Daniel R. DiMicco - Chairman and Chief Executive Officer James D.

Frias - Chief Financial Officer, Executive Vice President and Treasurer John J. Ferriola - President, Chief Operating Officer and Director

Michelle Applebaum - Steel Market Intelligence Inc Shneur Z. Gershuni - UBS Investment Bank, Research Division Sohail Tharani - Goldman Sachs Group Inc., Research Division Luke Folta - Jefferies & Company, Inc., Research Division David S.

Martin - Deutsche Bank AG, Research Division Timna Tanners - BofA Merrill Lynch, Research Division Arun S. Viswanathan - Longbow Research LLC Richard Garchitorena - Crédit Suisse AG, Research Division Evan L.

Kurtz - Morgan Stanley, Research Division David Galison - CIBC World Markets Inc., Research Division Michael F. Gambardella - JP Morgan Chase & Co, Research Division Aldo J.

Mazzaferro - Macquarie Research Mark L. Parr - KeyBanc Capital Markets Inc., Research Division Philip Gibbs - KeyBanc Capital Markets Inc., Research Division

Thank you. Good afternoon.

This is Dan DiMicco, Nucor's Chairman and Chief Executive Officer. Thank you for joining us for our conference call.

As always, we appreciate your interest in Nucor. With me for today's call are the other members of Nucor's senior management team: our President and Chief Operating Officer, John Ferriola; Chief Financial Officer, Jim Frias; and our other Executive Vice Presidents, Jim Darsey over our Long Products and Bar Products; Keith Grass over our David J.

Joseph and Scrap Operations; Ladd Hall over our Flat-rolled businesses; Ham Lott over our Downstream and Fabrication businesses; and Joe Stratman, who is responsible for our Beam and Plate businesses as well as our business development group. First and most importantly, as always, we like to thank everyone on our Nucor, Harris Steel, David J.

Joseph, Duferdofin, NuMit Steel Technologies and Skyline Steel teams for your hard work in today's extremely challenging economic and steel market conditions. We are extremely proud of your unrivaled commitment to taking care of our customers.

Every day, you are building a stronger and more profitable Nucor, and as always, you are doing it by working safely and by working together. You are Nucor's greatest asset and our real competitive advantage, the right people.

Thank you all very much. I will now ask our CFO, Jim Frias, to discuss our third quarter results and financial position.

Following Jim, John Ferriola will report our Nucor's operations and growth strategy. And then I will wrap up with some thoughts.

Jim?

Thanks, Dan, and good afternoon. Third quarter 2012 earnings of $0.35 per diluted share were at the high end of our guidance range of $0.30 to $0.35 per diluted share.

Third quarter results were negatively impacted by 2 noncash charges totaling $0.10 per diluted share. $0.06 per diluted share resulted from inventory-related purchase accounting adjustments associated with our acquisition of Skyline Steel, which we acquired at the end of the second quarter.

We expect those charges to be much lower in the fourth quarter. We also recorded a noncash charge of $0.04 per share resulting from a loss on the sale of assets of Nucor Wire Products Pennsylvania.

A quick comment about our tax rate since it can be confusing due to the impact of profits from noncontrolling interests. After adjusting out profits belonging to our business partners, the third quarter of 2012 effective tax rate was 35.9%.

Overall market conditions softened further in the third quarter. In addition to slowing economic growth both domestically and globally, steel imports into the U.S.

have increased significantly in both 2011 and again in 2012. The sheet market has been further pressured by new domestic capacity that began ramping up in 2011.

For Nucor, these market conditions were evidenced by a 5% decline in production and a 3% decline in shipments at our steel mills from the second quarter. Operating rates at our steel mills fell to 71% in the third quarter from second quarter's rate of 76%.

However, challenging steel markets highlight the value of Nucor's business model, particularly our highly variable cost structure and our diversified product portfolio. Our profitability in the just-completed quarter was supported by relatively more stable results from our bar and beam mills when compared to the profit declines at our sheet and plate mills.

Additionally, our downstream steel products business reported its second consecutive profitable quarter after being unprofitable for the preceding 13 quarters. Another key strength of our business model is Nucor's ability to generate healthy cash flow through cyclical downturns.

In contrast to a 43% decline year-over-year in the first 9 months of 2012's net income, cash generated from operations increased more than 60% over the same period to $1.1 billion. Nucor benefits from a countercyclical cushion provided to our cash flow as lower scrap and steel prices reduced our working capital investment during downturns.

Nucor's consistent cash flow performance is also helped by our highly variable cost structure. Balance sheet strength remains another important attribute of Nucor's business model.

Standard & Poor's, in its October 2 quarterly report entitled North American Metals and Mining Companies, Strongest to Weakest, again ranked Nucor #1 for credit rating and credit outlook among a universe of 62 companies. Nucor was the only steel company in the group that S&P awarded a strong business risk profile due to our competitive position and profit performance relative to our peers.

We are the only steel producer in North America to enjoy the extremely important competitive advantage of an investment grade credit rating. The benefits of our credit rating include a lower cost of capital, financial flexibility and our position as the lowest risk counterparty for both our customers and suppliers.

