Nucor Corporation (NUE) Q4 2014 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to the Nucor Corporation Fourth Quarter and Year-End 2014 Earnings Call. As a reminder, today's call 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 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. More information about the risks and uncertainties relating to these forward-looking statements may be found on Nucor's latest 10-K and subsequently filed 10-Qs, which are available on 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 for opening remarks and introductions, I would like to turn the call over to Mr. John Ferriola, Chairman, Chief Executive Officer and President of Nucor Corporation. Please go ahead, sir.

Thank you. Good afternoon. 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: Chief Financial Officer, Jim Frias; and our other Executive Vice Presidents, Jim Darsey, Ladd Hall, Ray Napolitan, Joe Stratman, Dave Sumoski, and Chad Utermark. The entire executive management team would like to thank everyone on our Nucor, Harris Steel, David J. Joseph, Duferdofin, NuMit, Steel Technologies and Skyline Steel teams for a job extremely well done in 2014. You worked hard, worked smart, worked together, and most importantly, worked safely to deliver solid improvements in our performance despite steel industry conditions that remained very challenging. I am pleased to report that full year 2014 net income increased significantly by 46% to $714 million. We also achieved very robust growth in our cash generated from operations. 2014 operating cash flow represents our strongest performance since 2008 demonstrating the strength of our business model. That’s the goal of more than 23,000 team mates continued their excellent work, implementing our company strategy for profitable growth. Subsequent to the last cyclical peak in the steel industry Nucor has invested significant capital in a large number of projects, have improved our core structure and expand our product portfolios to include more value and higher margin profits. In 2014, we began to see some of the early benefits from these strategic investments. There are more to come. In 2015 these investments will enhance our ability and navigate through the current challenges presented by energy industry turbulence and high levels of [indiscernible]. I will now ask our CFO, Jim Frias, to review Nucor's fourth quarter performance and financial position. Following Jim's comments, I will update you on current market conditions and execution of our strategy for the long-term profitable growth. Jim?

