Nucor Corporation (NUE) Q2 2012 Earnings Report, Transcript and Summary

Daniel R. DiMicco - Chairman and Chief Executive Officer James D. Frias - Chief Financial Officer, Executive Vice President and Treasurer John J. Ferriola - President, Chief Operating Officer and Director D. Michael Parrish - Former Executive Vice President R. Joseph Stratman - Executive Vice President of Beam & Plate Products Keith B. Grass - Executive Vice President, Chief Executive Officer of DJJ and President of DJJ Ladd R. Hall - Executive Vice President of Flat-Rolled Products

Kuni M. Chen - CRT Capital Group LLC, Research Division Michelle Applebaum - Steel Market Intelligence Inc Luke Folta - Jefferies & Company, Inc., Research Division Timna Tanners - BofA Merrill Lynch, Research Division Arun S. Viswanathan - Longbow Research LLC Sohail Tharani - Goldman Sachs Group Inc., Research Division Evan L. Kurtz - Morgan Stanley, Research Division Anthony B. Rizzuto - Dahlman Rose & Company, LLC, Research Division Michael F. Gambardella - JP Morgan Chase & Co, Research Division Brian Yu - Citigroup Inc, Research Division Richard Garchitorena - Crédit Suisse AG, Research Division

Good day, everyone, and welcome to the Nucor Corporation's Second Quarter of 2012 Earnings Conference Call. As a reminder, today's conference is being recorded. [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 expectation and information. Nucor believes they are based on reasonable assumptions. There can be no assurance that future events will not affect their accuracy. 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 and 10-Qs, which are available on the SEC's and Nucor's website. The forward-looking statements maybe -- I'm sorry, 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. 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, Toya. Good afternoon. This is Dan DiMicco, Nucor's Chairman and Chief Executive Officer. Thank you for joining us for our conference call. As always, we appreciate 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 other Executive Vice Presidents, Jim Darsey, responsible for our bar group; Keith Grass, responsible for our David J. Joseph's materials, handling and scrap group; Ladd Hall, responsible for our Flat-Rolled Products group; Ham Lott, heading up our Fabricated Products group; and Joe Stratman, who's responsible for both Business Development and our Plate and Beam businesses. First, as always, and most importantly, we want to thank everyone on our Nucor, Harris Steel, David J. Joseph, Duferdofin and NuMit/Steel Technology teams for your excellent work in today's extremely challenging economic and steel market conditions. We are tremendously proud of your unrivaled commitment to working safely, taking care of all of our customers, building a stronger and more profitable Nucor. You are and always will be Nucor's greatest asset and our true competitive advantage. Thank you all. We also want to extend a very warm welcome to the newest addition to our Nucor family. In late June, the 481 teammates of Skyline Steel joined the Nucor team. As proven and valued partners for over 2 decades, we are extremely excited to welcome you into Nucor. Together, our combined team is uniquely positioned to grow in the steel piling business. Skyline gives Nucor another attractive growth platform. We are bringing together the North American market leader in the production of steel piling products, Nucor, and the North American market leader in the distribution of steel piling products and some of its manufacturer, Skyline. Skyline's product portfolio includes H-piling, sheet piling and pipe piling, which it fabricates itself. It is a company and management team that we know very well. They have been one of Nucor-Yamato's most valued growth partners in this business from day 1. They are a significant consumer of our H-piling and sheet piling products. Again, welcome to all of our Nucor-Skyline teammates. I'll then ask our CFO, Jim Frias, to discuss our second quarter results and financial position. He will be followed by John Ferriola, who will report on Nucor's operations and growth initiatives. Then, I will conclude our presentation with some general comments on the economy and Nucor's growth strategy. Jim?

Thanks, Dan, and good afternoon. Second quarter 2012 earnings of $0.35 per diluted share were at the low end of our guidance range of $0.35 to $0.40 per diluted share. Our second quarter results were negatively impacted by a noncash charge of $8.5 million or $0.02 per diluted share due to purchase accounting charges and intercompany profit eliminations related to our Skyline acquisition. These costs were not factored into our guidance, which was issued several days prior to the closing of the acquisition. Second quarter results also included an impairment charge of $0.09 per diluted share related to our Duferdofin-Nucor joint venture located in Italy. This impairment charge was factored into our mid-quarter quantitative guidance. Nucor acquired its 50% interest in Duferdofin, a producer of beams and bars, in July of 2008 for a cash purchase price of approximately $667 million. Our $30 million impairment charge resulted from Duferdofin's disappointing performance through the first half of 2012, combined with increasing economic turmoil in Europe. It incorporates the impact on our fair value model of both greater losses in the near term and a slower than previously expected recovery to historic profitability. Although our timing on this acquisition has proven to be poor in the short run, we continue to view Duferdofin as a very attractive asset offering solid long-term value. Nucor's second quarter operating performance reflected mixed trends across our diverse product portfolio. Profitability at our steelmaking business has been severely impacted by an import search across most products. The sheet steel markets have also been challenged by new domestic supply that began production in 2011. Lower scrap pricing has depressed the profitability of our scrap processing business. On the positive side, our downstream products business reported its first profitable quarter since the fourth quarter of 2008. Nucor's Fabricated Construction Products, joist and decking, rebar fabrication and preengineered metal buildings, returned to profitability as a result of market share gains, improved pricing and effective management of costs. While first half of 2012 earnings decreased by 44% from the year-ago level, cash generated from operations actually increased by more than 50% to $446 million. Nucor benefits from a countercyclical cushion provided to our cash flow as lower scrap and steel prices reduce our working capital investment during downturns. Nucor's consistent cash flow performance is also helped by our highly variable cost structure. Balance sheet strength remains another competitive advantage for Nucor. Standard & Poor's, in its July 10 report entitled, North American Metals and Mining Companies, Strongest to Weakest, again ranked Nucor #1 for credit rating and credit outlook among a universe of 72 companies. Nucor was also the only metals and mining company in the group that S&P awarded a strong business risk profile due to our competitive position and profit performance relative to our peers. We are the only steel producer in North America to enjoy the very important competitive advantage of an investment grade credit rating. Globally, our credit rating is matched by only one other steel producer, Nippon Steel. The benefits of our credit rating include a lower cost of capital, financial flexibility and our position as the lowest risk counterparty for both customers and suppliers. Cash, short-term investments and restricted cash totaled $2.2 billion at the end of the second quarter of 2012. Further to Nucor's strong liquidity, our $1.5 billion unsecured revolving credit facility is undrawn. It does not mature until December 2016. We have no commercial paper outstanding. At the end of the second quarter, long-term debt totaled $4.3 billion. We expect our leverage to decline as a result of long-term debt maturities of $650 million in the fourth quarter of this year and an additional $250 million in 2013. Our plan is to fund those maturities by drawing from a healthy liquidity position and continued strong operating cash flow. Current economic conditions remain very difficult. However, the Nucor team is aggressively taking advantage of opportunities arising in this environment to grow our company's long-term earnings power. As we often say, Nucor uses cyclical downturns as opportunities to grow stronger. We are able to do this because of our conservative balance sheet, our healthy cash flow generation throughout the economic cycle and a long-term approach to managing our business. In 2012, we are continuing to invest in projects that will grow our long-term earnings power and provide attractive returns to our shareholders. In June, we completed the acquisition of Skyline Steel, the North American market leader in the distribution of steel piling products. The cash purchase price was approximately $684 million. Over the 5-year period ending in 2011, Skyline's annual EBITDA averaged $90 million. Additionally, we expect to realize meaningful synergies from this acquisition. It is expected to be accretive to cash flow immediately and to earnings by the fourth quarter of this year. Our projected 2012 capital spending of approximately $1 billion includes a number of growth investments. The largest project is our Louisiana direct reduced iron raw materials facility currently under construction. A number of other projects are being implemented throughout our upstream, steelmaking and downstream businesses to develop new products, increase quality and reduce costs. John Ferriola will update you on our recent progress implementing our capital spending plan. In addition to allowing us to invest in attractive growth opportunities, Nucor's strong financial position in cash flow generation has enabled our company to reward our shareholders with impressive record on cash dividends. Nucor has increased its regular base dividend for 39 consecutive years. Our base quarterly dividend has increased by approximately tenfold over the past 11 years, reflecting the Nucor's team's success in growing long-term earnings power. For the third quarter of 2012, we expect to see a modest reduction in earnings from the second quarter level, excluding the onetime charge of $0.09 per share and further purchase accounting and intercompany profit eliminations related to Skyline. Third quarter results should benefit from lower scrap costs and a likely improvement in customer buying patterns if scrap pricing stabilizes as we currently expect. In addition, we're beginning to see the positive impacts of some reduction in sheet imports, as well as recently shuttered capacity and reduced operating rates by newer domestic market entrants. Current efforts to raise sheet pricing above recent lows are meeting with some success. However, global economic uncertainty is a risk factor for the short-term outlook. Nucor will again follow our practice of providing quantitative guidance around the middle of the final month of the quarter. Nucor is in a position of strength to build on our company's long tradition of being effective stewards of our shareholders' valuable capital. We are excited by the opportunities we see ahead to reward our shareholders with very attractive long-term returns. Our team will achieve this by growing Nucor's long-term earnings power, rewarding Nucor shareholders with attractive dividends and maintaining Nucor's strong balance sheet. Thank you for your interest in Nucor. Dan?