Our natural gas working interest investment to support Nucor's raw material strategy is an excellent example of how financial strength pays off for Nucor. Cash, short-term investments and restricted cash totaled $2.5 billion at the end of the third quarter of 2012.

That was an increase of $365 million from the second quarter of 2012. This improved liquidity was driven by our strong operating cash performance during the third quarter.

Further to Nucor's strong liquidity, our $1.5 billion unsecured revolving credit facility is undrawn, and it does not mature until December 2016. We have no commercial paper outstanding.

At the end of the third quarter, long-term debt totaled $4.3 billion. In the fourth quarter, our leverage is declining.

On October 1, we paid off maturing debt of $350 million, and in December, we will be paying off an additional $300 million in debt. As a result of our strong cash flow performance, we expect year-end 2012 cash, short-term investments and restricted cash to exceed $1.5 billion.

We will maintain the strong liquidity position in a year when we invest almost $750 million in acquisitions, invest an estimated $1 billion in capital expenditures and pay off $650 million in debt maturities. That is a total of $2.4 billion in cash outflows in 2012 with most of it targeted on increasing our earnings power.

It is a long tradition of Nucor to grow stronger during downturns. We're able to do this because of our financial strength and the long-term approach we take to managing our business.

Through the first 9 months of 2012, capital spending totaled $692 million. The majority of the capital is going to a number of growth investments.

The largest project is our Louisiana direct reduced iron raw materials facility currently under construction. There are many other projects being implemented throughout our upstream, steelmaking and downstream businesses to develop new products, increase quality and reduce costs.

Skyline Steel, acquired in June for a cash purchase price of approximately $675 million, is off to an excellent start as a member of the Nucor family. This acquisition brings together Skyline, the North American market leader in the distribution of steel piling products and Nucor-Yamato, North America's leading producer of steel piling products.

The combination of these organization expands Nucor's opportunity for profitable growth in the steel piling business. Skyline has been immediately accretive to Nucor's cash flow and is expected to be accretive to our earnings in the fourth quarter.

For the fourth quarter of 2012, we expect to see a reduction in earnings exclusive of onetime charges from the third quarter level as a result of the ongoing trend, the economic softness in the global economy. Nucor will again follow our practice of providing quantitative guidance in the final month of the quarter.

Dan?

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

John?

Thanks, Dan, and good afternoon. Let me begin by thanking all of our raw materials, steelmaking and steel product teammates for your outstanding commitment to working safely and to taking care of Nucor's customers.

Thank you, and please keep it going. We are extremely excited about the impressive work being done by our raw materials, steelmaking and downstream product teams during these bad times to prepare Nucor for the good times ahead.

Here are some third quarter highlights from a few of the projects currently underway to grow Nucor's long-term earnings power. Our Hertford County, North Carolina plate mill team successfully brought their new vacuum tank degasser online during the third quarter.

New grades requiring degassing are now being trialed and made available to our plate customers on a regular basis. Coming next to Hertford County will be a new normalizing line that is scheduled to start up by the middle of next year.

These value-added investments build on the outstanding success of the mill's heat treat line that began operations last year. In the third quarter, the heat treat line again delivered record shipments, and our heat-treated plate products have largely avoided the severe pricing pressure of commodity grade imports.

Nucor's sheet mills also continued to move up the value-added chain. Our Hickman, Arkansas team will start up a new vacuum tank degasser within the next 3 weeks.

The degassing will allow Hickman to participate in the higher value-added OCTG products market along with opening new opportunities in Mexico. Our Decatur, Alabama team continues to run very successful trials in the automotive market using their world-class galvanizing line to produce parts for several of the new domestic auto producers.

Our Berkeley County, South Carolina team is moving ahead with their new wide and light project. It will allow Berkeley to produce up to 72-inch wide material and light gauge down to 0.042 inches.

Equipment orders have been placed, and construction is underway. We expect this project will be up and running in late 2013.

In the third quarter, our David J. Joseph team began operating 2 new nonferrous metals sortation facilities, 1 in Florida and the other is located in Kentucky.

These investments allow DJJ to maximize the profitability it realizes from its recycling of obsolete scrap. Another noteworthy DJJ third quarter achievement was the recognition of our Salt Lake City, Utah recycling facility by OSHA's SHARP program.

The Safety and Health Achievement Recognition program or SHARP program for short represents the gold standard for safety excellence and recognizes companies that voluntarily go to the extra mile to meet rigorous safety standards. Our team at Nucor Steel Louisiana made excellent progress during the third quarter on the construction of our new DRI plant in St.

James Parish. Their can-do attitude and high energy level allowed them to overcome significant challenges arising from this summer's record low level of the Mississippi River.

Two major milestones reached this quarter were the placement of the DRI vessel on the structural module that supports it and the erection of the iron ore storage domes. Most importantly, we are in schedule for a mid-2013 startup of DRI production.

Our Louisiana DRI project is a huge step forward, implementing Nucor's raw materials strategy. Combining Louisiana's annual capacity of 2.5 million tons with our Trinidad plant's 2 million tons of annual capacity brings us to about 2/3 of our goal to control from 6 million to 7 million tons of annual capacity in high-quality scrap substitutes.