Thanks, John. Fourth quarter of 2014 earnings of $0.65 per diluted share exceeded our guidance range of $0.50 to $0.55 per diluted share. This outperformance was largely driven by better than expected results from our sheet mills, joist and decking business and our direct produce iron plant in Trinidad. Newly acquired Nucor Steel Gallatin made solid contributions to our fourth quarter earnings and cash flow even after absorbing about $9 million or $0.02 per diluted share after tax, our purchase accounting expenses early in the quarter. We are encouraged by our fourth quarter performance given the strong seasonal and other influences dampening volumes during the period. Total sales turns to outside customers decline 10.5% in the fourth quarter compared to the third quarter. A strong full year 2014 earnings improvement highlights the value of Nucor’s industry leading product diversity. We are not America’s only manufacturer of all four major steel mill products – bars, beams, plate and sheet. Our steel mill shipments of 22 million tonnes increased more than 6% year-over-year, which is more than double the U.S. steel industry’s overall growth rate. The increase steel mill volume is further leveraged by steel mill metal margin expansion of $32 per tonne. As a $37 per tonne gain in our average steel sales price are based at $5 per tonne increase and an average cost of iron units consumed. In addition to the strong profit growth at our core steel making operations, Nucor’s downstream steel products segment more than double its profitability in 2014. These businesses are benefitting from the initial stages of recovery in non-residential construction markets, particularly strong volume growth which was achieved in our joist, decking, and rebar fabrication products. Nucor’s 2014 earnings improvement was achieved despite significant operating loss at our facility at our DRI facility in Louisiana. Nucor Steel Louisiana’s 2014 operating loss total $135 million or $0.28 per diluted share after tax and $35 million or $0.07 per diluted share after tax for the fourth quarter. Production operations at Louisiana facility have remain suspended since the process gas heater experienced a failure in early November, due to the lead times on a specialty steel pipes that must be replaced. We estimate the plant will not resume operations until late in the first quarter. The process gas heater is not part of the DRI technology utilized by Louisiana, but it is ancillary equipment required to operate plant. The DRI technology stock has worked well and established new world-class quality levels as measured by metallization rates and carbon content. Although Louisiana has been a challenging start up, it will be a major step forward in the implementation of our long term raw material strategy. The recent declines in iron ore pricing and the fourth quarter profits generated by our DRI facility in Trinidad provide further validation to our work over the past decade establishing and growing Nucor’s DRI production capacity. A quick comment of our tax rate can be confusing due to the impacted profits from non-controlling interests. After adjusting our profits belonging to our business partners, effective tax rate was 33.6% from the fourth quarter and 35.3% for the full year of 2014. Nucor’s financial position remains strong at the end of 2014. Our gross debt-to-capital ratio was 37%. Cash and short-term investments totaled more than $1.1 billion at the close of 2014 putting our net debt-to-capital ratio at approximately 31%. Our next significant debt maturity is not until December of 2017. Nucor's strong liquidity position also includes our $1.5 billion unsecured revolving Credit Facility, which remains undrawn. The facility does not mature until August 2018. Nucor is the only North American steel producer to hold an investment grade credit rating. John mentioned our very robust operating cash flow generation in 2014. Cash provided by operations of approximately $1.3 billion comfortably exceeded capital spending of $668 million combined with cash dividends paid to our shareholders of $475 million. In 2014, Nucor’s strong balance sheet, liquidity and cash flow again allowed us to take advantage of attractive opportunities to build long term earnings power. During the fourth quarter, we completed our purchase of all the equity of Gallatin Steel for cash purchase price of approximately $779 million. The acquisition was funded from cash-on-hand and issuance of approximately $300 million of commercial paper. By the end of 2014, we have reduced the acquisition related commercial paper outstanding by half to about $151 million. For 2015, we estimate capital spending will be approximately $500 million. Most of our recent larger scale projects had been completed or are nearing completion. Our capital spending forecast also reflects our joint decision with Encana, our natural gas working interest partner to extend our drilling suspension through the end of 2015. This year’s capital spending for drilling will be very modest and consistent drilling of few wells require to maintain leasehold rights. Depreciation and amortization for 2015 is expected to total about $700 million. Nucor’s financial strength as evidenced by our strong balance sheet and healthy cash flow generation through the economic cycle is the deadlock foundation to our mission of growing shareholder value. From this position of strength, we are able to allocate our shareholders valuable capital to the most optimal or attractive usage at any given point in time. Our financial strength allowed us to invest in capital projects during the severe industry downturns and the long-term returns are most attractive. It allows us to make strategic acquisitions when the right assets at the right price become available in the market. And just as importantly it allows us to reward our shareholders with a steadily growing base dividend, supplemental dividends during up cycles, and opportunistic share repurchases. During the current downturn from 2009 to 2014, our investments totalled nearly $6 billion which is about two-thirds going to capital spending and one-third going to acquisitions. These diverse projects all grow Nucor's long term earnings power by expanding our private portfolio into higher value added offerings that are less vulnerable to imports, by improving our cost structure and finally by building upon our market leadership positions. Growing stronger during downturns is a long tradition of Nucor. It is how we achieve higher highs and profitability from on cyclical beat to the next. With our disciplined approach to capital allocation and success in building long-term earnings power, Nucor is able to reward shareholders with attractive cash returns are based on the dividend, it has more than tripled to the end of 2007. With the increase affected with next month's quarterly dividend payment, Nucor has increased its base dividend every year since it first began paying dividends in 1973 for 42 consecutive years. During the last industry up-cycle from 2004 to 2008, Nucor paid a total of $5 per share in supplemental dividends. And over the 10 year period ending in 2014, Nucor returned a total of $6.7 billion of capital to our shareholders through dividends and opportunistic stock buybacks. The Nucor team’s unrelenting focus remains on continuing to build upon our record of being an effective steward of our shareholders valuable capital. First quarter of 2015 earnings will be impacted by the significant headwinds that developed for the steel industry at the end of 2014. The collapse in oil prices has triggered inventory reductions amongst pipe and tube producers an important customer group for Nucor and the overall steel industry. At the same time, imports are up automatically entering in 2015. Now, on the margin’s side, we are continuing to see favorable trends in non-residential construction markets that will benefit both our steel mills and fabricated construction products. Overall, we expect first quarter 2015 earnings will decrease in fourth quarter to a level slightly exceeding the first quarter of 2014. Nucor will again follow a practice of providing quantitative guidance in the final month of the quarter. Whatever short-term economic and steel industry conditions we face in 2015, Nucor’s unrivalled position and strength will allow our team to continue to execute our proven strategies for delivering profitable, long-term growth. We appreciate your interest in our company. John?