Thank you, Jim. I'll now ask John Ferriola to report on Nucor's operations and the implementation of our growth initiatives. John?

Thanks, Dan. Good afternoon. Let me begin by thanking all of our raw materials, steelmaking and steel product teams for your outstanding commitment to working safely and to taking care of Nucor's customers. Thank you, and please keep it going. We are very proud of the results our team is achieving in 2012's extremely challenging environment, and we are extremely excited about the impressive work being done on our raw materials, steelmaking and downstream products teams during these bad times to prepare Nucor for the good times ahead. Our team at Nucor Steel Louisiana made excellent progress during this year's first half on the construction of our new DRI plant in St. James Parish. The heavy haul road from the Mississippi River to the facility is nearing completion. Piling and concrete work is complete in the core plant area, and work has recently begun on the port which we expect to be completed by the end of this year. Most importantly, we are on schedule for a mid-2013 start of DRI production. Our construction team has done an outstanding job in overcoming the challenges that inevitably arise with an undertaking of this magnitude and scope. At the same time, this project is yet another great example of how our company succeeds by everyone working together. A number of Nucor's divisions have supported our Louisiana team with personnel and expertise to help in the areas of environmental, engineering and hiring. And of course, our divisions are major suppliers of material and equipment for the construction of the plant. Thank you to all of our teammates associated with this important project, for working safely and working together towards an on-time, on-budget start. Our Louisiana DRI project is a huge step forward, implementing Nucor's raw material strategy. Combining Louisiana's annual capacity of over 2.5 million tons with our Trinidad plants' 2 million tons annual capacity brings us to about 2/3 of our goal to control from 6 million to 7 million tons of annual capacity in high-quality scrap substitutes. And we expect our raw material strategy to be a game changer in advancing Nucor's growth in the sheet and SBQ markets. Here's why. First, Nucor has already achieved world-class performance in both quality, productivity and DRI production at our Trinidad plant. Second, our investments in natural gas assets have secured a long-term and low-cost energy supply. Together, these provide us with an extremely attractive cost structure of the high quality iron units required to produce higher value-added, higher margin, sheet and SBQ products. I would like to highlight that Nucor's sheet and SBQ mills are already growing their presence in one of the prime markets for high value-added steel, the automotive market. Through the first 6 months of 2012, our steel mills' shipments into the automotive market increased approximately 20% over the prior year period, and more specifically, our direct shipments to our automotive OEM customers increased about 25% year-over-year. This is more evidence that refutes the claims by some financial market observers that Nucor is "just a construction play." Nucor is maintaining its leadership position in construction products, while at the same time, expanding our participation in a number of other attractive value-added markets, including automotive, energy, heavy equipment, consumer durables, agricultural, transportation and industrial goods. The acquisition of Skyline Steel was another major second quarter 2012 development in the implementation of our growth strategy. The opportunity that it provides for profitable growth are numerous for both our steelmaking and our piling distribution businesses. Skyline will become a more valuable downstream consumer of Nucor's coiled plate and sheet products. In addition, Skyline will develop synergies with our other downstream operations in providing value-added, one Nucor solutions to the construction industry. Shortly after the acquisition of Skyline closed last month, Nucor-Yamato announced a $115 million project to add several new sheet piling sections. This announcement highlights the fact that Skyline provides Nucor-Yamato with excellent opportunities to expand its portfolio of sheet piling products. The Nucor-Yamato project will add several new sheet piling sections. These new offerings will increase the single sheet widths by 22% and provide a lighter, stronger sheet covering more areas at a lower installed cost. This combined initiative is an excellent example of Nucor's time-proven, highest-return strategy for profitable growth, investments that optimize our existing operations. I also have good news to share about another investment that will increase Nucor's long-term earnings power. Our Hertford County, North Carolina plate mill team has begun pipe commission of their new vacuum tank degasser. This new value-added capacity will build on the outstanding success of a heat treat line that began operations last year and continues to run at full capacity. Additionally, a normalizing line will be commissioned in 2013. These investments are expanding our plate mill group's value-added product mix into new applications, including armor plate, half-craft [ph] quality alloys, offshore oil platforms and petroleum refineries. Two other major projects to increase our value-added portfolio, the vacuum tank degasser at our Hickman, Arkansas sheet mill and our wide light project at our Berkeley County, South Carolina sheet mill, are continuing on time and on budget. In conclusion, our team's unrelenting focus remains on long-term sustainable growth in Nucor's profitability. We are continuing Nucor's historical and highly successful strategy of preparing for the good times during the bad times. Working together, our team is building an exciting and very rewarding future for all members of the Nucor family, our teammates, our customers and our shareholders. Thank you for your interest in our company. Dan?