Successful execution of our raw materials strategy, our DRI production capability, PED, with our long-term and low-cost supply of natural gas is a game changer for the cost structure of Nucor's Steelmaking Operations. It does more than just support our growth in the higher-value added and higher-margin sheet in SBQ markets.

Our investments in DRI production capacity and in natural gas assets will provide Nucor significant competitive cost advantages for raw materials and energy. The raw materials strategy is also a game changer by shortening our supply chain for high-quality iron units.

The Nucor team is in a position of strength to build on our company's proven ability to be effective stewards of our shareholders' valuable capital. As always, our success will be driven by the adaptability and sustainability of Nucor's business model.

In everything we do, our focus remains on long-term sustainable growth and Nucor's profitability. We are continuing Nucor's historical and highly successful strategy of preparing for the good times during the bad times.

Working together, our team is building an exciting and very rewarding future for all members of the Nucor family, our shareholders, our customers and our teammates. Thank you.

Dan?

Thank you, John. The biggest near-term challenge facing Nucor and the entire U.S.

steel industry is the current flood of steel imports into our country. Based on U.S.

Census Bureau data, steel imports are on a pace to reach 27.7 million short tons for full year 2012. This represents an increase of more than 20% from 2011 imports of 22.8 million tons and more than 40% from 2010 imports of 19.3 million tons.

Such increases are totally inconsistent with a domestic economy that is barely growing as well as a U.S. steel industry capacity utilization rate mired in the range of 70%.

Not only are we concerned about dumped and subsidized steel and steel products. We're taking action to protect our interest by asking our government to enforce rules-based free trade.

A number of sunset reviews are pending or about to be initiated by the U.S. International Trade Commission.

These include cases on galvanized steel sheet, rebar and hot-rolled sheets for a variety of countries. Maintaining these orders is critical to maintaining free and fair trade in the U.S.

market. And it's highly likely that new trade cases will soon be filed.

The Nucor culture will always be proactive and aggressive in addressing all risks to our business. For that same reason, our team continues to take a leadership role in advocating real solutions to our nation's economic challenges.

Our view of the situation is unchanged. The time is right and long overdue to reinvigorate the American economy by seizing new and exciting opportunities.

They include capitalizing on our nation's vast energy resources, growing a globally competitive U.S. manufacturing sector ready to prosper on a truly level playing field and rebuilding our decaying infrastructure.

Long term, we are bullish in the profitable growth opportunities for the American economy and Nucor. That is why we're working hard to build a stronger Nucor.

A stronger Nucor is one positioned to deliver higher highs and higher lows in earnings power to successive economic cycles. Our disciplined execution of our multipronged growth strategy has invested nearly $7 billion of our shareholders' valuable capital since the last cyclical peak in 2008.

Those investments have dramatically increased our company's long-term earnings power. That is why our confidence has never been greater that Nucor's best years are ahead of us.

Thank you for your interest in Nucor, and we'd now be happy to take your questions.

I wanted to also applaud you for taking the time in your release and in your script to talk about the issue of imports, to put that front center because you've got over $1 billion of projects that we could spend 90 minutes on. But this is an industry problem that is just plaguing everywhere you look.

There's no place to hide. I wanted to address how that can be fixed because in my 30 years, I've only seen one time where action really made a huge difference, and that was the Reagan era VRAs back in the '80s.

Is there a solution like that? And is there a real trade solution here?

The trade solutions that we have available to us have numerous facets, and I've mentioned several of them in my script. In addition to that, we are exploring some very new and unique ways to deal with these trade issues that I will not go into on this call.

But rest assured that our trade of users [ph] have been hard at work to come up with new ways to deal with the abuse of our markets by trading companies and by foreign steel companies and countries, particularly state-owned enterprises. And we will continue to be very active on these issues along with the entire industry and many in our domestic manufacturing customer base.

So just stay tuned, and over the next 6 to 9 months will be a number of things that will be obvious to people about the directions we're taking to deal with these issues. I would also suggest that VRAs are probably not the only time when we had a strong action on the part of our government to deal with a massive flood that occurred during these 2000 to 2003 time period.

And there are opportunities for us to deal with this today with tools that are in toolbox and tools that will be added to the toolbox. In addition to that, we are working with our government to find more proactive ways to stop this before it becomes damaging.

And that's enough said on that subject.

Can I ask another question?

Well, certainly.

Okay, I -- there's been a kind of overwhelming number of price increases for sheet this week, and there hasn't been anything since July. And I was just wondering if you could give us some color on what's prompting that.

Well, as you know, we don't really get into discussing the pricing situation, particularly on a short-term basis. And I'll leave John the opportunity to make some comments.

John?

In general terms, Michelle, when you look at sheet, first of all, the market was oversold. Pricing had reached unsustainably low levels.

Also, when you look at the inventory throughout the supply chain, the inventory's low throughout the entire supply chain on sheet. Imports are down a little bit, and we're reaching a point where customers are beginning to place their first quarter business.

So we've seen an improvement in our backlog, in our order entry rate. Right now, our lead times are out just about to December.

So all of those factors played into making an announcement on sheet increases.