Thanks, Jim. There certainly has been an abrupt change in the near term outlook in the recent weeks. The two headwinds mentioned by Jim, collapse in oil prices and surging imports will certainly challenge our team during the first quarter but that's okay. Our team has faced and overcome challenges and adversity in the past. And we’ll do it again. Energy is an extremely important driver of demand for steel in the U.S. and here at Nucor. Pipe and tube produces serving the energy markets represent approximately 10% of our steel mill shipments. Meaningful production and inventory adjustments for our pipe and tube customers are currently underway. Following this period of marketplace adjustment, we believe the future remains very positive for local energy production in North America. Importantly, lower energy costs over time should support increased U.S. manufacturing activity and consumer spending. That is all very positive for Nucor. The other major headwind is from the renewed surge in import activity. Full year 2014 import of finished carbon steel products are estimated to have jumped to an unreasonable and unacceptable level of approximately 34 million tonnes. That’s an increase of about 37% over 2013 and just under 2006’s record level of 35 million tonnes. Indications are that January 2015; finished steel imports may set a monthly record of around 3.9 million tonnes. These short-term headwinds are significant but the Nucor is extremely well-positioned and navigate through them, and we will. Some key advantages of our Company come immediately to mind. We will benefit from our low and highly variable cost structure. Additionally, we expect continued growth in non-residential construction activity. Iron use, are the largest single-cost item. As previously mentioned, profitability at our DRI plant Trinidad is benefiting from a large decline in iron ore cost. After resuming production from the Louisiana facility we will also benefit from what appears to be an oversupplied oil market over at least the next several years. Continuing on the raw material cost topic, we believe that the U.S. graph is currently significantly over priced versus iron ore and global scrap markets. Based on increased imported steel penetration, slack international demand for US scrap, the strength of the U.S. dollar and moderating U.S. demand for [indiscernible]. We expect scrap prices to fall dramatically in early 2015. During this period of transition, Nucor will continue to utilize our unmatched global supply chain, optimized all raw material costs. Our investments in DRI and then scrap yards as well as access to international raw material markets hears Nucor’s best in class capabilities and profitability and approaching the market for iron units. Non-residential construction markets count for more than half of the end-user demand of Nucor’s products as measured by square footage, U.S. non-residential construction activity increased by 6.7% in 2014. We expect continued improvement in 2015. There is worth nothing that 2014 square footage activity level represents only about 56% of 2007’s peak activity level. So there is plenty of room for additional improvement. Whenever the steel industry and the economy see unexpected periods of turbulence like what we are experiencing now in early 2015, Nucor will do what Nucor always does. We will grow bigger, stronger, and more profitable and we will outperform our competitors. Here are the reasons why Nucor will do this. Our balance sheet and twin cycle cash flow generation is unviable by any of our competitors. Our industry leading product and market diversity continues to grow as we move up the value chain in all of our businesses. The recent expansions in our offerings include normal lines and E-treated plates, wider and lighter sheet steels, additional SVQ and wire rod products and new filing sections. All of these products are less impacted by our rationally priced imports. Our low cost structure will benefit from increased DRI production capacity as our new Louisiana facility completes it start-up process this year. Our commitment to achieve commercial excellence by leveraging Nucor's competitive advantages, such as product diversity and operational flexibility to create more value for and build stronger relationships with each of our customers, and most importantly Nucor’s employees, the right people. They are our company’s greatest asset and our greatest competitive advantage. Here are just a few of their 2014 achievements, implementing our strategy of investing a long-term profitable growth. In the fourth quarter, our Nucor remodel structure steel mills began client production of its new sheet filing sections. The initial output was sold to Skyline Steel, a Thailand distributor and will be installed next month at a construction project in New Jersey. Nucor model expanded its product portfolio to include wider filing sections that are wider and stronger covering more area at a lower install cost. The market with these high value added mix products is currently [indiscernible]. In addition to taking advantage, of Nucorean models world class structural steel manufacturing capabilities. Our customers will benefit from this new domestic solution which will create valuable strategies with the other products and services offered by Skyline Steel. Acquired in 2012, Skyline is the market leader in its business with an unreliable package of engineering support, stocking locations, processing centers and dedicated sales teams. In 2014, Nucor’s Steel Hertford County’s plate mill leveraged their T-trading capabilities to capture a growing share of the market for value-added plate products. For example, in 2014, Hertford County has more than doubled its share of the bridge market during the current steel industry down. Over the same period, shipments to higher margin OEM customers have doubled as a percent of mill’s total volume. These value-added products are also less vulnerable to pressure from commodity influence. Our Nucor steel Berkeley sheet Mills successful start up in 2014of its wide light capital project continued to build momentum. Shipments in the new wide light products totalled over a 120,000 tonnes in the first year. Berkeley now has the lightest, hot rolled gauge capacity capability of any sheet mill in the Southern U.S. market and with a finished product width up to 72 inches. We estimate the size of the new market segment now available to Berkeley to be approximately 4 million tonnes annually. Of particular importance, the upgrade allows Nucor to produce thinner, high strength field grade that could be used to develop light weight automotive applications. In closing, based upon all of these strategic factors and the faith, the absolute faith, I have in our team’s ability to face and overcome challenges, I remain very confident that Nucor's best years are still ahead of us. Thank you for your interest in Nucor. We will now be happy to take your questions.