Thank you, John. Day in and day out, the news flow regarding our economy gives little reason for short-term optimism. The challenges are most definitely real and serious, but the Nucor team firmly believes these problems, if defined and understood properly, all have solutions. Our view of the situation is unchanged. The time is right and long overdue to reinvigorate the American economy by seizing new opportunities in energy, infrastructure rebuilding and growing a globally competitive U.S. manufacturing sector that will prosper in an environment of rules-based free trade and an improved global competitiveness here at home. Nucor's success over nearly 5 decades has always been driven by our long-term focus in running and growing our business. And our team is bullish on the American people and their ability to do the right things over the long run. That is why we are busy building a stronger Nucor. A stronger Nucor is one positioned to deliver the higher highs and higher lows in earnings power through success in economic cycles. In the last cyclical peak in the economy in 2008 until the end of 2012, Nucor will have invested more than $6.5 billion of capital by a disciplined execution of our multipronged, long-term growth strategy. That is why Nucor is primed and ready to generate higher highs and earnings once a sustainable economic recovery inevitably arise. That is why my confidence has never been greater that Nucor's best years are ahead of us. At this point in time, we'll be happy take your questions.

[Operator Instructions] Okay, we'll move first to the site of Kuni Chen.

I guess just first off, there's been some controversy over the air permits down in Louisiana. Can you just give us an update there? What's the risk that, that leads to some delays? And what's your pathway to get this resolved in the timeline?

Rumors always abound, particularly on issues that concern how the environmental issues might be handled on a new project. The fact is, we have 0 concern. I repeat, 0 concern, that the project will be delayed due to the permitting issues because our permits are in place, legal and supported by the state and actually discussed openly by Lisa Jackson as being signs of a successful functioning of the EPA. Having said that, there are always nuisance suits that develop, which are being dealt with and will in no way slow down the project. Our biggest issue today on that project is the water level in the Mississippi River. And the good news lately is, that a -- the river Corps of Engineers is forecasting a 9-inch rise because of rains in the Ohio Valley, so keep your fingers crossed as the rain continues where it's needed, both for the crops and for the Mississippi River. Anyone else like to make any comments on that? Go ahead.

No, that's pretty valid, Dan.

And it might be worth noting. I mean, these permits have been thoroughly read, both in the public arena advantage [ph], okay, with the state agency and frankly in the courts already, all of which gives us the confidence that Dan alluded to, that construction will continue and we will complete this project on time.

Okay, good to know. And just as a follow-up, on the automotive side, I know it's about 10% of your mix right now. And as you know, other steel folks have a much higher proportional mix there. Do you think we could see Nucor dedicating even more resources to growing your share in automotive? And can you talk about how your strategy there may play out, particularly from a sheet products' perspective?

The simple answer to that is yes, and I'll ask John to elaborate on that.

Yes, we reported in the past that about 10% of our sheet shipments have gone into the automotive. Frankly, those were numbers that we gave last year and it has increased since that time. It's higher today, and it continues to grow. As we continue to develop more value-added products, we'll continue to grow in that market. A good example of the investments that we're making to accomplish that is our project that we refer to as our wide light project at Berkeley. The 72-inch-wide sheet will give us more occupations in the automotive arena, as well as the vacuum tank degasser at our Hickman facility, which will give us a better portfolio of what we call deep-drawn steels and extreme deep-drawn steels, which are very, very commonly used in the automotive industry. Today, on the sheet side, we're in the neighborhood of about 12% to 13% of our shipments going into automotive, and I'll also point out that, that's -- we've talked about sheet, but our participation in automotive through the SBQ product has also grown tremendously as Memphis continues to come online with more and more qualifications going into automotive. I guess my last comment that I'll make about our participation in automotive is this. We sell product today to virtually every domestic and new domestic automotive company in production, and we are very proud of the fact that our team continues to grow in that very important market to us.

We'll move next to the site of Michelle Applebaum with Steel Market.

Steel Market Intelligence. A couple of questions. I noticed that your reported price per ton dropped by 1.4% in the second quarter versus the first quarter, but the market dropped about 6%. Was there a product mix shift in the quarter? And how did that work?

John?

Yes, there was definitely some product mix shift during the quarter. Also, frankly, in the quarter, we were challenged with some imports that have continued to flood into the country. That was a challenge for us. The fact that the overall pricing decreased is probably a function more of the overall economic conditions in the country. It's a challenge for us and as it is for all of our -- for the industry. So product mix, general economic conditions, imports, all are factors in the decrease.

I guess I wasn't clear. I'm asking, your prices went down very little relative to -- much less than the market. Was that about like more value-added or more higher price?

It's attributed to the great job that our commercial team does, so I want to thank them all for that. It is definitely a function of the fact that we are moving higher into the value-added products. And our whole focus on a commercial effort by moving into more value-added products and through our commercial excellence program has been to make us more sticky to the customer. When you're more sticky to the customer, it gives you greater pricing power, and those are some of the reasons why we fared better than the industry as a whole in the quarter.

Great. Can I ask a second one?

Please.

Okay. Iron ore, when you -- I must've asked when you first started the iron, I probably asked a bunch of times what are you going to do about iron. And clearly, waiting was validated. So now what are you going to do about iron at -- in Louisiana?

The current strategy is to continue to feed the DRI plant in Trinidad and the new one that will start up mid '13 with supplies from our existing pellet suppliers for DRI pellets. And as far as iron ore goes, when there's something to talk about, if there's ever anything to talk about, we'll talk about it. But thanks for the question.

We'll move next to the site of Luke Folta with Jefferies. Luke Folta - Jefferies & Company, Inc., Research Division: The first question I had was, Jim, you threw out an average EBITDA for Skyline over the last 5 years. I think it was $90 million, if I heard correctly.