My first question, I guess, sort of following on the importing just slightly. Your prepared remarks, as well as in the press release earlier, it sort of called out imports and new domestic supply as kind of a headwind.

But generally speaking, we've seen imports starting to trail off a little bit. We've had a big bankruptcy in the space as well, too.

Do you believe that, that's enough to sort of readjust the supply-demand balance? Or do you need to see a little bit more capacity come out as well, too?

I was just trying to understand sort of where you're thinking things are going from that perspective.

First thing we need is a recognition in Washington that the best way to get out of this mess that we're in, whether it be jobs or deficit spending, is to get increased revenues coming in from a stronger economy, and that will drive increased demand in steel sectors. Having said that, imports are not falling off significantly enough to have a major impact.

We've got -- as I've mentioned in the prepared remarks, it's coming at an annualized rate of almost 28 million tons. That's ridiculous considering how much tonnage is actually being produced by the domestic producers that are operating in the low 70 utilization rates.

So there's much more that needs to be dealt with there, and they will be dealt with. And in many cases, the penalties will be retroactive.

And so as far as the domestic production and the shuddering at the present time with the RG assets, that's obviously a positive thing for the supply-demand balance, and it helps cushion the negative impact of the poor economy and the flood of imports that have come in. And as far as the new startups go, they're in a desperate situation.

They're bankrupt. They're selling their assets, and they're behaving that way in the marketplace.

Sooner they're sold, the better.

A follow-up question if I may. While iron ore prices have bounced in the last couple of weeks, they're certainly off from where they were.

Given what's -- given your focus on DRI and so forth, has there been any thought or consideration to kind of some vertical integration as to maybe picking up some assets in that respect to sort of vertically integrate your operation at all?

We are thinking about a whole host of things all the time, exploring all different opportunities. And if we make a move in that space, it will be because the opportunity says it's the right price and the right time to do it.

But we are constantly exploring opportunities throughout the downstream through the upstream space literarily on a daily basis.

Great. And one last question.

There's a competitor of yours out there talking about SBQ weakness and so forth. Is this something that you're seeing as well, too?

Is it unique to them? Or I was wondering if you have some color on that market.

There certainly has been some slowing in some of the markets of SBQ. In other areas, it's still significant strength.

Automotive would be one example of that, and though heavy trucks are off a little bit from the peak where they were a few months ago, still fairly strong. So some SBQ markets have weakened for sure, but then there's others that we're very active in that have remained strong.

In general, the larger sections in the SBQ marketplace have been hit the hardest, and certainly, some competitors are more impacted by that than others.

So this won't necessarily impact the expansion of the Memphis [indiscernible] ...

No, no. We're -- what we're doing with our SBQ expansions in Memphis and at 2 of our other mills that focus on SBQ is based upon how we see the future.

If it was based upon how we saw it today, we would probably stop them all. But we are very confident that we're going to see an influx of manufacturing coming back to this country for a host of reasons in sectors that are strong consumers of SBQ-type products and in the energy area as well.

John?

The other thing I would add, Dan, is that when you look at the investments we are making in SBQ, they're investments that get us into new products, new geographical territories, new applications with new customers. So even if the market remains a little stagnant, we have opportunities to grow in those areas.

Dan, you are going to start the DRI mid-2013, so it means that you will not start looking for buying iron ore a few months before that. I was wondering if anything you've thought about, was it because there's some new capacity coming in, in the Minnesota region in the U.S.

Also the pellets, would that be a good alternative? Or do you think you -- think that Brazil is the best source for you to bring pellets into the plan?

Currently, we buy pellets from 3 different pellet producers. Two are in Brazil.

One is in Canada. The startup and the continued operation of Louisiana's first DRI plant will be supplied by those same suppliers and probably in similar percentages to what they do today for us.

And we have been and are currently exploring other supply sources. And we will be successful in bringing out some additional supply sources from other parts of the world.

And continuing on that, remember you had mentioned that there's an opportunity to actually get to the resource and buy the resource or acquire the resource of iron ore. That would also be an option.

But with the iron ore prices now weakening, do think that option's still on the table?

I think that the options become less expensive that are on the table, and that may exist for some period of time. And so again, we will be opportunistic.

If we can get something that looks like it'll be a good long-term add to our raw materials strategy, we will take serious look at it. And you'll hear about it when it happens, if it happens.

The opportunities -- We believe there'll be more opportunities for that going forward that will happen [ph] .

First question, I think I read recently that Moody's had put Nucor on review for potential downgrade on the credit rating, and Jim talked about how important that is to you guys. I just kind of want to hear your thoughts on what you thought about that, number one, and then also if that factors into your view on how you look at spending opportunities over the next term here.

I'll let Mr. Frias to take a shot at that one.

Jim?

Yes, we are several levels above investment grade. The bottom investment grade is a BBB-, and we're right now on middle A, so we're like 5 brackets above the bottom.

And we may end up with a split rating if Moody's does, in fact, downgrade us to a low single A. We will still have an A rating that's split.

So we don't like the idea that it could happen, but it's a real possibility. We've always been committed to maintaining a strong credit rating, and we will remain committed to maintaining a strong credit rating.

