Nucor Corporation (NUE) Q3 2015 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to the Nucor Corporation Third Quarter of 2015 Earnings Call. As a reminder today's call is being recorded. Later we will conduct a question-and-answer session and instructions will be given at that time. Certain statements made during this conference will be forward-looking statements involving 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 assurances that future events will not affect their accuracy. More information about the risk and uncertainties relating to these forward-looking statements may be found in Nucor's latest 10-K and subsequently filed 10-Qs, which are available on the SEC's and Nucor's website. The forward-looking statements made in this conference can speak only as of this date, and Nucor does not assume any obligations to update them, either as a result of new information, future events, or otherwise. 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. John J. Ferriola - Chairman, President & Chief Executive Officer: 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 your excellent work taking care of our customers and implementing our company strategy for long-term profitable growth. Your hard work in these challenging market conditions is paying off. First I will ask our CFO, Jim Frias, to review Nucor's third quarter performance and financial position. Following Jim's comments I will update you on the execution of our strategy for long-term profitable growth. Jim? James D. Frias - Chief Financial Officer, Treasurer & Executive VP: Thanks, John. Third quarter 2015 earnings of $0.71 per diluted share exceeded our guidance range of $0.45 to $0.50 per diluted share. Third quarter results included a LIFO credit that was approximately $0.11 per diluted share larger than anticipated in our guidance for the quarter, and a $0.03 per diluted share non-cash gain related to a correction of deferred tax balances. Excluding LIFO and the tax related gain the third quarter outperformance resulted from better than expected results for the month of September at our steel mills and downstream products segments. We are benefiting from the effective execution of Nucor's channel-to-market strategy and our ongoing investments to expand our offerings of value-added products. We are successfully expanding into these higher margined offerings using more demanding and import resistant applications, while at the same time maintaining our position as the low cost producer across our product portfolio. The third quarter of 2015 performance of our raw materials segment included an operating loss at our new DRI facility in Louisiana of approximately $28 million, which included a $7.7 million net charge related to the write-off of the two remaining storage domes at the facility. That compared with a second quarter operating loss of about $20 million, which included the benefit of a vendor product warranty payment of approximately $10 million. As expected Nucor Steel Louisiana has now consumed the remaining higher cost iron ore inventory acquired in 2014. In addition to continuing to produce DRI at world-class quality levels, our Louisiana team has realized significant improvements in yield, facility uptime and conversion costs. Nucor's DRI production capability in Louisiana and Trinidad puts our company in an unrivaled position of flexibility and optimizing our raw material costs through the cycle. A quick comment of our tax rate to adjust for the impact of profits from non-controlling interests. Excluding profits belonging to our business partners and the $10.2 million non-cash gain for correction of deferred tax balances, the effective tax rate was approximately 29% for the third quarter. Nucor continued to generate very robust operating cash flow in extremely challenging steel market conditions. With a highly variable and low cost structure we benefit from significant reductions in working capital during downturns. That was the case again in the first 9 months of 2015 with cash provided by operations of approximately $1.8 billion, a dramatic increase from the year ago period's operating cash flow of $926 million. Nucor's financial position remains strong. Our gross debt to capital ratio was 36% at the close of the third quarter. Cash and short-term investments totaled approximately $2 billion which compares with total debt outstanding of $4.4 billion. Our next significant debt maturity is not until December 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 of 2018. Nucor is the only North American steel producer to hold an investment grade credit rating. Capital expenditures totaled $269 million for the first 9 months of 2015. We estimate full year 2015 capital spending will be approximately $400 million. Most of our recent larger scale organic investments have been completed or are nearing completion. Depreciation and amortization for 2015 is expected to total about $700 million. In September Nucor's Board of Directors authorized the repurchase of up to $900 million of our company's common stock. This replaced a repurchase program that had been in place since 2007. The timing and amount of repurchases will depend on market conditions, share price, applicable legal requirements, and other factors. The Nucor team places the highest priority on making sound capital allocation decisions that continue our long-term history of being effective stewards of our shareholders' investment. Earnings in the fourth quarter of 2015 are expected to decrease compared to the third quarter of 2015, due to continued deterioration in global steel markets. A slowing economy in China is causing further global overcapacity and resulting in significant levels of imports into the domestic market. The performance of our downstream product segment is expected to decrease due to typical fourth quarter seasonality. We expect slightly lower performance in the raw materials segment due to lower scrap and metallic commodity prices. We are encouraged by the ongoing gradual improvement in non-residential construction markets and the strength in the automotive market. We are confident that Nucor's significant competitive advantages and highly adaptable business model will allow our team to continue to execute our proven strategies for delivering profitable long-term growth. We do appreciate your interest in our company. John? John J. Ferriola - Chairman, President & Chief Executive Officer: Thanks, Jim. Typical words used to describe current steel market conditions range from bleak to dismal. However those words in no way describe the attitude and outlook of the Nucor team. Even better those words also do not describe the performance of any of my teammates in the third quarter's extremely challenging environment. At Nucor we remain optimistic, determined, and focused. Nucor's long-term success has always been driven by our team's unrelenting focus on a simple strategy. Nucor capitalizes on its unrivaled position of strength to gain profitable market share in our core businesses of steel and steel products. In short we work on what's under our control. Anchoring the strategy and its execution is Nucor's business model. Its strength and adaptability is highlighted by a number of powerful building blocks. They include our culture, our robust balance sheet and cash flow generation, our low and highly variable cost structure, our flexibility and reliable production capabilities, our product diversity, and our leadership positions that we hold in many of the markets we serve. Put together these competitive strengths provide Nucor with a powerful platform for delivering value to our customers. Challenging market conditions, as we face currently, only serve to increase the opportunities to add value and grow our long-term relationships with our customers. What we call Nucor's five drivers to profitable growth highlight where we are focusing our energies to build long-term earnings power and provide our shareholders with attractive returns on their valuable capital. They are, one, enhance our position as a low cost producer. Two, achieve the market leadership position in every product line in our portfolio. Three, move up the value chain by expanding our capabilities to produce higher quality, more import resistant products. Four, expand our downstream channels to market to increase our steel mills base volume load, especially in weak markets. And five, achieve commercial excellence to complement our traditional, operational strength. Our third quarter performance provides strong evidence that our strategy of investing through the downturn is already paying off. Rather than being stuck in a defensive mode, fighting to survive, the Nucor team is on the offensive and growing stronger. The examples are numerous. Let me review a few of them for you. Through the first 9 months of 2015 our rebar and merchant bar mills delivered year-over-year earnings improvement, despite the challenges of high imports and less than robust capacity utilization rates. The keys to their success are clear. They have built market leadership