Thank you. [Operator Instructions] And we will take our first question from Luke Folta with Jefferies.

Hi! Good afternoon.

Good afternoon, Luke. How are you?

Good. First question is on, in the release you talked about what you're expecting in terms of demand in First Quarter and you made some comments around an expectation for significantly lower scrap prices. Just trying to get a sense, if you could give us some more color around what your price expectations are heading into 1Q? What takes into the assumption that earnings should be slightly higher year on year, and also, if you could give us some sense of what your LIFO expectation would be as well that would be helpful.

Let me start with the first part of the question and I’ll turn over to Jim for the rightful comments. Let me start by saying that our first quarter outlook is based upon what we see today in the current scrap pricing. As I mentioned in the script, there are numerous reasons why we believe that that pricing will decline dramatically in the early part of the year, we believe probably in the first quarter. One of the biggest drivers for that is when you look at our steel pricing, our steel pricing has already gone down, hence, the decrease in those products maybe $50 to $100 per tonne. As a result, scarp pricing has to follow that steel pricing down. We see the steel pricing under pressure because of the imports that are coming in as produced with iron ore giving them a cost advantage to the overall scrap market that has said, we believe will adjust. There is certainly lot of reasons we believe that we are going to see the scarp pricing drop significantly over the next couple of months. It got the strength of the U.S. dollar, global scrap markets are low, scrap imports are bound to start coming in and as I mentioned decreased demand for steel scrap as a result of decreased production of steel because of the pressure that we’re seeing both because of the import being produced by the iron ore, and because of the iron the oil pricing as we mentioned in the script. So given these reasons, we believe very strongly that we will see a dramatic drop in scrap pricing in the first quarter. The other thing that I wanted to mention is that we are seeing some impact on lag of the scrap pricing moves due to the inventories in our mill. So we are currently, in our mills higher priced scrap because there's usually a four to six week lead time and a lag time in our use of the inventories. So given all of those reasons, we believe that a: scrap pricing is going to come down dramatically and I want to stress that it’s following steel pricing now. The steel pricing has already come down. Scrap pricing must follow. And I also want to mention that, again, that we based our First Quarter outlook based upon current scrap pricing. Jim, you want to touch upon the LIFO adjustments?

Yes, little more assuming, $25 million LIFO credit for the year, and obviously if metal prices fall as dramatically as we think they could we will end up having a larger credit, just bigger advance but we’re going to start the year off looking -- I think it comes to $6.5 million in expense in first quarter for a 25 million annualized base.

Okay, so just to be clear, whenever the scarp move that we could see in February, I think last update, some of the people we were talking to were looking for down 30 to 50, maybe that’s changed over the past week or so. But your expectation now would be, your guidance were based on today’s scrap price before the down movement in February or that would be included in that?