And there's a lot of different ways to achieve growth investments that don't always require issuing significant amounts of debt. So as opportunities come, we'll evaluate them from a number of different perspectives.

In addition, I would add to the comments that Jim made in his presentation, his prepared remarks, that the countercyclical cash generation that we benefit from is actually adding to our stronger cash position at the end of the year people might be forecasting. So that only serves to help us in regard to issues like you're talking about.

Got you. Okay.

And then I guess just secondly, I think you guys probably have as much insight into non-residential construction as any other company in the U.S. And I just wanted to understand your thoughts on -- typically we see -- the rule of thumb is basically that once housing starts to recover you get a lag, 12 to 18 months or whatever it is recovery in commercial construction.

And I just wanted to get a sense on how you -- is there anything different that you see in this cycle that would result in that not happening?

Well, first off, people all like to focus on the positive when possible. I mean, when we see a nice uptick in the housing side of things, it tends be portrayed as good news, which it is.

But relatively speaking, we're still at dismal levels overall. And so I think that this will -- it's something that is going to take longer to have a positive impact on the commercial construction than would have been normally the case coming out of recessions where housing had suffered.

I have no idea exactly the timeline on that, but the way things are going in Washington with the lack of action on the economy, the dismal performance of the economy and job creation, the threats to the business community and the private sector, there's -- things are going to happen slower as long as that's the case. And hopefully, that won't be the case for a whole lot longer.

Whoever wins the presidency, hopefully, they will do the right things to stimulate this economy and create job creation. And so we still see the nonresidential, which commercial would be a component, struggling.

While our downstream businesses have been profitable now for 2 quarters in a row, as Jim mentioned, it's still a very weak environment out there. And we've got -- under the current set of circumstances, we've got a couple of years yet to deal with before we start to see strong non-residential construction market.

Hopefully, we can -- we will be able to change that. I know we can change it if we do the right things.

It remains to be seen if we will or not as a country.

Okay. Can I ask one more quick one?

Sure.

Just on Skyline, are the shipments that are going through Skyline showing up in your reported sales tons in your supplemental data? And also when the segment data is reported, is that going to be in the downstream segment?

It will be in the steel segment. It is included in the tons right now.

Is it -- can you tell me which category?

It will be in the structural.

Jim and Dan, as you pointed out, you had a very good cash flow and cash quarter in the last couple of months, and some of this was due to asset investment sales. But I'm just kind of curious as to whether any of this may reverse in the fourth quarter if there's anything unusual.

David, I would say very little of it had to do with the asset sales. The proceeds from the sale of wire products were in the tens of millions of dollars, in fact, less than 20, I think, as I recall.

And so that really wasn't a factor. In fact, if the pricing trends that we've kind of seen in the pipe for steel was weaker in the second half, the third quarter, than it was in the first half, so we're starting off with a low pricing position, I would say the more likelihood is that we'll get another benefit in the fourth quarter from working capital.

And so no, this isn't a onetime thing that's going to reverse direction. It's likely to get another little bit of pop of cash burst in the fourth quarter as well.

Maybe not as big as third quarter, but still something there.

Okay. And then secondly, just had a quick question on structural pricing, which was up in the quarter versus second, which looks a little odd.

But was that -- is that just a function of Skyline?

Yes.

Yes.

John was going through in detail with the projects and I kind of caught the part about auto and wanted to probe a little bit more. Given the additional investments you've been making there and the time frame for starting up late 2013, so I mean it's been a parable at least in the steel industry that the mini mills could never make auto-quality exposed sheet.

Can you tell us if you're attempting to break down that expectation and what your plans are there?

Before John gives you details on your question, I will just repeat one phrase that I've always thought of as being very important: Never say never. If people haven't learned that after the last 30-plus years of mini mills in the steel business, then they have not been awake or alive until very recently.

Never say never. John?

And I will tell you with a great deal of confidence, we will be able to achieve that at some point. I go back to the history of mini mill steelmaking, and I remember when people told us we couldn't make garbage-can-quality steel.

Look at the things that we're doing today in every aspect of our business. So the investments that we're making, the world-class galvanizing line, other investments, the wide and light project that we're working on, the degassers that we are adding virtually in every one of our mini mills, focus on moving up the value chain in our SBQ business, clearly we are focused on automotive, and we have a great deal of confidence that we will be able to make all of the steels that are used in automotive at some point.

So not a timeline...

Excuse me, Timna. I think on one previous call, John talked about a product that we made for Nissan, was it, and satisfied the most demanding hood quality requirements for exposed hoods.

Yes, we are -- I will say this, Timna. We have done trials in -- with many different new domestic and domestic auto producers on a wide range of automotive steel, okay.

And what Dan is referring to is a particular application which is, without a doubt, the most difficult application in terms of surface quality. And we did extremely well in that trial.

So at some point in the next couple of years, when we list who's suppliers to the main auto companies, we'll expect to see Nucor up there on the top?

I would be disappointed if it was measured in years.

Months? Okay, got it.

All right. So then my other question is for Jim.

I think I'm understanding the LIFO. But just with the extent of the swing this last couple of quarters, can you help us understand the assumptions behind the change to credit from earlier this year?