positions. Equally important they have established strong channels to market through Nucor's downstream joist, decking, rebar fabrication, cold finish bar, and fastener businesses by providing our steel mills the opportunity to earn a base level of volume. Our downstream vertical integration into value-added steel products significantly enhances the through the cycle profitability and flexibility of Nucor's core steel making business. Additionally the downstream businesses are attractive profit generators for Nucor as well. All three major fabricated construction products – joists and decking, fabricated rebar, and metal buildings – achieved very strong profit growth year over year in the third quarter and the first nine months of 2015. I'm pleased to report that our Vulcraft, Verco, joist and decking group set a single month profitability record in September. More importantly both our Vulcraft, Verco group and our metal buildings group achieved record performance for the third quarter of 2015. The improved results of our fabricated construction products group is particularly impressive when you consider the state of the overall construction (13:31 – 13:36) market. Forecasted U.S. non-residential construction activity for 2015, as measured by square footage, represents only about 60% of 2007's peak activity level, so there's plenty of room for additional growth. I would like to congratulate and thank our teammates for their hard work, reducing costs and providing world-class quality products and services to our customers. Our beam mills also delivered attractive year-to-date earnings growth, while facing high import levels and low mill capacity utilization. Nucor's structural steel group's success is driven by a potent combination of its market leadership position, strong channels to market throughout our independent wide-flange beam fabricated partners, our Skyline Steel piling distribution business, and new product introductions that continue to move us up the value chain. After completing last year's $115 million sheet piling product expansion project, our Nucor-Yamato mill is now enjoying strong marketplace success with its new, wider piling sections. These value added products are lighter and stronger, covering more area at a lower installed cost. Our Nucor-Yamato team is aggressively going after this market, which currently is largely supplied by imports. Our goal over the next several years is to grow our wider piling sections annual volume to 100,000 tons with these value added tons generating above average profitability. Last month, Nucor-Yamato announced another project to expand its value-added offerings, a $75 million quench and self-tempering process will be installed with commissioning expected during the second half of 2016. This will give Nucor-Yamato the capability to produce A913 structural sections with a high-strength, low-alloy grade chemistry that provides excellent weldability, while achieving good toughness, even at low temperatures. Common applications include gravity columns for high-rise buildings, long-span trusses for stadiums and convention centers, and for all projects where seismic design is a critical factor. These A913 beams allow the use of lighter foot weights, which reduces the weight and cost for the builder. That makes steel even more competitive versus concrete and wood. The low-alloy grade chemistry also enhances our position as a low cost producer of beams. As the sole North American supplier of high-strength, low-alloy beams, Nucor-Yamato will further enhance its market leadership position in wide-flange beams. Nucor's focus on our drivers to profitable growth and resulting strategic investments are paying big dividends in our other businesses. This is particularly evident in the markets that are under the greatest pressure from the flood of imports and other challenges. Our Berkeley County, South Carolina sheet mill achieved very solid third quarter and year-to-date profitability in what can only be described as horrific flat-rolled market conditions. The Berkeley team is capitalizing on its investments in vacuum degassing, combined with upgrades last year to its caster and hot mill. The mill's performance is being driven by its very diverse product mix, technical capabilities, and commitment to commercial excellence. As we have discussed on previous calls, Berkeley now has the lightest hot-rolled gauge capability of any sheet mill in the southern U.S. market and with a finished steel capability of up to 74 inches. New products from the wide, light modernization are allowing us to gain new business in a range of end use markets, including metal buildings, railcars, water heaters, automotive, heavy equipment, and water transmission pipe. Despite severe pressure from imports and demand weakness in several key end use markets, Nucor's engineered bar mills remain profitable. We are moving aggressively to utilize our recently expanded range of production and inspection capabilities to grow profitable market share in the SBQ and wire rod markets. Our Memphis mill was recently awarded automotive crankshaft business that is a direct result of its quality inspection investments made since 2012. This week, Memphis announced another improvement, the very cost effective acquisition of a continuous quench and temper line with a separate annealing furnace capable of processing bar products from 2.5 inches to 11 inches in diameter. The addition of heat treating capabilities will enable Memphis to grow in a number of markets, including energy, heavy equipment, service centers, and automotive. The automotive market continues to be an attractive growth opportunity for Nucor. Nucor's shipping rate into the automotive market increased by 20% in 2015 versus 2014 to a 1.4 million tons per year rate. Particularly encouraging is the volume of business that Nucor is being awarded on future automotive platforms. The automotive companies are more and more appreciating the value of Nucor's reliability, sustainability, and our financial strength. Our portfolio of light weighting, advanced high-strength steels is also attracting a lot of interest. We remain optimistic about reaching our 2 million tons annual goal in the next few years. Finally, our Darlington, South Carolina, facility's wire rod rolling mill continues to grow Nucor's market share in the wire rod market. Year to date rod shipments through the first 9 months are up 11% compared to 2014. Darlington's wire rod growth is also allowing us to more efficiently utilize the capacity at our other bar mills producing merchant bar and rebar products. Since I have mentioned several times the challenging market conditions faced by all of our businesses, I will share my thoughts on what is by far the biggest factor driving the weakness. Illegally traded imports continue to have a significant impact on the U.S. steel industry. The underlying issue is global steel making overcapacity, resulting from the trade distorting practices of some governments. Steel imports into the U.S. market remain at historically high levels. The import levels are depressing the capacity utilization rates of the U.S. steel producers and continue to account for one-third of the U.S. market. In the first 8 months of this year China's global steel exports surged 27% to 72 million tons. They are on track to exceed 100 million tons, which is greater than the total U.S. steel production last year. Steel products from China are flooding into markets around the world, creating a domino effect as countries look for markets for their steel products. The massive increase in China's steel exports are provoking a wave of trade actions across the globe, including Europe, South Africa, Mexico, and India, as steel producers fight against the illegally subsidized steel imports being dumped into their markets. As these nations continue to successfully protect their markets from illegally traded and subsidized Chinese steel products, more of those products are being dumped into our market. Recent decisions in several trade cases have been positive for the U.S. industry. The International Trade Commission has made preliminary determinations of injury in the cold-rolled, hot-rolled, and corrosion resistant sheet steel trade cases, allowing the investigation in all three cases to proceed. Nucor will continue to assess market conditions in other product areas and aggressively pursue cases when appropriate. Our fight against illegally traded steel imports is essential to meeting our responsibility to be an effective steward of our shareholders' valuable capital. These are challenging times. But for a company such as Nucor, one that is in a unique position of strength, these are also times for opportunistic action. And that is exactly what I see throughout Nucor. The right people focusing their unrivaled energy level and sense of urgency to achieving our goal of profitable growth. I have never been more confident that Nucor's best years are still ahead of us. Thank you for your interest in Nucor. We would now be happy to answer your questions.