Luke as John has explained, we tend to have scrap in the ground and so when we made the forecast we are assuming that the benefit of foreign scrap price because we don’t know if it’s going to fully come through in February or late in the March that will just start to see some of the benefit in March and so if we see it sooner, our results could be better. But our forecast probably is a big concern in terms of we seeking any benefit from scrap prices if that helps. We will like here to specific numbers and I frankly don’t have that it’s a bottoms up forecast for every business unit, individually making a forecast. Luke Folta - Jefferies & Company: Got it. That's helpful. Thank you. And then just the second one, in terms of your energy demand, your shipments. John, I think you said it was 10% or so of your total steel shipments. Can you give us some sense of how that breaks out by product from flat-roll versus SBQ? And anything in terms of the magnitude of how that's changed just over the past month or so, or in the First Quarter, would be very helpful, thank you.

The vast majority of the horizontal sheet products are about three quarters of our shipments not of sheet products maybe 75% to 80% of a small amount that comes out of SBQ. As I mentioned we've seen a significant adjustment by our customers to produce it, pipe and tube that's into the oil business. They are adjusting their inventories and we will see an impact upon our order book. But I do want to stress as I mentioned several times in the script, the investments that we’ve made over the last several years in diversifying our products and our markets will help us get through this period. Just as one of [indiscernible] of information when you look at just in 2014 is about 700,000 tonnes of products that is either new or value-added product or product we can now supply into markets and we could not supply into previous to these investments. So although we’re going to be taking a hit on the oil and gas, no doubt about it, 10% of our shipments are linked to that. We believe that through the investments that we've made in diversifying our products will mitigate that impact. I'll also stress as I mentioned in the script that 50% of oil products go into non-residential construction and we expect to see continued improvement in that market. Luke Folta - Jefferies & Company: Thanks for the color.

And we will take our next question from Matt Murphy with Union Bank Switzerland.

Good afternoon. The question is just on, I guess your order book -- I mean how do you, what sense are you getting, are customers holding off waiting for the market to find a bottom or are you finding pretty healthy inquiries out there?

Other than the pipe and tube that's oil and gas related, the rest of the markets are okay. Now certainly there's a lot of doubt about what’s going to happen, both on pricing, but I think more particularly on what the customers view might happen with scrap pricing which is why I am once again emphasizing that it’s an unusual event where we are going to see scrap pricing following steel pricing down, typically it’s reversed. This time because of the pressure from imports and from our competition that is ore based, we are seeing the inverse effect take place. Steel pricing has gone down before scrap pricing. We believe that quite, as I mentioned scrap pricing will follow it down and it will happen pretty quickly and pretty dramatically, but again it is following the steel pricing down. Not the other way around. And I think our customers understand that and so as they are not expecting large price decreases as scrap continues to rebound because we've already seen the impact of that on our pricing. One other, important that I mention, in terms of just booking as a general statement. We talked about imports being high and although we’ve been successful in some of our trade cases on rebar and hot-rolled coil and wire rod, there's still a lot of imported steel that's in inventory that is impacting our order book. We’ll see that from the next couple of months.

Sure. That's helpful. And then when you talk about repeatedly your strategy of going into higher end product, how are you finding competition from imports in the higher end categories? And if that remains a better business for Nucor than for imports, is it fair to say maybe we would see imports continuing to attack in some of the lower end applications? So maybe you don't get the volume growth, but you still get the margin growth from the higher end products? Maybe if you could just talk through how that might look, thanks.

Well clearly, the higher value products have a greater resistivity to imports as well as having higher margins, so you kind of get a double benefit of that. In terms of your comment about we expect to see volumes not growing, I would not agree with that statement. We expect to see our volumes grow the higher value added products just as we continue to develop them being more and more market share. And it’s always been Nucor’s policy, we don’t give up on the lower commodity products. Okay. We're in this game across the full spectrum. We are just as interested in maintaining our market share in rebar as we are developing the advanced high strength steels. We'll grow in all of the products that are out there. As we’ll not concede market share easily to be our competitors or from [indiscernible] importing pressure will continue [indiscernible] in other words, we will gain higher ground without giving up what we already have. Does that answer your question?

Perfect, thanks.

And we will take our next question from Evan Kurtz with Morgan Stanley.

