and more impacting absolute scrap market than the prime scrap market as we head into a time of stronger seasonal scrap flows into the scrap processing yards.

And also, as those changes that Keith talked about going forward over the next 45 days, 60 days, we believe will be more moderate in nature than we saw on the way up in the latter part of last year.

We'll take our next question from Sal Tharani of Goldman Sachs.

Dan, how is the export market looking at -- I know the prices are higher over here than global prices. Have you had any opportunity to do some exports here in the first quarter?

John?

We continue to export quite a bit of our products. It has been impacted in the first quarter by the large difference between global pricing and products and in domestic pricing and products. That said, the location of our mills gives us a great freight advantage when selling in to our key international markets, which are the Americas. So we've seen a slight drop off. We finished last year with about 11% of our product being sold international, internationally. In the first quarter, about 9% of our product went to international markets.

Okay. And you mentioned that you were profitable at the Kingman rebar, which is I think remarkable because there has been a little bit of crowded market there with another rebar mill opening over there. What volume are you processing over there? What utilization rate are you running the Kingman bar mill at?

Sal, the key there is this is not conventional rebar that we are running there. We are running some wire rod products and coil product. John, do you want to add to that?

I would also add to that, that the market in that particular region is well served by Nucor. And the mill there, we've done a great job of that mill. Remember that we were able to build that mill at a very, very economical price and started up very reasonably. So that aided also in the profitability of that mill.

There's no melting fund, as you just rolling it over there. You're rolling billets, is that correct?

Yes. That's correct. The billets are coming in from our other operations, whether they'd be in Texas or Seattle and possibly Utah, depending on who is in the best position to do that on the freight rates.

Our next question comes from David Gagliano of Credit Suisse. David Gagliano - Crédit Suisse AG: Thanks for taking the question. You mentioned, you touched on some signs of weakness lately. And I was wondering, what are the most significant changes that you're seeing lately? And to the extent that you can forecast these kind of things, do you think those weaknesses will persist into Q3? That's my first question.

Well, I'll let John address most of that question in a second, but there are a number of things we touched in our script about restarting capacity, particularly in the Flat-Rolled segment of the business, and new capacity that will be coming on stream in Alabama and in Mississippi. And there's also been an impact on the automotive sector, which has been gaining strength due to the problems in Japan with some critical part supply, particularly semiconductors, chips and other automotive parts. John, do you want to give a little more detail on that?

Yes. I would say that starting with the positive, as we look at most of our product lines, plate, SBQ, we expect to remain strong through that period. We expect merchant product to be consistent, structural product to be consistent during that period. So the one market that we're going to keep a close eye on would be, as Dan addressed, our sheet businesses. And typically, as you come out of the second quarter and enter into the third quarter, you do see a seasonal slowdown that you usually generated as a result of the automotive shutdowns for retooling. Now this year, it's going to be much more difficult to predict the impact of that, that we feel the impact will be mitigated because of what's happening today, as Dan mentioned, with the supply of non-steel critical components into the automotive market from Japan. As a result, both the domestic and the new domestics production rates currently are down as they are waiting for those key raw materials. And when you look at, as we look at the fewer inventory days on hand, we see that they are dropping low, they're going down, and they're continuing to go down. When you look on the domestic side, on the domestic production side, you're looking at about 54 days, dealers days on hand, which is a low number. And with the new domestics, the number is even lower than that. So we see some pent-up demand in the automotive sector, which will release as these non-steel components become more available. And we believe that, that will mitigate the impact of the traditional seasonal slowdown that we see at the end of the second quarter and going into the third quarter.

The other issue we'll be keeping an eye on overall flat-roll imports in particular and taking swift and decisive action when they occur, if they occur at levels that could impact the market dynamics. So as usual, in this environment of recovery, and a regular recovery, there's ups and downs, positives and negatives. And we'll be working our way through them. But as we mentioned earlier, overall, we expect the second quarter to be stronger than the first quarter. And hopefully, with the part situation improving in 60 days or so that we'll see a stronger summer than we normally see in the automotive sector. John?