Thank you. We'll take our first question from Evan Kurtz with Morgan Stanley. Evan L. Kurtz - Morgan Stanley & Co. LLC: Hi. Good afternoon, everyone. John J. Ferriola - Chairman, President & Chief Executive Officer: Good afternoon. Evan L. Kurtz - Morgan Stanley & Co. LLC: Hi. Congrats on a strong quarter. I think you kind of beat my number on pricing alone. Actually the volume number was a little bit weak. So it was – it kind of let me to believe that perhaps you're taking a pretty disciplined approach about which steel you actually want to sell into the market at this point and perhaps you may be walking away from some lower value sales that are head to head with imports. So just kind of wanted to confirm that. And get a sense about how you think about selling into a weak market like this? And what that's doing to your mix? And then how does that kind of play into how you see operating rates in the fourth quarter? John J. Ferriola - Chairman, President & Chief Executive Officer: Well let me start by saying you hit the nail on the head with your analysis. We mentioned during my earlier comments that a key part of our strategic plan is to continue to grow market share in the higher quality, higher margin, more profitable products. And that's exactly what we've been doing. So, yes, that has some impact on our total output. The higher quality products, although they are more profitable, do tend to run slower on our mills. So that has some impact upon the amount of tons that we ship. But you're spot on. We're looking hard at those products that we believe bring higher margins, higher profits to our company. And that are also more import resistant. Given the overcapacity in the world today, we believe that that's an important element of our long-term strategy. Evan L. Kurtz - Morgan Stanley & Co. LLC: Great. And maybe just a question on trade. I've heard a couple conflicting views on how the process works. And I just wanted to try to clarify this. But obviously over the past couple of months in particular we've really seeing seaborne steel prices just absolutely get crushed. And clearly that data would be good to have in these trade cases as far as proving dumping. Is there an opportunity for the mills to go back and add some of this data before the final rulings come out at some point next year? John J. Ferriola - Chairman, President & Chief Executive Officer: There absolutely is. In fact in some cases, as is the case with the rebar, we were not at all happy with the determination on the tariff that was applied to the product surging into our country from Turkey. And we're considering strongly going back and appealing that decision. And obviously we will use the pricing data that you just mentioned as a strong component in that appeal. So yes, we can use that information that's out there today. And we will use it effectively. And I would just add to that that we spoke a little bit in the past about the recently passed legislation that strengthens the trade remedies that are available to us. And frankly giving us more effective tools for fighting against this illegally trade products. And we're really pleased with the way that that came out. We're very appreciative to the administration and to Congress for making that happen. And those new regulations, those new guidelines will be applied to the trade cases that are in effect, going into effect now. The corrosion-resistant, the hot-rolled, and the cold-rolled will all be impacted by the new trade remedies that are currently in effect. And as a result we're optimistic as to the outcome of these. We think we have very strong cases, and we expect to have very positive results. Evan L. Kurtz - Morgan Stanley & Co. LLC: Great. And just to clarify that just one more time, sorry if I'm being a little bit dense here. But the data that's coming out today, would you have to wait to appeal if you wanted to include that? So after the trade case is finalized. Or can you actually get that in maybe between the preliminary and the final ruling a little bit sooner? John J. Ferriola - Chairman, President & Chief Executive Officer: Well let me be clear. I might have confused the issue there for a minute. I was speaking in the case of rebar where there was a determination, we will be able to use that pricing data as we go back into the appeal. In the cases of cold-rolled and hot-rolled and corrosion-resistant we will be able to use that pricing data in these current cases. We will not have to wait for a determination and then use them in an appeal. They can be entered into the case as we press it forward. Evan L. Kurtz - Morgan Stanley & Co. LLC: Very clear. Thank you very much. John J. Ferriola - Chairman, President & Chief Executive Officer: Not now? Okay. Thank you.