Good afternoon every one. Question for you, I am guessing Jim, you’re probably following this literally in the playing field act that Senator Blair introduced last December and I was just wondering if you kind of walk us through what that might actually mean for the steel industry? How could that benefit Nucor and this might be asking too much but you're handicapping whether such legislation might be able to make it to Republican Congress?

I am going to ask our political guru, to answer that question to the level that we can answer it.

If that may the equation, it’s going to be good for us but something that’s very difficult to get through the system. So I really don't want to do answer it on this call but I'd be happy to talk to you afterwards.

Okay, so you will let me call after the --

Give us a call later in the day or tomorrow and we will give you some more color on that.

Great. I will definitely follow up. Maybe I'll just ask about the trade case on the coated [indiscernible] products. Where does that stand right now, know it's hung up a little bit because of the concerns about the injury determination. With pricing rolling over as much as it has over the past quarter, are we getting a little bit closer to the point where we may actually see something pretty soon?

I am not going to answer that specifically. I will say that like a general statement that we will be proactive, and we will be aggressive. The level of import is infringing at which absolutely ridiculous levels, and we believe that there's a potential for action coming up. We're monitoring the situation very closely, and that we will be aggressive. We look back at the last couple of cases and the success. And we’ve had all those cases. We had the rebar case against Mexico. We were very successful in that case, and we saw rebar imports from Mexico reduced by about 70%. We've seen wire rod, the case against China, result in virtually eliminating the Chinese wire rod from the US market. And finally I would mention the suspension agreement, the elimination of suspension agreement for hot rolled coil, against Russia. And we’re seeing significant, and we anticipate continuing to see significant reductions in Russian hot rolled coil coming into the country. So based upon those recent successes, we’ve got pretty good about our chances going forward. I am going to leave with that. We’ll monitor it closely. We will be aggressive and we will be proactive in pursuing cases when it is appropriate.

And we will take our next question from Sal Tharani from Goldman Sachs.

Good afternoon. A couple of questions. First on the end markets, more than 50% is non brand 10% energy; anything big you want to mention after these two?

I would mention, as we mentioned several times in past calls, automotive. We’re looking at about 10% of our automotive qualified steels will go in today, 10% of our steels that are qualified steels will go in today, 10% of our steels that are qualified going to automotive. We're shipping into that sector. If we look at our total tonnage, about 5% of that will be going for automotive today. Usually we don’t normally count structural steel beams and not much of that will be going to the automotives. We don’t factor that in. But if you look at what is possibly going to automotive, we’re shipping about 10% of that flat-rolled SBQ into automotive today. SBQ has just picked up a little bit in SBQ over the last year. It might have bumped up about 11%. But again, flat steel represents the vast majority of product that we're putting into automotive factory.

And you postponed drilling this year. How long can you do that? Is that part of contract? Or do you pay if gas prices to remain low? Do you have ability to continue postponing it?

We could continue to postpone it as long as we and our partner Encana agree to do that. And as we've mentioned several times we have a great relationship with and we constantly communicate with them. We made a decision this year to suspend drilling other than the few wells that are necessary to maintain the results. And we will take a look at the situation again during the course of the year. If we should see a sudden increase, sporadical increase in pricing, we'll begin drilling and if we don’t we will suspend it again. The key thing to remember about this agreement is that the gas is in the ground. It’s not evaporating. It’s not going anywhere. It’s there waiting for the right, the optimum opportunities for us to take it out of the ground.

Are you hedged for gas this year?

We are partially hedged for gas. It's a percentage of production at the Louisiana plant, which we're using, obviously at our Steel Mills that are operating. Q – Sal Tharani – Goldman Sachs: Great. I'll get back in the line with some more questions. Thank you.

And we'll go next to Brian Yu with Citi. Brian Yu – Citigroup: Great, thanks. I want to go back to the comment you made earlier about the scrap prices. And as I think about it, at first it is going to start with the scrap yards. And I was wondering if you can share with us, what's happening with the buy prices that you're getting at the yards that you operate? How much are those down say as you go into February?

I'm not going to give specific numbers, but I will say that they are down significantly and we expect that and we’re reacting properly to it. But I'm not going to give obviously any specific numbers. Our competitors would love to hear that number. Brian Yu – Citigroup: Okay. On the energy side, obviously that's having an impact. Can you give us a sense of how much have orders dropped so far in the year versus, say, what you were seeing back in 4Q? And is there any backlogs when you ship to the OCTG manufacturers that you're working off of now?