That's correct. Luke Folta - Jefferies & Company, Inc., Research Division: Are you all able to provide a trailing 12-month number? And also can you give us the revenue over the 5-year time frame?

No, we're not going to disclose either of those. I just stated that over the 5 years, there wasn't a lot of -- variation was pretty steady. There wasn't a peak or value that was very pronounced. It was pretty steady.

So pleasingly so. Luke Folta - Jefferies & Company, Inc., Research Division: Okay. In regards to how much steel that you had sold them previously versus what you expect to do now, can you talk about that and maybe how much -- what those percentages were in just some rough sense?

Joe, do you want to make any comments about that?

It is Joe Stratman. Joe?

This is Joe Stratman. What I'll say is clearly the -- on the H-piling business and on the sheet piling business that Skyline does, Nucor-Yamato had been its major supplier for 2 decades as we said in our opening remarks. And I would say that in those 2 categories, the percentages that were supplied by Nucor were well over 75%, 80% of the business. In the pipe piling, as Dan mentioned, Skyline actually manufactures their own pipe piling out of flat-rolled coil, both of a plate nature and a sheet nature. And that is where our opportunity for growth in internal with -- from Nucor mills is. And to speculate as to, yes, where that business is going to grow to and how much of that's coming in, I really don't have numbers to throw at you today on a percentage basis.

What we're talking about in terms of the opportunity to bring that additional flat-rolled sales in-house to Nucor as opposed to the previous owners, we're talking about somewhere between 150,000 and 200,000 tons of additional tonnage. And of course, all that goes without discussing the fact that the opportunity is to grow the overall Hertford [ph] and company. Now they're part of Nucor, whether it'd be in sheet piling, pipe piling, H-piling, will certainly be there for us as the market allows us to. But you're looking at somewhere around a 20% improvement in opportunity. Luke Folta - Jefferies & Company, Inc., Research Division: Okay. Can you talk about what your expectations are for D&A going forward then?

No, we're not going to break that out specifically yet. We don't have that isolated. We're still working on the allocation of the purchase price to the assets.

We'll move next to the site of Timna Tanners with Bank of America Merrill Lynch.

I wanted to ask just 2 questions, one about capital allocation considerations and the other just to clarify your outlook. So with regard to how you're thinking about uses of cash, you, like you said, have one of the best balance sheets globally along with Nippon Steel. Can you give us any updates on how you're thinking about the opportunities of buying dislocated assets out there versus building or your own organic growth?

Well, our philosophy there really hasn't changed and the opportunities really haven't changed over the past several years that would cause us to do that. In general, the world today is suffering from massive overcapacity because of the economic conditions that are out there, both here in the States and now popping -- certainly, popped up in Europe and now popping up in Asia. So the idea of building new capacity for new capacity's sake, certainly throughout most of the world, is not a good use of shareholders' capital. Our interest at the current time primarily focused on shoring up our existing operations where we have several hundreds of millions of dollars being spent there. We've indicated in the earlier calls. And also strengthening our vertical integration, both downstream with David Joseph, Harris rebar and now Skyline, and our new product and process developments at our fabricated products divisions like our joist and deck operations and obviously, our DRI operations that will be built in Louisiana. That's where our allocation of the capital is for the most part, whether they'd be to grow our existing operations vertically in both directions or to take advantage of acquisition opportunities as they come forward. As far as greenfield opportunities go, we have talked in the recent past about another plate mill. And under the current conditions in the world, that probably is something that's being put on the back burner as we speak and will depend upon how things proceed with the global economies over the next couple of years as to what gets done there. But our overall strategy still focuses on: number one, investing in our existing operations; number two, investing in the vertical integration, both up and down the line as the opportunities present themselves.

Okay, that's helpful. And then just to clarify on your guidance, if I could. So you talked kind of about a cautious outlook, but you also talked about opportunities with scrap falling and prices recovering, which would imply some sort of margin expansion. So is the risk you're thinking of the third quarter more on the volume side? Is that how should we should interpret your comments?

No, I think you should interpret them as being that we're in a very vertical state in the economy, both here and around the world. There's a lot of instability, potential instability, a lot of concerns over risks in the global and domestic economies. There are some things that are moving in the direction that will be positive for us. There are some things that are moving in a direction that will be negative for us. And as we highlight those, we like to highlight both the positive directions and the negative directions. So I wouldn't focus so much on volumes per se, but certainly, there'll be things that will be impacting the margins. As you know, selling prices have come down as scrap prices come down. That's a two-edged sword. In the long run, it benefits us. In the short run, it can catch us in a negative way on the scrap side, in our scrap business and also as a lag that exists out there for the lower scrap prices that make their way through the transportation system and into our actual usage in the mills. So most of what you're seeing in our guidance is a recognition that we are still in a very unstable economic climate and things are moving in both directions, and how they break and what their impact is relative to one another is still an unknown. We just know that those directions are there and that the pluses and minuses, we believe, will take us to a point similar to where we've been so far in the first 6 months of the year. They could bring more positive. And as we have mentioned already, that there is a price realization improvement because of the last sheet price increase and the scrap has come down. Although how far that's fallen and whether it stays there or goes back up is something that we should know much more better over the next 30 -- 15 to 30 days.

We'll move next to the site of Arun Viswanathan with Longbow Research.

Yes, I just have a similar kind of question. Maybe you can talk to me a little bit about what you saw in the quarter. Sheet, I know, is down. But as an earlier question, you guys suffered less, and was that because of you still had some orders that were booked at higher rates in the first quarter? And then similarly, structural was actually up. Is that still going up? And so how does that impact your third quarter outlook as far as the difference between sheet and kind of along products markets?

On the structural side, it's probably as much a function of mix. We're depending upon what products are moved -- being shipped more heavily, whether it'd be piling products. H-piling is probably the most competitive. Sheet piling is a higher value-added. We've been exporting whenever possible, which can have an influence on pricing in either direction, depending on strengths out there. But in all reality, it's probably more a question of some higher value-added mixes on the structural side, but that also applies to the flat-rolled side. Our teams have been doing, as John stated, an excellent job of moving up the value-added curve and up the pricing curve along with that in our flat-rolled. John?

You hit the major points, Dan. Maybe just to talk in general about some of the other products. On the bars side, business has been pretty stable and we're challenged, as always, by imports, particularly on the rebar aside where imports during the last quarter and, frankly, through the first half of this year just surged up. But even with that surge, we've been holding our own and fairly stable, same with merchant plate. We're also seeing a surging of imports on the plate side, particularly the cut plate. But again, because of the work of our commercial team and the investments we have made at Hertford, both with the [indiscernible] line and the value-added products that were coming online for the vacuum tank degasser, we've been able to hold our own there and have a stable water entry right and a stable backlog.