We'll take our next question from Matt Murphy with UBS.

Good afternoon. Maybe just a follow-up on the mix question there. So in particular I noticed cold finished was fairly low relatively to where you've been at in Q3 in past years and the same with plate. Just wondering if you can share any color on that? Is that specifically choosing not to compete on price? Or is there demand weakness? John J. Ferriola - Chairman, President & Chief Executive Officer: In those two instances you just gave it's more of a case of the demand is frankly still pretty good relative to last year. Our demand across all of our products is about consistent, maybe down 2% or 3%. The issue that we're struggling with particularly on plate is the massive amount of illegally traded, unfairly traded products coming in from many countries, particularly Russia is one that I would mention in particular. So it's an issue of excessive supply as a result of imports. There is a little bit of a demand decrease when you look at agriculture and in construction using heavy plate. So there's a little bit of a demand impact. But the real issue on plate without a doubt is the supply and the oversupply as a result of the imports.

Thanks. And then just a follow-up on the structural pricing. That was another area I noticed that had come down a bit faster in Q3. How are you seeing structural pricing going forward? Is it sliding? Or do you think you can keep it stable? John J. Ferriola - Chairman, President & Chief Executive Officer: We think structural pricing going forward will be fairly stable.

That's easy. Okay. Thanks. John J. Ferriola - Chairman, President & Chief Executive Officer: Okay. Thank you.

We'll take our next question from Matthew Korn with Barclays.

Hi. Good afternoon, everyone. John J. Ferriola - Chairman, President & Chief Executive Officer: Good afternoon.

So I'm wondering, are there any customers – any buyers from whom you've received orders for maybe the first time in a while? Who are shifting away from imported steel in anticipation of the effect of trade cases? And on the flipside are there any buyers out there who have told you, right now we're good. Inventories are okay. I'm seeing this gap down in scrap prices and I kind of see to – I need to see where we're going to shake out coming into the New Year? John J. Ferriola - Chairman, President & Chief Executive Officer: Well you've asked two questions. And the answer to both of them frankly is yes. We are seeing customers coming back to us, who are recognizing that right now their inventories are a little bit bloated. So we don't see them pouring in right now with new orders. But we are hearing from them that because of the trade cases and frankly because our pricing has become much more competitive relative to imported pricing, that they have not placed the orders for imports to the same level that they have in the past. And as you know when you're talking about import orders, there's about a 2-month to 3-month, maybe 4-month sometimes depending upon the product, delay or a lag time between when the order was placed and when product arrives. So many of our service center customers in particular are recognizing that the orders that they placed 2 months, 3 months, 4 months ago now do not look nearly as attractive. And unfortunately they're on the water, they're on the way, and they can't be cancelled. So we're going to see this issue of heavy inventories continue for a little bit of time. But ultimately we do believe that because we're more competitive today and because they have seen some other issues with lead times from the imported products, we'll be able to regain that business. We see our customers coming back to us from the imports. The other comment that I'll make just in general, you asked about other customers coming back to us. We're also seeing many new customers approaching us, because they see Nucor as a company with a very strong financial position and sustainable. They know we're going to be here for the long term. And there's some other companies that might be a little bit more challenged, particularly if this challenging time continues for another quarter or 2 quarters. So the answer to your question is yes, and the answer to your question is yes.

Thanks. Very helpful. Let me follow-up with that really quickly and just say look, the details of the organic product and the capacity development that you're doing, that's great. How are you thinking about use of available capital in terms of M&A? Is there any sense of look, we're in strong financial shape, especially relative to the group. We're expecting the bottom to come in sooner than later. Let's get active. Let's find other assets. Let's tuck-in some more downstream facilities. Is that – where's your thinking there? John J. Ferriola - Chairman, President & Chief Executive Officer: Well I'm going to answer that in a more general sense, and talk about how we view what we're doing with our cash. We have been a strong cash generator. This is not a very good year in terms of cash generation from operations. And certainly acquisitions would be one thing that we will look at. But in a more general sense when I think about the deployment of our cash going forward, our first priority will always be aggressive growth, profitable growth in our company. And that can be done several ways. Organic growth has been for us one of the ways that we get the largest returns for the investments that we've made. And you've heard us list today and in the past conference calls numerous projects, in which we are growing our company profitably through organic investments in our existing operations. Frankly, acquisitions is another way that we are deploying our cash to accomplish profitable growth. Skyline would be an example of that. Fairly recent – more recent than that would be our Gallatin acquisition. So yes. We're looking at that. It's a way to not only grow our volumes, but to grow our customer base and grow the breadth of our products. And that's something that's very important as we look potential targets out there. And I take this opportunity to just remind you of one other way that we can grow our company through investments. And that's we got a pretty good track record of growing through greenfield expansion. And I know that there's a lot of overcapacity. And everybody is lifting their eyebrows and rolling their eyes when I say that, but we are constantly looking for unique market opportunities or product niches, in which we can grow our – through greenfield expansion.

Excellent. Thanks for the time and good luck for the next quarter. John J. Ferriola - Chairman, President & Chief Executive Officer: You're welcome.

We'll take our next question from Timna Tanners with Bank of America Merrill Lynch.

Yeah. Hey, good afternoon. John J. Ferriola - Chairman, President & Chief Executive Officer: Good afternoon.

So I also wanted to follow-up if I could on the cash level, because it is the highest that you've had since 2009. And that was maybe hunkering down. So I guess I just wanted to know is that preparing for restocking? Does the message about your reauthorized buyback program send a signal? Or just I know there's a lot of uses of cash. I'm just wondering, this is a pretty big cash hoard even for you. So I just wondered if you could provide any priorities of how you're thinking about using them if you could? John J. Ferriola - Chairman, President & Chief Executive Officer: Well I've mentioned that the number one priority is to profitably grow our company. And that will always be our first priority. In terms of building up a large cash reserve or a war chest, how are we looking at that, I don't think that we're really looking at it as a need to be able to grow our inventories, our working capital as the businesses get better. That's really not – that is not what is driving it. The opportunity for opportunistic buys as we go forward, again as this challenging time extends out, there might be opportunities, as we've done in the past, to pick up some very good assets at a very good price. You know, Timna, that one our strategies has always been to grow our company during the downturns when assets are less expensive. So we think that that's going to be happening as we go forward. We think there's going to be more assets available at good prices. We want to make sure that we're prepared to capitalize on those opportunities. So we have that. And that's one of the reasons that we're making sure that we preserve our cash. Now to your questions about dividends and buyback programs, I'll make just a couple of comments. Now first of all as you know we pay a very health dividend today. And we've proven in the past that when our profit levels are such that we could pay out a supplemental dividend without adversely affecting our ability to aggressively grow and profitably grow our company, we'll do it. Right now that's not the case. And in terms of the buyback, what we did was we asked our board to authorize a buyback program that was, frankly, in place, so really just refreshing a program that had already been authorized and had been on the books for many years. We did that. We want to be prepared for a situation where there might be limited, profitable growth opportunities that do not provide a large enough return that would outweigh the repurchasing of our stock. In other words when we take a look at the opportunities in front of us, we want to make sure that the return that we gain from those acquisitions, those investments, surpass what we would gain for our shareholders by repurchasing the stock. If that's not the case, we want to be ready. If that situation should come up suddenly, we want to be ready. One thing about this industry, Timna, as you know, it changes. And when change occurs, it occurs rapidly. And we made this move just so that we're ready for that eventuality.