Yeah. There is a small backlog that we are working all the way through. We are working with our customers. We understand the situation that they face and the inventory problems that they're looking at. So, we've been working with them on that. As I said before, we've seen significant drop in the orders for our flat-rolled product going into oil and gas. Our other markets remained very strong. Heavy truck is still looking very good. Automotive is still looking very good. So, there are areas where we feel confident that our order book remains strong. We have seen a significant drop in our orders for specifically pipe and tube that goes into the energy markets. Brian Yu – Citigroup: Okay, can I get one more in?

You got one more that's it? Brian Yu – Citigroup: All right, thanks. Gallatin, I think roughly half of the shipments go into the energy markets. Are there other end markets at that facility?

I don’t know. I apologize, but I've got to correct you right off of the bat. It's true that about half of their product is the pipe and tube. But the vast majority of that goes into structural tubing and we’re about 10% of Gallatin products, shipments going to energy related pipe and tube, which is similar to our number here in Nucor.

We will go next to Timna Tanners of Bank of America Merrill Lynch.

I wanted to just ask you about there's some talk about blast furnaces, iron capacity in response to the level of import and the destocking on energy tubular as you mentioned. Just two questions I guess, one is how long do you think this destocking might last? And secondly, would Nucor be among those that's pre-emptively idling some capacity in response to a large level of import?

Well, it's hard to predict how long this is going to last. That's somewhat of a function of how long and how deep the oil pricing situation goes on. And you get all kinds of predictions on that. It’s frankly, as far as I'm concerned, if anyone guesses at this point and entirely up to the producers and how much oil they start pumping out of the ground. But currently, if we were to remain at today’s levels of oil pricing, and we look at the inventories we will be looking at probably around six to seven or eight months of inventory on the ground at today’s usage. Now having said that, there is always a stop to a system when something has a radical change and we see that happening today. Big change people throughout the entire supply chain are caught with inventory on hands, it’s a radical, it’s a major change, major reduction in the orders. Even then there will be a period of time when all of this works out and starts flushing through. And we'll begin to see the orders for pipe and tube going to energy returning to a new normal level, albeit less than where it was. But there will be some level greater than wordings today, but less than where it was a year ago. The other thing that I would mention about that is that you asked about shutting off, reducing our capacity. As you know, Timna, our furnaces are extremely flexible. We make that decision on a weekly basis. We want our mills to fill orders and giving our wearable cost structure and the flexible schedules that we have we can react extremely quickly that any changes whether or not we see some improvement in that energy market quicker than we anticipated or whether we see enough tick in one or the other markets we stand ready to be very quick in responding to any changes in the market. Again when you compare our operations to those of the blast furnace, clearly once you shutdown a blast furnace it's down for awhile and we have much greater flexibility. We don’t need to shutdown an EAF. We can simply skip a couple of heat, so skip a couple of shift and come back in a couple of days if we see the order book warranting that.

Okay, that's helpful. If I could, I also just wanted to see if you could give a little bit more color on the plate and SBQ markets, given that they have some energy exposure, and just haven't heard as much about them lately.

We haven’t seen much of an impact on either the plate or the SBQ markets. Now certainly there is some small amount, but a lot of our plate that goes into what we would call energy might go in to wind towers and other applications that really are impacting this heavily by the oil price going down. Because I mentioned earlier SBQ does, so a little bit into that. It’s been growing. We've been focused on that as a growth area, but it's not that heavy for us. When we see the bigger impact frankly, on our order book in both SBQ and, particularly in plates is due to the imports. So we see some impact due to the oil pricing but frankly a larger impact due to imports.

Okay, thank you very much.

Timna, one more thing that I might mention that, you mentioned specifically about the plate market. When you think about some of the infrastructure, although it's coming way too slowly, there are some infrastructure repairs being made particularly in the bridge. And there's a couple bridges going on. Some bridge fabrication, bridge repair and our plate business is doing well in that area. So we’re seeing some pickup in our plate order book as a result of general infrastructure and particularly bridge fabrication.