Okay. I guess what I was struggling with was, last year in the second quarter, you were at $8.94 per sheet. By the fourth quarter, you'd gone down to $7.47, and that kind of falloff was, I guess, somewhat commensurate with what we saw in the market. However, this year, you're at $7.80 in the first quarter and you're only at $7.59 in the second quarter. And that's really not close to what we saw in commodity hot-rolled. So I guess it has been mix in your own businesses. So that was nice to see. The other, I guess, part of my question -- or the -- another question I had was on the scrap side. Can you just talk to me about -- or us about your book in the second quarter? And do you expect to see much of the falloff as a benefit in your third quarter guidance?

Talking about scrap?

Yes.

Yes, there's been over $100 a ton drop in scrap over the past couple of buys, and some of that may be given back to the market, which I think just remains to be seen how much, if any. There seems to be some indication of stabilization of scrap after the last combined drops that will benefit us in the second quarter. How much depends on exactly the timing of outflows of scrap moved to the transportation channels into our yards and then from our yards, into the melt mix. John?

That was the point that I was going to add. We will see more of that impact as we go into the third quarter because of our inventory levels in our existing mills. So as it comes through the chain, as Dan pointed out, and into the mill, we'll see some of the benefit from that. One thing that we do watch as we watch the upflow of material across our scales at our yards to get some sense of what's happening going forward, and we have seen that slow down as a function of the decrease in pricing that Dan mentioned and also the extreme heat that we've gone through the last 6 weeks. So all of that we see as bringing some stability going forward into the market.

That, together, with some uptick in the export activity that we've seen in the recent few weeks. Keith, do you have anything you want to add to that?

That's it. You guys covered it pretty well.

We'll move next to the site of Sohail Tharani with Goldman Sachs.

I have a couple of housekeeping questions and then just another question. What was the export in the second quarter? And what was the startup cost?

Exports and startup costs? I'll start with the startup costs. Per operating startup cost in the first quarter were just over $7 million. They were closer to $18 million, $19 million in the second quarter. And they'll be relatively flat going to the third quarter. John, do you have some information on it?

Yes, a couple of comments on exports. We've had a lot of challenges in the export market. As you know, the situation in Europe, the currency. But despite that, our international team has just done an outstanding job. We exported about 11% of our product in the first quarter, and we maintained that percentage through the second quarter. So kudos to our international team. They've done a great job there despite a very challenging environment, and our export ratio has been stable.

And then I have a question on the strategy going forward. You have always mentioned in Louisiana, Phase 2, Phase 3, where eventually you want to, as market conditions get better, build a mill, a blast furnace mill and so forth. So I was just wondering if the Thyssen asset friction of that portfolio is in that strategy, if you can buy it at a very decent rate -- amount and have a very high quality rolling mill, which you can then attach to a DRI-based, either a blast furnace or electric arc furnace in the future.

That was a pretty neat way of dragging on what we might be doing or not doing there conversation, Sohail. I wondered why it took you a second to push the mute button. I don't mean that in a negative way. I thought it was a good question. As far as our strategy in Louisiana goes, it hasn't really changed from the standpoint of what the future holds down there. We are currently permitted for 2 DRI facilities and a blast furnace and coke oven operation. A lot will depend on how markets develop and how economic growth stabilizes and moves forward over the next 5 to 10 years, as to exactly how much more we do down there. Our plans do also call for either steelmaking activities or downstream activities. An expansion of the raw material strategy could very well be in the cards for Louisiana. Now as far as [indiscernible] goes, that's one of those bridges that never should've been built, but it's here, and it's for sale. People will be looking at it. How it would fit in with our strategy in Louisiana? Certainly, if we were interested, it could have a place. But the big issue there is the market doesn't need it. And the big question is, who's going to be interested and what's it going to cost? Certainly, there's very few steel companies that are in business today that aren't at least thinking about, "Jeez, what's going to happen there? And should we have an involvement?" But as far as where our involvement is or isn't, I really can't get into that.

We'll move next to the site of Evan Kurtz with Morgan Stanley.

Just a couple of ones here for you. First, on operating rates, it seems like we have various blast furnace producers taking some downtime in the second half here and imports seem to be tapering off. So I was wondering if it's safe to say that you guys are expecting an uptick in operating rates in the third quarter. And if so, is that factored into your rough guidance here for modestly lower earnings next quarter?

Well, certainly, on the plus side, as we mentioned in our earnings release and in our script, there are a lot of things like the shutdown of the RG assets and the pullback of ThyssenKrupp on putting steel into the marketplace because they're up for sale and other things that have taken place at the integrated plants. But before I go any further on that, I just want to make sure you understand that at the electric furnace shops, we don't announce changes in production ahead of time because they can be made at basically at a moment's notice as opposed to a blast furnace that has to be planned for and gets talked about. And then when it's shut down, it's shut down for a period of time before they can look at bringing it back and market conditions improve. We've moved in and out dependent upon our order entry, what it is, how strong it is. And we're not unaffected by the slowdowns and demand or the oversupply in the marketplace. So as you've seen, our operating rates in the second quarter had moderated. But in terms of -- what was the rest of your question? I'm sorry.

Basically, have you thought you were going to gain any share over the quarter since some of your competitors were taking downtime? Was there enough demand to perhaps facilitate some more orders on your part?

Well, I don't know. What demands out there remains to be seen. There are a lot of moving parts of scrap coming down, maybe going up, maybe staying stable. If you forecast [ph] what's going to happen there that can change in a couple of months' notice and how the domestic players actually continue to go forward on their capacity cutbacks, if they do, which can change as well. In general, the industry, the people who are operating their mills should benefit from the fact that some people have cut back or shut down completely as in the case of RG. Whether we actually pick up market share or not is tough to predict because the economy is still very weak overall, and there still is volume force to back them up. There's still a significant amount of tonnage coming in from overseas across most products. So in terms of how we look at the third quarter, we're probably looking at similar levels of our production to the second quarter.

Okay, that's helpful. And then just one other question. Been hearing a lot about the severe weakness in the export plate market, particularly in Asia. Some of the latest numbers I've heard out of there were about $560 a metric ton FOB. And I was surprised to see in your guidance here that you mentioned plate as one of the better-situated products going forward. I was wondering if you maybe could elaborate on your view there. Have you seen any storm clouds on the horizon?