Okay. No doubt. There's a lot of assets in mining if you decide to branch out there. So not making a suggestion, just saying. John J. Ferriola - Chairman, President & Chief Executive Officer: Well and I'll just pick up on that suggestion for a minute, not respond to it directly. But one of the things that you have to remember about our company, we have such a broad portfolio of businesses, such a large portfolio of upstream, core businesses, our downstream. If you look at our various businesses we have about 12 businesses that provide an opportunity in which we can invest. That's a large number of opportunities and it spans a very broad spectrum of opportunity. So as I look at the situation going forward, we can see opportunities both upstream, core business, and downstream. And we want to make sure that we're ready. We think they're going to be coming available as this – as people struggle to get through this challenging time. And we want to be positioned to take advantage of that, to capitalize on that.

Okay. I wanted to ask, if I could, about the – my second question would be about the raw material segment. And I cringe to ask this, but I know that you're probably not delighted to be reporting losses in the segment. And I know that DRI was looking a lot better positioned when met coal prices were much higher. But what are you thinking about doing to fix that segment and reverse it, or is it just strategic, and you're okay with losses there for now? John J. Ferriola - Chairman, President & Chief Executive Officer: Well as we've said many times that our DRI investment is a investment for the long term. And that we recognized and we recognized right from the beginning that there's going to be pricing situations in raw materials, in which the DRI investment is going to be a single and times when it's going to be a home run and times when it's going to be a grand slam. But the other point that I would make is that we always look at our investments for the long term. And when you look at the macro impact reasons for making the investment, the fact that manufacturing is leaving the country and with it prime scrap. When you look at long term, we still believe that the availability and the pricing for natural gas will be much more attractive than that for coking coal. When you look at the improvement in the efficiency of automotive blanking, which results in less prime scrap availability, even in periods where the automotive market is very strong. For all of these reasons, as we look long term, we believe that having the ability to produce a low residual scrap substitute product for Nucor is going to be a very good investment.

Okay. Thanks. John J. Ferriola - Chairman, President & Chief Executive Officer: And if I may, Timna, what – if I can, which is I let you ask a second question, maybe you can make me – let me make a second statement about this response.

Okay. John J. Ferriola - Chairman, President & Chief Executive Officer: And that's one thing that we – I don't know that we emphasize enough when we talk about the DRI project and what it does for us. And that gives us – it's that it gives us tremendous flexibility in our selection of raw material use for our currencies (44:11). And by using that flexibility we're able to impact other scrap or other iron unit products. And that has been very beneficial to us. I mean you saw – you've seen the impact of that a couple of months ago when we saw such a tremendous drop in scrap. And I would also suggest to you that whenever we put in or take out 4 million tons of a scrap substitute product, it's going to have an impact on other iron unit products. It's just going to have an impact. So it gives us tremendous flexibility and the ability to better utilize our scrap mix to enhance our low cost position as a steel supplier.

Okay. Thanks. John J. Ferriola - Chairman, President & Chief Executive Officer: You're welcome. Thank you.

We'll take our next question from Jorge Beristain with Deutsche Bank.

Hi. Good afternoon, guys. Jorge Beristain with DB here. I had a question about the bar volumes that we saw decline sequentially, 8% quarter on quarter, even exceeding that of sheet. Could you give some color as to what's happening in bars? Obviously we know that energy has been weak. But are there any other end markets that bars would be going into that would account for that kind of sequential weakness? John J. Ferriola - Chairman, President & Chief Executive Officer: Well again you hit the nail on the head. Certainly energy, in which a lot of our special bar quality products go into energy. That has taken a tremendous hit. We mentioned earlier, agricultural. That has been way down. And of course we have a lot of product, bar products, long products going into agriculture. So that's another area where we've seen a declining market. And finally I would say heavy equipment. And the heavy equipment market is down. And once again I'm going to go back to my favorite subject, and that's of unfairly traded imports, because when you look at particularly rebar, the tsunami of unfairly traded rebar into this country over the last year has been – it's just totally unacceptable. And it has had a tremendous impact upon our volume and our profitability in that area in our bar products.

Got it. And maybe just following up on Timna's question earlier about your raw material segment. Could you just give us some color as to the sort of quarter-on-quarter deterioration that we saw? You had pointed to an improvement in DRI. So are we to assume that it's really deterioration in the scrap purchasing there that's bringing down the results? Or can you give us just some color as to what's going on there? John J. Ferriola - Chairman, President & Chief Executive Officer: Well I don't have the exact number in my head for the amount that scrap has gone down over the quarter. But I can tell you that there has been recent movements that over the quarter – what would you say, Joe? How much has it been down over the quarter, scrap pricing?

Scrap pricing over the quarter has dropped about $70. John J. Ferriola - Chairman, President & Chief Executive Officer: $50 to $70. And when you have that kind of a scrap price drop, it certainly has an impact on our scrap operations. So yes, we've seen improvement in our DRI performance and the performance of our DRI plant. But the raw material has suffered as a result of the – our scrap operations.

And just to be clear, Jorge, this is Joe Stratman, the recycling scrap processing side of our business is where that would be. On the brokerage and services side that metallics pricing really doesn't affect a lot of the margin or profitability in that sector.