Yes, if you think about what's happened during the year, in the first quarter, we were experiencing a somewhat inflationary look forward, and so we were recording LIFO expenses, expecting the cost of scrap to be higher by the end of the year. That moderated in the second quarter so we reversed our accrual and went to a neutral position.

And now in the third quarter, it's clear that scrap prices are going to be lower than they started the year at. And overall raw materials costs -- because scrap is not the only thing that goes in the LIFO calculation.

It just tends to be the biggest driver. So having said that, we recorded 3 quarters of what we expect to book for the year at the end of September.

And so you'll see a smaller charge or credit in the fourth quarter if things stay the way we foresee them. So we booked, I think, $84 million this quarter.

We'll book 1/3 of that in the fourth quarter, if things stay the way we see them right now.

Just had a couple of quick questions. So I guess can you just tell me what you guys are you seeing in scrap right now?

There's been, I guess, speculation that things appear to be bottoming. What are you seeing on both domestic and export side for scrap?

Before I turn it over to Mr. Ferriola, the only comment I would make about the term bottoming is, it seems like we had several bottoms throughout a 12-month period in the course of the year, and you seem to hear talk about another "bottom."

At the end of the day, the demand in the marketplace will establish where scrap goes and right now, demand is still pretty weak. But John, you had some...

The only thing that I would add to that, Dan, I think you said it really well. Predicting where scrap is going is always somewhat of a challenge.

But there has always been a correlation to iron ore pricing. When you look at iron ore pricing, it's at lows over the last couple of years.

Well, it did have a small period where it spiked up, I'd say spiked by a few dollars, and it's on its way back down. So it's -- I don't want to say that it's at a bottom either.

I think it's going to -- I think the best way to say it is that at the end of the day, the market will determine what the price of scrap is. And it will be a function of volumes, production levels, utilization levels and what's happening in other raw materials, such as iron.

It's also impacted by what the rest of the world is doing, and there has been a general slowing. But that can change, and so it's probably more difficult to forecast today than -- and over the last couple of years than it ever has been.

So we'll just leave it at that.

That's why we're asking you guys because you guys are right there in the thick of it, right?

We're the experts, all right.

All right. Just another question I guess on DRI.

You expect start up in mid-'13 of the first plant. I mean, are you still planning for further capacity increases?

And then I think you've discussed the economics previously on a previous call. Can you just help me try to think about how much you will save by these 2 projects?

The answer to your first question is yes. We are still on track to move the second DRI facility shortly after starting up the first, if I understood your question properly.

And is there a timeline for that?

When we start up, the one that we are projecting for midyear and we see that some of the different technologies, not necessarily new technologies but different ones than we were used to working with, prove to be as effective as we've been told, we will begin immediately.

The second part of your question, you talked about the economics of making the DRI. We have an investor presentation that's available on our website where there's a slide that gives a side-by-side comparison of our DRI making cost at $100 iron ore costs compared to best in class in the world blast furnace with every recovery possibility that exists.

And you can see that side by side. And that shows the benefit of what I view at the bottom of a market.

And the real benefit -- so it's very cost-competitive with an advantage at the bottom of the market. And at peak market, we'll be a cost-based producer of iron, and iron ore may go up to, say, 180 like it did the last economic peak.

Whereas pig iron went to $1,000 a ton, and that's where we will have our real savings.

The first question is in the press release, you mentioned excess domestic sheet supply is an issue impacting the market. Obviously, RG Steel is offline.

Utilization rates are at 70%. So where do you think utilization need to be or is this more a function of where demand is right now?

Well, it's a function of overall where demand is. But you have 27 million, 28 million tons of imports coming in, it undermines even the supply, demand situation from an economic standpoint.

So it's a combination of those, plus we have, as I probably stated before, plants built that never should have been built, as witnessed by the fact that now they're being basically sold off and should never have been rejuvenated for the umpteenth time and are being sold off again without any strategic players stepping forward. So whether it be new stuff that was brought in, much to the chagrin of some of the major steel player in the world, that's not worked out well.

It has impacted the entire industry. And so that's the kind of situation we're in.

Even in a good market, "good market" with the imports rate at these kind of levels, there would be a supply, demand imbalance. And -- but certainly, some of the things that are taking place at RG and elsewhere will have a moderating effect.

But right now, the demand is -- and the import flows don't allow for it to show up in higher utilization rates, which need to be north of 80%.

Great. And then my other question, noticed a bit of an uptick in the conversion cost this quarter.

Can you give us some color as to what drives that? And is Skyline Steel part of that and then how should we think about that going forward?

The main issue that drives it is if you take a look at the utilization rates and the production numbers this quarter prior to the previous quarter, you'll see that it's throughput-related and tons-related. John, anything else?

It's volume. Volume is the driver.

I thought I'd ask you a question on OCTG since you're a pretty big supplier of feedstock there. We've been hearing a lot about an inventory overhang as some people may have overbought, assuming the rig count would just continuously go up through the course of the year, and it flattened out.

I just wanted to get your thoughts on where you see that market headed, what are we in for as far as destocking, when you think that could stabilize.