Well, certainly, we keep an eye on the imports and we'll take the appropriate action, both commercially and on the political perspective, if we see a surge -- if we see the surge continue unrestrained. In terms of why we feel fairly confident in our plate ability going forward, we talked about it several times. We have the value-added products that we're going to introduce to the market. We have a strong relationship with our customers. We've got a great reputation for quality, service and on-time delivery. And we keep them competitively priced. For those reasons, we feel that we will see stability going forward in our plate business.

And there's no doubt that we will and the industry is already making moves to deal with imports coming in, and we started talking about the kind of crisis you're talking about over in Asia to get them over here. They clearly would be dumped. And I think that will be dealt with if people are foolish enough to do that, which they historically seem to be. But the big thing, as John mentioned, is we've been growing our percentage of value-added business at our plate mills and changing our product mix at our plate mill in Tuscaloosa to be more plate versus coiled plate oriented that the product mix is working in our favor at the same time as there is definitely some softness in the pricing that's being created by the imports that have come in. And if they get out of hand, we'll have to maybe reevaluate where things are at. But right now, we're hopeful that we will be able to keep that from happening because of our proactive efforts in Washington and elsewhere. And we do have a very strong commercial program for dealing with imports and pricing product to be competitive against imports as they rear their heads. Of course, the other thing is, we do have scrap working on our favor as well, which benefits us in the plate area, as well as in other areas. Overall, demand in plate is still good. That's the key thing, and it's one of the stronger markets so it's a matter of the supply side and the product mix and how they move forward together.

We'll move next to the site of Tony Rizzuto with Dahlman Rose. Anthony B. Rizzuto - Dahlman Rose & Company, LLC, Research Division: I've got of question about the end markets, just to pursue that a little bit, and again in the release, you indicate the markets that remain improved. And I'm wondering, I've been hearing that some of the machinery and equipment manufacturers are talking to suppliers now about slowing trends in the second half. And I wonder, are you guys seeing any impact of that? And if you could kind of describe in July how the order book has shaped up a little bit because I understand, obviously, the 4th of July come in the middle of the week, people took off and maybe slowed that down. But what are kind of the trends you're seeing so far as we look into the third quarter right now?

John?

Well, we look at across all of our products on the order entry rates. As you pointed out, it's a difficult month to use as a guide because of the holiday and the way that it fell right in the middle of the week really messed up the order entry for that week. That said, we have seen some slowing through the month on pretty much across our product lines. But again, as we've said several times, we see, in most of our products, stability going forward in our backlog and in our order entry rates. So we're keeping an eye on it, again, and all the things we've talked about so far. We have to keep an eye on the imports, and we have to keep an eye on what's happening in the marketplace with demand and we'll act accordingly. But at this point, we see stability in most of our products. Dan alluded to the situation in plate that we have to keep an eye on with the pricing in Asia. We will do that. But right now, things look fairly stable.

As I mentioned a few minutes ago, Tony, that the volume side of the equation for the third quarter, we believe, will be similar to the second quarter overall. And as John said, we're going on a holiday month like July. The way things worked out, it's tough to draw conclusions just from that. It's more a sense of what's happening in the marketplace with the competition, and the overall order entry level is not out of balance one way or the other on average for our products. So as you know, we don't like to give short-term emphasis on what's going on, but we do have to talk about the quarter coming up and our general guidance as we see volumes holding their own.

We'll move next to the site of Michael Gambardella with JPMorgan. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: I have 2 questions for you, one that you'll like and one that you probably won't like, which one do you want first?

You be the judge. If you want, give me the one you like first, how's that? Michael F. Gambardella - JP Morgan Chase & Co, Research Division: That you'll like first, all right. So you made some comments early in your comments about how much money you've invested in growing the earnings base of the company. And obviously, that's hard to see right now. But if we were to take pricing back in the volume levels back in the '06 to '08 period...

Wait a minute, I'm getting -- my heart is palpitating very fast there. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: What I'm trying to say is you did around $4 to $6 a share in those 3 years. How much earnings power on an EPS basis in that type of volume and pricing condition do you think you've added in the last 5, 7 years?

Mike, this is Jim Frias. We can't give you a specific number, but it is significant. I don't know if it -- it's probably not a doubling, but it's a significant improvement.

Let me just toss something out there. One way you could potentially look at this is to look at how our company's doing today in a marketplace where the construction is at its lowest level in, I don't know, 30, 40 years. Obviously, very challenged. And for our company, which has historically had a strong participation in construction, for us to be doing -- operating at the levels today with construction being so weak, it could give you some insight as to how things might look when construction inevitably returns. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: Okay. Now the question you're probably not going to like.

Before you get to that, you asked me a good question. As Jim said, it's not going to be double where it was, but it is going to be... Michael F. Gambardella - JP Morgan Chase & Co, Research Division: 50% higher EPS?

It has the potential to be that, yes. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: Okay, okay. So back in 1990, the electric arc percent of total production in the U.S. was 37% and you had just introduced a new technology, thin slab casting, that basically got you into the flat-rolled markets, which doubled the potential size of your market. Today, electric arc furnace is about 62% of total U.S. production. So kind of the easy pickings, and most of your competitors that were easy to pick off back in the '90s and early 2000s have gone through bankruptcy, restructured their costs and there's also -- to go from 62% electric furnace, you can go higher, obviously, in the industry, but you're getting to a point where you need to put higher iron units in the product to make it applicable to the end markets. Say, in automotive, for exposed auto parts, yes, you can make exposed auto parts in the electric furnace, but you're probably going to have to use pig iron or DRI up around 75%, 80%.

No, no, not that high.

Not that high. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: Well, pretty high.

Take it that, in general, you're correct. You'll be using a higher percentage of those types of product in your mix, but nowhere near 70%. But go ahead, keep going. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: So I guess what I'm saying is, with electric furnace already at 62% in the U.S. of total production, and the other competitors on the integrated side that you had picked off pretty easily in the '90s and they've gone through bankruptcy, they've restructured. Certainly, they don't have the cost structure you do. But are you getting to a saturation point, is what I'm saying.

In terms of our earnings capability? Michael F. Gambardella - JP Morgan Chase & Co, Research Division: No, obviously, you've added a lot of earnings capability, but just in terms of just volume penetration.

Well, listen, there's 2 ways for Nucor to grow, if I just take your overall supposition, okay? Number one, just because 62% of the electric furnace industry or the steel industry is dominated by 62% electric furnace, doesn't mean our growth in the electric furnaces can't take place and it doesn't have to take place just at the expense of the integrators. Secondly, listen, if there are electric furnace operations and integrated operations that still has serious competitive challenges in front of them and so the opportunity is for growth at Nucor into either 1 of those 2 categories, so you shouldn't just look at it like the only way we grow, all right, and hence, we're being limited is because so much of the issues are EAF-based. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: Yes, that's fair. So let me ask you, in that regard...