Got it. Thanks very much.

We'll take our next question from Michael Gambardella with JPMorgan. John J. Ferriola - Chairman, President & Chief Executive Officer: Hello, Michael.

Hey, good afternoon. Hi. How are you? Just I wanted to... John J. Ferriola - Chairman, President & Chief Executive Officer: (48:14)

Good, good. I wanted to follow-up on one of your comments earlier on trade in terms of someone was asking about putting recent numbers into the trade case decision. Since the coated antidumping, this preliminary decision was pushed back from November to I think December 21. I mean what is the time period in which they'll be looking at data? From what to what period? John J. Ferriola - Chairman, President & Chief Executive Officer: Well as a general statement they're looking at data today. But frankly it'll be mostly into December, into the first quarter where they'll be doing their analysis. We do expect to have some kind of a rulings on the coated sometime in the first quarter. And probably hot-rolled and cold-rolled would be a little bit later than that. Towards – some time towards the latter part of the first quarter in terms of getting the final determinations. Is that what you're asking?

Well I was saying that the – I thought the preliminary decision on the first case, the coated case, was due out on December 21. And I'm just asking, there must be some period of time in which they look at data to decide what the decision is. John J. Ferriola - Chairman, President & Chief Executive Officer: Well first of all – if you're asking is that data being considered now? Is that's the question? I'm sorry I'm not following you.

Well is current data, current market activity right now being considered in the decision? John J. Ferriola - Chairman, President & Chief Executive Officer: Yes. Yes.

And when do they cut off? Okay we're going to stop looking at data and we're going to – for the decision? John J. Ferriola - Chairman, President & Chief Executive Officer: Well remember that we get to testify during the final argument so to speak before the determination is made. Clearly we will bring up pricing today, pricing between now and the time of the hearings and the final – excuse me, the testimony in the final hearings. And all of that will be submitted and be considered.

But you're still expecting the preliminary coated decisions on anti-dumping to be out as they're saying right now on December 21? Or are you saying you think it's going to be later? John J. Ferriola - Chairman, President & Chief Executive Officer: It's actually just the – for the AD case it's actually December 30 to be specific. And for the countervailing duty case it has been extended out to November 2.

Right. And last question just again on trade. Are there any similarities between now and back at the end of 2001 in the Chinese hot-rolled case, where Chinese have basically been locked out of hot-rolled since then with a 90% tariff? John J. Ferriola - Chairman, President & Chief Executive Officer: There are some similarities. And actually the way that it differs is that the amount of hot-rolled and all steel products that China is exporting today, compared to where it was back then, has increased by a magnitude of I don't know, 10 [times], 20 [times], 30% – times rather. It's just unbelievable. But they're talking about exporting. I think the number year to date that's coming out of China somewhere around 72 million tons year to date. It's expected to go up to over 100 million tons this year. Bearing in mind that the entire U.S. market is 100 million tons, that's a ridiculous amount to be exported out of one country. And it's a direct consequence of their building a tremendous amount of overcapacity in China. So yeah, there's some similarities in the sense that they're flooding the market today. They flooded the market then. And we will be aggressive in pursuing cases against them today as we were back in 2000.

Okay. Thanks, John. John J. Ferriola - Chairman, President & Chief Executive Officer: Thanks.

We'll take our next question from Andrew Lane with Morningstar.

Hi, good afternoon. First, could you provide some color as to the integration of Nucor Steel Gallatin? Given that it was about a year ago around this date that the acquisition was completed, has the contribution of Gallatin fallen in line with your expectations? And then also in terms of the virgin iron units at Gallatin, are those being supplied via imported material or via DRI produced in-house? John J. Ferriola - Chairman, President & Chief Executive Officer: Well first of all I have to say no to the first part of your question. The integration is not going as we expected it to go. Frankly it's going much, much better. And we knew going into that – into the acquisition that we had a lot of similarities in our culture. And clearly cultural compatibility is very high on our list of targets that we look to acquire. And all I can say – and I hope our teammates in Gallatin are listening – those guys have done a great job coming up to speed. They are doing a great job of integrating and simulating into the Nucor culture. We share a lot of similar cultural traits. And in one area frankly – and I want to thank them for this. In one area they helped us get a whole lot better. And that was in the area of safety. Safety performance before the acquisition was outstanding, their commitment to working safe is phenomenal. And the way they run their safety programs is phenomenal. And we've learned quite a bit from them. So despite the fact that Gallatin is operating today in an extremely tough market. The energy, which is a big product coming out of Gallatin, as you know has been really, really challenged. But our teammates are doing what we always do at Nucor, and that is finding new ways, new products. One example would be that they are working hard to qualify for automotive products. And we expect them to be successful in that attempt. And all I can say is it is without a doubt going much better than we anticipated. And one other comment to your question about the where are they getting their raw materials from? Obviously on the scrap side there's a lot of synergies with our DJJ operations right up the road is River Metals (55:00). And in scrap substitutes today, they are taking scrap substitutes in. We are working to modify the plant so that it can accept DRI out of our Louisiana plant. And we expect that to be up and running some time the end of next year, first part of 2017, the DRI. James D. Frias - Chief Financial Officer, Treasurer & Executive VP: 16 months to 18 months. John J. Ferriola - Chairman, President & Chief Executive Officer: Somewhere around 16 months to 18 months.

