Nucor Corporation

Good day, everyone, and welcome to the new core corporation first quarter of 2019 earnings call. As a reminder, today's call is being recorded. Later, we'll conduct a question and answer session, and instructions will come at that time. Certain statements made during this conference call will be forward-looking statements that involve risks and uncertainties. The words we expect, believe, anticipate, and variations of such words and similar expressions are intended to identify those forward-looking statements, which are based on management's current expectations and information that is currently available. Although NUCOR believes they are based on reasonable assumptions, there could be no assurance that future events will not affect their accuracy. More information about the risks and uncertainties related to these forward-looking statements may be found in NUCOR's latest 10-K and subsequently filed 10-Qs, which are available on the SEC's and NUCOR's website. The forward-looking statements made in this conference call speak only as of this date, and NUCOR does not assume any obligation to update them, either as a result of new information, future events, or otherwise. 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.

Good afternoon. Thank you for joining us for our first quarter earnings call, and thank you for your interest in Nucor. Other members of Nucor's executive team are also on the call today, including Jim Frias, our Chief Financial Officer, Joe Stratman, our Chief Digital Officer, Craig Feldman, responsible for raw materials. Vlad Hall, responsible for sheet and tubular products. Ray Napolitan, responsible for engineered bar products. Dave Samosky, responsible for merchant bar and rebar products. Leon Topalian, responsible for beam and plate products. And Chad Udemark, responsible for fabricated construction products. Last week, Joe Stratman announced his plans to retire from Nucor on June 8th, after more than 29 years of dedicated service to Nucor. Joe has been an exceptional and resourceful leader who has made outstanding contributions throughout his career with Nucor, which has included key roles in our steel, raw materials, and steel products businesses. Joe also served as our Executive Vice President of Business Development, and most recently, as our Chief Digital Officer. Joe, thank you for your leadership. You have played a key role in positioning Nucor for continued success in the years to come. Speaking personally and on behalf of our 26,000 teammates, we want you to know that you will be missed and that we wish you and Jill the very best as you begin this new chapter in your life. Effective May 19th, Mary Emily Slate will be promoted to Executive Vice President and will assume responsibilities for the tubular products group, logistics, and certain joint ventures. Mary Emily is a dynamic leader with 19 years of experience at Nucor in senior sales and operational management roles. We look forward to her building on the success that Ladd Hall and his team have achieved in tubular products. Ladd Hall will continue to serve as Executive Vice President of Sheet Products, where a Neapolitan will assume responsibility for Nucor's digital initiatives while also continuing in his role as EVP of engineered bar products. Before we discuss our strong first quarter results, I want to emphasize that safety is number one priority for everyone on the Nucor team. While we consistently lead the industry in safety outcomes, Our goal remains zero incidents at every NUCOR facility. We will keep working to achieve this goal by continuously identifying and mitigating safety risks. That is the mindset that will drive our success. By working together the NUCOR way, I have no doubt that we can achieve our goal of zero incidents. And while I'm on the subject of safety, I would also like to congratulate and thank our teammates at Nucor Gallatin for being recognized as a VPP star site by Kentucky's Division of Education and Training. Nucor Gallatin is only the 13th site to be awarded this designation by the Commonwealth of Kentucky. For those of you who are not familiar, Kentucky's VPP, or Voluntary Protection Partnership Program, is similar to the federal government's OSHA VPP program. These programs are the gold standard for implementing and maintaining safety and health management systems. To achieve VPP status, companies must meet rigorous qualifying criteria and undergo an extensive on-site evaluation. After a two-year process, Gallatin is the 24th NUCOR division, to achieve this impressive recognition. Each of our VPP-starred divisions must demonstrate continuous improvement in safety and health in order to maintain the designation going forward. Congratulations again to my teammates at Gallatin on this outstanding achievement and my continued thanks to all Nucor teammates who put safety first every day. Let's continue to set the bar higher for all manufacturers and lead the way towards better safety outcomes for all. Moving on to our first quarter results, Nucor achieved significant year-over-year improvement in our first quarter earnings, again demonstrating the value of our position as North America's most diversified producer of steel and steel products. The steelmaking operations that contributed most significantly to the improvement over the prior year include our plate, rebar, merchant bar, engineered bar, and beam mills. Several of our downstream businesses also achieved earnings gains compared to the first quarter of 2018, including our metal buildings, joists and deck products, and piling products. Jim Frias will discuss these results and outlook in more detail shortly. There's been a lot of commentary about capacity expansion plans announced by the U.S. steel industry. While we will not speak to the plans of other participants in our industry, Nucor's long-term strategy for profitable growth is both disciplined and sustainable. Sustainability is achieved by making strategic investments that position Nucor to deliver a superior value proposition in cost, quality, and service to our customers. Discipline is driven by NUCOR's laser focus on being effective stewards of the capital that our shareholders entrust to us. We only deploy capital on growth projects when we identify high return opportunities that will create value for our shareholders. Importantly, our senior management incentive compensation plans are directly tied to NUCOR's return on equity and return on capital performance, aligning pay with performance and value creation. We have announced 10 significant growth projects. We anticipate that six of these projects will begin operating this year, including the new specialty cold rolling mill at NUCOR Steel, Arkansas, which came online during the first quarter. We expect all 10 of these projects to be in operation by 2022. These projects will create approximately 1,500 direct jobs and we believe at least 7,500 indirect jobs. With respect to the six projects set to begin operations this year, three projects expand the value added capabilities of our flat rolled steel operations. And the other three projects improve the competitive position of our rebar and merchant bar long products businesses. Let me provide more detail about the new specialty cold rolling mill at New Corsteel, Arkansas, and two others that will start up this summer. First, our new specialty cold rolling mill at New Corsteel, Arkansas, had a successful startup in March. We have already delivered to customers prime product both pickled and oiled, as well as fully processed coal rolled product, and production continues to ramp up. This flexible coal reduction mill expands our capability to produce motor lamination, high strength low alloy, and advanced high strength steel products. Congratulations to the entire Nucor Steel Arkansas team on a very successful startup. The second project, New Core Steel Marion's new in-line rolling mill is scheduled to start up in the third quarter. The newly installed reheat furnace is running well and delivering the anticipated reductions in energy use. These upgrades will significantly improve Marion's core structure and position the mill as the leader in the regional rebar market that it serves. And third, we expect our sheet mill in Kentucky Nucor Steel Gallatin, to begin producing pickled and oiled coils in July and galvanized coils in August. The mill's new 72-inch galvanizing line will be the widest hot-rolled galvanizing facility in North America. It expands our capability to serve the automotive and other value-added markets. Three other projects, our joint venture galvanizing line with JFE Steel in Mexico, The Merchant Bar Mill expansion in Illinois and the new Rebar Micro Mill in Missouri are all on track for startups later in 2019. I also should mention that we have recently received our permits and commenced construction on our Frostproof Florida Rebar Micro Mill. We are targeting startup there in mid-2020. In March, we announced our plans to build a new state-of-the-art plate mill in in Brandenburg, Kentucky. This is a strategic move to solidify Nucor's position as a leader in the U.S. plate market, not just in terms of volume, but also quality, reliability, and cost. The new mill will give us the ability to produce 97% of the plate products consumed in the United States, including specialty high-margin grades. Our site on the Ohio River is located in the center of the country's largest plate-consuming market, strengthening our ability to serve our customers with lower freight costs and superior on-time delivery. Further, we will be in a region with abundant, low-cost scrap that is well covered by our David J. Joseph scrap business. We are excited about this investment and our entire pipeline of value-enhancing growth projects. Nucor has achieved success over the past five decades by building market leadership positions, and we have done this by providing our customers with unmatched performance in quality, cost, product range, and on-time delivery. At Nucor, we build powerful partnerships that deliver powerful results. The more successful we can make our customers, the greater success we will have as Nucor shareholders and teammates. Jim Frias will now provide more specific detail about our first quarter performance as well as our outlook for the remainder of this year. Jim?