So we can grow into both. As we've shown when we -- with the acquisitions that we made and the growth we've done between 2000 and 2010, all that took place on the EAF side. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: So on the EAF side today, your commentary about the plate business and going in the value-added plate, I guess you're targeting the old Lukens operations that's owned by Arcelor now?

No, were not targeting competitors per se. We're targeting markets, and our job is to go out and to win the customers' business because we're easy to do business with, we provide better quality product and at a lower cost, and they know we're going to be around for decades and decades to come where some of our competition is not going to be. So targeting is a bad way to put that and that's not the way it should be looked at. We're targeting markets for sure, not necessarily producers, but the markets, yes. And you have to keep in mind that our strategy does not involve just moving it to higher value-added products. It also involves improving our cost structures dramatically by moving into vertical integration backwards into raw materials and to increase our downstream business activities where profitability tends to be stronger with the acquisition making and the growth we're seeing in our downstream businesses. So I'm a little bit at a loss to follow the logic, they start out with about 62% EAF, 38% integrated, you got no place to grow. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: It's not you have no place to grow. But the places to grow on volume are shrinking compared to where they were in '90.

Well, listen, we're a 25-million, 26-million-ton-a-year producer, okay? That's what our low-cost, high-quality produced, competitive modern equipment. We went from -- we doubled from where we were back in 2000. To double again, we'd be going to 50 million tons. That actually is theoretically possible. But certainly, it gets tougher to do the bigger you get, to grow about the same relative percentages. But we're far from being limited into profitable growth of the company, and there are still opportunities to grow our steel footprint significantly. John, you seem like you have a few things to say.

I'm kind of just chuckling a little bit because you used the term game changer when we spoke of what we did in 1990. It was the thin strip casting technology and I would suggest to you I used the word game changer in reference to our raw material strategy and what we're doing on that front. And we believe that that's going to be the next step for us, DRI and our entire raw material strategy. What we've accomplished in Trinidad, in increasing the quality and productivity of the DRI production in Trinidad, we're confident we'll be able to duplicate in Louisiana. That's going to give us an advantage in all of the products that you mentioned. That's going to allow us to continue to move further off the value-added chain, higher quality products, higher quality scrap substitutes, deal with the potential issues that you're alluding to on the scrap side because of the increase in the electric arc furnace capacity entrenchment. So that's one of the reasons you'll hear us focusing, and we've been focusing now for over 5 years on a raw material strategy. We saw these issues you're bringing up today 5, 6, 7 years ago and began preparing for them. And we're well down that road in being ready for that situation you're alluding to. So yes, I recognize all of your points and I see them as positives for our company. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: No, the game changer on thin slab got you into a totally new market that was basically double the size of your market going from long products to long and flat. The DRI, I understand the logic. I wouldn't call it a game changer for DRI because I'd call it more of a defensive strategy because you're getting most of your pure scrap substitute pig iron from Brazil that was basically tearing down the rainforests to use charcoal, and that's not a sustainable source. That's why you're putting the DRI in. So that, to me, is kind of a breakthrough. It helps you tremendously, but it's not as big of a breakthrough as thin slab was, in my opinion.

Michael, it is a bigger -- it has a bigger potential impact than thin slab, particularly with the way things went in thin slab because it has an impact in every ton of steel we produce. From the standpoint of growing our volumes of steel production by another 100%, that's not the issue here in terms of what John's comments are about a game changer. This is a game changer from the standpoint of the cost structure of the company, which applies across all of our current 25 million tons, more so for the flat-rolled and the higher quality side. But the cost structures we're looking at for producing DRI would be natural gas game-changing event on the energy side, which is a separate issue, allow us to be in a position to have very, very strong competitive position on costs relative to everybody else out there today. So it's much more. It has nothing to do with replacing charcoal in Brazil. It has nothing to do, at this point in time now, with replacing pig iron because we certainly could build a blast furnace. We've got the permit for it, we have the money for it. The additional game-changing event is the combination of the natural gas, which is going to be available for decades at very low pricing, both because of market conditions and because of what we've done on our own on the drilling side of things; and the use of those raw materials in an environment of rising raw materials, where we have more control over the process. It never was -- had anything to do with charcoal in Brazil. I don't know where you're getting that from. So this is -- you're looking at this whole DRI thing totally the wrong way, and it is indeed a game changer because just by the sake of argument, if it saves us $50 a ton at 25 million tons, you can do the math. Jim, do you have something you want to say?

Yes. I wanted to note, Michael, that the DRI facilities are not cost centers. They're profit centers. And they have the ability and they are, today, historically achieving profits per ton in the same range as what steel mills can in a strong market that will be even more expanded. In the summer of 2008, our Trinidad DRI facility was making extremely strong margins because of how high the alternative fine scrap and pig iron purchase options work. So they are the profit centers, they make a big return in strong markets. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: Well, that was my point, that the traditional Brazilian source pig iron is going to get more and more expensive because it's not a sustainable supply. They rip down the rainforest.

Well, listen, on that point on its own, Michael, you're absolutely right on. But as it relates to what we're doing and why we're doing it would be other sources of pig iron out there. We buy a lot of pig iron from all over the world, not just from the rainforests of Brazil. And our issue with respect to pig iron was not that it wasn't going to be available or be available at some globally competitive pricing, it's that the lead times required to buy pig iron from around the world strips the supply chain out 6 months, and we got caught in 2009 with a massive amount of pig iron purchased, which would have been fine under normal operating conditions. But in a 30% to 50% operating environment, it was a 3-year supply or more. We wanted to shorten that supply chain up on the raw materials side so, like we have with scrap, we have more control over it and we don't have to get into those kind of extended inventories and supply chains and commitments. And our original plan was to build a pig iron facility in Louisiana and that changed because of the natural gas situation and our experience at using high-quality DRI will ramp up the produce in Trinidad. So we really need to look at this whole integration back into the direct reduced iron business as a game changer for Nucor. Just as -- I know we need to move on because there's other questions, but keep in mind that Nucor's success over the years has been based upon a number of things. One of them is the combination of low cost, plenty available energy, low-cost plenty available raw materials and a very unique culture and how that was applied to technologies that other people weren't in a position to take advantage of or weren't willing to take the risk on. And over time, everything but the culture has lost some of its cost competitiveness. Now we're in a situation where we have an opportunity to strengthen both the raw material side in terms of costs day in and day out, year after year, and also on the energy side with the natural gas situation. And the direct reduced iron developments that we are putting forward here and moving forward will take advantage of both of those things and help us to reestablish a stronger competitive position against most of our competitors, not just here in the United States, but globally.