Okay great. Thanks. And then as a second question could you provide an update on where you stand with the high cost iron ore inventory position you've been digesting at the Louisiana DRI facility? And then what portion of the $28 million of losses at Nucor Steel Louisiana were driven by that particular factor during the quarter? John J. Ferriola - Chairman, President & Chief Executive Officer: Well let me start off by saying that this is the second time in your one question where you've made me smile. Question about Gallatin made me smile about how well that has gone. And I'm smiling now, because I can tell you we have completely digested the higher cost iron ore. We've worked our way completely through that. And so the second part of your question was of the $28 million loss in the quarter. Now first of all I would suggest that the number is actually closer to... James D. Frias - Chief Financial Officer, Treasurer & Executive VP: $20 million. John J. Ferriola - Chairman, President & Chief Executive Officer: $20 million because of the impact. Jim, you want to jump in on the impact of the $7 million? James D. Frias - Chief Financial Officer, Treasurer & Executive VP: Yeah. We had some raw material iron ore storage domes that we made a decision that we were not going to continue to use. And so we had an asset write-down for I think just under $8 million. But, John, I think his question is of the $20 million loss, how much was driven by higher cost iron ore. And I don't think we have that number... John J. Ferriola - Chairman, President & Chief Executive Officer: No. James D. Frias - Chief Financial Officer, Treasurer & Executive VP: ...at our finger tips. John J. Ferriola - Chairman, President & Chief Executive Officer: We don't have that number. I don't think. James D. Frias - Chief Financial Officer, Treasurer & Executive VP: But they did finish using the iron ore that was on hand. John J. Ferriola - Chairman, President & Chief Executive Officer: Yes. James D. Frias - Chief Financial Officer, Treasurer & Executive VP: There might be a little trace amount left, but not anything notable. John J. Ferriola - Chairman, President & Chief Executive Officer: Yeah. And I – one of the things that if you'll – another reason why I'm smiling to be honest with you is that our Louisiana plant was cash positive for the last 2 months, and that's a significant improvement. Now they will continue to be challenged given the current pricing of raw materials in general. That's going to be a challenging operation for a while. As I said earlier we don't expect it to be a grand slam in this pricing environment. But long term we have a great deal of confidence that it was a good investment and will pay large dividends over the long run.

Much appreciated. Congrats on a solid quarter. John J. Ferriola - Chairman, President & Chief Executive Officer: Thank you.

We'll take our next question from Phil Gibbs with KeyBanc Capital Markets.

Hi, good afternoon. John J. Ferriola - Chairman, President & Chief Executive Officer: Good afternoon.

A question on the automotive business and just want to understand where we are in terms of the kind of the absolute tonnage penetration? And maybe if you could give us a breakout of products within that number, whether it be cold finish bar, hot band, SBQ, cold rolled? Just kind of a general thought process here. And then how you're looking to grow that market going forward? John J. Ferriola - Chairman, President & Chief Executive Officer: Yeah. That's a great question. It's an area that we're very proud of the way that we've been able to grow that business. When you ask about specific shipment rates, in 2015 we are on track to ship at a rate of about 1.4 million tons a year. And that's about a 20% improvement over where we were last year. In terms of a breakdown between sheet and cold finish, today about 85% of our products going into automotive are in sheet products, and 15% coming out of some form of SBQ or cold finish. And in terms of where we want to go the sky is the limit ultimately. But over the next 2 years to 3 years we are confident that we will be able to grow that business to a rate of about 2 million tons of shipments per year going into automotive.

Okay. I – 2 million [tons] is what you said. Okay. I appreciate that. And then... John J. Ferriola - Chairman, President & Chief Executive Officer: We want grow it to 2 million [tons]. Okay? Over the next 2 years to 3 years. Beyond that we will continue to grow in that market, as we will continue to grow in all high quality, higher valued, and more import resistant products.

Okay. And then just in terms of what your feelers are out there on non-residential construction and what those are telling you. What's the read at this point in time? Just noticing the fabrication, I think volumes were down a little bit year on year. Any sense of why that's the case? Just trying to get a better feel for your view of non-res and what your indicators are telling you right now. John J. Ferriola - Chairman, President & Chief Executive Officer: Well I would start off by saying that we do think that the rate of growth in non-residential construction as we measure it in square footage has slowed. At the beginning of the year we were anticipating somewhere about an 8% or 9% growth over the course of the year. Today, we would say that that number is probably closer to 5% or 6% today. So we do see the rate of increase, the rate of growth, slowing as the year has progressed. Now, when I look at our business in particular, Nucor's business and our downstream businesses, what's frankly going to the non-residential construction. And we're feeling pretty good about our backlogs. Our backlogs today in all three of our downstream businesses – Vulcraft, Verco, building systems, and Harris – our backlogs are the largest they have been, the strongest they have been in a 10-year period. And when you couple that with the profitability that we talked about earlier, we've had a very good quarter for our downstream businesses. Although we see the rate of improvement slowing, we still feel pretty good about our downstream businesses and their ability to compete in the construction market.

Well in terms of the shipments, John, was that year-over-year comparison a bit negative because maybe there was some overbuying in Q1, and you need a quarter to level that out? John J. Ferriola - Chairman, President & Chief Executive Officer: Yeah. Yeah.

Because your backlog is pretty strong from what you're saying right now? John J. Ferriola - Chairman, President & Chief Executive Officer: Yeah. And it's hard to take a look at – that's a business that – those projects are long-term projects, some of them spanning several years. So as you look at the length of time, it becomes cyclical. The order entry rate becomes cyclical. The shipping rates will become cyclical. So it's hard to look at any one particular quarter and compare it to another particular period of time. You've got to really look at the overall order entry rate and the backlogs. And that's what we use to track how we see the business performing.