And let me just add one comment to that. When we talk about demand, we look at demand that is tied to manufactured goods and the energy sector. The demand in those areas remain strong and, frankly, is getting stronger. And Nucor's product expansion into the higher valued manufactured product steel is really paying dividends as we go through this downturn. So we expect that, that diversity will also help us as we go down -- as we enter into the traditional slowdown period. David Gagliano - Crédit Suisse AG: Okay, great. Thanks. That's very helpful. Just switching gears away from the current market and looking into the future, I've got a couple of questions related to the DRI project. First of all, now that you've broken ground, any changes to the project timeline? And then the second question, assuming scrap prices stay around $400 a ton, is there any way to gauge what the expected annual cost savings would be of, say, 5.5 million tons of DRI once it's up and running?

Well, the two major cost components are natural gas and iron ore. We have a very good handle on the natural gas side. On the iron ore side, it will depend on where prices are in the marketplace at the time that we are actually in production down in Louisiana. And of course, at that point in time, which is a couple of years down the road, where scrap prices are. At these prices, we expect to have a competitive product that will help our pricing competitiveness versus the prime grades of scrap and/or pig iron that are out there. John?

I would just add, your first question was whether there'd be any impact in the timing. Given the timing, I think a few times, it has not changed. We're looking at somewhere in the second, the end of the second or beginning of the third quarter of 2013.

And we'll take our next question from Brian Yu of Citi.

Great. Thank you. With the import pressures that were mentioned previously, are you seeing a difference between, let's say, the sheet markets versus rebar? It seems like there might be a little bit more rebar, but I want to get your take on it.

Well, right now, the import pressures still remain to be seen as to what extent they'll occur to and whether it's in the rebar or the sheet market. We have seen some uptick and, but whether they get out of control or not is another matter. And that has not happened as of yet. Bob, do you have any thoughts?

No, Dan, other than the fact that we are watching and then we are very cautious now that they are not in the high import levels that are coming in. So to Dan's point on rebar, we are beginning to get more concerned, and that's one of the things that could impact some of our second quarter volumes.

Okay. And then just on the sheet prices that were reported in Q1, it was $755, and I'm looking at second quarter last year when hot-roll was $700 and you reported $726. So given that hot-roll still remains above $800 per ton, is there anything you can draw our attention to for 2Q that would preclude you from posting a number that's above $800?

Well, listen, as John mentioned earlier, our customers are keeping their inventories very lean and for good reason. They were burned severely when this recession started, and they have decided to maintain a leaner inventory structure. The lead times of imports are an issue. The potential for movements in scrap prices over the next couple of months, our customers are very as much aware of that as we are. So there are things that will cause our customers to think about importing too much flat-rolled or what have you going forward. And so we think that between keeping our eye on things and half the mindset of our customer base, we should be able to see the results throughout the second quarter.

Dan, the only point I would add is, when you look at our order entry rate and how our customers are ordering, frankly, customers today are buying just what they need and bringing it in just when they need it. And in that kind of a circumstance, imports are a challenge for our customers because, as you mentioned, the long lead times and the large volumes that are necessary in those offerings. So while we are aware of the potential and we are watching it carefully, we feel confident that we can react to any sharp increase in the imports.

On the rebar side, that's much more sensitive because of the low levels of demand in the marketplace, period, for construction overall. And so even one time of rebar coming in is one time too many, particularly with where flat-rolled raw material prices have gone over the last six months.

And how far out does your sheet order book go right now?

Our lead times are out about six to eight weeks currently.

And we'll take our next question from Mark Parr of KeyBanc Capital Markets.

Thanks very much. I had a question and I think you may have answered it in the release when you talked about each month getting stronger. But I was looking at you, when you came out with -- you quantified guidance for the first quarter and I don't think the street was too far off for where you ended up actually coming in. And I'm just curious as to, was there something that really changed in March? I mean, could you talk a little bit about how surprised were you with the March numbers? I'd just like to get some sense or some extra color on that.

Well, first off, I don't disagree with your comment about where the street was prior to our guidance. However, I think -- I don't think the reason is the street was where they're at , we're fundamentally sound. And I say that only because what we were giving is guidance.

Oh, but we tried, Dan. We tried.