Well, I appreciate the fact that you highlighted that some people overbought. I think the bigger problem with the OCTG supply side has been the amount of tons have been shoved into this market from overseas again when the market wasn't there for it.

It wasn't a question of people having greater expectations as much as it was stuff being dumped into our market, which will be addressed shortly. John, you want to add to that?

No, that's it. There is certainly a concern about the overall inventories.

It is a result of the imports and all the buying of those imports.

And the docks that are under siege these days and sagging from the weight of imports sitting on top of them that have not been sold.

Got you. And I mean, I guess, at the risk of kind of beating a dead horse.

On some of these trade case, it seems like the real issue here is not that -- it's pretty obvious that there's dumping going on, but we have to prove damages as well. And I mean how do you think about it?

It seems like OCTG might be a right product as far as the case goes. We've been hearing more and more about that in the news flow.

But what do we need to see on the damages front before some of these things can actually start going forward?

Damages are occurring. It's a matter of a timing issue, and there's time that needs to -- you need to have passed by where those damages are and the case is put together.

And those are -- will roll along the way as an industry on a number of those fronts right now.

Just wanted to touch on the automotive again. We've talked in the past about efforts to increase automotive market share.

We've seen some good success in this area. I was just wondering do you have a target level that you're looking for that you're working towards for the automotive market.

Do we have a target level for the automotive market? Well, 100% would be nice, okay?

I mean, as a percentage of Nucor's business.

As a percentage of Nucor's business? Somewhere in the neighborhood of 15% to 20% would be a good number for us.

Okay. And then just if you could touch on your operating rates in the quarter.

It looked like there was a possibility to get a bit of an uptick in Q3 with some of the downtime expected. But operating rates actually sort of trailed the industry.

Just wondering if you could provide some color there.

Well, actually if you look at our operating rate as it was recorded, it's 71%. When you look at the industry numbers, the most recent AISI number was just over 71%, 71.2%, something in that neighborhood.

And what you have to look at there, David, is there's a little bit of a trailing effect on the industry-recorded numbers because of the way that they are calculated. So we feel confident when you look at the history, be it today's numbers, for example, we're right in the ballpark with the AISI numbers as we were last year.

The last year the full year the AISI number was about 74.4%, we were just at 74% even. So we feel comfortable that we're right there with them.

The problem with comparing any individual company's latest information with the number reported by AISI is it's complicated even for us to figure out, but it has to do with what John said, and that is that the reporting is not from the current time period in some of the numbers that are reported as current. It may sound strange to you, but that's the way it is because it's a reporting line and what have you.

It's the best estimate the industry can give at the time, but it won't be as current as what any individual company can give you.

And that's why the best way to take a look at it is to look at it over a period, and so you're not looking at any one particular week of numbers. It doesn't give you an active picture.

Feel free to call AISI up and ask them their methodology.

Over the last 30 years or so, we've seen many foreign steel companies coming in and buying assets or building assets in North America with just tremendous failures. The specific one being the most recent and even as we speak, there's an article out on The Financial Times saying Mittal is looking to sell part of their iron ore up in Canada now.

Do you think this is just the tip of the iceberg? Do you think you're going to see more opportunities, more distressed opportunities in some of these assets?

I think back in 2003, you picked up, I think, it was Tuscaloosa pretty cheap. You think there's more coming?

That's a tough call. Certainly, if things don't improve from where they're at, there'll be more opportunities, i.e.

failures in the marketplace. And as you well know, sometimes these things take a couple of reiterations of failure to go away.

But specifically, I couldn't give you a really good feel for what the odds are of that happening. You'd have to tell me where the economy is going to be in 6 to 9 months.

Principally to the flat rolled side, that's probably the most impacted by the things that you're talking about in the marketplace with new mills being built and new players coming in from overseas. Even though these companies haven't gone out of business yet, they're not making a whole lot of money on new plants they've built.

Yes. You've mentioned there's a bit [ph] of this down in Alabama.

What exactly do you see in that property?

I think, at this point in time, all of the people that have been mentioned, if they are indeed looking, including us, are doing it because it's nonbinding, whatever they're [indiscernible] ...

It's a free look.

At this point in time and at the very least, people would want to know, "Okay, what am I going to be up against in the future because this is a new asset?" It didn't need to be built.

Despite all the rhetoric, it's never been built, and it's not going to go away. It will end up in somebody's hands.

So if you can get a free look-see of what's in there, people are taking a free look-see. But it will get sold, don't get me wrong.

It's not worth anywhere near what they spent on it and -- but at the end of the day, the market will determine what it gets sold for and who ends up with it. But the main attraction to it is it's new, it's there, and it's not going to be cut up by anybody.

Yes. For you, would the most interesting parts be just the cold rolled and galvanized?

No, our interest would encompass the entire thing. I don't mean the Brazilian assets.

We're talking specifically about the U.S. assets.

So you'd have to work a traditional castor into that if you're going to do it?

I don't want to give anything exactly what our plans would be if we actually ended up bidding and binding rounds and what have you. There are a couple of alternatives for how you deal with the factors, there's no melt shop there, including building one at some point in time.

Right. So basically you're saying that it's just a free look right now?