Okay. We'll move next to the site of Brian Yu with Citi.

Dan, when you look at the hot-rolled coil market where prices popped out at $740 back in February and $600 just a couple of weeks back. Was there at some point in that slide where some of the marginal importers into the U.S. drop off the picture and it was just more competition amongst the domestic mills that was driving prices further down? And I ask that because utilization rates have come up, scrap prices are down, yet there was some rebound in hot band and I'm just wondering where could we see the market settle out, assuming where it doesn't start to track imports again?

Well, there were so many imports that came in that got into people's inventories, got into the -- sitting in warehouses, at the ports. I mean, there was a huge, huge influx of imports including flat-rolled. It got to the point where people who were working at selling flat-rolled into our market, it's $520 a ton for goodness sakes, out of Russia. And we've taken some actions to stop that and we have. But all of that was having an impact on moving pricing down. At the same time, as the pricing started to go down because of the flood of imports, not because of the situation with oversupply from domestic producers here with new capacity that came on at the worst possible time, that pricing dropped down to the $600 level that you're referring to, started to cause people to have second thoughts not only about bringing steel in, but also about continuing to run their operations the way there were. Obviously, RG shut down. Obviously, ThyssenKrupp proved their point that they could get the mill to produce and then they put it up for sale. And so all of those things have worked to modify the supply side in a fairly steady demand environment, and that's why you see the opportunity for some slight moves in pricing right now. Whether they hold or not remains to be seen. Where they go to re-attract imports? The imports got so low in pricing that they were way below where it make any sense, that they were selling stuff to make a profit and were dumping the product. So it's hard to tell exactly how they will behave going forward. The fact that there's been some moderation on the domestic side is supporting, and we'll just have to see what happens with the imports. There's no doubt the world has slowed down. China has slowed down and they're still adding capacity, they're still trying to export around the world. None of that bodes well for any really strong moves in pricing. But hopefully, we'll see some things that allow us to get off the bottom.

All right. I didn't think there would be a simple answer. Okay. The next one is, just sort of your background on the DRI project, are there any notable differences between what you're building in Louisiana versus what you're operating now in Trinidad? I'm just trying to get a sense as we get closer to startup next year, are there certain aspects of it that you have your guys, say, keep an eye on this particular part of the process because it could cause some issues that you may need to debottleneck and work through?

Not really. The kind of things that we're looking at with respect to this project versus Trinidad are all positives. The shorter supply chain, having it in the U.S. and under our control here on the river system, which gives us a lot of flexibility of how to move it, the technology that we're employing will allow us to operate at a much lower cost per ton of DRI produced and with much less emissions. So even though our plant in Trinidad is world class, the opportunity here for the use of this technology that's not the same technology as in Trinidad to improve our operating costs are significant. John?

The only thing I would say is it is larger than our facility in Trinidad so I don't see that as a negative, but it is something that we will keep an eye on. And you asked if there's anything we'll be focusing on, that definitely will be larger, so we want to make sure that we understand the impact of the scale change.

And Brian, one other point is the facility in Trinidad was used. It had been idle for a while, and there were problems with it that we fixed initially. And then we stumbled on new problems as we operated it. And so there's going to be a lower risk of those kind of interruptions. Remember, we had to do the former crude replacement, I think, a year or so ago. So it's going to be better that we're operating it from day 1 and taking care of it from day 1 versus buying something that was idled and operated probably not as well as we would take care of something.

Maybe one other point, Brian. This is Ladd Hall. This is not new technology. It's a proven technology and used around the world, so it's not like we're breaking a new technology. Something tried-and-true and we know that it will work.

Yes. What would be the expected ramp-up [indiscernible] 2.5 million tons?

The ramp-up time, is that what you asked?

Yes.

Pretty quick, like months. And that's what we experienced in Trinidad quite honestly. You got the full capacity with all the issues of having used equipment fairly quickly.

Our last question comes from the site of Rich Garchitorena. Richard Garchitorena - Crédit Suisse AG, Research Division: Yes, I just wanted to touch back on Skyline, and I know it's a great opportunity given your relationship there. But just wondering if there's anything that you're into, your strategy going forward, looking at the fact that you're continuing to build your downstream. Do you see distribution as maybe a bigger piece of the business going forward longer term?

Yes, this should not be construed at all as an indication of our movements in distribution of all steel products, flat-rolled products or what have you. This is a very unique company with a very unique product mix that lends itself to some market leadership positions that have been tied to us from day 1. So it's not -- nobody should take it as, oh this is another example of how Nucor's going to end up buying service centers and things of that nature. That's not the game plan. John?

I think I will just add, you use the word service center. It's clearly not a service center. It's a distributor, and that's the significant difference.

A very highly specialized products that aren't normally distributed around the countries through the normal distribution chain. Richard Garchitorena - Crédit Suisse AG, Research Division: Great. That's what I thought. I just wanted to clarify. My last question, I just noticed that conversion costs in Q2 were slightly higher than Q1. Was there anything specific driving that? And how should we think about it for Q3?

John?

Repeat that question for me, please.

First off, utilization rate is lower. That always drives up costs. He's asking about why our conversion costs were higher in second quarter than first quarter.

The utilization rate was down, that was a factor. We saw -- as you know, we saw scraps start to move down towards the second part of the quarter. There's a lag time on that also.

The only thing I would add is plate had the smallest reduction in sales tons shipped and so that's one of our more value-added products that we manufacture. So that probably ends up weighting the average cost up somewhat as well.

Okay, I'll now turn the call back over to Mr. DiMicco for any closing remarks.

Thank you. Again, I'd like to thank all of our teammates around the company for your efforts on working safely and helping us continue to be profitable in a very, very difficult environment. There's things that we have that are in our control. Our goal is to operate in those arenas as efficiently, as effectively and as safely as possible. There are some things that are outside our control, but are areas that we can have an influence on, and our goal there is to have the maximum influence as possible. And there are things that are outside of our control, and our goal there is to live with that and focus on the other 2. You've been doing a great job of that, and I want to thank you. And also, thanks to all the other parties listening. The questions were excellent, and thank you to our shareholders for your continued support and we will continue to reward you over time with strong returns that we've had all throughout the history of the company. Thank you very much.

This concludes today's conference. You may disconnect at this time.