Okay. And then I have one high level political/philosophical question, and then I'll jump off. I guess first your thoughts on a long-term highway bill, and if you see any light at the end of the tunnel there. And then in terms of the TPP are you (1:02:35 – 1:02:37) concerned if that's – are you concerned if that measure is passed without any further safeguards like FX manipulation? Thanks. John J. Ferriola - Chairman, President & Chief Executive Officer: Yeah. Well I'll start with that one. But I would like to address both of them. We are absolutely concerned about TPP passing in its present form. Now, remember we all, all of us, have not yet gotten a chance to take a look at the complete document. So I'm not going to say whether or not we would favor it or we would struggle with it, until we have an opportunity to read and study the entire document, which we have not had at this time. That said, I will say that we are extremely, extremely disappointed that it's not – that currency manipulation is not more strongly baked into that agreement. At the end of the day you can have all kinds of trade agreements and if a country manipulates its currency, it's guaranteed to have an unfair trade advantage. And so we have – what we are insisting upon with TPP is that it does, as it's promising to do, and that is to provide a more level playing field, on which we can compete. We at Nucor are absolutely convinced that if we were given a level playing field to compete upon, we would compete successfully against any company or any country in the world. So we're taking a hard look at TPP before we come out with a definitive statement, but you are absolutely correct in saying that currency manipulation not being a part of that agreement makes us really struggle about the impact it will have on our company, the impact it'll have on our industry, the impact it'll have on manufacturing in the United States, and the impact most importantly that it'll have upon middle class Americans working hard to make a living and to make a better life for themselves and their family. So you got a little philosophical. So did I. Okay? Now to infrastructure. Once again I have to say that I'm disappointed in the administration and frankly in Congress in not taking advantage of what I consider a great opportunity. Right now, steel costs are down. What a time to focus on rebuilding our infrastructure. Okay? Energy. Okay? How important is energy in our – going forward in a manufacturing world and for our country frankly? What a great time to be able to rebuild our energy infrastructure, our power grids. And frankly, with the price of oil where it is today and the resulting price of gasoline at the pump, it seems to me like this would be a great time to be able to – and I know this is politically unpopular, but I'm not running for office so I can say it. Okay? This would be a great time to just put a little bump onto the tax of the tax rate on gasoline and use that money to rebuild the crumbling infrastructure of this country. What an embarrassment. 30 years, 40 years, 50 years ago, we were – our country was known for its infrastructure. People came here to study how we build bridges. And today you look at it. And overall our bridges, our infrastructure as a whole just recently received a D-plus. And they were bragging on the fact that it wasn't really D, it was D-plus. Okay? We don't need infrastructure – if we're going to have a manufacturing powerhouse in the 21st century, we need infrastructure that gets an A-plus, not a D-plus. This is a great opportunity to rebuild our infrastructure. I'm extremely disappointed that we continue to kick the can down the road on funding with three-month extensions after extension after extension. I believe that there's something like 33 or 34 three-month extensions since 2008. That's an embarrassment. And I really hope that our leaders step up to the plate and do not miss this great opportunity to rebuild the infrastructure in this country.

Thanks, John. Amen.

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

Thanks. Good afternoon, John, Jim. Just piggybacking off Phil's question earlier on the auto side. With the growth to 2 million tons is that related for equipment upgrade and qualifications or is that more marketing in terms of you're getting Nucor product onto the next auto build? John J. Ferriola - Chairman, President & Chief Executive Officer: Okay. Well clearly, the way that we have been able to grow our automotive presence has been through investments in our company. The vacuum-tank degassers throughout all of our sheet mills, the wide, light project at Berkeley that – the work that we've done and the advances that we have made in our advanced high strength steels, those have opened the doors for us in growing our automotive presence. And I also have to say that the automotive companies recognizing the long-term sustainability of Nucor and the quality and service that we've been able to provide for them, have attracted them and given us the opportunity to grow in those areas. In terms of your specific question relative to how we see it growing over the next 2 years, the answer to that would be a yes. We're basing that upon qualifications that we've already – have been through and have passed and qualified for applications in future platforms and commitments that have been made to us on future platforms. So we are confident in that projection of 2 million tons to 3 million tons. I would also add just one more thing on that is you mentioned the commercial and marketing. We recognize the need to improve our marketing into automotive. And to that end we've established a sales office right in Detroit. It's the first time Nucor has had a sales office located in Detroit. We've named a sales manager to oversee automotive specifically. And this is an extremely experienced guy with a lot of years in the service. And again we're confident that we will be able to commit the – we will be able to fulfill the commitment that I'm making to you and that our commercial team has made to me that we will get to 2 million tons over the next 2 years to 3 years.

Great. Thanks for the detail. And then second one, on natural gas, I know you guys have stopped drilling with Encana there for a couple years. Could you give us an update on how you're positioned there? With the wells declining how are you looking at 2016? Any need or desire to hedge out your gas exposure? John J. Ferriola - Chairman, President & Chief Executive Officer: Right now given the pricing that we're seeing in natural gas and that we expect to continue through 2016, we don't see any significant change in our drilling program. There might be a couple of wells that we might have to drill in order to maintain the leases on the property. And we would want to do that. We've got some great property there, and we want to maintain the leases on those properties. But frankly I don't see us changing our drilling program at this time. And in terms of hedging we feel confident that we see natural gas pricing remaining low for at least next year. And so we're pretty comfortable with our gas positions.

Is there a meaningful earnings impact from those wells decline... John J. Ferriola - Chairman, President & Chief Executive Officer: Can you repeat that? I didn't catch the last part of that.

Yeah. With gas at $2.40, $2.50, I'm wondering how does that compare with your share of the offtake from those natural gas wells? And as those wells decline and produce less, and you're buying more from the open market, is there a perceivable difference in the cost of the two that we could see an earnings impact? James D. Frias - Chief Financial Officer, Treasurer & Executive VP: The wells are incurring a very small loss right now, but they're actually cash flow positive. So it's not meaningful.

Okay. Thank you. John J. Ferriola - Chairman, President & Chief Executive Officer: That was Jim Frias. John J. Ferriola - Chairman, President & Chief Executive Officer: Okay. Now is that the end of the questions?

Yes. This does conclude today's question-and-answer session. For closing remarks I'd like to turn the conference back to Mr. John Ferriola for any closing remarks. John J. Ferriola - Chairman, President & Chief Executive Officer: Okay. Well let me conclude by saying thank you to our shareholders for your confidence and your support. Thank you to our customers. We truly appreciate your business. We know that without you there would be no us. And I want to say thank you to my Nucor teammates for creating value for our customers, generating attractive returns for our shareholders, and building a sustainable future for all of us. And most importantly thank you all for doing it safely. Thanks for your interest in Nucor. Have a great day.

Ladies and gentlemen, this concludes today's conference. We appreciate your participation.