I think everybody is safe, they're taking a look at it, in that respect. Everybody that's looking at it is taking a look at it to see what they can make out of it.

When it gets to the point where it's binding, that's when the rubber meets the road on people's interest.

I just had a couple of housekeeping questions and then one other one. The housekeeping ones are just if you could update us on how many people you picked up when you bought Skyline, and what the total employees are now.

And secondly, if you had any startup costs in the quarter and what they may have been.

The Skyline teammates that came on board are a lean, mean 350 in total.

Dan, it's a little higher than that.

It's a little higher than that?

It's about 490, and pre-operating startup cost, the trend, Aldo, was back...

There are people looking at me cross-eyed here. It's somewhere between 350 and 490, Aldo.

We'll get our s*** together.

And in the second quarter, our pre-operating startup costs were $19 million. They actually slipped a little bit in the third quarter to $16 million, and we're expecting next quarter to be around $19 million again.

All right, great. And then Dan, this is not an import-related question.

It's a question of a little bit on politics. If you were to go forward with the request for import protection and cases like that, which political party you think gives you better support in that?

It's a little confusing to me.

First off, we're not going forward on import protection. We're going forward on enforcement of the laws that these trading -- so-called trading partners agreed to have access to global markets, including the markets here in the U.S., both WTO-related and U.S.

trade law-related and favored nation trading status-related and so on and so on. So we're not looking for protection.

We're looking for enforcement of the laws to stop cheaters from cheating. That's number one.

Number two, as far as the political parties go, I'm not going to get into commenting about that. I certainly like the strong tough language that Romney is putting out on China and stopping the cheaters.

As you well know, our position on China is well known, well documented and no running from that, no desire to run from that. We've had good success with support on trade cases in Washington in the Democratic resilience [ph] too although we've been disappointed there hasn't been stronger action on China, which is the #1 trade issue facing this country not just the steel industry.

So at the end of the day, it's who walks the talk as opposed to who just says the words.

Most of my questions have been answered. The one area that I was curious, if you could maybe give some color on would be every month you have to make a determination on scrap buy and those [ph] that would potentially be in a position to see how other mills would buy it.

I mean we've seen such a downdraft in scrap, particularly in October. Just wondering if you characterize the buying activity as about in line with what you would normally do or maybe it's a little heavier than usual.

Any color that you've got will be appreciated.

Our buying opportunity or the industry's buying?

Just whatever you -- either way would be great. I mean, if you think the industry bought heavy in October because the price came down so much, that would be interesting.

I know it would be, but I wouldn't comment on either one. No offense, but that's not something we should comment on.

I think you just take a look at the pricing, and it tells you what's going on. If prices are dropping $40 to $50 a ton one month, going up $40 to $50 a ton another month, that pretty much gives you an idea how the industry is behaving, particularly if you understand what's going on with the Turks and others in terms of exporting scrap out of our market.

So I don't really want to comment about exactly what we saw taking place and not taking place. But I understand your question.

It's a good question.

I just had a question for Jim. CapEx this year, about $1 billion.

What are we looking at for next year preliminarily?

We haven't put our budget together yet. We'll have those budget meetings in November to set that, but we expect it to be lower with the windup of the DRI facility.

Okay. And any help you could give us on startup costs?

I know you don't like to break those out necessarily anymore.

I think the next quarter -- I just talked about next quarter, that's about as far out as we have a good view at. We think might be in the neighborhood of $19 million next quarter, with $16 million this quarter.

We'll start ramping up obviously, next year as the DRI facility gets to full employment prior to them actually up -- being up and running. So we'll start ticking up probably, and the second quarter will be the heaviest quarter, I would think.

Second quarter will be the heaviest on startup costs?

Yes, and we'll probably start disclosing it in our earnings release itself when it becomes a material number. Not probably, we will.

Okay. So we should expect basically a ramp from this rate of startup into startup peaking in the second quarter next year?

Yes, sir. It will probably be at a similar level in the third quarter and then it will fall off.

Just a follow-up question, and hopefully, it's just a housekeeping question. When you say that you expect earnings to be down exclusive of onetime items, that's down from $0.45, is what you're assuming as the clean number?

Michelle, we specifically don't give quantitative guidance. We're giving qualitative guidance.

And you do a good job with math. We've talked about what LIFO was.

It was $0.84 -- $84 million, $0.16. It will be about 1/3 of that next quarter, so you can make that adjustment.

You know the onetime startup costs are going to be not recurring. There may be other ones, but we don't know what those are or what those might be right now.

And then finally, we are saying that steel mill profits will be lower. So you can do the math from there.

We're not saying a specific number.

We're not saying a specific number, but there is a...

I'm asking about the LIFO, the $0.11.

Yes. Well, I answered the question on LIFO for an earlier caller.

We said $0.16 year-to-date. It was booked all in the third quarter.

We're expecting to be in the neighborhood of $0.05 in the fourth quarter. It could change depending on what happens to scrap prices this quarter, but that's our current expectation.

Thank you, Camille. And once again, we'd just like to thank all our teammates, our shareholders and our customers for your support, our suppliers and also, thank everybody listening for their interest in Nucor.

Thank you, all, very much. Have a good day.