You don't need to get defensive now about the fact that you were there and you changed. Now we ended up a little bit above it. That's just the way it goes sometimes. Sometimes it goes the other way. I don't hear you complaining then.

Right. I'm not really complaining because it was a good result. Come on now, I'm just trying to talk about it, that's all.

What good would it be, Mark, if we couldn't give each other a little s*** now and then, right?

You made my day.

At the time that we gave our guidance, I think you can appreciate our caution. We had said all along that things were improving. As we were going through the first quarter we expected to be getting price realizations that had lagged, the raw material increases that we had seen and it went through our cost structure. The problem in being more accurate, if we want to call it that, forecast, was that, that is a moving target, exactly where the pricing ended up depended upon how strong the shipments were and how strongly our customers were taking those shipments. And in all honestly, that March was a rollout month. It was a very strong month, particularly in reference to the first 2 months of the quarter. So it was better for us to, under those circumstances, with so many things floating out there in terms of where pricing would end up and how strong shipments would be in the month of March, the stronger the shipments, the further you go into getting the higher price increases. And all of that turned out to be very favorable on all the products, not just flat-roll, but in every product line.

Yes. It just seem really surprising to me -- not necessarily surprising, but certainly a good reflection of how little growth in service center inventories we've seen year-to-date. And it just -- it really does seem like the end demand environment has strengthened pretty meaningfully. I hope the momentum keeps up here in the second quarter. Congratulations, really, though, on the first quarter. And look forward to second quarter unfolding well for you guys.

Thank you, Mark. I just want to add one thing. It was the ability to get the pricing to overcome the raw material costs and to recoup the raw material costs sooner than expected that allowed us to have the strong quarter and the strong March. And that we fully anticipate that trend to continue as we go into and through the second quarter. The end of the second quarter is still a little bit mushy at this point, and we will give our quantitative guidance, as usual, in early June. And as we mentioned in our script, I think it would be wise based upon your question for the street not to get too far ahead of itself.

And our next question comes from David Lipschitz of CLSA. David Lipschitz - Credit Agricole Securities (USA) Inc.: A question, you talked about audit demand picking up, but are you worried with the new system facility in the Sever [Severstal] core facility that, that -- the capacity is just going to take up all that demand?

I don't know if worry is the right word, but realistic about the fact that we're still at best producing at 13 million units in the United States and we were over 17 million units at peak. And so any additional capacity coming into the marketplace at these levels is something that will have to be dealt with by the market, and the demand in the marketplace isn't to the point where it can absorb additional tons of that magnitude without there being some impact unless the market continues to strengthen. And I think the monkey wrench that got thrown into that in the short-term was what took place in Japan and the parts impact, parts supply impact on the auto production for both domestics and new domestics. Here again, we do believe that when that is resolved, that we may see a stronger third and fourth quarter in that sector because of the fact that there will be taking their shutdowns basically now while they're short on parts. David Lipschitz - Credit Agricole Securities (USA) Inc.: Just a follow-up on the non-reg sector. I mean, do you have expectations of it picking up in '12? Or when you talk to your clients and stuff like that, are they thinking things are going to be better later on in this year, early into next year, or nobody has any clue?

Really, saying nobody has any clue, is just probably a little strong. David Lipschitz - Credit Agricole Securities (USA) Inc.: But not much.

Maybe not much. You tell me what is going to happen in a number of different areas, including Washington, and we might have a better handle on that. But what I will say is reiterate what John said earlier, we've definitely hit the bottom and the direction from here on in will be up. But there will not be a rapid increase through the remainder of this year. It will probably grow in 2012 at a greater pace than 2011. But speculating as to the relative strengths is really not appropriate and reckless behavior.

And at this time, there are no further questions in the queue.

Okay. Well, then, I will say thank you, all, for the questions. Thank you for your interest in the company. Again, thank you to all of our fellow teammates throughout the corporation for working safely and helping us to have a much stronger quarter than anticipated. And look forward to being able to come back and talk about the second quarter results with an improvement over first quarter. Thank you all very much, and have a good weekend.

And this does conclude today's conference call. We thank you for your participation and have a wonderful day.