Thanks, John. Nucor reported first quarter of 2019 earnings of $1.63 per diluted share. Included in these results was a benefit of $0.08 per diluted share related to the gain on the sale of an investment in our raw material segment. Excluding this non-recurring gain, first quarter performance exceeded our guidance range of $1.45 to $1.50 per diluted share. As John discussed, Nucor continues to benefit from our diversified business model. Another key strength of Nucor's business model is strong through the cycle cash flow generation. First quarter 2019, cash provided from operations was $651 million, even after funding just over $300 million in profit sharing earned by Nucor teammates in 2018. Inventory was a source of about $108 million in the quarter, even as net sales were approximately 10% higher year on year. Consistent with Nucor's disciplined approach to capital allocation, other major uses of cash during the quarter were capital expenditures of $289 million, dividends of $123 million, and stock repurchases of $73 million. We returned almost 40% of net income for the quarter to our shareholders, while also investing for long-term profitable growth. We ended the quarter with $1.6 billion in cash on hand. Nucor teammates are executing the current stages of our long-term growth strategy, and we therefore expect to accelerate our capital spending as the year progresses. For the full year of 2019, we continue to estimate that our capital expenditures will total approximately $1.8 billion. Nucor's financial condition remains strong. With total debt outstanding of $4.3 billion, our gross debt-to-capital ratio was 29% at the end of the first quarter. Our $1.5 billion unsecured revolving credit facility remains undrawn and does not mature until April of 2023. It is worth noting that our first quarter results included $19.6 million of pre-operating startup costs related to strategic investment projects. That is an increase from $17.4 million in the fourth quarter of 2018 and $2.3 million in the year-ago first quarter. Now turning to the outlook. We expect 2019 to be another robust earnings year for Nucor. We continue to be encouraged by the overall strength of our domestic end-use markets. In fact, we see stable or improving demand in 21 of the 24 end-use markets we monitor. One market power transmission is seeing a meaningful decline due to the completion of major grid extension projects in 2018. Automotive OEMs and automotive suppliers comprise the other two markets that we expect to decline for the year. However, We anticipate that the decline in automotive unit volumes will be moderate and the Nucor will actually grow its shipments to these customers in 2019. Of course, the largest source of demand for our products are applications in non-residential construction, which appears set for another solid year in 2019. Earnings in the second quarter of 2019 are expected to be similar to the first quarter, excluding the gain on the sale of the investment. We expect similar linked quarter performance in the steel mill segment as improving margins for structural and bar mill products offset weakening margins at our sheet and plate mills. The steel product segment is expected to achieve significant improvement in the second quarter over the first quarter as typical seasonal patterns and improved weather conditions benefit construction activity. The performance of the raw materials segment is expected to decline in the second quarter compared to the first quarter due to further margin pressure in our direct reduced iron or DRI plants. Thank you for your interest in our company. I will now turn the call back over to John.