We will take our next question from Michael Gambardella with JPMorgan.

I have a question just about this whole change in the raw material market share, particularly with the stock move and the lack of the scrap move, I guess relative to iron ore in past six months. But when you look forward, I would think in the next few months, it will be a great opportunity to gain share particularly on the sheet market not to close down your production because if you’re not ready, you're going to become the low cost producer in market for sheet. And when you look at the sheet market, it’s about two thirds iron ore integrated based on about a third, even the rest of mini-mills on the sheet side and you've been suffering from a relative cost disadvantage because scrap didn’t come down relative to iron ore in the last six months and now it is. So, going forward you've kind of seen the worst scenario. You relative to integrated [Licax] [ph] and AK. But isn't there a great opportunity to pick up some share as your costs drop and their costs basically don't?

I’ll say that we have seen the worst of the times relative to opposition because we do believe scrap is coming down. I will point out that we fared a little bit better on our cost side relative to most of EAF-based competitors because of our DRI situation. We call that with the iron ore pricing going down, our DRI cost of production has been going down also. And so we've seen benefit at our Trinidad facility and we will see a benefit as our Louisiana facility comes back into line. So, yes, we believe we've seen worse of the times. Okay. Yes, we see scrap pricing going down and we will benefit from that. Yes, we played better than our other competitors in the EAF arena because of our DRI capabilities. I'm not going to [indiscernible] what all that means going forward. We will stay competitive. We will take care of our customer needs. We will continue to supply our customers with high quality, fairly priced product on time with great service. And we will see how it plays out in the market place. Michael Gambardella – JPMorgan: Okay.

And we will go next to Andrew Lane with Morningstar

Given the significant declines in both iron ore and natural gas prices since this time last year, do you expect to achieve profitable DRI production in Louisiana shortly after the facility is restarted? Or will it likely take some time to ramp up production before your output is profitable?

Well, it will take some time to ramp up our production and it will also take some time to work through the iron and higher cost iron ore inventory that we have on the ground, iron ore that was purchased last year, that we have now worked all way through because the facility has been out of commission. So it will take time to work through that inventory and it will take some time to get up to full production. But we expect to see the Louisiana facility running well and profitable by the end of the ear.

Okay, great. And then to change gears, you mentioned that the energy end market represents about 10% of your steel mill shipments. Could you provide a split as to how much of that total is directly associated with the shipments for oil and gas drilling projects, and how much is associated with shipments for other energy related applications, such as power generation?

We don’t break it down that definitively. I would say to you that probably, if you look at the energy pipe and tube as opposed to other oil and gas applications, you're looking at probably 90% going directly into the energy pipe and tube that would be associated with drilling, maybe 10%, and that would be rough numbers here, maybe 80:20, 90:10 somewhere in that area.

Okay, that's helpful, thanks. If I can just ask one last question. Would you be able to provide an update as to how the integration process is going through the Gallatin Steel operations? And are the incremental 2015 benefits you initially expected still intact?

I would love to do that actually. The integration is going extremely well. We expected that it would go well. The team there is a great team and management style. Their culture is very similar to our Nucor culture. So we anticipated a smooth integration. But I have to tell you what, its gone even better than we anticipated. Those guys is doing a great job. The financial team there, I’d give a call out to them, they very-very quickly integrated into our financial programs. I am surrounded by some financial people in the room here and they are all nodding their head, saying what a great job, the Gallatin financial team did, in getting up to speed very quickly, converting the systems, integrating the systems. I would also make that statement relative to the commercial team. They integrated extremely well with our commercial team. We're enjoying the synergies that we’ve anticipated from that and it’s going great.

And this does conclude the question and answer portion of today’s conference call. I would like to turn the call back over to John Ferriola for comments and closing remarks.

Well, thank you. Let me just conclude by saying thank you to our shareholders. We certainly appreciate your confidence and your support. Thank you to our customers. We appreciate your business. I want to say thank you to all of my Nucor teammates for creating value for our customers, generating attractive returns for our shareholders and building a sustainable future generating a attractive returns for our shareholders and building a substantial future for all of us. And most importantly thank you all for doing it safely. And for everyone on the call today, thank you for your interest in Nucor. Have a great day.

And this does conclude today’s conference. We thank you for you participation.